SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
( X ) Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1995.
( ) 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 (I.R.S. EmployerIdentification No.)
incorporation or organization)
2955 North Meridian Street
P.O. Box 1980
Indianapolis, IN 46206-1980
(Address of principal executive offices)
Registrant's telephone number, including area code: (317) 931-7000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Shares
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. (X)
The aggregate market value of voting stock owned by non-affiliates at
March 9, 1996, based on the closing sales price, was $53,306,445.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date: 6,779,375
Common Shares at March 9, 1996.
The Index of Exhibits is located at page 44 in the sequential
numbering system. Total number of pages, including cover page: 243.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document have been incorporated by reference
into this Annual Report on Form 10-K:
Parts of Form 10-K into Which
Identity of Document Document is Incorporated
Definitive Proxy Statement Part III
with respect to the 1996
Annual Meeting of Shareholders
of Registrant
MERIDIAN INSURANCE GROUP, INC.
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1995
PART I PAGE
ITEM 1. BUSINESS 4
ITEM 2. PROPERTIES 15
ITEM 3. LEGAL PROCEEDINGS 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS 17
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 41
ITEM 11. EXECUTIVE COMPENSATION 41
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 41
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K 42
PART I
ITEM 1: BUSINESS
General
Meridian Insurance Group, Inc. ("the Company"), is a regional holding
company principally engaged in the business of underwriting property
and casualty insurance through its wholly-owned subsidiary, Meridian
Security Insurance Company ("Meridian Security"). Meridian Security
has 100 percent ownership in Vernon Fire & Casualty Insurance Company
("Vernon"), which is presently a dormant property and casualty
insurance company. The Company also has two non-insurance
subsidiaries, Meridian Service Corporation, a service support company,
and MarketMasters Agency, Inc., an insurance agency. These two
companies are small and have very little impact on the Company's
operations.
Approximately 89 percent of the 1995 business for the Company was
written by Meridian Mutual Insurance Company ("Meridian Mutual"), an
Indiana domiciled mutual insurance company that currently owns 46.5
percent of the outstanding common shares of the Company. The Company
participates in the underwriting gain or loss on business written by
Meridian Mutual pursuant to a reinsurance pooling agreement ("pooling
agreement") between Meridian Mutual and Meridian Security which covers
all of the property and casualty business of the two companies.
Meridian Mutual writes a broad line of property and casualty
insurance, including personal and commercial automobile; homeowners,
farmowners and commercial multi-peril; and workers' compensation.
Business is written through approximately 925 independent insurance
agencies in the states of Illinois, Indiana, Kentucky, Michigan, Ohio,
Tennessee, and Wisconsin. During the fourth quarter of 1995, Meridian
Mutual was granted licenses to write insurance in the states of Iowa,
Minnesota and Pennsylvania, however, no direct premiums were written
during 1995. Meridian Security is admitted in all states in which
Meridian Mutual is licensed, with the exception of Pennsylvania, in
which admittance is expected during the first quarter of 1996.
Meridian Security writes personal and farm lines policies primarily in
the rural areas of Indiana, Kentucky, Ohio, Tennessee, and Wisconsin
through approximately 400 independent insurance agencies, many of
which are cross-licensed with Meridian Mutual.
Relationships with Meridian Mutual
All of the Company's corporate officers are officers of Meridian
Mutual, and six of the nine members of the Company's Board of
Directors are directors of Meridian Mutual. Directors of the Company
constitute a majority of the members of the Board of Directors of
Meridian Mutual. The Company has no employees and is dependent upon
Meridian Mutual for the sale and underwriting of insurance, the
servicing of policyholder claims and all other aspects of the
Company's operations. Meridian Mutual provides all of the facilities,
employees, data processing, and administrative services required to
conduct the business of the Company. Underwriting expenses are shared
under the pooling agreement between Meridian Mutual and Meridian
Security in accordance with the participation percentages of the
parties. Other expenses which can be directly identified with
Meridian Mutual or the Company are paid by the company to which the
expense is attributable, and all other operating expenses relating to
the business of Meridian Mutual and the Company (which have not been
and are not expected to be significant in amount) are allocated in
accordance with policies established in good faith by their Boards of
Directors.
Pooling Agreement
The pooling agreement covers all of the property and casualty
insurance written by Meridian Mutual and Meridian Security. Under the
pooling agreement, all premiums, losses, loss adjustment expenses and
other underwriting and administrative expenses of Meridian Mutual and
Meridian Security are shared between the parties in accordance with
the participation percentages established under the pooling agreement.
The current participation percentages of 74 percent for Meridian
Security and 26 percent for Meridian Mutual were
established effective May 1, 1993. Prior to the change, the
participation percentages were 62 percent for Meridian Security and 38
percent for Meridian Mutual. The participation rates were established
with reference to the respective surplus accounts of Meridian Mutual
and Meridian Security on the assumption that each company's capacity
to underwrite premium income (and, therefore, its share of any gain or
loss on insurance underwriting operations) bore a direct relationship
to that company's surplus.
The Boards of Directors of the Company and Meridian Mutual have
delegated to their respective Audit Committees the responsibility of
monitoring the relationships between Meridian Security and Meridian
Mutual under the pooling agreement pursuant to such procedures as
those Committees may deem necessary and appropriate to allocate the
pool participation percentages to each participant of the agreement.
The Audit Committees have established guidelines for reviewing the
participation percentages at least annually and for referring to the
Pooling Committees of the Company and Meridian Mutual any decision to
change the participation percentages. Future events that could affect
the relationship between the surplus accounts of the parties include
the receipt by Meridian Mutual of dividends on the common shares of
the Company held by it, changes in the capital structure of Meridian
Security, changes in the asset values of Meridian Mutual or Meridian
Security, or different effective rates of income taxation which
disproportionately affect the surplus of the two companies.
The Company and Meridian Mutual have conflicting interests with
respect to the establishment of the respective ratios of Meridian
Security and Meridian Mutual under the pooling agreement, and
conflicts may arise between the Company and Meridian Mutual relating
to the allocation of expenses not related to insurance underwriting,
business and investment philosophies, profit objectives, cash
management, dividend policy and other matters. The business and
operations of the Company are integrated with and dependent upon the
business and operations of Meridian Mutual. Management of Meridian
Mutual determines which expenses are associated with underwriting
operations (and therefore shared by Meridian Mutual and Meridian
Security under the pooling agreement), and also selects and values the
assets and liabilities transferred between the two companies pursuant
to the pooling agreement. The pooling agreement contains no specific
provisions regarding the procedures to be followed in making these
decisions.
In arriving at decisions involving matters in which Meridian Mutual
has an interest, the directors of the Company will be governed by
their fiduciary duties to the Company and its shareholders, but those
directors who also are directors of Meridian Mutual also owe fiduciary
duties to the policyholders of Meridian Mutual and no procedures have
been established under which those decisions would be made by
disinterested directors. The terms of the pooling agreement preclude
conflicts which could arise in deciding which risks are to be insured
by each of the participants by making the results of the operations of
both participants dependent on the results of the total business
covered by the pooling agreement.
The pooling agreement has no fixed term and provides that it is to
remain in force until canceled by the mutual consent of Meridian
Security and Meridian Mutual. The pooling agreement may be amended or
terminated without the necessity of a vote by the shareholders of the
Company. In the event of a termination of the pooling agreement,
Meridian Security would transfer back to Meridian Mutual the
liabilities ceded to it by Meridian Mutual and Meridian Mutual would
transfer back to Meridian Security the liabilities ceded to it by
Meridian Security, and each party would receive from the other assets
in an amount equal to the amount of the policy liabilities received by
it. The Company would continue to own all of the outstanding common
shares of Meridian Security and the Company's assets would consist of
investments and other assets in an amount approximately equal to
consolidated shareholders' equity. In the event of termination of the
business relationships between the Company and Meridian Mutual,
Meridian Security would have no underwriting, claims processing, data
processing operations or other administrative services. However,
Meridian Security would have limited sales operations through their
independent agency force.
The approval of the Indiana Insurance Commissioner is required to
change the participation percentages of the parties to the pooling
agreement or to terminate the pooling agreement; however, the
requirement for such
approvals is for the protection of the policyholders of Meridian
Security and Meridian Mutual and not for the protection of
shareholders of the Company. The Company intends that Meridian
Security will continue its participation in the pooling agreement,
absent some unforeseen change in circumstances.
A. M. Best Company, Inc., Ratings
Since 1993, Meridian Mutual and Meridian Security have maintained a
rating of "A" (excellent) (a group rating) by A. M. Best Company, Inc.
("Best"). Best is an independent company which rates insurance
companies on the basis of their opinion as to the financial position
and operating performance. Best's ratings are based upon factors
related to the capacity of the insurer to make payment of its
obligations to policyholders and do not relate to the protection of
investors or indicate expected investment results.
Operations
In the following discussion of operations, the term "Meridian" refers
to the operations of the property and casualty insurance business of
Meridian Mutual and Meridian Security covered by the pooling
agreement. Effective January 1, 1994, the property and casualty
insurance operations of Vernon were assumed by Meridian Security
through an assumption reinsurance agreement, which in turn became part
of the pooling agreement. The marketing strategies and reserving
methods used by Vernon remained the same. The underwriting of the
farmowners line of business was integrated with Meridian Mutual's and
the remaining lines were underwritten separately by Meridian Mutual
employees. The insurance products, which now bear Meridian Security's
name, continued to be marketed in Indiana and were expanded into
Kentucky, Ohio, Tennessee and Wisconsin during 1995. The former
Vernon agents were licensed with Meridian Security and were given the
opportunity to be cross-licensed with Meridian Mutual.
Underwriting
The underwriting division of Meridian is responsible for establishing
risk-selection guidelines for Meridian's agents and underwriters and
monitors policy issuance to insure adherence to the established
guidelines. The underwriting division also determines the pricing of
Meridian's products and is responsible for the development of new
products and enhancements. The underwriting division works closely
with Meridian's sales representatives and consults regularly with
Meridian's agents to assess current market conditions.
In establishing prices, the underwriting division analyzes studies of
statistical and actuarial data concerning the impact of price changes
in the markets served by Meridian and considers data compiled by
industry organizations. This allows Meridian to more accurately
assess the anticipated costs of risks underwritten.
Over the past several years, Meridian has emphasized efforts to
improve underwriting in order to reduce its loss ratio. Processes
such as re-underwriting the existing book of business, monitoring
unprofitable agents, improving rate adequacy and the consolidation of
four district offices into the home office facility have resulted in
an improvement in the Company's statutory combined ratio from 105.3
percent in 1991 to 100.2 percent in 1995. Currently, the Company is
focused on reducing underwriting expenses in order to further improve
the combined ratio. Beginning in 1994, Meridian began to re-engineer
and re-design certain core processes. The implementation of these re-
engineered processes and the continued refinement of the automated
systems contributed to a 1.5 percentage point reduction in the loss
adjustment and operating expense ratio's during 1995. Management
believes that the continuation of these processes in 1996 will further
reduce the Company's underwriting ratio.
Products and Marketing
Meridian Mutual writes a broad line of property and casualty insurance
including personal and commercial automobile; homeowners, farmowners
and commercial multi-peril; and workers' compensation. Meridian
Security writes private passenger automobile, homeowners, farmowners,
and other personal lines coverages. Meridian markets all of its
insurance through independent insurance agents, and development and
maintenance of a strong agency system is essential. Meridian seeks to
provide its agents and policyholders a level of service that surpasses
industry standards. Meridian Mutual's agency network numbers
approximately 925 independent
insurance agencies spread throughout eight states. Meridian Security
maintains its own agency network of approximately 400 independent
insurance agencies in five states, many of which are cross-licensed
with Meridian Mutual. Meridian's independent agencies are primarily
small to medium-sized firms with no agency producing more than 2
percent of the total written premium during 1995. Meridian
continuously monitors its agencies, giving special attention to the
volume and profitability of business written by each agency. Agencies
which consistently write unprofitable business may be terminated by
Meridian, subject to compliance with applicable state laws.
Each agency enters into a standard agency agreement, under which the
agency is authorized to sell and bind insurance coverage in accordance
with procedures specified in the agreement and in accordance with
Meridian's underwriting guidelines, as well as to collect and remit
premiums. The agency receives as a commission a percentage of the
premium for each policy written. Meridian offers a direct billing
service to its agents, under which premium statements are provided to
the insured and the insured pays the premiums directly to Meridian.
Meridian pays the same commission rates on company-billed and agency-
billed policies, thereby allowing agencies to reduce administrative
costs without a reduction in commission income. The amount of company-
billed business in 1995 was approximately 79 percent of Meridian's net
premiums written. Meridian offers an annual incentive trip to agents
who meet qualifying requirements that are set each year by Meridian.
In addition, Meridian offers an agency profit-sharing agreement in
which agencies attaining prescribed premium volume and meeting
prescribed profitability requirements receive a bonus.
Meridian has established agency councils which meet regularly with
members of management to discuss the concerns of the agents. These
councils are encouraged to suggest ways for Meridian to improve its
operations and service to the individual agents.
Meridian has developed separate growth strategies with respect to the
personal, commercial and farm lines of business. With respect to
personal lines, Meridian believes that continued improvements in
service to agents and policyholders and the development of additional
product enhancements will increase penetration of existing markets.
By emphasizing strict adherence to underwriting guidelines and
targeting selected lines of business, Meridian believes moderate
growth in personal lines business is achievable without significantly
increasing risk exposure.
Meridian has identified several segments of its commercial lines
markets in which management believes Meridian can compete effectively.
Meridian has and will continue to focus on the mid-sized accounts in
the $15,000 to $100,000 range of annual premium volume in addition to
its traditional business with smaller accounts. In an effort to
increase Meridian's penetration in commercial markets, Meridian has
increased its number of commercial field underwriters to work closely
with designated larger volume agents in developing new commercial
accounts.
The strategy with respect to farm lines emphasizes increased
penetration of existing markets by targeting small to medium sized,
family-owned farms which meet Meridian's underwriting guidelines.
Management believes Meridian enjoys a competitive advantage in this
target market because of its regional focus and due to the fact that
some national insurers have vacated this market.
The following table sets forth for the periods indicated the net
premiums written, the net underwriting gain (loss), loss ratios,
expense ratios and combined ratios for the Company's insurance
operations, prepared in accordance with statutory accounting
principles. The combined ratio does not reflect investment income,
federal income taxes, or other non-underwriting income or expense, all
of which are included in determining net income.
Year Ended December 31,
1995 1994 1993 1992 1991
(Dollars in thousands)
Premium Written
Personal lines:
Automobile $59,444 $54,205 $55,291 $48,468 $49,164
Homeowners 19,526 16,667 17,407 14,510 14,447
Other 5,190 4,035 3,894 3,226 3,355
Total personal lines 84,160 74,907 76,592 66,204 66,966
Farmowners 8,166 7,099 7,544 6,373 6,291
Commercial lines:
Automobile 13,107 11,972 11,556 8,363 7,587
Workers' compensation 22,438 21,894 19,264 12,518 10,394
Commercial multi-peril 19,548 19,414 18,842 14,417 14,863
Other 1,323 859 995 1,052 1,002
Total commercial lines 56,416 54,139 50,657 36,350 33,846
Total premium written $148,742 $136,145 $134,793 $108,927 $107,103
Net Underwriting
Gain (Loss) $ (1,610)$ (2,751)$ (5,536)$ (3,900)$ (6,158)
Loss Ratio
Personal lines:
Automobile 75.0% 69.2% 65.8% 71.4% 71.6%
Homeowners 81.2 82.9 77.8 91.0 75.3
Other 43.7 53.9 64.7 61.4 59.7
Total personal lines 74.6% 71.5% 68.4% 75.1% 71.8%
Farmowners 69.6% 64.4% 68.5% 78.0% 58.0%
Commercial lines:
Automobile 89.1% 80.0% 65.3% 65.9% 69.5%
Workers' compensation 58.6 62.7 79.9 71.1 92.4
Commercial multi-peril 45.8 70.3 67.4 50.4 68.5
Other 47.4 (14.0) 35.1 64.7 119.3
Total commercial lines 61.0% 68.1% 71.0% 61.3% 77.4%
Total loss ratio 69.2% 69.8% 69.4% 70.8% 72.7%
Expense Ratio 31.0% 32.0% 32.4% 32.3% 32.6%
Combined Ratio 100.2% 101.8% 101.8% 103.1% 105.3%
Claims
Meridian's claim division is responsible for developing and
implementing policies and procedures for the payment and disposition
of claims and for establishing claim reserves. In connection
therewith, it resolves questions concerning policy coverage and
manages reinsurance recoveries and salvage and subrogation matters.
Claims litigation is managed in conjunction with Meridian's legal
division.
All claim services for Meridian are handled through claim service
centers in Indianapolis, Indiana; Louisville, Kentucky; and East
Lansing, Michigan. Insurance claims on policies underwritten by
Meridian are normally
investigated and settled by Meridian claim adjusters. Independent
adjusters are employed as needed to handle the occasional overload of
claims and in territories in which the volume of claims is not
sufficient to justify having company claim adjusters.
Meridian claim adjusters have authority to settle claims within policy
limits, subject to direction and control by a claim manager or
supervisor. All claims estimated to have a potential value of $50,000
or more are supervised by examiners at the home office, and all claims
in excess of $100,000 must be approved by the claim division director
and, if litigation is involved, the legal division director. A claim
review committee provides for the periodic evaluation of larger claims
to enhance the investigation and decision-making process. The
committee reviews claims reserved in excess of $100,000, and any other
claims involving special circumstances in order to make decisions as
to investigations and/or settlement values.
Reserves
Loss reserves are estimates at a given time, based on facts then
known, of what an insurer predicts its exposure to be in connection
with incurred losses. Loss adjustment expense reserves are estimates
of the ultimate liability of the expenses in settling all claims,
including investigation and litigation costs resulting from such
claims. The ultimate liability of the insurer for all losses and loss
adjustment expenses reserved at any point in time may be greater or
less than these estimates.
Meridian maintains reserves for the eventual payment of losses and
loss adjustment expenses with respect to both reported and unreported
claims. Meridian follows two principal methods of establishing
reserves. For coverages which involve a large volume of claims of
relatively small amounts such as automobile property damage,
comprehensive and collision insurance, reserves are maintained on an
average basis by reference to the number and amount of paid claims.
Adjustments to average reserves are made quarterly, based on the
claims experience for the prior quarter. Reserves for other claims
are established on a case-by-case basis pursuant to which a reserve
amount is assigned to each claim when reported, based primarily upon
an investigation of the circumstances surrounding each claim,
consideration of the liability and the damages, and the insurance
policy provisions relating to the claim. During the claim settlement
process, it may become necessary to adjust estimates of future
liability as additional facts regarding individual claims become
known.
Meridian also establishes reserves for claims which have been incurred
but which have not been reported, utilizing a statistical model based
on historical experience. Reserves established pursuant to this
statistical model also are designed to correct historical deficiencies
or redundancies in the reserves established on a case-by-case basis.
Meridian consults with an independent actuarial firm on a quarterly
basis concerning the adequacy of its reserves.
Meridian believes that reserves for losses and loss adjustment
expenses are adequate to cover the ultimate cost of settling reported
and unreported claims, net of reinsurance, anticipated salvage and
subrogation receipts, and other recoveries. Loss reserves are not
discounted to present value. Inflation is implicitly provided for in
calculating reserves through analysis of cost trends and review of
historical reserve estimates.
The following table sets forth a three-year reconciliation of the
beginning and ending reserves for losses and loss adjustment expenses
for the Company.
Year Ended December 31,
1995 1994 1993
(In thousands)
Balance at beginning of period $123,755 $119,764 $ 95,106
Less reinsurance recoverables 31,815 30,134 23,100
Net balance at beginning of period 91,940 89,630 72,006
Incurred related to:
Current year 104,585 99,444 92,996
Prior years (5,461) (5,473) (6,374)
Total incurred 99,124 93,971 86,622
Paid related to:
Current year 61,792 55,216 48,107
Prior years 36,899 36,445 20,891
Total paid 98,691 91,661 68,998
Net balance at end of period 92,373 91,940 89,630
Plus reinsurance recoverables 31,204 31,815 30,134
Balance at end of period $123,577 $123,755 $119,764
The reconciliation for 1995 shows an approximately $5.5 million
reduction in previously established loss reserves. Favorable loss
developments resulting from decreases in the frequency and severity of
claims in 1994 and prior accident years for all of the Company's major
lines of business with the exception of the commercial automobile line
were the primary factors in the most recent period reduction. The
Company also experienced favorable underwriting trends from its
involvement in the involuntary National Workers' Compensation Pool.
The following table shows the calendar-year development of the unpaid
losses and loss adjustment expenses of the Company's pooled business
for each of the last ten years. The Company was formed in 1987, thus
the reserve development for years prior to that date was based on the
statutory combined reserves and development of Meridian Security.
