<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[ X ]
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to___________________
Commission file number 0-11413
MERIDIAN INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1689161
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)
2955 North Meridian Street
P.O. Box 1980
Indianapolis, IN 46206
(Address of principal executive offices)
Registrant's telephone number, including area code: (317) 931-7000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
6,775,430 Common Shares at June 30, 1995
The Index of Exhibits is located at page 14 in the sequential numbering
system.
Total pages: 14
<PAGE> 2
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. In the opinion of management, the financial information
reflects all adjustments (consisting only of normal
recurring adjustments) which are necessary for a fair
presentation of financial position, results of
operations and cash flows for the interim periods. The
results for the three and six months ended June 30,
1995, are not necessarily indicative of the results to
be expected for the entire year.
These quarterly interim financial statements are
unaudited.
<PAGE> 3
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
as of June 30, 1995 and December 31, 1994
June 30 December 31
1995 1994
(Unaudited)
ASSETS
Investments:
Fixed maturities--held to maturity,
at amortized cost (market value
$4,281,000 and $4,757,000) $ 4,077,133 $ 4,389,117
Fixed maturities--available for sale,
at market (cost $209,556,000 and
$201,577,000) 211,356,372 191,483,830
Equity securities, at market
(cost $19,717,000 and $19,323,000) 21,337,792 18,377,530
Short-term investments, at cost,
which approximates market 4,295,768 4,124,829
Other invested assets 1,006,407 1,085,271
------------- --------------
Total investments 242,073,472 219,460,577
Cash 246,061 603,566
Premiums receivable 2,641,303 2,491,976
Accrued investment income 2,965,395 3,063,515
Deferred policy acquisition costs 12,923,223 11,977,429
Goodwill 2,216,564 2,280,788
Reinsurance receivables 30,414,206 32,703,457
Prepaid reinsurance premiums 2,700,644 2,619,792
Due from Meridian Mutual Insurance Company 8,007,655 6,810,483
Other assets 4,870,136 9,394,448
------------- -------------
Total assets $309,058,659 $291,406,031
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Unearned premiums $62,641,380 $59,663,286
Losses and loss adjustment expenses 124,811,636 123,754,650
Other post-retirement benefits 1,149,953 1,101,155
Reinsurance payables 8,893,971 5,890,675
Other liabilities 4,574,911 6,743,826
------------ ------------
Total liabilities 202,071,851 197,153,592
Shareholders' equity:
Common shares, no par value,
authorized 20,000,000 shares;
issued 6,801,810 at June 30, 1995,
and 6,769,343 at December 31, 1994;
outstanding 6,775,430 at June 30,
1995, and 6,742,763 at
December 31, 1994 44,068,778 43,930,722
Contributed capital 15,058,327 15,058,327
Unrealized appreciation (depreciation)
of investment securities, net
of deferred income tax 2,250,596 (7,281,724)
Retained earnings 45,609,107 42,545,114
------------ ------------
Total shareholders' equity 106,986,808 94,252,439
------------ ------------
Total liabilities and shareholders'
equity $309,058,659 $291,406,031
============= =============
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 4
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
for the three months ended June 30, 1995 and 1994
(Unaudited)
June 30, June 30,
1995 1994
Premiums earned $35,653,703 $33,473,048
Net investment income 3,673,903 3,349,745
Realized investment gains 210,656 129,206
Other income 94,387 136,596
----------- -----------
Total revenues 39,632,649 37,088,595
Losses and loss adjustment expenses 27,015,909 24,414,009
General operating expenses 3,345,441 3,188,530
Amortization expenses 7,690,371 7,112,556
---------- ----------
Total expenses 38,051,721 34,715,095
---------- -----------
Income before income taxes 1,580,928 2,373,500
Income taxes (benefit):
Current 182,000 797,000
Deferred 138,000 (141,759)
---------- ----------
Total income taxes 320,000 655,241
---------- ----------