The top line of the table shows the estimated reserves for losses and
loss adjustment expenses as recorded by the Company for each of the
indicated years. These reserves represent the estimated amount of net
unpaid losses and loss adjustment expenses for claims arising on or
before December 31 of each year, including claims that had not yet
been reported. The data in the upper portion of the table reflect the
cumulative payments made as they have developed through time. The
payments are expressed as a percentage of the year-end reserves shown
in the top line. The data in the lower portion show the change in the
reserve estimate over time.
A redundancy in reserves means that reserves established in prior
years exceeded actual losses and loss adjustment expenses or were re-
evaluated to less than the originally reserved amount. A deficiency
in reserves means that the reserves established in prior years were
less than actual losses and loss adjustment expenses or were re-
evaluated at more than the originally reserved amount.
In evaluating the following information for the Company, it should be
noted that each amount includes the effects of all changes in amounts
for prior periods. For example, the amount of redundancy related to
losses settled in 1995 but incurred in 1990 is included in the
cumulative redundancy amount for each of the years from 1990 through
1994. The table does not present accident or policy-year development
data. Reserves
increased significantly from 1986 to 1989 principally as a result of
an increase in private passenger automobile as a percentage of the
total business written by the Company, and related increases in the
frequency and severity of claims. Additionally, reserves in 1988 were
increased by approximately $5.0 million to adjust for the adverse
loss development trends experienced in 1985 through 1987. Increases
in Meridian Security's share of the pooled loss and loss adjustment
expense reserves also contributed significantly to the increase in
reserves. Meridian Security's participation increased from 8 percent
in 1985, to 44 percent on December 1, 1986, to 62 percent on April 1,
1987, and to the current level of 74 percent on May 1, 1993.
Conditions and trends that have affected development of the reserves
in the past may not necessarily occur in the future. Accordingly, the
data in the table may not be indicative of future redundancies or
deficiencies.
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net reserves for losses
& loss adjustment
expenses $92,373 $91,939 $89,630 $72,006 $68,102 $64,742 $62,281 $53,569 $43,899 $26,819 $ 8,360
Cumulative paid as
a percent of year-
end reserves:
One year later 39.0% 40.7% 29.0% 42.4% 46.6% 46.1% 47.2% 57.4% 41.6% -57.5%
Two years later 59.0% 51.7% 55.0% 68.5% 68.9% 68.1% 79.7% 74.0% -11.4%
Three years later 62.6% 67.5% 74.7% 81.3% 81.3% 90.3% 93.6% 42.2%
Four years later 74.9% 81.6% 84.1% 87.4% 97.0% 102.3% 74.3%
Five years later 85.7% 88.0% 88.6% 99.9% 107.2% 86.3%
Six years later 90.1% 90.7% 100.1% 109.7% 94.5%
Seven years later 92.3% 101.4% 110.3% 98.5%
Eight years later 102.7% 111.4% 99.4%
Nine years later 113.2% 102.0%
Ten years later 107.4%
Reserves re-estimated
as a percent of
year-end reserves:
One year later 92.9% 92.3% 93.6% 97.5% 103.2% 99.7% 102.3% 112.8% 109.6% 87.9%
Two years later 89.0% 84.6% 93.0% 99.0% 100.7% 100.6% 112.7% 120.1% 106.7%
Three years later 83.3% 89.0% 97.9% 99.2% 100.4% 109.5% 122.9% 123.2%
Four years later 89.3% 95.3% 99.3% 99.7% 110.0% 120.0% 126.9%
Five years later 96.3% 97.9% 100.3% 109.2% 119.3% 122.0%
Six years later 98.4% 99.5% 110.6% 119.6% 122.9%
Seven years later 100.0% 109.9% 122.6% 124.6%
Eight years later 110.6% 123.0% 134.7%
Nine years later 124.4% 136.0%
Ten years later 141.0%
Redundancy (deficiency) 7.1% 11.0% 16.7% 10.7% 3.7% 1.6% 0.0% -10.6% -24.4% -41.0%
</TABLE>
Reinsurance
Meridian follows the customary industry practice of limiting its
exposure by ceding to reinsurers a portion of the premiums received
and risks assumed under the policies reinsured. Reinsurance is
purchased to reduce a net liability on individual risks to
predetermined limits and to protect against multiple losses from a
single catastrophe or a series of catastrophes. Although reinsurance
does not discharge an insurer from its primary liability for claims up
to the full limits of the policies, it makes the assuming reinsurer
liable to the insurer to the extent of the reinsurance ceded.
Employers Reinsurance Corporation, rated "A++" by Best, is the
Company's main reinsurer providing property and liability excess of
loss coverage. Meridian uses a large number of reinsurers for
property catastrophe and facultative coverages to reduce the effect of
a default by any one reinsurer. Most of these companies are rated "A-
" or better by Best, or an equivalent rating by other recognized
independent rating agencies. Reinsurers not rated by Best or another
independent agency are analyzed and approved by Meridian's reinsurance
broker, E. W. Blanch, and by Meridian personnel.
The reinsurance purchased by Meridian includes contracts under which
certain types of policies are automatically reinsured up to the
contract limits ("treaty reinsurance") and contracts which provide
reinsurance on an individual risk basis and require specific agreement
of the reinsurer as to limits of coverage provided ("facultative
reinsurance"). The amount of coverage under Meridian's treaty
reinsurance depends upon the amount, nature, and size of the risks
insured. For liability insurance, an excess of loss treaty provided
for recovery of losses over $200,000 per occurrence up to limits of
between $1.0 million and $5.0 million depending on the line of
business. For property insurance, an excess of loss treaty provided
for the recovery of losses over $200,000 up to $4.0 million per
occurrence. Separate catastrophe coverage provided for recovery of 95
percent of catastrophic losses in excess of an aggregate retention of
$3.25 million per catastrophic event, up to a limit of $50.0 million.
The catastrophe coverage is intended to protect the Company from a
loss occurrence directly occasioned by any one disaster, accident or
loss or a series of disasters, accidents or losses arising out of a
single "event," as that term is defined in the relevant reinsurance
agreements. Meridian Mutual and Meridian Security are each named as
insured parties under these treaty reinsurance contracts, and the
coverage described herein applies to all risks written by these
companies. Meridian Security retains risk according to its percentage
participation under the pooling agreement. On both property and
liability coverages, facultative reinsurance is purchased by Meridian
to cover exposure from loss over the limits provided under treaty
reinsurance. The risks shared by Meridian Mutual and Meridian
Security under the pooling agreement consist of only the net risks
remaining after the ceding of reinsurance to third party reinsurers.
Meridian also maintains a multiple-event catastrophe loss treaty to
provide protection for multiple catastrophe events that fall below the
$3.25 million single event retention level noted above but are large
enough in aggregate to cause significant loss exposure. Under this
contract, catastrophe property losses (defined as those in excess of
$150,000) are accumulated for the calendar year to a retention of $4.9
million. Once the accumulated losses exceed this retention, recovery
is available from the reinsurers at a rate of 95 percent of the
covered losses in excess of the retention to a limit of $9.9 million.
In 1995, the Company had an excess catastrophe coverage agreement
which was classified as a "funded cover" reinsurance contract that
expired on December 31, 1995. Over the four years this contract was
in-force, the Company paid premiums that exceeded the losses and
expenses paid by the reinsurers, therefore, a "profit sharing" return
premium of approximately $1,360,000 was due the Company at December
31, 1995. This amount was received in January, 1996. In lieu of this
contract, Meridian increased its catastrophe retention to $6.0 million
in 1996 from the $3.25 million retention that had been in effect for
1995. Coverage limits under the continuing catastrophe contracts have
been raised from $50 million in 1995 to $65 million for 1996.
As of December 31, 1995, the Company had approximately $31.2 million
of reinsurance recoverable on unpaid losses. Of this amount,
approximately $14.7 million was recoverable from Employers Reinsurance
Corporation and approximately $16.1 million was recoverable from the
Michigan Catastrophic Claims Association, a mandatory state-
administered personal injury protection reinsurance pool in which all
insurers writing automobile business in that state must participate.
The cost of Meridian's reinsurance contracts is renegotiated annually.
If the relationships between Meridian and its current reinsurers were
to be terminated, Meridian believes that, under current circumstances,
relationships with other reinsurers could be established without a
material adverse effect on its business.
On December 29, 1995, Meridian Mutual entered into an indemnity
reinsurance agreement with Celina Mutual Insurance Company ("Celina")
to purchase the right to renew a select book of commercial lines
business. Under this agreement, Celina transferred approximately $6
million of its Pennsylvania commercial lines annualized premiums to
Meridian Mutual along with access to approximately 80 independent
insurance agents located in the state of Pennsylvania. This
transaction was recorded as assumed written premium, which will become
earned over the next twelve months. Renewals of the assumed policies
will be recorded as direct business of Meridian Mutual. Meridian
Mutual's underwriting results related to this business will be pooled
with Meridian Security.
At December 31, 1995, the Company reflected unearned premiums of
approximately $2.1 million and ceding commissions of approximately
$409,000, which are deferred on the Company's books until the premiums
become earned.
Aside from the indemnity reinsurance agreement described above,
Meridian assumes a limited amount of reinsurance from third parties.
This business accounted for approximately 3.5 percent of net premiums
written in 1995.
Investments
Investments of the Company are principally held by Meridian Security
and Vernon, which are subject to regulation by the Indiana Department
of Insurance. The investment decisions are made pursuant to
guidelines established by the Company's Finance and Investment
Committee. This committee is made up of five directors of the
Company, three of whom are also directors of Meridian Mutual. All
investment transactions are reviewed by this committee.
The investment guidelines established by the Finance and Investment
Committee are intended to reflect a prudent approach to managing
invested assets. Investments are required to be diversified by type
of issuer, type of security and type of industry. Specific
restrictions prohibit investments in real estate mortgages unless the
related credit instruments are collateralized by federal or government
agencies, and also limit the amount which may be invested in common
stocks, based upon the premium-to-surplus ratio of the Company.
The Company's fixed maturity portfolio, which is made up of bonds and
sinking fund preferred stocks, consists almost entirely of investment
grade securities, the average quality of which is rated Aa/AA. The
fixed maturity securities at December 31, 1995 were made up entirely
of securities classified as available for sale, which are carried on
the Company's balance sheet at fair market value. In 1994, the
Company's portfolio included both securities expected to be held to
maturity and those available for sale. The Company invests in both
taxable and tax-exempt securities as part of its strategy to maximize
after-tax income. This strategy considers, among other factors, the
impact of the alternative minimum tax. Tax-exempt bonds, on a
carrying value basis, made up approximately 33.9 percent and 30.7
percent of the total fixed maturity portfolio at December 31, 1995 and
1994, respectively. On a carrying value basis, sinking fund preferred
stocks made up approximately 16.5 percent of the total fixed maturity
portfolio of the Company for each of the periods ended December 31,
1995 and 1994.
The weighted average maturity of the Company's bonds and sinking fund
preferred stocks is approximately eleven years. However, as a result
of the number of early calls and prepayments, management believes the
anticipated weighted average effective maturity of the bonds and
sinking fund preferred stocks is approximately six years.
The Company also holds investments in mortgage-backed pass-through
securities and collateralized mortgage obligations ("CMO") which had a
carrying value of $58.3 million at December 31, 1995. The Company has
attempted to reduce the prepayment risks associated with mortgage-
backed securities by investing a majority of the Company's CMO
holdings in planned amortization and very accurately defined tranches.
These investments are designed to alleviate the risk of prepayment by
providing predictable principal prepayment schedules within a
designated range of prepayments. If principal is prepaid earlier than
originally anticipated, investment yields may decrease due to
reinvestment of these funds at lower current interest rates and
capital gains or losses may be realized since the book value of
securities purchased at premiums or discounts may be different than
the prepayment amount.
As a result of the Company's improved profitability, the Company, as
approved by the investment committee, has increased its equity
security holdings over the past two years. Equity securities consist
solely of common stocks and had a fair market value of $31.1 million
and $18.4 million at December 31, 1995 and 1994, respectively. Equity
securities accounted for 12.2 percent and 8.4 percent of the total
investment portfolio at December 31, 1995 and 1994, respectively.
Regulation
Numerous aspects of the business and operations of Meridian Mutual and
Meridian Security are subject to supervision and regulation in each
state in which they transact business. The primary purpose of state
supervision and regulation is the protection of policyholders. The
extent of such regulation varies among states but generally derives
from state statutes which delegate regulatory, supervisory, and
administrative authority to state insurance departments. The
authority of state insurance departments generally extends to the
establishment of solvency standards which must be met and maintained
by insurers, the licensing of insurers and agents, the nature of and
limitations on investments and premium rates, the provisions which
insurers must make for current losses and future liabilities, the
deposit of securities for the benefit of policyholders, the approval
of policy forms, the payment of dividends, the establishment of
premium rates and the settlement of claims. State insurance
departments also conduct periodic examinations of insurance companies
and require the filing of annual and other reports relating to the
financial condition of insurance companies.
The regulatory agencies of each state have statutory authority to
enforce their laws and regulations through various administrative
orders, civil and criminal enforcement proceedings, and the suspension
or revocation of certificates of authority. In extreme cases,
including insolvency, impending insolvency and other matters, a
regulatory authority may take over the management and operation of an
insurer's business and assets.
Meridian Mutual and Meridian Security are admitted as insurers in the
states of Illinois, Indiana, Iowa, Michigan, Minnesota, Kentucky,
Ohio, Tennessee, and Wisconsin. Meridian Mutual is also licensed to
transact insurance business in the state of Pennsylvania. Under
insolvency or guaranty laws in the states in which Meridian Mutual and
Meridian Security operate, insurers doing business in those states can
be assessed up to prescribed limits for losses incurred by
policyholders of insolvent insurance companies. Additionally,
Meridian Mutual and Meridian Security are required to participate in
various mandatory pools or underwriting associations. The maximum
amounts that can be assessed against an insurer in any one year under
the insolvency or guaranty laws of the states named above are limited
to a percentage (2 percent in Iowa, Minnesota, Pennsylvania, and
Wisconsin, 1.5 percent in Ohio and 1 percent in Illinois, Indiana,
Michigan, Kentucky, and Tennessee) of the annual direct premiums
written by the company in the state in question with respect to the
affected line of business.
The Company is subject to statutes governing insurance holding
companies. Typically, such statutes require the Company to file
information periodically concerning its capital structure, ownership,
financial condition, and material transactions between the Company and
its insurance subsidiaries not in the ordinary course of business.
The Company's insurance subsidiaries are subject to periodic
examination by the insurance departments of the states in which they
do business, and the payment of dividends by the insurance
subsidiaries to the Company is subject to certain limitations. See
Note 9 of Notes to Consolidated Financial Statements. Certain
transactions between the Company and its insurance subsidiaries
including changes in the terms of the pooling agreement and certain
loan transactions, if any, may be effected only upon prior approval
thereof by the Indiana Insurance Commissioner. Certain transactions
deemed to constitute a "change in control" of the Company, including a
party's purchase of 10 percent or more of the outstanding common
shares, are all subject to approval by the Indiana Insurance
Commissioner.
Changes in the laws or regulations to which the Company is subject
could adversely affect the operations of the Company. Specific
regulatory developments which could materially adversely affect the
operations of the Company include, but are not limited to, the
potential repeal of the McCarran-Ferguson Act (which exempts insurance
companies from a variety of federal regulatory requirements) and rate
rollback legislation. The Company will continue to monitor current
developments closely.
Competition
The property and casualty insurance industry is highly competitive.
Meridian Mutual and Meridian Security competes with other property and
casualty insurers both in the recruitment and retention of qualified
agents and in the sale of insurance products to consumers. The
Company believes the principal competitive factors in its
markets to be service to agents and policyholders and price. Success
in recruiting and retaining agents is dependent upon the
administrative support provided to agents, commission rates, and the
ability of the insurer to provide products that meet the needs of the
agent and the agent's customers.
In selling its insurance products, Meridian Mutual and Meridian
Security compete with other insurers writing through independent
agents (including insurers represented by the independent agents who
represent Meridian), with insurers having their own agency
organizations and with direct sellers of insurance products. There
are numerous companies competing for business in the geographic areas
in which Meridian Mutual and Meridian Security operate. No single
company dominates the marketplace, but many of Meridian's competitors
have more established national reputations and substantially greater
financial resources and market share than Meridian.
Employees
The Company has no employees and relies upon Meridian Mutual to
provide all management and administrative services required by the
Company. Meridian Mutual employs approximately 500 people. The
Company believes that Meridian Mutual's relationship with its
employees is satisfactory.
Audit Practices
The Board of Directors has an Audit Committee composed of three
directors who are not employees of the Company or its affiliates.
Usually meeting in conjunction with the Meridian Mutual Audit
Committee, the committee monitors the Company's financial reporting
and internal control systems and reviews the work of internal audit.
The Company retains the firm of Coopers & Lybrand L.L.P. as
independent accountants to perform an independent audit of the
financial statements of the Company and its affiliates. The audit is
conducted in accordance with generally accepted auditing standards.
The independent accountants have unlimited access to, and meet
regularly with, the Audit Committees.
Pending Acquisition
On February 8, 1996, the Company announced its intent to acquire
Citizens Security Group Inc. ("Citizens") for approximately $29
million in cash. This pending acquisition will fit well into the
Company's plan for geographic expansion into additional Midwestern and
North Central states. When the acquisition of Citizens is completed,
the Company's operating territory will expand into four additional
states: Minnesota, Missouri, North Dakota and South Dakota; and its
revenue base will increase in Iowa, Ohio and Wisconsin. The Company
will gain control of Citizens Security Mutual Insurance Company as a
result of the acquisition. Direct written premiums for the Citizens'
affiliated companies were approximately $50 million in 1995.
Underwriting results of Citizens are expected to be incorporated into
a pooling arrangement with Meridian Mutual and Meridian Security. On
March 22, 1996, the Company and Citizens executed a definitive
acquisition agreement. This acquisition is conditioned upon the
approval of Citizens' shareholders, Citizens Mutual's policyholders
and the insurance departments of Indiana, Minnesota and Ohio. It is
expected that the acquisition will be completed by June 30, 1996.
ITEM 2: PROPERTIES
The headquarters building of the Company and Meridian Mutual is owned
by Meridian Mutual and is located near downtown Indianapolis, Indiana.
The building is a multi-level structure containing approximately
205,000 square feet of office space. During 1995, construction was
completed on a 75,000-square-foot addition to the home office
facility. This expansion allowed the Company and Meridian Mutual to
enhance and enlarge its operational work areas and create a brighter,
more open environment. The expansion also allowed Meridian to
consolidate the two Indianapolis satellite offices, which were being
leased, into the home office facility.
In 1995, Meridian Mutual sold its 27,000-square-foot district service
office facility in Louisville, Kentucky. Due to consolidations which
led to staff reductions in the Louisville office, the Company and
Meridian Mutual now jointly lease office space of approximately 6,500
square feet in Louisville. Meridian also leases a claim service
center in Lansing, Michigan and a district service office in Columbus,
Ohio.
ITEM 3: LEGAL PROCEEDINGS
The Company's insurance subsidiaries are parties to litigation arising
in the ordinary course of their business. The Company believes that
the resolution of these lawsuits will not have a material adverse
effect on its financial condition.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders in the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Market Information
The Company's common stock has traded on the Nasdaq Stock Market under
the symbol "MIGI" since completing an initial public offering of
1,700,000 shares in March 1987 at a price of $12 per share. On May 5,
1993, the Company completed a second public offering of 1,725,000
common shares at $12 per share. As of February 22, 1996,
approximately 46.5 percent of the common stock was owned by Meridian
Mutual and the balance was spread among approximately 264 common
shareholders of record, including many brokers holding shares for
their individual clients. The number of individual shareholders on
the same date was approximately 1,300. The number of Common Shares
outstanding on February 22, 1996, totaled 6,779,375. Information
relating to the common stock is available through the Nasdaq Stock
Market System and the following table sets forth the high and low
closing sale prices of the common stock for each quarter of 1995 and
1994.
1995 1994
Quarter Ended High Low High Low
March 31 $12.00 $10.00 $12.13 $10.13
June 30 13.50 11.25 11.25 9.50
September 30 14.13 11.25 11.00 10.00
December 31 15.50 13.00 11.00 9.75
Dividend Policy
Beginning with the first quarter of 1995, the Company increased its
quarterly cash dividend to $0.07 per common share. In 1993 and 1994,
the Company paid out quarterly dividends of $0.06 per share. The
continued payment of dividends is reviewed quarterly by the Board of
Directors in relation to changes in the financial condition and
results of operations of the Company. The ability of the Company to
pay dividends is dependent upon the receipt of dividends from its
insurance company subsidiaries, which are subject to state laws and
regulations which restrict their ability to pay dividends. See Note 9
of the Notes to Consolidated Financial Statements.
ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data is derived from the consolidated
financial statements of the Company. The data should be read in
conjunction with the consolidated financial statements, related notes,
and other financial information included elsewhere in this document.
Year Ended December 31,
1995 1994 1993 1992 1991
(In thousands, except per share data and ratios)
Operating data:
Premiums earned $143,866 $135,002 $125,902 $108,097 $105,685
Net investment income 14,564 13,996 13,569 12,620 11,953
Realized investment gains 1,538 286 890 540 1,408
Other income (expense) (146) 54 (115) 182 305
Total revenues 159,822 149,338 140,246 121,439 119,351
Losses and loss
adjustment expenses 99,124 93,971 86,622 75,980 79,308
General operating expenses 14,156 14,527 14,935 12,742 12,451
Amortization expenses 30,820 29,304 27,039 22,695 22,283
Total expenses 144,100 137,802 128,596 111,417 114,042
Income before taxes and
change in accounting method 15,722 11,536 11,650 10,022 5,309
Income taxes 4,105 2,415 2,765 1,797 733
Income before change in
accounting method 11,617 9,121 8,885 8,225 4,576
Changes in accounting method:
Other post-retirement benefits -- -- -- (651) --
Accounting for income taxes -- -- 526 -- --
Net income $ 11,617 $ 9,121 $ 9,411 $ 7,574 $ 4,576
Weighted average shares
outstanding 6,770 6,740 6,139 4,945 4,911
Net income per share $ 1.72 $ 1.35 $ 1.53 $ 1.53 $ 0.93
Dividends declared per share $ 0.28 $ 0.24 $ 0.24 $ 0.18 $ 0.00
Underwriting ratios (statutory basis):
Loss and loss adjustment
expense ratio 69.2% 69.8% 69.4% 70.8% 72.7%
Expense ratio 31.0 32.0 32.4 32.3 32.6
Combined ratio 100.2% 101.8% 101.8% 103.1% 105.3%
Balance sheet data at end of period:
Total investments (1) $254,694 $219,461 $221,197 $169,277 $160,655
Total assets 322,588 291,406 285,936 221,534 181,459
Total liabilities 204,346 197,154 191,490 154,935 122,107
Shareholders' equity 118,243 94,252 94,447 66,599 59,352
Shareholders' equity per share $ 17.45 $ 13.98 $ 14.02 $ 13.42 $ 12.09
(1) The 1995 and 1994 investments reflect the Company's adoption of
SFAS No. 115 (See Note 1 of the Notes to the Consolidated Financial
Statements).
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The Company continues to strive for profitable growth and has made
several advances in that area during the past year. Through a
reinsurance pooling agreement between Meridian Mutual and Meridian
Security, the Company currently receives 74 percent of all the
property and casualty business of the combined insurance operations.
During the fourth quarter of 1995, Meridian Mutual and Meridian
Security gained admittance to the states of Iowa and Minnesota.
Meridian Mutual was also granted a license to write property and
casualty business in the state of Pennsylvania, with Meridian Security
expecting to receive regulatory approval for admission during the
first quarter of 1996. Meridian Security charted new territory in
1995 by beginning to write personal and farm lines policies in the
states of Kentucky, Ohio, Tennessee, and Wisconsin.
On December 29, 1995, Meridian Mutual entered into an indemnity
reinsurance agreement with Celina Mutual Insurance Company ("Celina"),
covering a book of commercial lines business. Under this agreement,
Celina will transfer approximately $6 million of its Pennsylvania
commercial lines annual premiums to Meridian Mutual along with access
to approximately 80 independent insurance agents located in the state
of Pennsylvania. Since this transaction occurred at the end of the
year, it had no impact on the Company's 1995 statement of income.
Meridian Mutual's underwriting results related to this business will
be pooled with Meridian Security's.
On February 8, 1996, the Company announced its intent to acquire
Citizens Security Group Inc. ("Citizens") for approximately $29
million in cash. This pending acquisition will fit well into the
Company's plan for geographic expansion into additional Midwestern and
North Central states. When the acquisition of Citizens is completed,
the Company's operating territory will expand into four additional
states: Minnesota, Missouri, North Dakota and South Dakota; and its
revenue base will increase in Iowa, Ohio and Wisconsin. The Company
will gain control of Citizens Security Mutual Insurance Company as a
result of the acquisition. Direct written premiums for the Citizens'
affiliated companies were approximately $50 million in 1995.
Underwriting results of Citizens are expected to be incorporated into
a pooling arrangement with Meridian Mutual and Meridian Security.
During 1995, the Company continued implementation of processes that
were re-engineered during 1994. Personal computer based client server
technology is now in use to support the data gathering activities and
rating of four major lines of business. A commercial lines select
business unit was organized to handle certain commercial accounts by
identifying those that require further underwriter scrutiny, and
assigning those accounts to underwriters with the appropriate level of
authority. Resulting productivity improvements were as high as forty
percent for some of the affected transactions. These productivity
gains allow the Company to increase policy counts with minimal
staffing increases.
During 1996, the Company expects to install an automated personal
lines underwriting system that will enable policies meeting certain
criteria to be issued without manual review, thus reducing costs
without increasing risk. If an application for certain types of
policies receives a passing grade electronically, the policy will be
automatically issued. If the application is "kicked out"
electronically for any number of reasons, it is then passed on to an
underwriter for further review. We believe this is how automation can
be used to assure consistent underwriting compliance and cost-
effectively leverage the experience of senior underwriters.
The Company has made substantial progress in automated agency
interface. Meridian began uploading private passenger automobile and
homeowners policy information from 121 agencies during 1995.
Information is entered on the agencies' computer systems and then
transmitted directly to Meridian's computer system. Uploading and
downloading reduce the duplication of efforts by both agency and
company personnel for processing policies. By the end of 1995, over
300 agencies were receiving policy information downloaded directly
from Meridian's mainframe computer. Plans for 1996 include adding
approximately 200 more upload agencies and 75 more download agencies.
Results of Operations
1995 Compared to 1994
In 1995, the Company reported record highs in net income of $11.6
million and earnings per common share of $1.72. This compares to 1994
net income of $9.1 million and $1.35 per share. The improved results
were primarily attributed to increased revenues and a reduction in all
three components of the combined underwriting and expense ratio.
Total revenues increased 7.0 percent to $159.8 million from $149.3
million while the 1995 statutory combined ratio improved to 100.2
percent from 101.8 percent for 1994.
Net premiums earned for 1995 reflected 6.6 percent growth to $143.9
million from 1994's $135.0 million. This growth was attributed to
nearly all major lines of business. Meridian's personal lines
production for 1995 experienced growth of 8.7 percent. This was
primarily attributed to the homeowners and private passenger
automobile lines of business, which reflected earned premium growth of
9.7 percent and 7.6 percent, respectively. Farmowners achieved
earnings growth of 10.2 percent, while Meridian's commercial lines of
business grew 3.1 percent over the 1994 level. The increase in
commercial lines was attributed primarily to 8.9 percent growth in the
commercial automobile line and 6.7 percent increase in voluntary
workers' compensation business. Depressing the commercial lines
growth was a reduction of nearly $600,000 in assumed earned premiums
from the National Workers' Compensation Pool ("NWCP"). This partially
resulted from actions taken by Meridian to control the type of
workers' compensation business it would accept in states where the
NWCP was unprofitable. The commercial lines growth was also hampered
by soft market conditions, primarily in the state of Michigan where
premium volume declined from the 1994 level. Meridian has addressed
its products, rates and personnel in the state of Michigan and will
continue to monitor these actions for improved results. Total policy
count, on a pooled basis, for 1995 increased by approximately 7,000
policies, or 3.0 percent, over the 1994 total.
Net investment income for 1995 increased 4.1 percent to $14.6 million
from $14.0 million in 1994 resulting primarily from a larger invested
asset base. A reduction in the Company's pre-tax net investment yield
to 6.1 percent in 1995 from 6.4 percent in 1994 primarily was a result
of a greater proportion of common stocks and tax-exempt bonds in the
investment portfolio and increased investment expenses. During 1995
the Company realized gains on the disposition of invested assets of
$1.5 million compared to $0.3 million of realized gains for the prior
year. Such gains were realized primarily on the sale of common stocks
and have an insignificant effect on future investment yields.
The Company's incurred losses and loss adjustment expenses of $99.1
million for 1995 increased 5.5 percent over 1994's $94.0 million,
primarily as a result of the increased volume of business. The
statutory loss and loss adjustment expense ratio improved to 69.2
percent in comparison to 69.8 percent for the previous year. The
Company reflected improved results in its commercial multiple-peril,
homeowner and workers' compensation lines of business. The loss ratio
for commercial multiple-peril improved significantly from 1994's ratio
of 55.5 percent to a 37.6 percent ratio in 1995. Homeowners also
recorded a reduction from 72.9 percent in 1994 to 71.0 percent in
1995. A reduction in liability claims for the current period was the
primary reason for the improvement in these lines of business. The
Company also experienced improved underwriting results in both the
voluntary and involuntary workers' compensation lines. Partially
offsetting these improvements was deterioration in the personal and
commercial automobile and farmowners lines of business. The loss
ratio for personal and commercial auto increased to 67.4 percent from
61.4 percent in 1994 primarily as a result of increased severity. The
deterioration in the farmowners loss ratio to 60.7 percent for 1995
from 56.5 percent in 1994 was caused by a rise in liability claims.
General operating expenses incurred during 1995 of $14.2 million
decreased 2.6 percent from $14.5 million reported for 1994. Lower
state income taxes, reduced assessments from the NWCP and certain
economies of scale were the primary contributors to the expense
reduction. The reduced expenses, combined with a slight
reduction in the Company's average commission rate, produced a
statutory expense ratio of 31.0 percent for the current period
compared to 32.0 percent for the prior year. Amortization expenses of
$30.8 million for the 1995 period increased 5.2 percent from $29.3
million, corresponding with the Company's growth in premium volume.
The Company's effective tax rate in 1995 increased to 26.1 percent
compared to the prior year's 20.9 percent. This increase was
attributed to an overall growth in taxable income causing the Company
to be subject to less relative impact of tax-exempt income and the
dividends received deduction.
1994 Compared to 1993
Net income for 1994 was $9.1 million, or $1.35 per share of common
stock. This compares to income before change in accounting method of
$8.9 million, or $1.45 per share for 1993 on approximately 601,000
fewer weighted average shares outstanding. The cumulative effect of
the accounting change for income taxes added $526,000, or $.08 per
share, to the 1993 results.
The Company's net premiums earned in 1994 increased 7.2 percent to
$135.0 million from the $125.9 million reported in 1993. Commercial
lines growth of $5.1 million came primarily from the workers'
compensation and commercial package products. Personal lines premiums
grew $3.5 million in 1994, with the majority of growth seen in the
personal automobile and homeowners lines of business. Farmowners
products reported growth of $0.5 million. Total 1994 year-end policy
count for all Meridian lines increased 3.1 percent over 1993.
Net investment income of $14.0 million represents an improvement of
3.1 percent over the 1993 total of $13.6 million. The Company's
effective investment yield for 1994 declined to 6.4 percent from 7.0
percent in 1993. A greater emphasis on the purchase of tax-exempt
municipal bonds and equity securities produced a lower average
portfolio yield. Realized gains of $0.3 million declined from the
$0.9 million reported at year-end 1993.
The Company's statutory loss and loss adjustment expense ratio
deteriorated slightly from the 69.3 percent reported in 1993 to 69.8
percent for 1994. The year-end loss ratio for commercial auto was
80.0 percent compared to 65.4 percent reported in 1993. Increase in
liability claim frequency accounts for the higher ratio in this line.
However, improvement was seen in the voluntary workers' compensation
results from the 69.6 percent reported in 1993 to 50.7 percent
reported at year-end 1994, due to both an increase in earned premiums
and a decline in the average loss payment. Meridian continues to
monitor the legislative environment for workers' compensation in our
operating states to optimize underwriting results.
General operating expenses totaled $14.5 million, a slight decrease
from the $14.9 million reported in 1993. Reduced commission expenses
were partially offset by an increase in state income taxes. Higher
deferred acquisition costs relating to increased premium volume caused
the Company's amortization expense to grow by 8.4 percent to $29.3
million from the $27.0 million reported in 1993.
The Company's effective tax rate for 1994 was 20.9 percent compared to
23.7 percent for 1993. A larger proportion of tax exempt interest and
the dividends received deduction contributed to the effective rate
reduction.
Liquidity and Capital Resources
The Company's primary need for liquidity is to pay shareholder
dividends, and its main source of liquidity is the receipt of
dividends from its subsidiaries. The Company's subsidiaries are
subject to state laws and regulations which restrict their ability to
pay dividends. (See Note 9 of the Notes to Consolidated Financial
Statements.) The principal need of the Company's insurance
subsidiaries for liquid funds is the payment of claims and general
operating expenses in the ordinary course of business. The funds of
the Company's insurance subsidiaries are generally invested in
securities with maturities intended to provide adequate cash to pay
such claims and expenses without forced sales of investments. Over
the next year, a relatively small portion of the Company's bond
portfolio is scheduled to mature.
Approximately 86 percent of the Company's investment assets are held
in fixed maturities, substantially all of which are believed to be
readily marketable. Within the fixed maturity portfolio, the Company
holds approximately 26 percent in mortgage-backed pass-through
securities and collateralized mortgage obligations. The Company has
attempted to reduce the prepayment risks associated with mortgage-
backed securities by investing a majority of the collateralized
mortgage obligations in planned amortization and very accurately
defined tranches. These investments are designed to alleviate the
risk of prepayment by providing predictable principal prepayment
schedules within a designated range of prepayments. The Company has
no exposure to high risk derivatives in its portfolio.
The Company's fixed income investment portfolio consists almost
entirely of investment grade securities, the average quality of which
is rated Aa / AA. The Company currently holds all of its fixed
maturity investments in the "available-for-sale" category which are
carried at market value. In 1995, the carrying values for these
investments increased significantly. As a result, the Company at
December 31, 1995 recorded unrealized gains in the bond portfolio of
approximately $4.1 million, net of deferred income taxes. At year-end
1994, the Company recorded unrealized losses on the bond portfolio of
approximately $6.7 million, net of deferred income taxes. Net
unrealized appreciation of investments added $1.01 to the Company's
$17.45 book value per share at December 31, 1995, compared to
unrealized losses causing a decrease of $1.08 per share in December
31, 1994's book value of $13.98.
On February 8, 1996, the Company announced that it has entered into a
letter of intent to acquire Citizens Security Group, Inc. of Red Wing,
Minnesota for approximately $29 million in cash. The transaction is
subject to the execution of a definitive acquisition agreement and
approvals by state regulatory authorities, the companies' boards of
directors and Citizens' common and preferred shareholders. It is
anticipated that the acquisition will be completed by mid-1996.
Approximately 60 percent of the cash will be generated from the sale
of a portion of Meridian Security's investment portfolio with the
balance likely to be financed with bank debt. Such acquisition
financing has not yet been finalized. This acquisition is expected to
generate approximately $35 to $40 million of net premium writings in
seven states, four of which the Company does not currently operate in.
Beginning in 1994, state insurance regulators required companies to
calculate Risk Based Capital ("RBC"). RBC is the capital required to
cover the varying degrees of risk inherent in a company's assets, loss
reserves, underwriting, and reinsurance. The "company action level"
RBC is the minimum amount of capital required in order to avoid
regulatory action. Meridian Security's adjusted capital of $89.4
million in 1995 is over four times the required minimum.
Impact of Inflation
Inflation can have a significant impact on property and casualty
insurers because premium rates are established before the amount of
losses and loss adjustment expenses is known. The Company attempts to
anticipate increases from inflation in establishing rates, subject to
limitations imposed for competitive pricing.
The Company considers inflation when estimating liabilities for losses
and loss adjustment expenses, particularly for claims having a long
period between occurrence and settlement. The liabilities for losses
and loss adjustment expenses are management's estimates of the
ultimate net cost of underlying claims and expenses and are not
discounted for the time value of money. In times of inflation, the
normally higher investment yields may partially offset potentially
higher claims and expenses.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS Page
Report of Independent Accountants 24
Financial Statements:
Consolidated Statement of Income 25
Consolidated Balance Sheet 26
Consolidated Statement of Shareholders' Equity 27
Consolidated Statement of Cash Flows 28
Notes to Consolidated Financial Statements 29
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Meridian Insurance Group, Inc.
We have audited the accompanying consolidated balance sheet of
Meridian Insurance Group, Inc., and Subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Meridian Insurance Group, Inc., and Subsidiaries as of December 31,
1995 and 1994, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 1, the Company changed its method of accounting
for certain investments in debt and equity securities in 1994, and
its method of accounting for income taxes in 1993.
Coopers & Lybrand L.L.P.
Indianapolis, Indiana
February 16, 1996
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
for the Years Ended December 31, 1995, 1994 and 1993
December 31,
1995 1994 1993
Premiums earned $143,865,821 $135,001,881 $125,902,355
Net investment income 14,563,820 13,995,984 13,568,919
Net realized investment gains 1,538,281 285,701 890,052
Other income (expense) (146,345) 54,623 (114,865)
Total revenues 159,821,577 149,338,189 140,246,461
Losses and loss adjustment expenses 99,123,849 93,970,529 86,621,891
General operating expenses 14,155,631 14,527,021 14,935,470
Amortization expenses 30,820,058 29,304,576 27,039,135
Total expenses 144,099,538 137,802,126 128,596,496
Income before taxes and change in
accounting method 15,722,039 11,536,063 11,649,965
Income taxes (benefit)
Current 3,554,000 2,574,000 3,368,000
Deferred 551,000 (159,000) (603,000)
Total income taxes 4,105,000 2,415,000 2,765,000
Income before change in
accounting method 11,617,039 9,121,063 8,884,965
Cumulative effect of change in
accounting method:
Accounting for income taxes -- -- 525,804
Net income $ 11,617,039 $ 9,121,063 $ 9,410,769
Weighted average shares outstanding 6,770,081 6,739,712 6,138,706
Per share data:
Income before change in
accounting method $ 1.72 $ 1.35 $ 1.45
Change in accounting method:
Accounting for income taxes -- -- 0.08
Net income $ 1.72 $ 1.35 $ 1.53
The accompanying notes are an integral part of the consolidated
financial statements.
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
as of December 31, 1995 and 1994
December 31,
1995 1994
ASSETS
Investments:
Fixed maturities--available for sale, at market
value (cost $213,816,000 and $201,577,000) $220,036,772 $191,483,830
Fixed maturities--held to maturity, at amortized
cost (market value $0 and $4,757,000) -- 4,389,117
Equity securities, at market
(cost $26,961,000 and $19,323,000) 31,119,875 18,377,530
Short-term investments, at cost, which
approximates market 2,483,338 4,124,829
Other invested assets 1,053,905 1,085,271
Total investments 254,693,890 219,460,577
Cash 935,098 603,566
Premium receivable, net of allowance for bad debts 2,642,425 2,491,976
Accrued investment income 2,942,194 3,063,515
Deferred policy acquisition costs 13,354,600 11,977,429
Goodwill 2,152,339 2,280,788
Reinsurance receivables 32,469,285 32,703,457
Prepaid reinsurance premiums 2,617,138 2,619,792
Due from Meridian Mutual Insurance Company 9,358,803 6,810,483
Other assets 1,422,444 9,394,448
Total assets $322,588,216 $291,406,031
LIABILITIES AND SHAREHOLDERS' EQUITY
Losses and loss adjustment expenses $123,577,240 $123,754,650
Unearned premiums 64,558,695 59,663,286
Other post-employment benefits 1,298,378 1,101,155
Reinsurance payables 6,863,626 5,890,675
Other liabilities 8,047,610 6,743,826
Total liabilities 204,345,549 197,153,592
Shareholders' equity:
Common shares, no par value, Authorized-20,000,000
Issued-6,803,185 and 6,769,343, Outstanding-
6,776,805 and 6,742,763 at December 31, 1995 and
1994, respectively 44,076,685 43,930,722
Contributed capital 15,058,327 15,058,327
Unrealized appreciation (depreciation) of
investments, net of deferred income taxes 6,842,245 (7,281,724)
Retained earnings 52,265,410 42,545,114
Total shareholders' equity 118,242,667 94,252,439
Total liabilities and shareholders' equity $322,588,216 $291,406,031
The accompanying notes are an integral part of the consolidated
financial statements.