Net income $ 1,260,928 $ 1,718,259
========= =========
Weighted average shares outstanding 6,773,304 6,738,095
========= =========
Per share results:
Net income $ 0.19 $ .26
========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 5
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
for the six months ended June 30, 1995 and 1994
(Unaudited)
June 30, June 30,
1995 1994
Premiums earned $70,470,117 $65,360,182
Net investment income 7,302,408 6,964,809
Realized investment gains 306,438 180,207
Other income 220,632 316,997
---------- ----------
Total revenues 78,299,595 72,822,195
Losses and loss adjustment expenses 51,360,467 49,737,585
General operating expenses 6,918,300 7,017,883
Amortization expenses 14,934,817 13,988,964
---------- ----------
Total expenses 73,213,584 70,744,432
---------- ----------
Income before income taxes 5,086,011 2,077,763
Income taxes (benefit):
Current 962,000 480,000
Deferred 112,000 (480,759)
---------- ----------
Total income taxes (benefit) 1,074,000 (759)
---------- ----------
Net income $ 4,012,011 $ 2,078,522
========== ==========
Weighted average shares outstanding 6,763,648 6,736,988
========= =========
Per share results:
Net income $ .59 $ 0.31
========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 6
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
for the six months ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Unrealized
Appreciation
Common Contributed (Depreciation) Retained
Shares Capital of Investments Earnings
<S> <C> <C> <C> <C>
Balance January 1, 1994 $43,855,319 $15,058,327 $ 491,027 $ 35,041,862
Cumulative effect of
accounting change for
certain investments,
net of deferred
income taxes -- -- 4,417,201 --
Net income -- -- -- 2,078,522
Unrealized depreciation of
investment securities,
net of deferred income taxes -- -- (6,707,834) --
Dividends ($0.12 per share) -- -- -- (808,465)
Vested restricted common shares 35,584 -- -- --
Exercise of stock options for
2,525 common shares 14,519 -- -- --
---------- ---------- ----------- -----------
Balance June 30, 1994 $43,905,422 $15,058,327 $ (1,799,606) $ 36,311,919
========== ========== =========== ===========
Balance January 1, 1995 $43,930,722 $ 15,058,327 $ (7,281,724) $ 42,545,114
Net income -- -- -- 4,012,011
Unrealized appreciation of
investment securities, net
of deferred income taxes -- -- 9,532,320 --
Dividends ($0.14 per share) -- -- -- (948,018)
Exercise of stock options for
39,146 common shares 215,089 -- -- --
Repurchase and retirement of
6,479 common shares (77,033) -- -- --
---------- ----------- ------------ -----------
Balance June 30, 1995 $44,068,778 $ 15,058,327 $ 2,250,596 $ 45,609,107
========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 7
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended June 30, 1995 and 1994
(Unaudited)
June 30, June 30,
1995 1994
Cash flows from operating activities:
Net income $4,012,011 $2,078,522
Reconciliation of net income to net cash
provided (used) by operating activities:
Deferred policyacquisition costs, net (945,794) 246,503
Increase (decrease) in unearned premiums 2,978,094 (756,452)
Increase in losses and
loss adjustment expenses 1,056,986 2,569,826
Increase in amount due from
Meridian Mutual Ins. Co (1,197,172) (1,655,889)
Decrease (increase) in
reinsurance receivables 2,289,251 (928,757)
Increase in other assets (52,470) (2,298,294)
Increase in other post-retirement benefits 48,798 51,030
Increase in reinsurance payables 3,003,296 759,149
Decrease in other liabilities (2,233,347) (2,013,913)
Other, net (25,751) 1,756,892
----------- -----------
Net cash provided (used) by
operating activities 8,933,902 (191,383)
----------- -----------
Cash flows from investing activities:
Purchase of fixed maturities,
available for sale (13,544,917) (14,487,563)
Proceeds from sale of fixed maturities,
available for sale 2,328,180 10,844,346
Proceeds from calls, prepayments
and maturity of fixed maturities,
available for sale 3,228,629 9,486,981
Proceeds from calls, prepayments
and maturity of fixed maturities,
held to maturity 145,000 --
Purchase of equity securities (4,217,534) (11,634,658)
Proceeds from sale of equity securities 4,078,059 6,239,070
Net increase in short-term investments (170,939) (1,190,525)
Decrease (increase) in other invested assets 78,864 (239,977)
Increase (decrease) in payable for securities (476,501) 1,288,097
----------- ------------
Net cash provided (used) in
investing activities (8,551,159) 305,771
----------- ------------
Cash flows from financing activities:
Dividends paid (878,304) (808,613)
Repurchase and retirement of common stock (77,033) --
Exercise of stock options 215,089 14,519
----------- ------------
Net cash used in financing activities (740,248) (794,094)
----------- ------------
Decrease in cash (357,505) (679,706)
Cash at beginning of period 603,566 1,307,654
----------- ------------
Cash at end of period $ 246,061 $ 627,948
=========== ============
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 8
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited consolidated financial statements should be read in
conjunction with the following notes and with the Notes to Consolidated
Financial Statements of Meridian Insurance Group, Inc., for the year ended
December 31, 1994. In the opinion of management, the financial information
reflects all adjustments (consisting only of normal recurring adjustments)
which are necessary for a fair presentation of financial position, results
of operations and cash flows for the interim periods. The results for the
three and six months ended June 30, 1995 are not necessarily indicative of
the results to be expected for the entire year.
1. Related Party Transactions
Meridian Insurance Group, Inc. (the "Company") is an insurance
holding company principally engaged in underwriting property and
casualty insurance through its wholly-owned subsidiary, Meridian
Security Insurance Company ("Security"). Security participates in a
pooling arrangement with Meridian Mutual Insurance Company ("Meridian
Mutual"), a principal shareholder of the Company, in which the
underwriting income and expenses of both Meridian Mutual and Security
are shared. Security's participation for the three and six months
ended June 30, 1995 and 1994 was 74 percent.
2. Reinsurance
For the six months ended June 30, 1995 and 1994, the effect of
reinsurance on the Company's written and earned premium are as
follows:
June 30, 1995 June 30, 1994
Written Earned Written Earned
Direct $76,497,408 $73,424,242 $68,707,309 $69,241,943
Assumed 2,501,438 2,596,509 2,018,292 2,102,802
Ceded (5,631,487) (5,550,634) (5,967,304) (5,984,563)
----------- ----------- ----------- ------------
Net $73,367,359 $70,470,117 $64,758,297 $65,360,182
=========== =========== ========== ============
Reinsurance recoveries recognized during the six month periods ended
June 30, 1995 and 1994 were approximately $852,000 and $2,069,000,
respectively.
<PAGE> 9
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations:
Financial Position
The Company's total assets of $309,059,000 at June 30, 1995, reflect
6.1 percent growth over the December 31, 1994, total of $291,406,000.
This growth was largely attributable to increased market values of
the Company's fixed maturity investment portfolio classified as
available-for-sale. At June 30, 1995, the Company had an
unrealized gain before deferred tax on this portfolio of
approximately $1,800,000 compared to an unrealized loss of
approximately $10,093,000 at December 31, 1994. Approximately 98
percent of the Company's fixed maturities are classified as
available-for-sale and are carried at market value. Total
liabilities of $202,072,000 at June 30, 1995, were 2.5 percent
higher than the 1994 year-end total of $197,154,000. Increased
reserves for unearned premiums, losses and loss adjustment expenses
and reinsurance payables were the contributing factors for the
additional liabilities. A high volume of claims associated with a
series of wind and hail storms that plagued Meridian's operating
territory during May and June was the primary cause for the increased
loss reserves and ceded reinsurance payables. The unearned premium
reserve growth was reflective of the Company's increased premium
volume for the current period.