<TABLE>
<CAPTION>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
for the Years Ended December 31, 1995, 1994 and 1993
Unrealized Unearned
Appreciation Restricted
Common Contributed (Depreciation) Retained Common
Shares Capital of Investments Earnings Shares
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993 $24,391,097 $15,058,327 $ 2,722 $27,147,210 $ --
Net income -- -- -- 9,410,769 --
Sale of 1,725,000 shares of
common stock 19,458,000 -- -- -- --
Stock issue costs (494,040) -- -- -- --
Unrealized appreciation of
equity securities, net of
deferred income taxes -- -- 488,305 -- --
Dividends ($0.24 per share) -- -- -- (1,516,117) --
Issuance of 49,667 restricted
common shares 526,504 -- -- -- (526,504)
Vested restricted common shares 33,758 -- -- -- 432,004
Exercise of stock options for
6,000 common shares 34,500 -- -- -- --
Forfeiture of 9,000
restricted common shares (94,500) -- -- -- 94,500
Balance at December 31, 1993 43,855,319 15,058,327 491,027 35,041,862 0
Cumulative effect of accounting
change for certain investments,
net of deferred income taxes -- -- 4,417,201 -- --
Net income -- -- -- 9,121,063 --
Unrealized depreciation of
investment securities, net of
deferred income taxes -- -- (12,189,952) -- --
Dividends ($0.24 per share) -- -- -- (1,617,811) --
Vested restricted common shares 35,584 -- -- -- --
Exercise of stock options for
6,925 common shares 39,819 -- -- -- --
Balance at December 31, 1994 43,930,722 15,058,327 (7,281,724) 42,545,114 0
Net income -- -- -- 11,617,039 --
Unrealized appreciation of
investment securities, net of
deferred income taxes -- -- 14,123,969 -- --
Dividends ($0.28 per share) -- -- -- (1,896,743) --
Exercise of stock options for
40,521 common shares 222,996 -- -- -- --
Repurchase and retirement of
6,479 common shares (77,033) -- -- -- --
Balance at December 31, 1995 $44,076,685 $15,058,327 $ 6,842,245 $52,265,410 $ 0
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the Years Ended December 31, 1995, 1994 and 1993
December 31,
1995 1994 1993
Cash flows from operating activities:
Net income $ 11,617,039 $ 9,121,063 $ 9,410,769
Reconciliation of net income to net
cash provided by operating
activities:
Realized investment gains (1,538,281) (285,701) (890,052)
Amortization 31,257,989 30,202,060 27,364,007
Deferred policy acquisition costs (32,068,780) (29,181,486) (29,270,562)
Increase in unearned premiums 4,895,409 982,535 5,398,792
Increase (decrease) in loss and
loss adjustment expense (177,410) 3,990,725 15,206,998
Increase in amount due from Meridian
Mutual (2,548,320) (1,337,003) (1,067,309)
Decrease (increase) in reinsurance
receivables 234,172 (2,303,137) (6,972,539)
Decrease (increase) in prepaid
reinsurance premiums 2,654 205,510 (695,342)
Decrease (increase) in other assets 66,763 (638,901) (732,235)
Increase in other post-employment
benefits 197,223 102,060 84,095
Decrease in payable under funded
cover contract -- -- (536,815)
Increase (decrease) in reinsurance
payables 972,951 (248,655) 333,172
Increase in other liabilities 116,619 831,814 1,463,115
Other, net 755,919 (247,430) (367,222)
Net cash provided by operating
activities 13,783,947 11,193,454 18,728,872
Cash flows from investing activities:
Purchase of fixed maturities, held to
maturity -- (598,781) (15,053,397)
Purchase of fixed maturities, available
for sale (39,897,557) (36,558,664) (84,512,019)
Proceeds from sale of fixed maturities 17,111,272 18,528,560 37,608,463
Proceeds from calls, prepayments
and maturity of fixed maturities 14,404,070 16,403,055 34,508,225
Purchase of equity securities (15,735,622) (16,369,601) (14,592,666)
Proceeds from sale of equity securities 9,556,180 10,267,616 2,249,118
Net (increase) decrease in short-term
investments 1,641,491 (2,075,005) 4,896,901
Decrease (increase) in other invested
assets 31,366 (347,414) 4,586
Increase (decrease) in securities
payable 1,117,355 430,569 (927,801)
Net cash used in investing activities (11,771,445) (10,319,665) (35,818,590)
Cash flows from financing activities:
Repurchase and retirement of common
stock (77,033) -- --
Net proceeds from issuance of common
stock -- -- 18,963,960
Exercise of stock options 222,996 39,819 34,500
Dividends paid (1,826,933) (1,617,696) (1,409,713)
Net cash provided by (used in)
financing activities (1,680,970) (1,577,877) 17,588,747
Increase (decrease) in cash 331,532 (704,088) 499,029
Cash at beginning of year 603,566 1,307,654 808,625
Cash at end of year $ 935,098 $ 603,566 $ 1,307,654
Net cash provided by operating activities reflects cash
payments for income taxes as follows:
Federal income tax paid $ 3,247,630 $ 2,950,000 $ 3,323,445
The accompanying notes are an integral part of the consolidated financial
statements.
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.Summary of Significant Accounting Policies
Nature of Operations
Meridian Insurance Group, Inc. ("the Company"), was organized in
1986 as a subsidiary of Meridian Mutual Insurance Company
("Meridian Mutual"), an Indiana mutual insurance company that
currently owns 46.5 percent of the outstanding common shares of
the Company. The Company is a regional holding company
principally engaged in the business of underwriting property and
casualty insurance through its wholly-owned subsidiary, Meridian
Security Insurance Company ("Meridian Security"), which owns 100
percent of Vernon Fire & Casualty Insurance Company ("Vernon").
The Company also has two non-insurance subsidiaries, Meridian
Service Corporation, a service support company, and MarketMasters
Agency, Inc., an insurance agency. During the periods presented,
the results of operations of the Company's non-insurance
subsidiaries were not significant. The Company participates in
the underwriting gain or loss on business written by Meridian
Mutual pursuant to a reinsurance pooling agreement between
Meridian Mutual and Meridian Security which covers all of the
property and casualty business of the two companies. (See Note 4.)
Meridian Mutual writes a broad line of property and casualty
insurance, including personal and commercial automobile;
homeowners, farmowners and commercial multi-peril; and workers'
compensation. Business is written through approximately 925
independent insurance agencies in the states of Illinois,
Indiana, Kentucky, Michigan, Ohio, Tennessee, and Wisconsin.
During the fourth quarter of 1995, Meridian Mutual was granted
licenses to write insurance in the states of Iowa, Minnesota and
Pennsylvania; however, no direct premiums were written in these
three states during 1995. Meridian Security is licensed in all
states in which Meridian Mutual is licensed with the exception of
Pennsylvania, for which an application is currently pending.
During 1995, Meridian Security wrote personal and farm lines
policies in Indiana, Kentucky, Ohio, Tennessee, and Wisconsin
through approximately 400 independent insurance agencies, many of
which are cross-licensed with Meridian Mutual.
Basis of Presentation
The consolidated financial statements have been prepared on the
basis of generally accepted accounting principles which differ in
some respects from those followed in reports to insurance
regulatory authorities. Certain prior year amounts have been
reclassified to conform to the current-year presentation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
and disclosure of certain assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of
Meridian Insurance Group, Inc., and its wholly-owned subsidiaries.
All intercompany transactions have been eliminated.
Investments
Fixed maturity investments include bonds, notes, collateralized
mortgage obligations, mortgage backed pass-through securities and
sinking fund and perpetual preferred stocks. The fixed maturity
portfolio is invested in securities classified as available for
sale and is carried at quoted market values. Equity
securities, consisting entirely of unaffiliated common stocks, are
reported at market. Short-term investments are recorded at cost,
approximating market value. Other investments include a limited
partnership recorded on the equity method and a mortgage loan
stated at the aggregate unpaid balance.
Realized gains or losses on disposition of investments are
determined on a specific identification basis. Unrealized gains
and losses resulting from changes in the valuation of both equity
securities and fixed maturities available for sale are recorded
directly in shareholders' equity, net of applicable deferred
income taxes.
The Company regularly evaluates its investments based on current
economic conditions, past credit loss experience and other
circumstances of the Company. A decline in a security's net
market value that is not a temporary fluctuation is recognized as
a realized loss, and the cost basis of that security is reduced.
Premium Revenue
Premiums are recognized as revenue on a monthly pro-rata basis
over the coverage terms of the respective policies. Any premiums
applicable to the future terms of the policies are included in
liabilities as unearned premiums.
Deferred Policy Acquisition Costs
Policy acquisition costs, principally commissions, premium taxes,
and variable underwriting and policy issue expenses, have been
deferred. Such costs are amortized as premium revenue is earned.
The method used in computing deferred policy acquisition costs
limits the amount of such deferred costs to their estimated
realizable value, and also considers the effects of anticipated
investment income, losses and loss adjustment expenses, and
certain other costs anticipated to be incurred as the premium is
earned.
Goodwill
The Company's goodwill represents the excess of cost over the fair
value of identifiable net assets acquired from business
acquisitions and is being amortized on a straight-line basis over
a 25-year period.
Losses and Loss Adjustment Expenses
Reserves for unpaid losses and loss adjustment expenses are based
on both estimates of the ultimate costs of individual claims and
on other non-discounted estimates, such as claims incurred but not
reported and salvage and subrogation. The methods of making such
estimates are continually reviewed and updated, and any reserve
adjustments are reflected in current operating results.
Accounting For Stock-Based Compensation
In November 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation" to
become effective for financial statements for fiscal years
beginning after December 15, 1995. This Statement encourages, but
does not require, companies to recognize compensation expense for
grants of stock, stock options, and other equity instruments to
employees based on the fair value method of accounting. The
Company intends to continue to value its stock option plans under
the existing accounting rules contained in Accounting Principles
Board Opinion No. 25. The Company intends to disclose the pro-
forma impact of SFAS No. 123 on net income and earnings per share,
the effect of which has not yet been determined. See Note 10 for
a detailed description of the Company's incentive stock plans.
Accounting For Certain Investments in Debt and Equity Securities
Effective January 1, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities". Under this statement the Company classified all
investment securities into three categories:
Held-to-maturity securities (those securities which the Company
has the ability and positive intent to hold to maturity) are
carried at amortized cost. The Company may only dispose of
such securities under certain unforeseen circumstances, such as
issuer credit deterioration or regulatory requirements.
Available-for-sale securities (securities that may be sold prior
to maturity if changes occur in market interest rate risks, changes
in securities prepayment risk, the Company's management of its income
tax position, its general liquidity needs, etc.) are carried at fair
value, with the unrealized gains and losses recorded, net of deferred
tax, to shareholders' equity.
Trading securities (securities purchased for trading) are carried at
fair value, with the unrealized gains and losses reflected in the
consolidated statement of income.
Initially, the Company classified approximately 98 percent of its
fixed maturities as "available for sale" and 2 percent as "held to
maturity", with no fixed maturities being assigned to the
"trading" category. The cumulative effect of adopting SFAS No.
115 resulted in a $4,417,201 increase, net of deferred income
taxes, to the Company's shareholders' equity.
On November 30, 1995, the Company, as permitted in Q61 of the FASB
Special Report on SFAS No. 115, transferred all holdings
classified as "held to maturity" to the "available for sale"
category. This transaction did not have a material effect on the
Company's financial statements.
Accounting for Income Taxes
In 1993, the Company adopted SFAS No. 109, "Accounting for Income
Taxes", which requires that deferred income taxes be calculated
using the liability method. Companies establish deferred tax
liabilities or assets estimating the future tax effects of
temporary differences between the tax basis of an asset or
liability and the basis recorded in financial statements. Changes
in future tax rates thus cause immediate adjustments to deferred
taxes. The cumulative effect of adopting this statement resulted
in a tax benefit for the Company of $525,804, representing an
increase in the net deferred tax asset as of January 1, 1993. The
cumulative effect of this reporting change increased the Company's
income per share by $0.08 for the year ended December 31, 1993.
Net Income per Share
Net income per share is computed by dividing net income by the
weighted average number of common shares outstanding during the
year.
2.Investments
Investment income is summarized as follows:
1995 1994 1993
Interest on fixed maturities:
Tax-exempt securities $ 3,578,156 $ 3,050,947 $ 2,894,337
Taxable securities 8,727,315 8,251,261 8,052,603
Dividends on redeemable
preferred stock 2,402,974 2,673,605 2,667,643
Dividends on equity securities 560,390 339,559 130,250
Interest on short-term investments 247,272 162,067 170,167
Other investment income 84,873 146,698 302,371
Total investment income 15,600,980 14,624,137 14,217,371
Investment expenses 1,037,160 628,153 648,452
Net investment income $14,563,820 $13,995,984 $13,568,919
Realized and unrealized gains on investments are summarized as
follows:
1995 1994 1993
Realized gains (losses):
Fixed maturities $ 87,370 $ (118,358) $ 896,166
Equity securities 1,458,589 404,059 (6,114)
Other invested assets (7,678) -- --
Total realized investment gains $ 1,538,281 $ 285,701 $ 890,052
Net change in unrealized
appreciation (depreciation):
Fixed maturities, available
for sale $16,373,654 $(16,819,514) $ --
Equity securities 5,104,315 (1,696,054) 740,305
Cumulative effect of accounting
change for certain investments -- 6,743,818 --
Deferred income tax from
cumulative effect of accounting
change for certain investments -- (2,326,617) --
Deferred income tax benefit
(expense) (7,354,000) 6,325,616 (252,000)
Net change in unrealized
appreciation (depreciation) $14,123,969 $ (7,772,751) $ 488,305
Net change in unrealized appre-
ciation (depreciation) of fixed
maturities, held to maturity $ (367,533) $ (713,522) $ 5,187,662
The fixed maturity portfolio at December 31, 1995 consisted
entirely of securities classified as available for sale. At
December 31, 1994, the portfolio was made up of both securities
that were expected to be held to maturity and those classified as
available for sale. The amortized cost and estimated market
values of investments in fixed maturity securities at December 31,
1995 and 1994, are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
December 31, 1995
Available for sale:
Government and agency
domestic bonds $ 8,127,012 $ 600,241 $ 3,790 $ 8,723,463
Municipal bonds 72,356,941 2,649,867 371,703 74,635,105
Corporate bonds 40,484,745 1,633,386 5,580 42,112,551
Mortgage-backed
securities 57,037,770 1,425,970 158,915 58,304,825
Sinking fund preferred
stocks 35,809,142 803,950 352,264 36,260,828
Total fixed maturity
securities $213,815,610 $ 7,113,414 $ 892,252 $220,036,772
December 31, 1994
Held to maturity:
Government and agency
domestic bonds $ 836,966 $ 264,034 $ -- $ 1,101,000
Municipal bonds 2,555,000 118,409 11,064 2,662,345
Mortgage-backed
securities 997,151 5,393 9,239 993,305
Total held to maturity 4,389,117 387,836 20,303 4,756,650
Available for sale:
Government and agency
domestic bonds 10,374,013 6,820 262,473 10,118,360
Municipal bonds 60,559,578 203,144 3,242,025 57,520,697
Corporate bonds 33,777,177 167,484 1,898,193 32,046,468
Mortgage-backed
securities 61,167,044 228,563 1,850,753 59,544,854
Sinking fund preferred
stocks 35,698,821 148,190 3,593,560 32,253,451
Total available for
sale 201,576,633 754,201 10,847,004 191,483,830
Total fixed maturity
securities $ 205,965,750 $ 1,142,037 $10,867,307 $196,240,480
The amortized cost and estimated market value of fixed maturity
securities available for sale at December 31, 1995, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrower's may have the right to
call or prepay obligations with or without call or prepayment
penalties.
Estimated
Amortized Market
Cost Value
Available for sale:
Due in one year or less $ 818,008 $ 692,263
Due after one year through five years 31,104,759 31,960,828
Due after five years through ten years 46,709,065 49,029,337
Due after ten years through fifteen years 53,417,983 55,177,084
Due after fifteen years 24,728,025 24,872,435
Subtotal 156,777,840 161,731,947
Mortgage-backed securities 57,037,770 58,304,825
Total fixed maturity securities $213,815,610 $220,036,772
Proceeds from sales of investments in fixed maturity securities
during 1995, 1994 and 1993, respectively, were $17,111,272,
$18,528,560 and $37,608,463. During 1995, 1994 and 1993,
respectively, gross gains of $445,260, $444,784 and $1,400,322 and
gross losses of $357,890, $563,142 and $504,156 were realized on
those sales.
Unrealized appreciation resulting from changes in the valuation of
equity securities at December 31, 1995 totaled $4,158,392,
representing $4,907,598 of gains on certain securities and
$749,206 of losses on other securities.
3.Distribution of Proceeds From Public Offering
On May 5, 1993, Meridian Insurance Group, Inc., completed a second
stock offering of 1,725,000 common shares at $12 per share. Total
proceeds received from this offering, net of commissions, were
$19,458,000; related underwriting expenses totaled $494,040. This
stock offering allowed the Company to contribute $18,000,000 to
its principal subsidiary, Meridian Security Insurance Company,
thus increasing Meridian Security's surplus and enabling it to
assume a greater volume of business under the reinsurance pooling
agreement. (See Note 4.)
4.Related Party Transactions
Meridian Security and Meridian Mutual are parties to a reinsurance
pooling agreement ("pooling agreement") structured such that
Meridian Security cedes all of its insurance business to Meridian
Mutual and in turn receives back a percentage participation in all
of the business written by both companies. All losses and loss
adjustment expenses as well as other underwriting expenses are
shared by Meridian Mutual and Meridian Security based on their
percentage participation defined in the pooling agreement. Other
expenses are allocated on the basis of specific identification or
estimated costs. Amounts either due to or due from Meridian
Mutual result from these transactions, and are normally reimbursed
on a monthly basis. Management believes that such expenses would
not be materially different if incurred directly by each company.
Effective May 1, 1993, Meridian Security's participation in the
reinsurance pooling agreement was increased to 74 percent from the
62 percent in effect since April, 1987. In exchange for Meridian
Security's increased assumption of liabilities for unearned
premiums and losses and loss adjustment expenses under the pooling
agreement, Meridian Mutual transferred cash and marketable
securities having a market value of $18,493,000 to Meridian
Security, net of a ceding commission of $2,491,893. The ceding
commission was amortized as the related premium revenue was
recognized. The following table presents the pro-forma
underwriting results of Meridian Insurance Group, Inc., for the
year ended December 31, 1993 as though Meridian Security's
participation in the pooling agreement had been at the 74 percent
level for the entire period:
1993
Premiums earned $130,405,000
Losses and loss adjustment expenses 90,428,000
General operating expenses 15,420,000
Amortization of deferred acquisition costs 27,385,000
Underwriting gain (loss) $ (2,828,000)
For the year ended December 31, 1995, approximately 90 percent of
the Company's total premium volume was derived from its
participation in the pooling agreement. In 1994 and 1993,
approximately 84 percent and 87 percent, respectively, was derived
from the pooling arrangement.
Meridian Security has no employees and is dependent on the
business and operations of Meridian Mutual. Meridian Mutual has a
defined pension plan covering substantially all employees and a
non-tax qualified retirement plan for certain key employees.
Related pension costs allocated to the Company in 1995 were
approximately $100,000. The Company also participates in the
multi-employer plan for other post-retirement benefits offered by
Meridian Mutual to employees, including medical benefits for
early retirees (eligible upon attainment of age 55 and five years
of service up to age 65) and group term life insurance that phases
out over a five year period from the retirement date. Related
costs allocated to the Company were approximately $102,000,
$84,000 and $100,000 for 1995, 1994 and 1993, respectively.
Effective January 1, 1994, Vernon transferred its book of business to
Meridian Security via an assumption reinsurance agreement. Under
the agreement, Meridian Security assumed all of the in-force
business and liabilities of Vernon. This transfer did not have a
material impact on the Company's financial statements. Prior to
the assumption reinsurance agreement, the operations of Vernon
were not included in the pooling arrangement between Meridian
Mutual and Meridian Security; Vernon had separate agreements with
Meridian Mutual for both reinsurance and for services provided by
Meridian Mutual for the Vernon operation. For the year ended
December 31 1993, Vernon ceded approximately $2,259,000 in
premiums to Meridian Mutual. As a result of the assumption
reinsurance agreement, Vernon no longer writes insurance business
and is currently a dormant operation.
The Company's non-insurance subsidiaries are provided office space
and various services by Meridian Mutual and Meridian Security.
Expenses are allocated to such subsidiaries on the basis of
specifically identified or estimated costs.
5.Liability for Losses and Loss Adjustment Expenses
Activity in the liability for losses and loss adjustment expenses
is summarized as follows:
1995 1994 1993
Balance at beginning of period $123,754,650 $119,763,925 $ 95,105,928
Less reinsurance recoverables 31,815,440 30,133,606 23,099,968
Net balance at beginning of period 91,939,210 89,630,319 72,005,960
Incurred related to:
Current year 104,584,909 99,444,243 92,995,660
Prior years (5,461,060) (5,473,714) (6,373,769)
Total incurred 99,123,849 93,970,529 86,621,891
Paid related to:
Current year 61,791,602 55,216,000 48,107,000
Prior years 36,898,679 36,445,638 20,890,532
Total paid 98,690,281 91,661,638 68,997,532
Net balance at end of period 92,372,778 91,939,210 89,630,319
Plus reinsurance recoverables 31,204,462 31,815,440 30,133,606
Balance at end of period $123,577,240 $123,754,650 $119,763,925
6.Reinsurance
Meridian Mutual and Meridian Security limit the maximum net loss
which can arise from large risks or risks in concentrated areas of
exposure by reinsuring their insurance business with other
insurers. In accordance with industry practice, the Company in
its consolidated financial statements treats risks, to the extent
reinsured, as though they were risks for which the Company is not
liable. Reinsurance recoverables are estimated in a manner
consistent with the claim liability associated with the reinsured
policy. Insurance ceded by the Company's insurance subsidiaries
does not relieve the subsidiaries' primary liability as the
originating insurers. The following table sets forth data
relating to third party reinsurance transactions.