The Company's shareholders' equity of $106,987,000 at June 30, 1995,
reflects an increase of 13.5 percent over the 1994 year-end total of
$94,252,000. Unrealized investment gains, net of deferred income
taxes, of $9,532,000 and net income of $4,012,000 were the primary
contributors to the growth in shareholders' equity. This growth was
partially offset by dividends of $0.14 per share, or $948,000. The
Company's book value per share increased to $15.79 from the
December 31, 1994, value of $13.98. The June 30, 1995,
shareholders' equity and book value per share are the highest in the
Company's history.
Results of Operations
For the three months ended June 30, 1995, the Company recorded net
income of $1,261,000, or $0.19 per share, which is down in comparison
to the 1994 second quarter net income of $1,718,000, or $0.26 per
share. The results for both periods were hampered by severe wind
and hail storms that hit the Midwest with the heaviest impact being
in May and June of 1995. Total revenues of $39,633,000 for the 1995
second quarter were 6.9 percent higher than the $37,089,000 reported
for the same 1994 period. Growth of 6.5 percent in earned premiums
to $35,654,000 from 1994's $33,473,000 was the primary factor in the
current period revenue increase. Net investment income of $3,674,000
for the 1995 second quarter increased 9.7 percent over the
$3,350,000 for the comparable 1994 period, due primarily to an
increase in invested assets. Realized investment gains on the
disposition of invested assets for the current three month period
was $211,000 compared to $129,000 for the 1994 second quarter.
<PAGE> 10
Incurred losses and loss adjustment expenses of $27,016,000 for the
three-month period ended June 30, 1995, were 10.7 percent higher
than the 1994 second quarter total of $24,414,000. As was the case
in the 1994 second quarter, the Company's results were impacted by
severe weather during the months of May and June. These storms
reduced the 1995 second quarter net income by approximately
$2,511,000, or $0.37 per share and 1994's net income by $1,439,000,
or $0.21 per share. The Company's statutory loss and loss
adjustment expense ratio for the 1995 second quarter was 76.0
percent, of which the severe weather contributed approximately 10.7
percentage points. This compares to the 1994 ratio of 73.0 percent,
of which 4.2 percentage points were in catastrophe related losses.
General operating expenses of $3,345,000 for the most recent quarter
reflect a 4.9 percent increase from the $3,189,000 reported for the
same three-month period in 1994. The Company's statutory expense
ratio for the 1995 second quarter was 30.3 percent compared to 30.0
percent for the comparable 1994 period. Amortization expenses of
$7,690,000 for the 1995 second quarter represent an 8.1 percent
growth over the same 1994 period total of $7,113,000. This increase
relates to the Company's increased premium volume for the 1995
second quarter. The statutory combined ratio of 106.3 percent for
the 1995 second quarter deteriorated 3.3 percentage points from the
103.0 percent reported for the same period in 1994, due primarily to
increased losses.
Through the first six months of 1995, the Company reported net
income of $4,012,000, or $0.59 per common share. This compares
favorably to net income of $2,079,000, or $0.31 for the
corresponding 1994 period. The improved 1995 results were primarily
attributed to increased revenues and a reduction in the loss ratio.
Revenues have grown 7.5 percent to $78,300,000 from $72,822,000 for
the comparable 1994 period. Premiums earned, the largest component of
the Company's revenue, reflected a growth of 7.8 percent to
$70,470,000 from $65,360,000 reported for the 1994 six-month period.
The Company's 1995 premium volume reflects growth in all major lines
of business and has met Company expectations through the first half
of the year despite continued soft market conditions in both
personal and commercial lines of business. Net investment income for
the first six months of 1995 has increased 4.8 percent over the same
1994 period to $7,302,000 from $6,965,000. This resulted primarily
from a larger invested asset base in the current period. The
Company recorded realized gains on the disposition of invested
assets of $306,000 through the first six-months of 1995 compared to
$180,000 for the same period one year ago.