1995 1994 1993
Ceded:
Premiums earned $11,126,543 $12,062,572 $11,587,107
Unearned premiums $ 2,617,138 $ 2,619,792 $ 2,564,379
Reserve for losses and loss
adjustment expenses $31,204,462 $31,815,440 $30,133,606
Three types of reinsurance are purchased jointly by Meridian
Mutual and Meridian Security. Treaty reinsurance automatically
covers certain types of policies up to contracted limits.
Meridian Mutual and Meridian Security are named as insured
parties, so contracted coverage applies to risks written by either of
the companies. Facultative reinsurance is purchased on an individual
risk basis and sets specific limits of coverage. Such coverage is
purchased to cover liability and property exposures in excess of
$200,000, up to the limits set forth in the individual treaty. In
addition, a separate catastrophe reinsurance treaty provides
coverage for multiple losses caused by a single catastrophic event
such as a windstorm or earthquake. The combined retention for
Meridian Mutual and Meridian Security under this contract was
$3,250,000 plus five percent of losses up to the $50,000,000
contract limit.
In 1993, FASB announced that the financial statements of insurance
companies must accrue certain liabilities under funded cover
catastrophe arrangements with reinsurers in accordance with SFAS
No. 5. During 1995, the Company had an excess catastrophe
agreement which was classified as "funded cover" reinsurance.
This "funded cover" reinsurance agreement expired on December 31,
1995 with an excess balance of approximately $1,360,000 to be
returned to the Company.
Approximately 99 percent of the Company's ceded reserves for
losses and loss adjustment expenses are with Michigan Catastrophic
Claims Association, Employers Reinsurance Corporation and General
Reinsurance Corporation. Reinsurance recoveries recognized for
the years ended December 31, 1995, 1994 and 1993 were $1,547,000,
$2,758,000 and $4,685,544, respectively. The effect of
reinsurance on premiums written and earned for the years ended
December 31, 1995, 1994 and 1993 are as follows:
1995 1994 1993
Premiums written:
Direct $152,596,128 $144,084,372 $144,272,466
Assumed 7,269,782 6,132,096 6,005,502
Ceded (11,102,025) (14,026,543) (14,121,576)
Net $148,763,885 $136,189,925 $136,156,392
Premiums earned:
Direct $149,748,331 $141,275,894 $134,021,523
Assumed 5,222,170 5,744,277 5,690,972
Ceded (11,104,680) (12,018,290) (13,810,140)
Net $143,865,821 $135,001,881 $125,902,355
On December 29, 1995, Meridian Mutual entered into an indemnity
reinsurance agreement with Celina Mutual Insurance Company
regarding commercial line business in the state of Pennsylvania.
This transaction was recorded as assumed written premium, which
will be earned over the next twelve months. Renewals of these
policies will be recorded as direct business of Meridian Mutual.
Through the pooling agreement, Meridian Security assumed premiums
written of approximately $2,100,000 and ceding commissions of
approximately $409,000, all of which have been deferred until the
premiums are earned.
7.Deferred Policy Acquisition Costs
Changes in deferred policy acquisition costs are summarized as
follows:
1995 1994 1993
Deferred, beginning of period $11,977,429 $11,972,069 $9,612,192
Additions:
Commissions 25,797,651 23,444,057 23,403,068
Ceding commission 409,350 621,494 2,491,893
Premium taxes 1,625,370 2,108,746 1,586,490
Other 4,236,409 3,007,189 1,789,111
32,068,780 29,181,486 29,270,562
Amortization expense 30,691,609 29,176,126 26,910,685
Deferred, end of period $13,354,600 $11,977,429 $11,972,069
8.Income Taxes
Current tax expense for the following periods differed from the
tax expected solely on pre-tax income by applying the applicable
statutory corporate tax rate to the various differences identified
as follows:
1995 1994 1993
Tax at statutory rate $ 5,403,000 $ 3,813,000 $ 3,849,000
Tax-exempt interest (1,005,000) (897,000) (827,000)
Dividends received deduction (598,000) (593,000) (581,000)
Salvage and subrogation fresh start (7,000) (20,000) (130,000)
Nondeductible expenses 109,000 74,000 75,000
Other 203,000 38,000 379,000
Total income taxes $ 4,105,000 $ 2,415,000 $ 2,765,000
The Revenue Reconciliation Act of 1990 required insurance
companies to accrue future recoveries of salvage and subrogation
on a discounted basis. A fresh start of 87 percent of the
beginning 1990 discounted balance was provided for by that act.
The impact of this provision has been calculated at $923,000, of
which approximately $7,000 was recognized in 1995, $20,000 in
1994, and $130,000 in 1993. Prior to 1993, $746,000 was
recognized.
The deferred income tax provision results from temporary
differences in the recognition of certain items for tax and
financial statement purposes. The sources of these temporary
differences and the resulting components of the deferred tax
provision are as follows:
1995 1994 1993
Deferred policy acquisition costs $ 542,000 $ 2,000 $ 862,000
Loss and loss expense reserves and
salvage and subrogation 366,000 45,000 (1,092,000)
Unearned premium reserves (400,000) (82,000) (753,000)
Payable under funded cover contract -- -- 183,000
Post-employment benefits (74,000) (35,000) (34,000)
Investments 98,000 (105,000) 14,000
Other 19,000 16,000 217,000
Total deferred income taxes
(benefit) $ 551,000 $ (159,000) $ (603,000)
Under SFAS No. 109, "Accounting For Income Taxes", the Company
recorded a net deferred tax asset in 1995 and 1994, which is
included among other assets. The net deferred tax asset at
December 31, 1995 and 1994, is comprised of the following:
1995 1994 1993
Deferred tax assets:
Unearned premium reserves $ 4,336,000 $ 3,936,000 $ 3,854,000
Loss and loss expense reserves and
salvage and subrogation 4,980,000 5,346,000 5,391,000
Unrealized depreciation on
investment securities -- 3,747,000 --
Other post-employment benefits 454,000 380,000 345,000
Other -- 10,000 24,000
Total deferred tax assets 9,770,000 13,419,000 9,614,000
Deferred tax liabilities:
Deferred policy acquisition costs 4,674,000 4,132,000 4,130,000
Investments 178,000 80,000 184,000
Unrealized appreciation on investment
securities 3,607,000 -- 252,000
Other 34,000 25,000 24,000
Total deferred tax liabilities 8,493,000 4,237,000 4,590,000
Net deferred tax asset $ 1,277,000 $ 9,182,000 $ 5,024,000
The Company has paid income taxes during the last three preceding
years that exceed the recorded deferred income tax asset generated
by operations.
9.Statutory Information
Subsidiary retained earnings available for distribution as
dividends to the Company are limited by law to the statutory
unassigned surplus of the subsidiaries on the previous December 31,
as determined in accordance with the accounting practices
prescribed or permitted by insurance regulatory authorities of the
State of Indiana (statutory basis). Subject to this limitation,
the maximum dividend that may be paid during a 12-month period,
without prior approval of the insurance regulatory authorities, is
the greater of ten percent of statutory capital and surplus as of
the preceding December 31 or net income for the preceding calendar
year determined on a statutory basis. Meridian Security declared
and paid dividends to the Company of $2,400,000 in 1995, $2,200,00
in 1994 and $500,000 in 1993. As of December 31, 1995,
approximately $11,0000,000 was available for distribution to the
Company without prior approval of the insurance regulatory
authorities.
The following is selected information for the Company's insurance
subsidiaries, as determined in accordance with accounting practices
prescribed or permitted by the Department of Insurance of the State
of Indiana:
1995 1994 1993
Statutory capital and surplus $ 90,952,000 $ 74,716,000 $ 72,260,000
Statutory net investment income $ 14,733,000 $ 13,927,000 $ 13,526,000
Statutory net income $ 11,625,000 $ 10,097,000 $ 5,165,000
10.Shareholders' Equity
In 1987, the Company's Board of Directors and Shareholders
approved an Incentive Stock Plan ("Plan") for the purpose of
attracting and retaining key employees. On June 23, 1993, the Plan
was amended to increase the maximum number of common shares
authorized for issuance under the Plan to 750,000 shares. Awards
under the Plan may include non-qualified and incentive stock
options, stock appreciation rights, and restricted stock. Options
to purchase common shares granted under the Plan are to have an
exercise price of not less than the fair market value of the
Company's common shares on the date of grant. Options are to be
exercisable beginning one year from the date of grant and are to
expire over various periods not to exceed ten years from the date
of grant. Stock appreciation rights may be granted, which are
subject to the same terms as the options and are exercisable only
to the extent such options are exercisable. Restricted stock
awards may be granted subject to terms and conditions as prescribed
by the committee which administers the Plan.
In 1991, options with respect to 88,647 common shares were granted to
60 employees of Meridian Mutual and Vernon. These options have a
term of five years, become exercisable in full beginning on the
first anniversary of the date of the grant, and have an exercise
price of $5.75 per share. As of December 31, 1995, 69,047 shares
of these options had been exercised.
In 1994 and early 1995, options with respect to 268,280 common
shares were granted to 13 key employees of Meridian Mutual. These
options have a term of ten years with one-third of the shares
granted to each employee becoming exercisable annually beginning on
the first anniversary of the date of grant, at $11.875 per share.
As of December 31, 1995, none of these options had been exercised
and 19,099 of these options had been forfeited.
The 1994 Outside Director's Stock Option Plan ("Plan") provides
for an aggregate maximum of up to 150,000 common shares to be
issued upon the exercise of options granted to "outside" directors,
who are defined as non-employee directors of the Company or
Meridian Mutual. Each outside director was granted an option to
purchase 1,000 common shares on May 4, 1994, and automatically will
be granted an option to purchase an additional 1,000 common shares
on the date of each subsequent annual meeting of shareholders held
prior to termination of the Plan. The exercise price per share for
each option will be equal to the fair market value of a common
share on the date of grant of the option. Each option will be
exercisable commencing one year after the date of grant and will
expire no later than 10 years after the date of grant. As of
December 31, 1995, 21,000 options have been granted under the Plan
and none of the options have been exercised.
In 1995, options with respect to 26,000 common shares were granted
to 26 key management/professional personnel of Meridian Mutual.
These options have a term of 10 years. One-half of the options
granted to each employee will become exercisable on November 30,
1996, and one-half on November 30, 1997, at $15.28 per share
subject to the individual's employment on the vesting date. As of
December 31, 1995, none of the options had been exercised and 2,000
of the options had been forfeited.
11.Unaudited Selected Quarterly Financial Data
(Amounts in thousands except per-share data)
1995
First Second Third Fourth
Revenues $ 38,667 $ 39,633 $ 41,400 $ 40,122
Net income $ 2,751 $ 1,261 $ 3,404 $ 4,201
Net income per share $ 0.41 $ 0.19 $ 0.50 $ 0.62
1994
First Second Third Fourth
Revenues $ 35,734 $ 37,089 $ 38,542 $ 37,973
Net income $ 360 $ 1,718 $ 2,632 $ 4,411
Net income per share $ 0.05 $ 0.26 $ 0.39 $ 0.65
12.Subsequent Events
On February 8, 1996, the Company and Citizens Security Group, Inc.
("Citizens") jointly announced that they have entered into a letter
of intent providing for Meridian Security's acquisition of Citizens
for approximately $29 million in cash. The transaction is subject
to the execution of a definitive acquisition agreement which is
expected by mid-March 1996. The acquisition is conditioned upon
approval by the companies' Boards of Directors, Citizens' common
and preferred shareholders and insurance regulators in Indiana,
Minnesota and Ohio, where the insurance companies are domiciled.
It is anticipated that the acquisition will be completed by mid-
year 1996.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated herein by
reference to the information contained under the captions "Election of
Directors" and "Executive Compensation" in the Company's definitive
proxy statement to be sent to shareholders in connection with the
annual meeting of shareholders to be held May 1, 1996.
ITEM 11: EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the information contained under the caption "Executive
Compensation" in the Company's definitive proxy statement to be sent
to shareholders in connection with the annual meeting of shareholders
to be held on May 1, 1996.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated herein by
reference to the information contained under the caption "Beneficial
Ownership of Common Shares" in the Company's definitive proxy
statement to be sent to shareholders in connection with the annual
meeting of shareholders to be held on May 1, 1996.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the information contained under the caption "Certain
Relationships and Transactions" in the Company's definitive proxy
statement to be sent to shareholders in connection with the annual
meeting of shareholders to be held on May 1, 1996.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) Documents filed as a part of this report.
(1) Financial Statements:
Report of Independent Accountants
Financial Statements:
Consolidated Statement of Income for the years ended December
31, 1995, 1994 and 1993
Consolidated Balance Sheet as of December 31, 1995 and 1994
Consolidated Statement of Shareholders' Equity for the years
ended December 31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
Report of Independent Accountants on Financial Statement
Schedules
Financial Statement Schedules:
Schedule I -- Summary of Investments Other Than Investments
in Related Parties
Schedule II -- Condensed Financial Information of Registrant
Schedule IV -- Reinsurance
Schedule VI -- Supplemental Information Concerning
Property-Casualty Insurance Operations
Schedules other than those listed above have been omitted
because the required information is contained in the financial
statements and notes thereto or because such schedules are not
required or applicable.
(3) Exhibits:
See Index to Exhibits
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the year ended December
31, 1995.
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.
By: /s/ Steven R. Hazelbaker
Steven R. Hazelbaker
Vice President, Chief Financial Officer
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on March
20, 1996, on behalf of the registrant in the capacities indicated:
/s/ Ramon L. Humke /s/ John T. Hackett
Ramon L. Humke John T. Hackett
Chairman of the Board Director
/s/ Norma J. Oman /s/ David M. Kirr
Norma J. Oman David M. Kirr
President, Chief Executive Officer Director
and Director
/s/ Brent Hartman /s/ Sarah W. Rowland
Brent Hartman Sarah W. Rowland
Senior Vice President Director
/s/ Harold C. McCarthy /s/ Van P. Smith
Harold C. McCarthy Van P. Smith
Director Director
/s/ Joseph D. Barnette, Jr. /s/ Thomas H. Sams
Joseph D. Barnette, Jr. Thomas H. Sams
Director Director
MERIDIAN INSURANCE GROUP, INC.
FORM 10-K
for the fiscal year ended December 31, 1995
Index to Exhibits
Exhibit Number
Assigned in
Regulation S-K
Item 601 Description of Exhibit
(3) 3.01 Restated Articles of Incorporation of Meridian
Insurance Group, Inc. (Incorporated by reference
to Exhibit 3.01 to the registrant's Form S-1
Registration Statement No. 33-11413.)
3.02 Bylaws of Meridian Insurance Group, Inc. (Incorporated
by reference to Exhibit 3.02 to the registrant's
Form 10-K for the fiscal year ended December 31, 1987;
Commission File No. 0-11413.)
(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.)
(9) No exhibit.
(10) 10.01 Form of Meridian Mutual Insurance Company Agency
Agreement. (Incorporated by reference to Exhibit 10.04
to the registrant's Form S-1 Registration Statement
No. 33-11413.)
10.02 Form of Meridian Security Insurance Company Agency
Agreement. (Incorporated by reference to Exhibit 10.05
to the registrant's Form S-1 Registration Statement
No. 33-11413.)
10.03 Form of Supplemental Pension Agreement between Meridian
Mutual Insurance Company and Harold C. McCarthy.
(Incorporated by reference to Exhibit 10.06 to the
registrant's Form S-1 Registration Statement No.
33-11413.) **
10.04 Meridian Insurance Group, Inc., Incentive Stock Plan.
(Incorporated by reference to Exhibit 10.07 to
Amendment No. 1 to the registrant's Form S-1
Registration Statement No. 33-11413.) **
10.05 The Meridian Mutual Insurance Company Non-employee
Director's Pension Plan. (Incorporated by reference to
Exhibit 10.11 to the registrant's Form 10-K for the
fiscal year ended December 31, 1988; Commission File
No. 0-11413.) **
10.06 Form of 1991 Non-qualified Stock Option Agreement under
1987 Meridian Insurance Group, Inc., Employee Incentive
Stock Plan. (Incorporated by reference to Exhibit 19.03
to the registrant's Form 10-K for the fiscal year ended
December 31, 1990; Commission File No. 0-11413.) **
10.07 Stock Option Agreement between Meridian Insurance Group,
Inc., and Norma J. (Hicks) Oman date December 17, 1990.
(Incorporated by reference to Exhibit 19.02 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1991; Commission File No. 0-11413.) **
10.08 Meridian Mutual Insurance Company Sharing Success Plan
effective January 1, 1992. (Incorporated by reference
to Exhibit 19.03 to the registrant's Form 10-K for the
fiscal year ended December 31, 1991; Commission File
No. 0-11413.) **
10.09 Form of Addendum to Supplemental Pension Agreement
between Meridian Mutual Insurance Company and Harold C.
McCarthy. (Incorporated by reference to Exhibit 19.07 to
the registrant's Form 10-K for the fiscal year ended
December 31, 1991; Commission File No. 0-11413.) **
10.10 Form of Change in Control Agreement between Meridian
Mutual Insurance Company and Norma J. Oman, William E.
Denny, J. Mark McKinzie, Brent Hartman, and Steven R.
Hazelbaker. (Incorporated by reference to Exhibit 19.08
to the registrant's Form 10-K for the fiscal year ended
December 31, 1991; Commission File No. 0-11413.) **
10.11 Funded Excess Catastrophe Reinsurance Contract issued to
Meridian Mutual Insurance Group effective January 1,
1992. (Incorporated by reference to Exhibit 10.25 to the
registrant's Form S-2 Registration Statement, File
No. 33-58406.)
10.12 Property Per Risk Excess of Loss Reinsurance Agreement
between Employers Reinsurance Corporation and Meridian
Mutual Insurance Company, Meridian Security Insurance
Company and Vernon Fire & Casualty Insurance Company
effective January 1, 1992. (Incorporated by reference
to Exhibit 10.26 to the registrant's Form S-2
Registration Statement, File No. 33-58406.)
10.13 Multiple Layer Reinsurance Agreement between Employers
Reinsurance Corporation and Meridian Mutual Insurance
Company, Meridian Security Insurance Company and Vernon
Fire & Casualty Insurance Company effective January 1,
1991. (Incorporated by reference to Exhibit 10.28 to
the registrant's Form S-2 Registration Statement, File
No. 33-58406.) Amendments No. 1 and No. 2 to Multiple
Layer Reinsurance Agreement. (Incorporated by reference
to Exhibit 19.12 to the registrant's Form 10-K for the
fiscal year ended December 31, 1993; Commission File
No. 0-11413.)
10.14 Form of 1991 Non-qualified Stock Option Agreement
Amendment effective February 13, 1992. (Incorporated
by reference to Exhibit 19.01 to the registrant's Form
10-K for the fiscal year ended December 31, 1992;
Commission File No. 0-11413.) **
10.15 Form of Vernon Fire & Casualty Insurance Company Agency
Contract. (Incorporated by reference to Exhibit 19.04
to the registrant's Form 10-K for the fiscal year ended
December 31, 1992; Commission File No. 0-11413.)
10.16 Form of Vernon Fire & Casualty Insurance Company Agency
Profit Sharing Agreement. (Incorporated by reference to
Exhibit 19.05 to the registrant's Form 10-K for the
fiscal year ended December 31, 1992; Commission File
No. 0-11413.)
10.17 Meridian Insurance Statement of Policy on Inter-Company
Expense Allocation. (Incorporated by reference to
Exhibit 19.06 to the registrant's Form 10-K for the
fiscal year ended December 31, 1992; Commission File
No. 0-11413.)
10.18 Reinsurance Pooling Agreement between Meridian Mutual
Insurance Company and Meridian Security Insurance
Company amended and restated as of June 23, 1993.
(Incorporated by reference to Exhibit 19.02 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1992; Commission File No. 0-11413.)
10.19 Form of Meridian Security Insurance Company Agency
Profit-Sharing Agreement. (Incorporated by reference
to Exhibit 19.03 to the registrant's Form 10-K for the
fiscal year ended December 31, 1993; Commission File
No. 0-11413.)
10.20 Form of Meridian Insurance Agency Profit-Sharing
Agreement. (Incorporated by reference to Exhibit 19.04
to the registrant's Form 10-K for the fiscal year ended
December 31, 1993; Commission File No. 0-11413.)
10.21 Meridian Insurance Group, Inc., 1994 Outside Director
Stock Option Plan. (Incorporated by reference to
Exhibit 19.05 to the registrant's Form 10-K for the
fiscal year ended December 31, 1993; Commission File
No. 0-11413.) **
10.22 Written Description of 1994 Meridian Mutual Insurance
Company Employee Incentive Plan. (Incorporated by
reference to Exhibit 19.08 to the registrant's Form
10-K for the fiscal year ended December 31, 1993;
Commission File No. 0-11413.) **
10.23 Commercial and Personal Umbrella Reinsurance Agreement
between Employers Reinsurance Corporation and Meridian
Mutual Insurance Company and Amendments No. 1 through 6
thereto. (Incorporated by reference to Exhibit 19.09
to the registrant's Form 10-K for the fiscal year ended
December 31, 1993; Commission File No. 0-11413.)
10.24 Personal Excess Liability Reinsurance Agreement between
Employers Reinsurance Corporation and Meridian Mutual
Insurance Company and Amendments No. 1 through 6
thereto. (Incorporated by reference to Exhibit 19.10
to the registrant's Form 10-K for the fiscal year ended
December 31, 1993; Commission File No. 0-11413.)
10.25 Written Description of 1995 Meridian Mutual Insurance
Company Employee Incentive Plan. (Incorporated by
reference to Exhibit 19.01 to the registrant's Form
10-K for the fiscal year ended December 31, 1994;
Commission File No. 0-11413.) **
10.26 Form of Supplemental Retirement Income Plan for
Employees of Meridian Mutual Insurance Company.
(Incorporated by reference to Exhibit 19.02 of the
registrant's Form 10-K for the fiscal year ended
December 31, 1994; Commission File No. 0-11413.) **
10.27 Form of 1994 Incentive Stock Option Agreement under
1987 Meridian Insurance Group, Inc., Incentive Stock
Plan. (Incorporated by reference to Exhibit 19.03 to
the registrant's Form 10-K for the fiscal year ended
December 31, 1994; Commission File No. 0-11413.) **
10.28 Form of 1994 Non-qualified Stock Option Agreement under
1987 Meridian Insurance Group, Inc., Incentive Stock
Plan. (Incorporated by reference to Exhibit 19.04 to
the registrant's Form 10-K for the fiscal year ended
December 31, 1994; Commission File No. 0-11413.) **
10.29 Amendment No. 3 to the Multiple Layer Reinsurance
Agreement between Employers Reinsurance Corporation and
Meridian Mutual Insurance Company, Meridian Security
Insurance Company and Vernon Fire & Casualty Insurance
Company effective January 1, 1991. (Incorporated by
reference to Exhibit 19.05 to the registrant's Form
10-K for the fiscal year ended December 31, 1994;
Commission File No. 0-11413.)
10.30 Amendment No. 7 to Commercial and Personal Umbrella
Reinsurance Agreement between Employers Reinsurance
Corporation and Meridian Mutual Insurance Company.
(Incorporated by reference to Exhibit 19.06 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1994; Commission File No. 0-11413.)
10.31 Excess Catastrophe Reinsurance Contract effective
January 1, 1995, issued to Meridian Mutual Group by the
Subscribing Reinsurers identified therein.
(Incorporated by reference to Exhibit 19.07 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1994; Commission File No. 0-11413.)
10.32 Underlying Aggregate Excess Catastrophe Reinsurance
Contract effective January 1, 1995, issued to Meridian
Mutual Group by the Subscribing Reinsurers identified
therein. (Incorporated by reference to Exhibit 19.08
to the registrant's Form 10-K for the fiscal year ended
December 31, 1994; Commission File No. 0-11413.)
10.33 Amendment No. 1 to Property Per Risk Excess of Loss
Reinsurance Agreement between Employers Reinsurance
Corporation and Meridian Mutual Insurance Company,
Meridian Security Insurance Company and Vernon Fire &
Casualty Insurance Company effective January 1, 1992.
(Incorporated by reference to Exhibit 19.09 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1994; Commission File No. 0-11413.)
10.34 Form of Meridian Insurance Agency Profit-Sharing
Agreement. (Incorporated by reference to Exhibit 19.11
to the registrant's Form 10-K for the fiscal year ended
December 31, 1994; Commission File No. 0-11413.)
10.35 Form of Meridian Insurance Agency Agreement.
(Incorporated by reference to Exhibit 19.12 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1994; Commission File No. 0-11413.)
10.36 Agreement between Meridian Mutual Insurance Company and
William E. Denny. (Incorporated by reference to
Exhibit 19.13 to the registrant's Form 10-K for the
fiscal year ended December 31, 1994; Commission File
No. 0-11413.)
10.37 Written Description of 1996 Meridian Mutual Insurance
Company Employee Incentive Plan ** *Page 57
10.38 Form of 1995 Non-qualified Stock Option Agreement under
1987 Meridian Insurance Group, Inc., Employee Incentive
Stock Plan ** *Page 58
10.39 Meridian Insurance Group, Inc., 1996 Employee Incentive
Stock Plan ** *Page 62
10.40 Schedule of reinsurers and their participation
percentages under the Excess Catastrophe Reinsurance
Contract issued to Meridian Mutual Group effective
January 1, 1996 *Page 79
10.41 Excess Catastrophe Reinsurance Contract effective
January 1, 1996, issued to Meridian Mutual Group by
the Subscribing Reinsurers identified therein*Page 83
10.42 Underlying Aggregate Excess Catastrophe Reinsurance
Contract effective January 1, 1996, issued to
Meridian Mutual Group by the Subscribing Reinsurers
identified therein *Page 141
10.43 Reinsurance Confirmation Letter dated January 2, 1996,
regarding catastrophe reinsurance contracts *Page 163
10.44 Property Excess of Loss Reinsurance Binding Agreement
between Meridian Mutual Group and NAC Reinsurance
Corporation effective June 15, 1995 *Page 164
(11) No exhibit.
(12) No exhibit.
(13) No exhibit.
(16) No exhibit.
(18) No exhibit.
(21) 21.01 Revised list of Subsidiaries of Meridian Insurance
Group, Inc. (Incorporated by reference to Exhibit
22.01 to the registrant's Form 10-K for the fiscal year
ended December 31, 1992; Commission File No. 0-11413.)
(22) No exhibit.
(23) 23.01 Consent of Independent Accountants dated March
26, 1996 *Page 182
(24) No exhibit.
(27) 27.01 Financial data schedule for Meridian Insurance Group,
Inc., for the year ended December 31, 1995. *Page 183
(28) 28.01 Combined Statutory Schedule P Loss and Loss Adjustment
Expense Reserves for the Consolidated Insurance
Subsidiaries of Meridian Insurance Group, Inc., as of
December 31, 1995 *Page 185
* Exhibits filed as a part of this document.
** These exhibits represent management contracts, compensatory plans
or arrangements that are required to be filed by Item 601 of
Regulation S-K.
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Shareholders and
Board of Directors
Meridian Insurance Group, Inc.
Our report on the consolidated financial statements of Meridian
Insurance Group, Inc., and Subsidiaries is included on page 24 of this
Form 10-K. In connection with our audits of such financial
statements, we have also audited the related financial statement
schedules listed in the index on page 51 of this Form 10-K.
In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as
a whole, present fairly, in all material respects, the information
required to be included therein.
Coopers & Lybrand L.L.P.
Indianapolis, Indiana
February 16, 1996
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
FORM 10-K
INDEX TO FINANCIAL STATEMENT SCHEDULES
PAGE
Schedule I Summary of Investments Other than Investments
in Related Parties 52
Schedule II Condensed Financial Information of Registrant 53
Schedule IV Reinsurance 55
Schedule VI Supplemental Information Concerning Property-
Casualty Insurance Operations 56
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
SCHEDULE I--SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 1995
Amount at
Which Shown
Market in the
Cost Value Balance Sheet
Fixed maturities
Available-for-sale:
Bonds
United States Government and
government agencies and
authorities $ 56,584,045 $ 58,288,599 $ 58,288,599
States, municipalities, and
political subdivisions 78,499,234 80,849,601 80,849,601
Public utilities 6,878,027 7,045,609 7,045,609
All other corporate bonds 36,045,162 37,592,135 37,592,135
Redeemable preferred stocks 35,809,142 36,260,828 36,260,828
Total fixed maturities 213,815,610 220,036,772 220,036,772
Equity securities
Common stocks
Public utilities 1,610,719 2,056,850 887,275
Banks, trust, and insurance
companies 1,480,975 1,611,100 1,345,325
Industrial, miscellaneous,
and all other 23,869,789 27,451,925 16,144,930
Total equity securities 26,961,483 31,119,875 31,119,875
Mortgage loan 727,111 727,111 727,111
Other long-term investments 250,000 326,794 326,794
Short-term investments 2,483,338 2,483,338 2,483,338
Total investments $244,237,542 $254,693,890 $254,693,890
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY)
BALANCE SHEET
as of December 31, 1995 and 1994
ASSETS
1995 1994
Cash and short-term investments $ 1,041,331 $ 533,836
Investment in subsidiaries (eliminated in
consolidation) 118,957,091 95,266,894
Other assets 24,411 18,946
Total assets $120,022,833 $ 95,819,676
LIABILITIES AND SHAREHOLDERS' EQUITY
Due to Meridian Mutual Insurance Company $ 6,551 $ 61,517
Post-employment benefits 1,298,378 1,101,155
Dividends payable 474,376 404,566
Other liabilities 861 --
Total liabilities 1,780,166 1,567,237
Shareholders' equity:
Common shares 44,076,685 43,930,722
Contributed capital 15,058,327 15,058,327
Unrealized appreciation (depreciation) of
investments, net of deferred income tax 6,842,245 (7,281,724)
Retained earnings 52,265,410 42,545,114
Total shareholders' equity 118,242,667 94,252,439
Total liabilities and shareholders' equity $120,022,833 $ 95,819,676
STATEMENT OF INCOME
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Dividend income from subsidiaries $ 2,400,000 $ 2,200,000 $ 500,000
Other income 1,928 780 --
Less: General operating expenses 730,704 734,605 1,032,719
Current federal income tax benefit (379,345) (314,016) (172,644)
Income (loss) before equity in net
income of subsidiaries 2,050,569 1,780,191 (360,075)
Equity in undistributed net income of
subsidiaries 9,566,470 7,340,872 9,245,040
Income before change in
accounting method 11,617,039 9,121,063 8,884,965
Change in accounting method:
Accounting for income taxes -- -- 525,804
Net income $11,617,039 $ 9,121,063 $ 9,410,769
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT, Continued
STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Cash flows from operation:
Net income $11,617,039 $ 9,121,063 $ 9,410,769
Reconciliation of net income to net
cash provided (used) by operations:
Equity in undistributed net
income of subsidiaries (9,566,470) (7,340,872) (9,245,040)
Compensation expense related to
restricted stock -- 35,584 465,762
(Increase) decrease in other assets (5,465) 47,371 247,303
Increase (decrease) in due to
Meridian Mutual Insurance Company (54,966) 40,107 (10,308)
Increase in post-employment benefits 197,223 102,060 84,095
Increase (decrease) in other
liabilities 861 -- (66)
Change in accounting method for
income taxes -- -- (525,804)
Other, net 243 431 --
Net cash provided by operations 2,188,465 2,005,744 426,711
Cash flows from investing activities:
Capital contribution to subsidiary -- -- (18,000,000)
Net cash used by investing activities -- -- (18,000,000)
Cash flows from financing activities:
Proceeds from issuance of common stock -- -- 18,963,960
Proceeds from stock options 39,819 39,819 34,500
Repurchase and retirement of common
stock (77,033) -- --
Dividends paid (1,826,933) (1,617,696) (1,409,713)
Net cash provided (used) by financing
activities (1,680,970) (1,577,877) 17,588,747
Net increase in cash 507,495 427,867 15,458
Cash at beginning of year 533,836 105,969 90,511
Cash at end of year $ 1,041,331 $ 533,836 $ 105,969
<TABLE>
<CAPTION>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
SCHEDULE IV--REINSURANCE
For the Years Ended December 31, 1995, 1994 and 1993
Percentage
Ceded Assumed of Amount
Gross to Other from Other Net Assumed
Amount Companies(1) Companies(1) Amount to Net
<S> <C> <C> <C> <C> <C>
Property and liability
insurance premiums:
Year ended
December 31, 1995 $149,748,331 $11,104,680 $ 5,222,170 $143,865,821 3.6%
Year ended
December 31, 1994 $141,275,894 $12,018,290 $ 5,744,277 $135,001,881 4.3%
Year ended
December 31, 1993 $134,021,523 $13,810,140 $ 5,690,972 $125,902,355 4.5%
<FN>
1) The amounts for the years ended December 31, 1995 and 1994
represents Meridian Security's share of third party reinsurance
transactions pursuant to the pooling agreement. Prior to 1994, the
amount ceded also includes Vernon Fire & Casualty's third party
reinsurance transactions which were not subject to the pooling
arrangement.
</TABLE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
SCHEDULE VI--SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY-CASUALTY INSURANCE OPERATIONS
For the Years Ended December 31, 1995, 1994 and 1993
Year Ended December 31,
1995 1994 1993
Deferred policy acquisition costs $ 13,354,600 $ 11,977,429 $ 11,972,069
Reserves for losses and loss adjustment
expenses $123,577,240 $123,754,650 $119,763,925
Unearned premiums $ 64,558,695 $ 59,663,286 $ 58,680,751
Earned premiums $143,865,821 $135,001,881 $125,902,355
Investment income $ 14,563,820 $ 13,995,984 $ 13,568,919
Losses and loss adjustment expenses
incurred related to:
Current years $104,584,909 $ 99,444,243 $ 92,995,660
Prior years $ (5,461,060) $ (5,473,714)$ (6,373,769)
Amortization of deferred policy
acquisition costs $ 30,691,609 $ 29,176,126 $ 26,910,685
Paid losses and loss adjustment
expenses $ 98,690,281 $ 91,661,638 $ 68,997,532
Premiums written $148,763,885 $136,189,925 $136,156,392
1996 EMPLOYEE INCENTIVE ANNOUNCED
by Norma Oman
The key corporate objective in 1996 is "to strengthen the
financial position of the corporation through sound,
aggressive insurance operations and investment strategies."
To achieve this objective, each of us needs to focus on the
right issues and effect positive change to produce
profitable premium growth, to gain processing efficiencies
and to deliver A++ service to our customers. The 1996
employee incentive is designed to reward your efforts in the
achievement of these results.
Eligible participants in the 1996 plan include Meridian
employees as of January 2, 1996, who remain active employees
at the time of bonus payment in early 1997.
Each eligible participant will receive a cash award based on
the pre-tax income level attained. The size of your cash
award may vary from 1.5 percent to 4.5 percent of your
annual salary as of December 31, 1996, and is based on
meeting at least the threshold combined pre-tax income goal.
In addition, bonus payments will be pro-rated for pre-tax
income results between the threshold and maximum levels.
For example, if pre-tax income is $18,150,000 (halfway
between target and maximum), then your bonus would be 3.8
percent (or halfway between the target and maximum award).
The applicable company goals and your accompanying awards
are as follows:
CORPORATE FINANCIAL PERFORMANCE
Award Payout Schedule as a % of Annual Base Salary
Pre-Tax Income Your Award
Potential
Maximum (120% of $19,800,000 4.5% of annual base
goal) salary
Target (100% of $16,500,000 3% of annual base
goal) salary
Threshold (80% of $13,200,000 1.5% of annual base
goal) salary
Barring unforeseen circumstances, bonus payments will be
finalized after the close of the fiscal year and results
have been approved by the Joint Audit Committee of the Board
of Directors. Normally, the bonuses will be paid in March.
No bonuses are payable in the event of a participant's
termination before the bonus payment date, other than by
death, permanent disability, or normal retirement, in which
event a discretionary payment may be made. An employee for
whom a formal leave of absence has been granted by the
Company may be construed to be an active employee of the
Company at the time of bonus payment, with approval of the
President. The Company reserves the right to modify or
terminate this incentive plan as necessary.
Meridian is pleased to offer this incentive opportunity. I
am confident in our abilities to meet and exceed our
objectives.
NON-QUALIFIED
STOCK OPTION AGREEMENT
THIS AGREEMENT, made this 30th day of November, 1995,
between Meridian Insurance Group, Inc., with its principal office
at Indianapolis, Indiana, (hereinafter called the "Corporation")
and __________ residing at _____________, Indianaplis, Indiana,
_______, (hereinafter called the "Employee").
WITNESSETH THAT:
WHEREAS, the directors of the Corporation adopted the 1987
Employee Incentive Stock Plan (the "Plan") on January 21, 1987,
and the shareholders of the Corporation approved the Plan at
their meeting held on January 21, 1987; and
WHEREAS, the Employee has been designated, in accordance
with the terms of the Plan, as a key employee to whom an Option
to purchase shares of the Corporation is to be granted;
NOW, THEREFORE, it is mutually agreed as follows:
1. The Corporation hereby grants to the Employee, on the
terms and conditions hereinafter set forth, an Option to purchase
all or any part of 1,000 shares of the Corporation's common
shares at a price of $15.28 per share. This Option is for all
purposes pursuant and subject to the provisions of the Plan, and
the Employee agrees to be bound by the rules and regulations for
the administration of the Plan as presently prescribed or
hereafter amended, and by any amendment, construction or
interpretation of the Plan adopted by the Board of Directors of
the Corporation.
2. The right to purchase the shares subject to this Option
shall accrue on the following dates provided the Employee is
employed by the Corporation, its parent, subsidiaries or
affiliates on such dates: 50 percent on November 30, 1996, and 50
percent on
November 30, 1997. No part of the Option shall lapse by reason
of any omission to exercise the Option or any part thereof prior
to November 30, 2005.
3. This Option may be exercised only by written notice to
the Corporation specifying the number of shares in respect of
which the Option is being exercised and by payment to the
Corporation in cash of the full purchase price for the shares so
specified, or, at the option of the Employee, the purchase price
may be paid in whole or in part through the transfer to the
Corporation of shares of Meridian Stock previously acquired by
the Employee.
4. The Corporation shall take any action required by law
and applicable regulations, including the Indiana Securities Act
and the rules and regulations of the Indiana Securities Division,
to authorize the issuance and delivery of any shares covered by
this Option. Upon completion of such action and the receipt of
payment for the shares in respect of which this Option is
exercised, the Corporation shall deliver to the Employee or his
duly authorized representatives, certificates for such shares,
which shares shall be fully paid and non-assessable.
5. (a) If prior to the delivery by the Corporation of all of
the shares covered by this Option, there shall be any increase or
decrease in the number of issued shares of the Corporation
resulting from a subdivision or consolidation of shares or any
other capital adjustment, the payment of a share dividend, or
other increase or decrease in the shares of the Corporation
effected without receipt of consideration, there shall be a
proportionate and equitable adjustment of the terms of this
Option with respect to the amount and class of shares remaining
subject to the Option and the purchase price to be paid therefor,
as determined by the Board of Directors or their designated
Committee.
(b) In the event that, prior to the delivery by the
Corporation of all of the shares covered by this Option, there
shall be a capital reorganization or reclassification of the
Corporation resulting in a substitution of other shares for
common shares, there shall be substituted for the shares of the
Corporation the number of substitute shares which would have been
issued in exchange for the common shares then remaining under the
Option if such common shares had been then issued and
outstanding.
(c) If the Corporation shall enter into any agreement
providing for the merger or consolidation of the Corporation with
or into any other person, regardless of whether or not the
Corporation shall be the surviving or resulting Corporation as a
consequence of such merger or consolidation, the Corporation
shall have the right to terminate this Agreement and to thereby
terminate all rights thereunder on thirty (30) days' written
notice to the Employee; provided, however, that if such merger or
consolidation is not consummated within 180 days from the date of
the notice, the Agreement so terminated shall be deemed to have
been continuously in effect since the date of execution thereof.
In the event of a dissolution or liquidation of the Corporation,
the Corporation shall give thirty (30) days' written notice
thereof to the Employee, and all rights of the Employee under
this Agreement shall be deemed to be terminated upon such
dissolution or liquidation.
6. The Employee shall have no rights or privileges as a
shareholder of the Corporation with respect to the common shares
issuable under this Option until certificates representing such
shares have been delivered to him.
7. The Employee agrees, for himself and his personal
representatives, that any and all shares purchased by him or
them, upon the exercise of any portion of this Option, may be
"restricted securities" within the meaning of Rule 144
promulgated by the Securities and Exchange Commission ("SEC")
under the Securities Act of 1933 (the "1933 Act"), or may
otherwise be subject to the provisions of Rule 144. The Employee
may be required to agree in writing, at any time deemed
appropriate by the Corporation, that there will be no sale or
other disposition of the shares (i) unless a registration
statement is in effect with respect to the resale of such shares,
(ii) unless the Employee has received an opinion from counsel for
the Corporation to the effect that the shares may be sold without
compliance with the registration provisions of the 1933 Act, or
(iii) unless a "no-action" letter to that effect has been
obtained from the staff of the SEC. In this connection, all
certificates representing the shares purchased upon exercise of
this Option may have set forth thereon a legend evidencing the
foregoing restrictions in such form as the Corporation may
determine, and appropriate stop transfer instructions may be
issued to the Corporation's transfer agent in connection
therewith. In addition, the Employee may be required to agree to
any other limitation upon resale deemed appropriate by the
Corporation for the purpose of complying with the then current
rules and regulations of the SEC.