The Company's incurred losses and loss adjustment expenses of
$51,360,000 for the current six-month period increased 3.3 percent
over 1994's $49,738,000. The statutory loss and loss adjustment
expense ratio for the first six months of 1995 was 73.5 percent,
which reflects an improvement of 2.5 percentage points from 1994's
ratio of 76.0 percent. Improvement in several major lines of
business was partially offset by deterioration in personal and
commercial automobile lines of business due to increased severity of
losses incurred during the first six months of 1995. Year-to-date
catastrophe related losses were higher in 1994 and accounted for
approximately one percentage point of the improvement.
<PAGE> 11
General operating expenses of $6,918,000 for the six months ended
June 30, 1995, were slightly lower than the $7,018,000 reported
for the 1994 period. Contributing to the reduced operating expenses
were lower state income taxes and a lower average commission rate
during 1995. The Company's statutory expense ratio for the current
six month period improved to 30.7 percent from 31.5 percent one
year ago. Amortization expenses for the six months ended
June 30, 1995, were up 6.8 percent to $14,935,000 from $13,989,000
for the comparable 1994 period. This increase was attributable to
the Company's gowth in premium volume. The statutory combined ratio
of 104.2 percent for the six months ended June 30, 1995, improved
3.3 percentage points from the 107.5 percent reported for the same
period in 1994.
<PAGE> 12
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. a. Exhibits. See index to exhibits.
b. No reports on Form 8-K were filed during the
period covered by this statement.
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MERIDIAN INSURANCE GROUP, INC.
DATE: July 26, 1995 By: /s/ Norma J. Oman
------------------------------
Norma J. Oman, President and
Chief Executive Officer
DATE: July 26, 1995 By: /s/ Steven R. Hazelbaker
------------------------------
Steven R. Hazelbaker,
Vice President, Chief
Financial Officer and
Treasurer
<PAGE> 14
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
FORM 10-Q
For the quarter ended June 30, 1995
Index to Exhibits
Exhibit Number
Assigned in Regulation S-K
Item 601 Description of Exhibit
(2) No exhibit.
(4) 4.01 Text of Certificate for Common
Shares of Meridian Insurance
Group, Inc. (Incorporated by
reference to Exhibit 4.01 to
the registrant's Form S-1
Registration Statement
No. 33-11413.)
(11) No exhibit.
(15) No exhibit.
(18) No exhibit.
(19) No exhibit.
(20) No exhibit.
(23) No exhibit.
(24) No exhibit.
(25) No exhibit.
(27) Financial Data Schedule
(28) No exhibit.
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 211,356
<DEBT-CARRYING-VALUE> 4,077
<DEBT-MARKET-VALUE> 4,296
<EQUITIES> 21,338
<MORTGAGE> 730
<REAL-ESTATE> 0
<TOTAL-INVEST> 242,073
<CASH> 246
<RECOVER-REINSURE> 1,412
<DEFERRED-ACQUISITION> 12,923
<TOTAL-ASSETS> 309,059
<POLICY-LOSSES> 124,812
<UNEARNED-PREMIUMS> 62,641
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 44,069
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 309,059
70,470
<INVESTMENT-INCOME> 7,302
<INVESTMENT-GAINS> 306
<OTHER-INCOME> 221
<BENEFITS> 51,360
<UNDERWRITING-AMORTIZATION> 14,935
<UNDERWRITING-OTHER> 6,918
<INCOME-PRETAX> 5,086
<INCOME-TAX> 1,074
<INCOME-CONTINUING> 4,012
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,012
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
<RESERVE-OPEN> 123,755
<PROVISION-CURRENT> 29,917
<PROVISION-PRIOR> 65,263
<PAYMENTS-CURRENT> 24,811
<PAYMENTS-PRIOR> 22,672
<RESERVE-CLOSE> 124,812
<CUMULATIVE-DEFICIENCY> (3,368)
</TABLE>