8. This Option shall not be assignable or transferable by
the Employee otherwise than by will or the laws of descent and
distribution and shall be exercisable during his lifetime only by
him.
9. (a) If the Employee shall cease to be employed by a
Company in the Meridian Group (as defined in the 1987 Employee
Incentive Stock Plan) for reasons other than (i) death, (ii)
discharge for cause, or (iii) voluntary action of the Participant
without the written consent of the President of the Company (or
the President's delegate), the Employee may exercise this Option
at any time within three years after such termination, to the
extent of the number of shares covered by this Option which were
purchasable at the date of such termination; provided, however,
that this Option shall be so exercisable only until the earlier
of the expiration of such three-year period or the expiration
date of such Option.
(b) If the Employee shall cease to be employed by a Company
in the Meridian Group either (i) for cause or (ii) by voluntary
action of the Employee without the written consent of the
President of the Company (or the President's delegate), this
Option shall expire and any rights hereunder shall terminate
immediately.
(c) Should the Employee die either while in the employ of a
Company in the Meridian Group or after termination of such
employment (other than discharge for cause, by voluntary action
of the Employee without the written consent of the President of
the Company, or the President's delegate), the Option rights of
the deceased Employee may be exercised by his or her Personal
Representative until the earlier of one year after the Employee's
death or three years after his or her termination of employment
to the extent of the number of shares covered by this Option
which were purchasable at the date of such death except that this
Option shall not be exercisable on any date beyond the expiration
date of this Option. If the Employee granted an Option should
die within thirty days prior to the expiration date of such
Option, if on the date of death the Employee was then entitled to
exercise such Option, and if the Option expires without being
exercised, the Personal Representative of the Employee shall
receive in settlement a cash payment from the Company of a sum
equal to the amount, if any, by which the Fair Market Value
(determined on the expiration date of the Option) of Meridian
Stock subject to the Option exceeds the Option Price.
10. A leave of absence for the Employee during the term of
this Option which is authorized by the Corporation shall not be
deemed a termination of employment; however, the Employee may not
exercise any Options hereunder during such leave of absence.
11. Nothing in this Agreement shall be deemed to create any
limitation or restriction upon such rights as the Corporation
would otherwise have to terminate the employment of the Employee
at any time for any reason.
12. Any notice to be given or served under the terms of
this Agreement shall be delivered to the Secretary of the
Corporation and to the Employee at the address shown above, or
such other address or addresses as either party may designate in
writing to the other. Any such notice shall be deemed to have
been duly given or delivered if it is sent by registered or
certified mail, return receipt requested.
13. This Agreement shall be construed in accordance with
the laws of Indiana and shall be binding on and inure to the
benefit of any successor or successors of the Corporation and the
personal representatives of the Employee.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the day and year first above written.
MERIDIAN INSURANCE GROUP, INC.
By:______________________________
Norma J. Oman, President
EMPLOYEE:
_________________________________
MERIDIAN INSURANCE GROUP INC.
1996 EMPLOYEE INCENTIVE STOCK PLAN
ARTICLE I
Purpose and Effective Date
1.1. Purpose. The purpose of the Plan is to provide financial
incentives for selected Key Employees of the Meridian Group,
thereby promoting the long-term growth and financial success
of the Meridian Group by (i) attracting and retaining
employees of outstanding ability, (ii) strengthening the
Meridian Group's capability to develop, maintain, and direct
a competent management team, (iii) providing an effective
means for selected Key Employees to acquire and maintain
ownership of Meridian Stock, (iv) motivating Key Employees
to achieve long-range performance goals and objectives, and
(v) providing incentive compensation opportunities
competitive with those of other major corporations.
1.2. Effective Date and Expiration of Plan. The Plan shall be
effective May 8, 1996. Unless earlier terminated by the
Board pursuant to Section 7.3 the Plan shall terminate on
the tenth anniversary of its Effective Date. No Award shall
be made pursuant to the Plan after its termination date, but
Awards made prior to the termination date may extend beyond
that date.
ARTICLE II
Definitions
The following words and phrases, as used in the Plan, shall have
these meanings:
2.1 "Award" means individually or collectively, any Option,
Tandem SAR, SAR, or Stock or Restricted Stock Award.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Committee" means a committee of not less than three persons
appointed by the Board from the Compensation Committee of
the Board or from the Executive Committee of the Board, each
of whom shall be a Disinterested Person.
2.5 "Company" means Meridian Insurance Group, Inc. and its
successors and assigns.
2.6 "Disinterested Person" means any person who, at the time
discretion under the Plan is exercised, meets the definition
of a "disinterested person" in Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended, and then
applicable to the Company.
2.7 "Effective Date" means May 8, 1996.
2.8 "Fair Market Value" means, as of any specified date, an
amount equal to the mean between the reported high and low
bid prices of Meridian Stock on the specified date on the
National Association of Securities Dealers, Inc. Automated
Quotation System or any system then in use, or, if no such
quotation is available, the fair market value on the
specified date of the share of such stock as determined by
the Board in good faith, and at such time as the shares are
traded on the National Market System the price for purposes
of this paragraph shall be the last reported sales price on
the specified date.
2.9 "Incentive Stock Option" means an option within the meaning
of Section 422(b) of the Code.
2.10 "Key Employee" means an employee of one of the Companies in
the Meridian Group who occupies a responsible executive,
managerial, insurance professional, or administrative
position and who has the capacity to contribute to the
success of the Meridian Group.
2.11 "Meridian Group" means the Company and each of its'
subsidiaries and Meridian Mutual Insurance Company, on and
after the Effective Date.
2.12 "Meridian Stock" means common shares of the Company.
2.13 "Nonqualified Stock Option" means an Option granted under
the Plan other than an Incentive Stock Option.
2.14 "Option" means both a Nonqualified Stock Option and an
Incentive Stock Option to purchase Meridian Stock.
2.15 "Option Price" means the price at which Meridian Stock may
be purchased under an Option as provided in Section 5.4.
2.16 "Participant" means a Key Employee to whom an Award has been
made under the Plan.
2.17 "Personal Representative" means the person or persons who,
upon the death, disability, or incompetency of a
Participant, shall have acquired, by will or by the laws of
descent and distribution or by other legal proceedings, the
right to exercise an Option or the right to any Restricted
Stock Award theretofore granted or made to such Participant.
2.18 "Plan" means Meridian Insurance Group, Inc. 1996 Employee
Incentive Stock Plan.
2.19 "Reload Option" means an Option described in Section 5.7 of
the Plan.
2.20 "Restricted Stock" means Meridian Stock subject to the terms
and conditions of Sections 6.1 through Section 6.6 of the
Plan.
2.21 "Restricted Stock Award" means an Award granted under
Sections 6.1 through 6.6 of the Plan.
2.22 "Restriction Period" means a period of time determined under
Section 6.2 during which Restricted Stock is subject to the
terms and conditions provided in Section 6.3.
2.23 "SAR" means a stock appreciation right granted under Section
5.10.
2.24 "Stock Award" means an Award in the form of Meridian Stock
as described under Section 6.7 of the Plan.
2.25 "Stock Option Agreement" means an agreement entered into
between a Participant and the Company under Section 5.3.
2.26 "Subsidiary" means a corporation, domestic or foreign, the
majority of the voting stock of which is owned directly or
indirectly by the Company or Meridian Mutual Insurance
Company.
2.27 "Tandem SAR" means a stock appreciation right described in
Section 5.9 of the Plan.
ARTICLE III
Administration
3.1 Committee to Administer. The Plan shall be administered by
the Committee. The Committee shall have full power and
authority to interpret and administer the Plan and to
establish and amend rules and regulations for its
administration. The Committee's decisions shall be final
and conclusive with respect to the interpretation of the
Plan and any Award made under it.
A majority of the members of the Committee shall constitute
a quorum for the conduct of business at any meeting. The
Committee shall act by majority vote of the members present
at a duly convened meeting, which may include a meeting by
conference telephone call held in accordance with applicable
law. Action may be taken without a meeting if written
consent thereto is given in accordance with applicable law.
3.2 Powers of Committee. (a) Subject to the provisions of the
Plan, the Committee shall have authority, in its discretion,
to determine those Key Employees who shall receive an Award,
the time or times when such Award shall be made, and the
type of Award to be granted.
(b) The Committee shall determine the terms,
restrictions, and provisions of the agreement relating
to each Award, including such terms, restrictions, and
provisions as shall be necessary to cause certain
options to qualify as Incentive Stock Options. The
Committee may correct any defect or supply any omission
or reconcile any inconsistency in the Plan or in any
agreement relating to an Award, in such manner and to
the extent the Committee shall determine in order to
carry out the purpose of the plan. The Committee may,
in its discretion, accelerate (i) the date on which any
Option or SAR may be exercised, or (ii) the date of
termination of the restrictions applicable to a
Restricted Stock Award, if the Committee determines
that to do so will be in the best interests of the
Company and the Participants in the Plan.
ARTICLE IV
Awards
4.1 Awards. Awards shall be subject to the terms and conditions
of the Plan and to such other terms and conditions
consistent with the Plan as the Committee deems appropriate.
Awards under a particular section of the Plan need not be
uniform and Awards under two or more sections may be
combined in one agreement. Any combination of Awards may be
granted at one time and on more than one occasion to the
same Key Employee.
4.2 Eligibility For Awards. An Award may be made to any Key
Employee selected by the Committee. In making this
selection and in determining the form and amount of the
Award, the Committee may give consideration to the functions
and responsibilities of the respective Key Employee, his or
her present and potential contributions to the success of
the Meridian Group, the value of his or her services to the
Meridian Group, and such other factors deemed relevant by
the Committee.
4.3 Shares Available Under the Plan. The Meridian Stock to be
offered under the Plan pursuant to Options, Tandem SARs,
Restricted Stock Awards, and Stock Awards may be authorized
but unissued Meridian Stock or Meridian Stock previously
issued and outstanding and reacquired by the Company.
Subject to adjustment under Section 7.2, no more than an
aggregate of 750,000 shares of Meridian Stock shall be
issuable upon exercise of Options (including Reload Options)
and Tandem SARs and pursuant to Restricted Stock Awards and
Stock Awards granted under the Plan. SARs with respect to
no more than 250,000 shares of Meridian Stock may be granted
under Section 5.10 of the Plan. Any shares of Meridian
Stock subject to an Option which for any reason is canceled
or terminated without having been exercised, or any shares
of Restricted Stock which are forfeited, shall again be
available for Awards under the Plan. Shares subject to an
Option canceled upon the exercise of an SAR shall not again
be available for Awards under the Plan.
ARTICLE V
Stock Options and Stock Appreciation Rights
5.1 Award of Stock Options. The Committee may, from time to
time, subject to the provisions of the Plan and such terms
and conditions as the Committee may prescribe, award
Incentive Stock Options and Nonqualified Stock Options to
any Key Employee. Awards of Incentive Stock Options and
Nonqualified Stock Options shall be separate and not in
tandem.
5.2 Period of Option. (a) Unless otherwise provided in the
related Stock Option Agreement, an Option granted under the
Plan shall be exercisable only after twelve months have
elapsed from the date of grant. After the twelve-month
waiting period, the Option may be exercised at any time
during the term of the Option, in whole or in installments,
as specified in the related Stock Option Agreement. Subject
to Section 5.6, the duration of each Option shall not be
more than ten years from the date of grant.
(b) Except as provided in Section 5.6, an Option may
not be exercised by a Participant unless such
Participant is then, and continually (except for sick
leave, military service, or other approved leave of
absence) after the grant of the Option has been, an
employee of one of the Companies in the Meridian Group.
5.3 Stock Option Agreement. Each Option shall be evidenced by a
Stock Option Agreement, in such form and containing such
provisions not inconsistent with the provisions of the Plan
as the Committee from time to time shall approve.
5.4 Option Price, Exercise, and Payment. The Option Price of
Meridian Stock under each Option shall be determined by the
Committee, but the Option price of Meridian Stock under an
Incentive Stock Option shall be a price not less than 100
percent of the Fair Market Value of Meridian Stock at the
date such Incentive Stock Option is granted, as determined
by the Committee.
Options may be exercised from time to time by giving written
notice of exercise to the Treasurer of the Company,
specifying the number of shares to be purchased. No Option
may be exercised for less than ten shares unless the issue
of a lesser number is enough to exhaust the Option. The
notice of exercise shall be accompanied by payment in full
of the Option Price in cash or its equivalent, provided,
however, that if the Committee, in its discretion, so
provides in the related Stock Option Agreement, the Option
Price may be paid in whole or in part through the transfer
to the Company of shares of Meridian Stock previously
acquired by the Participant, provided the shares so
transferred have been held by the Participant for a period
of more than one year and, further provided, that no
Restricted Stock may be transferred as payment of the Option
Price. In the event such Option Price is paid, in whole or
in part, with shares of Meridian Stock, the portion of the
Option Price so paid shall be equal to the value, as of the
date of exercise of the Option, of such shares. The value
of such shares shall be equal to the number of such shares
multiplied by the average of the high and low sales prices
of Meridian Stock quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System on the
trading day coincident with the date of exercise of such
Option (or the immediately preceding trading day if the date
of exercise is not a trading day). Such shares must be
delivered (along with the portion to be paid in cash) within
three days after the date of exercise. If the Participant
fails to pay the Option Price within such three-day period,
the Committee shall have the right to take whatever action
it deems appropriate, including voiding the exercise of the
Option. The Company shall not issue or transfer Meridian
Stock upon exercise of an Option until the Option Price is
fully paid.
5.5 Limitations on Exercise of Incentive Stock Options. (a)
The aggregate Fair Market value (determined as of the time
such Option is granted) of Meridian Stock with respect to
which Incentive Stock Options are exercisable for the first
time by a Key Employee during any calendar year (under all
plans of the Company, and its Subsidiaries) shall not exceed
$100,000.
(b) An Incentive Stock Option shall not be awarded to
any Key Employee who, at the time of award, owns
Meridian Stock possessing more than ten percent of the
total combined voting power of all classes of stock of
the Company.
5.6 Termination of Employment. (a) If a Participant shall
cease to be employed by a Company in the Meridian Group for
reasons other than (i) death, (ii) discharge for cause, or
(iii) voluntary action of the Participant without the
written consent of the President of the Company (or the
President's delegate), the Participant may exercise an
Option at any time within three years after such
termination, to the extent of the number of shares covered
by such Option which were purchasable at the date of such
termination; provided, however, that an Option shall be so
exercisable only until the earlier of the expiration of such
three-year period or the expiration date of such Option.
(b) If a Participant shall cease to be employed by a Company in
the Meridian Group either (i) for cause or (ii) by voluntary
action of the Participant without the written consent of the
President of the Company (or the President's delegate), any
Options of such Participant shall expire and any rights
thereunder shall terminate immediately.
(c) Should a Participant die either while in the employ of a
Company in the Meridian group or after termination of such
employment (other than discharge for cause or by voluntary
action of the Participant without the written consent of the
President of the Company or the President's delegate), the
Option rights of such deceased Participant may be exercised
by his or her Personal Representative until the earlier of
one year after the Participant's death or three years after
his or her termination of employment to the extent of the
number of shares covered by such Option which were
purchasable at the date of such death except that an Option
shall not be so exercisable on any date beyond the
expiration date of such Option.
If a Participant who was granted an Incentive Stock Option
should die within thirty days prior to the expiration date
of such Option, if on the date of death the Participant was
then entitled to exercise such Option, and if the Option
expires without being exercised, the Personal Representative
of the Participant shall receive in settlement a cash
payment from the Company of a sum equal to the amount, if
any, by which the Fair Market Value (determined on the
expiration date of the Option) of Meridian Stock subject to
the Option exceeds the Option Price.
5.7 Reload Option (a) Concurrently with the award of Options
to a Participant under the Plan the Committee may authorize
Reload Options to purchase for cash or shares a number of
shares of Meridian Stock. The number of Reload Options
shall equal:
(i) the number of shares of Meridian Stock
used to exercise the underlying Options and
(ii) to the extent authorized by the
Committee, the number of shares of Meridian Stock
used to satisfy any tax withholding requirement
incident to the exercise of the underlying
Options. The grant of a Reload Option will become
effective upon the exercise of underlying Options
or Reload Options through the use of shares of
Meridian Stock held by the optionee for at least
12 months or such longer period as determined by
the Committee. Notwithstanding the fact that the
underlying option may be an Incentive Stock
Option, a Reload Option may qualify as an
"incentive stock option" subject to Section 422 of
the Internal Revenue Code of 1986.
(b) Each Stock Option Agreement shall state whether
the Committee has authorized Reload Options with
respect to the underlying Options. Upon the exercise
of an underlying Option or other Reload Option, the
Reload Option will be evidenced by an amendment to the
underlying Stock Option Agreement.
(c) The option price per share of Meridian Stock
deliverable upon the exercise of a Reload Option shall
be the Fair Market Value of a share of Meridian Stock
on the date the grant of the Reload Option becomes
effective.
(d) Each Reload Option is fully exercisable six months
from the effective date of grant. The term of each
Reload Option shall be equal to the remaining option
term of the underlying Option.
(e) The Committee may in its discretion limit the
number of Reload exercises available to a Participant,
or restrict the availability of a Reload Option until a
specified level of stock price appreciation occurs in
the underlying Options.
5.8 Shareholder Rights and Privileges. A Participant shall have
no rights as a shareholder with respect to any shares of
Meridian Stock covered by an Option until the issuance of a
stock certificate to the Participant representing such
shares.
5.9 Award of Tandem SARs. (a) At any time prior to six months
before an Option's expiration date, the Committee may award
to the Participant a Tandem SAR related to the Option.
(b) The Tandem SAR shall represent the right to
receive payment of an amount equal to the amount, if
any, by which the average of the high and low sales
prices of Meridian Stock quoted on the National
Association of Securities Dealers, Inc. Automated
Quotation System on the trading day immediately
preceding the date of exercise of the Tandem SAR
exceeds the Option Price.
(c) Tandem SARs shall be evidenced by either the Stock
Option Agreement or a separate agreement between the
Company and the Participant.
(d) A Tandem SAR shall be exercisable only at the same
time and to the same extent and subject to the same
conditions as the Option related thereto is
exercisable, except that the Committee may prescribe
additional conditions and limitations on the exercise
of any Tandem SAR. A Tandem SAR shall be transferable
only when the related Option is transferable, and under
the same conditions. The exercise of a Tandem SAR
shall cancel the related Option. Tandem SARs may be
exercised only when the value of a share of Meridian
Stock subject to the related Option exceeds the Option
Price. Such value shall be determined in the manner
specified in Section 5.9(b).
(e) A Tandem SAR shall be exercisable only by written
notice to the Treasurer of the Company and only to the
extent that the related Option is exercisable.
However, a Tandem SAR shall in no event be exercisable
during the first six months of its term, except in the
event of death or disability of the Participant prior
to the expiration of such six-month period.
(f) All Tandem SARs shall automatically be exercised
on the last trading day prior to the expiration of the
related Option, so long as the value of a share of
Meridian Stock exceeds the Option Price, unless prior
to such day the holder instructs the Treasurer
otherwise in writing. Such value shall be determined
in the manner specified in Section 5.9(b).
(g) Payment of the amount to which a Participant is
entitled upon the exercise of a Tandem SAR shall be
made in cash, Meridian Stock, or partly in cash and
partly in Meridian Stock, as the Committee shall
determine at the time of the Award. To the extent that
payment is made in Meridian Stock, the shares shall be
valued in the manner specified in Section 5.9(b).
(h) Each Tandem SAR shall expire on a date determined
by the Committee at the time of Award, or, if later,
upon the termination of the related Option.
5.10 Stock Appreciation Rights (a) Participants may be awarded
SARs for a period of five years or such shorter period
greater than six months as may be determined by the
Committee (the "Designated Period"). That Designated Period
may vary as among Participants and as among Awards to a
Participant. At the end of the Designated Period with
respect to a Participant, that Participant shall receive an
amount equal to the appreciation in market value of his or
her SARs as determined in Section 5.10(b) of the Plan. That
amount shall be payable in cash, Meridian Stock, or partly
in cash and partly in Meridian Stock (as determined in its
sole discretion by the Committee). The value of any shares
of Meridian Stock so payable shall be measured by the Fair
Market Value of Meridian Stock on the day on which the
Designated Period ends. No fractional shares shall be
issued but a Participant shall be entitled to a cash
adjustment for a fractional share that would otherwise be
issued.
(b) The market value of one SAR on a valuation date
for purposes of the Plan shall be considered to be the
Fair Market Value of one share of Meridian Stock on
that valuation date. The market value of SARs held by
a Participant on a valuation date shall be determined
by multiplying the number of SARs held by that
Participant by the market value of one SAR on that
valuation date. The appreciation in market value of
SARs for purposes of determining payments to be made to
a Participant shall be measured by determining the
market value of SARs held by that Participant on the
day on which the Designated Period of those SARs ends
and subtracting from that the market value of the same
SARs on the date awarded to that Participant. The
measurement of appreciation shall be made separately
with respect to each separate award of SARs.
(c) The SARs shall be used solely as a device for the
measurement and determination of the amount to be paid
to Participants. The SARs shall not constitute or be
treated as property or as a trust fund of any kind.
All amounts at any time attributable to the SARs shall
be and remain the sole property of the Company and all
Participants' rights hereunder are limited to the
rights to receive cash and shares of Meridian Stock as
provided in this Plan.
(d) In the event of an adjustment of shares of
Meridian Stock pursuant to Section 7.2, the number of
SARs of a Participant and the maximum number of SARs
and shares of Meridian Stock provided in Section 4.3
shall be adjusted in the same manner as shares of
Meridian Stock reflected by those SARs would be
adjusted.
5.11 Rules Relating to Exercise. In the case of a Participant
subject to the restrictions of Section 16(b) of the
Securities Exchange Act of 1934, as amended, no Tandem SAR,
SAR or other stock appreciation right (referred to in Rule
16b-3(e) or any successor rule under the Securities Exchange
Act of 1934, as amended (collectively, a "Stock Appreciation
Right") shall be exercised except in compliance with any
applicable requirements of Rule 16b-3 or any successor rule.
If a full or partial settlement in cash would result, (i)
such a Participant may not exercise a Stock Appreciation
Right or any related Option during the first six months of
the term of the Stock Appreciation Right or Option to be
exercised; and (ii) such a Participant may exercise a Stock
Appreciation Right only either: (A) during the period
beginning on the third business day following the date of
release of quarterly or annual summary statements of sales
and earnings of the Company and ending on the twelfth
business day following such date, unless a different period
is specified by Rule 16b-3(e) or any successor rule; (B)
pursuant to an irrevocable election to exercise made at
least six months in advance of the effective date of the
election, which election shall be subject to the consent or
disapproval of the Committee; or (C) pursuant to an election
to exercise incident to death, retirement, disability or
termination of employment.
ARTICLE VI
Stock and Restricted Stock Awards
6.1 Award of Restricted Stock. (a) The Committee may make a
Stock Award or Restricted Stock Award or both to any
Participant, subject to this Article VI and to such other
terms and conditions as the Committee may prescribe.
(b) Each certificate for Restricted Stock shall be
registered in the name of the Participant and deposited
by him or her, together with a stock power endorsed in
blank, with the Company.
6.2 Restriction Period. At the time of making a Restricted
Stock Award, the Committee shall establish the Restriction
Period applicable to such Award. The Committee may
establish different Restriction Periods from time to time
and each Restricted Stock Award may have a different
Restriction Period, in the discretion of the Committee.
Restriction Periods, when established for each Restricted
Stock Award, shall not be changed except as permitted by
Section 6.3.
6.3 Other Terms and Conditions. Meridian Stock, when awarded
pursuant to a Restricted Stock Award, will be represented by
a stock certificate registered in the name of the
Participant who receives the Restricted Stock Award. Such
certificate shall be deposited with the Company as provided
in Section 6.1(b). The Participant shall be entitled to
receive dividends during the Restriction Period and shall
have the right to vote such Meridian Stock and all other
shareholder's rights, with the exception that (i) the
Participant will not be entitled to delivery of the stock
certificate during the Restriction Period, (ii) the Company
will retain custody of the Meridian Stock during the
Restriction Period, and (iii) a breach of a restriction or a
breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Award will cause
a forfeiture of the Restricted Stock Award. The Committee
may, in addition, prescribe additional restrictions, terms,
or conditions upon or to the Restricted Stock Award.
6.4 Restricted Stock Award Agreement. Each Restricted Stock
Award shall be evidenced by a Restricted Stock Award
Agreement in such form and containing such terms and
conditions not inconsistent with the provisions of the Plan
as the Committee from time to time shall approve.
6.5 Termination of Employment. The Committee may, in its sole
discretion, establish rules pertaining to the Restricted
Stock Award in the event of termination of employment (by
retirement, disability, death, or otherwise) of a
Participant prior to the expiration of the Restriction
Period.
6.6 Payment for Restricted Stock. Restricted Stock Awards may
be made by the Committee under which the Participant shall
not be required to make any payment for the Meridian Stock
or, in the alternative, under which the Participant, as a
condition to the Restricted Stock Award, shall pay all (or
any lesser amount than all) of the Fair Market Value of the
Meridian Stock, determined as of the date the Restricted
Stock Award is made. If the latter, such purchase price
shall be paid in cash as provided in the Restricted Stock
Award Agreement.
6.7 Unrestricted Stock Award. (a) Grant or Right to Receive.
The Committee, in its sole discretion, (a) may offer a
Participant who has earned a cash bonus or other cash
incentive award the right to receive payment of such bonus
or incentive award in the form of Meridian Stock, or (b) may
require a Participant who has earned a cash bonus or other
cash incentive award to take payment of such bonus or
incentive award in the form of Meridian Stock. Such Stock
Award of shares of Meridian Stock shall be valued at the
Fair Market Value of such shares on the date or dates the
cash compensation would otherwise be paid and shall not be
subject to the restrictions set forth in Sections 6.1 - 6.6
of the Plan.
(b) Participant Election. With respect to paragraph (a) of
this Section 6.7, the Participant shall communicate his
choice of cash or a Stock Award by an irrevocable written
election delivered to the Company no later than the date or
dates specified by the Committee. With respect to any
Participant who is subject to Section 16 of the Securities
Exchange Act of 1934, as amended, such irrevocable election
shall become effective no earlier than six months and one
day following the date of the election; to change an
election such Participant must make a new irrevocable
election which shall be effective six months and one day
following the date of the new irrevocable election.
ARTICLE VII
Miscellaneous Provisions
7.1 Nontransferability. No Award under the Plan shall be
transferable by the Participant otherwise than by will or
laws of descent and distribution or pursuant to a qualified
domestic relations order. All Awards shall be exercisable
or received during the Participant's lifetime only by such
Participant or his Personal Representative. Any transfer
contrary to this Section 7.1 will nullify the Award.
7.2 (a) Recapitalization. The aggregate number of shares of
Meridian Stock which may be the subject of an Award, the
number of shares covered by each outstanding Award, and the
terms thereof relating to the value of Meridian Stock, shall
all be proportionately adjusted for any increase or decrease
in the number of issued shares of Meridian Stock resulting
from a subdivision or consolidation of shares or any other
capital adjustment, the payment of a share dividend, or
other increase or decrease in the shares of Meridian Stock
effected without receipt of consideration by the Company.
In the event that, prior to the delivery by the Company of
the Meridian Stock remaining under any Award, there shall be
a capital reorganization or reclassification of the Company
resulting in a substitution of other shares for common
shares, there shall be substituted for Meridian Stock the
number of substitute shares which would have been issued in
exchange for the common shares then remaining under the
Award if such common shares had been then issued and
outstanding.
(b) Merger, Dissolution. If the Company shall enter
into any agreement providing for the merger or
consolidation of the Company with or into any other
person, regardless of whether or not the Company shall
be the surviving or resulting corporation as a
consequence of such merger or consolidation, the
Company shall have the right to terminate all
outstanding Agreements entered into pursuant to Awards
and to thereby terminate all rights of the Participants
thereunder on thirty (30) days written notice to each
Participant; provided, however, that if such merger or
consolidation is not consummated within 180 days from
the date of the notice, all Agreements so terminated
shall be deemed to have been continuously in effect
since the date of execution thereof. In the event of a
dissolution or liquidation of the Company, the Company
shall give thirty (30) days written notice thereof to
each Participant, and all rights of the Participants
under all outstanding Agreements entered into pursuant
to an Award shall be deemed to be terminated upon such
dissolution or liquidation.
7.3 Amendment, Suspension, and Termination of Plan. (a) The
Board may suspend or terminate the Plan or any portion
thereof at any time, and may amend the Plan from time to
time in such respects as the Board may deem to be in the
best interests of the Company; provided, however, that no
such amendment shall, without stockholder approval, (i)
except as provided in Section 7.2, materially increase the
number of shares of Meridian Stock which may be issued under
the Plan (ii) materially modify the requirements as to
eligibility for participation in the Plan, (iii) materially
increase the benefits accruing to Participants under the
Plan. (iv) make any other change that would disqualify the
Plan for purposes of the exemption provided by Rule 16b-
3(d)(3) of the Securities and Exchange Commission, (v)
reduce the Option Price of an Incentive Stock Option below
the Fair Market Value of Meridian Stock on the day an
Incentive Stock Option is awarded, (vi) permit the award of
Tandem SARs other than in tandem with an Option, (vii)
permit the exercise of an SAR during the first six months of
its term except as otherwise provided herein, (viii) permit
the exercise of an Option or Tandem SAR without surrender of
the related Tandem SAR or Option, respectively, or (ix)
extend the termination date of the Plan. No such amendment,
suspension, or termination shall alter or impair any
outstanding Award without the consent of the Participant
affected thereby.
(b) With the consent of the Participant affected thereby, the
Committee may amend or modify any outstanding Award in any
manner to the extent that the Committee would have had the
authority under the Plan initially to grant such Award as so
modified or amended, including without limitation, to change
the date or dates as of which such Options, Tandem SARs or
SARs may be exercised or to remove the restrictions on
shares of Restricted Stock.
7.4 Nonuniform Determinations. The Committee's determinations
under the Plan, including without limitation, (i) the
determination of the Key Employees to receive Awards, (ii)
the form, amount, and timing of such Awards, (iii) the terms
and provisions of such Awards and (iv) the agreements
evidencing the same, need not be uniform and may be made by
it selectively among Key Employees who receive, or who are
eligible to receive, Awards under the Plan, whether or not
such Key Employees are similarly situated.
7.5 General Restriction. Each Award under the Plan shall be
subject to the condition that, if at any time the Committee
shall determine that (i) the listing, registration, or
qualification of the shares of Meridian Stock subject or
related thereto upon any securities exchange or under any
state or federal law, (ii) the consent or approval of any
government or regulatory body, or (iii) an agreement by the
Participant with respect thereto, is necessary or desirable,
then such Award shall not become exercisable in whole or in
part unless such listing, registration, qualification,
consent, approval, or agreement shall have been effected or
obtained free of any conditions not acceptable to the
Committee.
7.6 Securities Act of 1933. Upon issuance of Meridian Stock to
the Participant, or his heirs, the recipient of that stock
shall represent that the shares of stock are taken for
investment and not resale and make those other
representations as may be necessary to qualify the issuance
of the shares as exempt from the Securities Act of 1933 or
any applicable state securities laws or to permit
registration of the shares and shall represent that he or
she shall not dispose of those shares in violation of the
Securities Act of 1933. The Company reserves the right to
place a legend on any stock certificate issued under the
Plan to assure compliance with this paragraph. No shares of
Meridian Stock of the Company shall be required to be
distributed until the Company shall have taken such action,
if any, as is then required to comply with the provisions of
the Securities Act of 1933 or any other then applicable
securities law.
7.7 Withholding of Tax. (a) Payment by Participant. Each
Participant shall, no later than the date as of which the
value of an Award or of any Meridian Stock or other amounts
received thereunder first becomes includable in the gross
income of the Participant for federal income tax purposes,
pay to the Company, or make arrangements satisfactory to the
Committee regarding payment of, any federal, state, or local
taxes of any kind required by law to be withheld with
respect to such income. The Company shall have the right to
deduct any such taxes from the salary of the Participant.
(b) Payment in Meridian Stock. A Participant my elect to
have such tax withholding obligation satisfied, in whole or
in part, by (i) authorizing the Company to withhold from
shares of Meridian Stock to be issued pursuant to any Award
a number of shares with an aggregate Fair Market Value (as
of the date the withholding is effected) sufficient to cover
the amount required to be withheld, or (ii) transferring to
the Company shares of Meridian Stock owned by the
Participant with an aggregate Fair Market Value (as of the
date the withholding is effected) sufficient to cover the
amount required to be withheld. With respect to any
Participant who is subject to Section 16 of the Securities
Exchange Act of 1934, as amended, the following additional
restrictions shall apply:
(A) The election to satisfy tax withholding
obligations relating to an Award in the manner permitted by
this Section 7.7 shall be made either (1) during the period
beginning on the third business day following the date of
release of quarterly or annual summary statements of sales
and earnings of the Company and ending on the twelfth
business day following such date, or (2) at least six months
prior to the date as of which the receipt of such an Award
first becomes a taxable event for federal income tax
purposes;
(B) Such election shall be irrevocable;
(C) Such election shall be subject to the consent or
disapproval of the Committee; and
(D) The Meridian Stock withheld to satisfy tax
withholding must pertain to an Award which has been held by
the Participant for at least six months from the date of
grant of the Award.
7.8 No Right to Employment. Neither the action of the Company
in establishing the Plan, nor any action taken by it or by
the Board or the Committee under the Plan, nor any provision
of the Plan, shall be construed as giving to any person the
right to be retained in the employ of the Company, Meridian
Mutual Insurance Company, or any Subsidiary of either.
7.9 Insofar as Key Employees who are directors or officers
subject to Section 16 of the Securities Exchange Act of
1934, as amended, are concerned (i) the Plan is intended to
comply with all applicable conditions of Rule 16b-3 and its
successors; (ii) all transactions involving Key Employees
who are directors or officers are subject to such conditions,
regardless of whether such conditions are expressly set forth
in the Plan; and (iii) any provision of the Plan that
is contrary to a condition of Rule 16b-3 shall not apply
to Key Employees who are directors or officers.
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
Second Excess Catastrophe Reinsurance
Reinsurers Participations
The Aetna Casualty and Surety Company 7.00%
Country Mutual Insurance Company 6.58
Dorinco Reinsurance Company 10.00
Erie Insurance Exchange 1.50
Insurance Corporation of Hannover 3.50
International Property Catastrophe Reinsurance Company, Ltd.
3.67
Nationwide Mutual Insurance Company 3.50
Shelter Reinsurance Company 1.00
Sumitomo Marine Re Management, Ltd.
(for The Sumitomo Marine & Fire Insurance Co., Ltd.,
U.S. Branch) 1.75
Through Swire Blanch - Australia
GIO Insurance Ltd. (trading as GIO Reinsurance) 7.50
Reinsurance Australia Corporation Limited 3.00
Through Swire Blanch Europe
Bayerische Ruckversicherung A.G. 5.00
Cie Transcontinentale de Reassurance 4.00
Mapfre Re Compania de Reaseguros, S.A. 2.00
Unione Italiana Di Riassicurazione S.P.A. 1.50
Walbaum International
for SOREMA North America Reinsurance Company
(as the fronting company for P.R.A.M. subscriptions) 7.00
Through Swire Fraser Ltd.
Lloyd's Underwriters
Per Signing Schedule(s) 31.50
Total 100.00%
Third Excess Catastrophe Reinsurance
Reinsurers Participations
AXA Reinsurance Company 5.00%
Employers Mutual Casualty Company 2.00
Erie Insurance Exchange 2.00
Farmers Mutual Hail Insurance Company of Iowa 1.50
First Excess and Reinsurance Corporation 6.00
Global Capital Re 5.00
Great Lakes Re Management Corporation 5.25
Insurance Corporation of Hannover 2.50
International Property Catastrophe Reinsurance Company, Ltd.
2.00
LaSalle Re Limited 15.75
Nationwide Mutual Insurance Company 3.50
St. Paul Reinsurance Management Corporation
(for St. Paul Fire and Marine Insurance Company) 2.00
Shelter Reinsurance Company 0.75
United States Fidelity and Guaranty Company 5.25
Through Swire Blanch - Australia
GIO Insurance Ltd. (trading as GIO Reinsurance) 7.50
Reinsurance Australia Corporation Limited 7.50
Through Swire Blanch Europe
Cie Transcontinentale de Reassurance 2.50
Helvetia Swiss Insurance Company, Ltd. 1.00
La Mutuelle Du Mans Assurances I.A.R.D. 2.00
Mapfre Re Compania de Reaseguros, S.A. 2.00
Unione Italiana Di Riassicurazione S.P.A. 1.00
Walbaum International
for SOREMA North America Reinsurance Company
(as the fronting company for P.R.A.M. subscriptions) 6.00
Through Swire Fraser Ltd.
Lloyd's Underwriters
Per Signing Schedule(s) 12.00
Total 100.00%
Fourth Excess Catastrophe Reinsurance
Reinsurers Participations
Constitution Reinsurance Corporation 5.00%
Dorinco Reinsurance Company 6.00
Employers Mutual Casualty Company 0.60
Erie Insurance Exchange 1.25
First Excess and Reinsurance Corporation 2.00
Global Capital Re 7.50
Grinnell Mutual Reinsurance Company 1.50
LaSalle Re Limited 10.52
Nationwide Mutual Insurance Company 3.00
St. Paul Reinsurance Management Corporation
(for St. Paul Fire and Marine Insurance Company) 2.50
Shelter Reinsurance Company 1.00
SOREMA North America Reinsurance Company 15.00
Sumitomo Marine Re Management, Ltd.
(for The Sumitomo Marine & Fire Insurance Co., Ltd.,
U.S. Branch) 1.00
United Fire & Casualty Company 0.75
Vesta Fire Insurance Corporation 5.50
Through Swire Blanch - Australia
GIO Insurance Ltd. (trading as GIO Reinsurance) 4.25
Through Swire Blanch Europe
AXA RE 6.00
Cie Transcontinentale de Reassurance 2.50
La Mutuelle Du Mans Assurances I.A.R.D. 1.50
Mapfre Re Compania de Reaseguros, S.A. 1.50
Unione Italiana Di Riassicurazione S.P.A. 1.00
Walbaum International
for SOREMA North America Reinsurance Company
(as the fronting company for P.R.A.M. subscriptions) 4.50
Through Swire Fraser Ltd.
Lloyd's Underwriters
Per Signing Schedule(s) 15.63
Total 100.00%
Fifth Excess Catastrophe Reinsurance
Reinsurers Participations
AXA Reinsurance Company 1.25%
Employers Mutual Casualty Company 1.00
Erie Insurance Exchange 1.25
Farmers Mutual Hail Insurance Company of Iowa 0.35
Grinnell Mutual Reinsurance Company 0.35
International Property Catastrophe Reinsurance Company, Ltd.
2.50
LaSalle Re Limited 2.50
Nationwide Mutual Insurance Company 2.50
Renaissance Reinsurance Ltd. 10.00
St. Paul Reinsurance Management Corporation
(for St. Paul Fire and Marine Insurance Company) 1.10
Shelter Reinsurance Company 0.50
SOREMA North America Reinsurance Company 7.50
United Fire & Casualty Company 0.50
United States Fidelity and Guaranty Company 5.00
Vesta Fire Insurance Corporation 5.00
Through Park International Limited
Mid Ocean Reinsurance Company Ltd. 7.50
Through Swire Blanch Europe
Albingia Versicherungs AG 2.50
AXA RE 5.00
Bayerische Ruckversicherung A.G. 5.00
Cie Transcontinentale de Reassurance 1.25
La Mutuelle Du Mans Assurances I.A.R.D. 1.50
Mapfre Re Compania de Reaseguros, S.A. 2.50
Sirius International Insurance Corporation 1.00
Walbaum International
for SOREMA North America Reinsurance Company
(as the fronting company for P.R.A.M. subscriptions) 3.50
Through Swire Fraser Ltd.
Lloyd's Underwriters
Per Signing Schedule(s) 28.95
Total 100.00%
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
E. W. BLANCH CO.
Reinsurance Services
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
by
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the "Reinsurer")
Preamble
The "Meridian Mutual Group" for purposes of this Contract shall
consist of Meridian Mutual Insurance Company, Meridian Security
Insurance Company and Vernon Fire and Casualty Insurance Company,
all of Indianapolis, Indiana. It is understood that Meridian
Mutual Insurance Company shall be deemed the agent of the other
reinsured companies for purposes of sending or receiving notices
required by the terms and conditions of this Contract, and for
purposes of remitting or receiving any monies due any party.
Article I - Classes of Business Reinsured
By this Contract the Reinsurer agrees to reinsure the excess
liability which may accrue to the Company under its policies,
contracts and binders of insurance or reinsurance (hereinafter
called "policies") in force at the effective date hereof or
issued or renewed on or after that date, and classified by the
Company as Fire, Allied Lines, Homeowners (property perils only),
Mobile Homeowners (property perils only), Farmowners (property
perils only), Commercial Multiple Peril (property perils only),
Businessowners (property perils only), Earthquake, Inland Marine
and Automobile Physical Damage (comprehensive coverage only)
business, subject to the terms, conditions and limitations set
forth herein and in Schedule A attached to and forming part of
this Contract.
Article II - Term
A. This Contract shall become effective on January 1, 1996, with
respect to losses arising out of loss occurrences commencing
on or after that date, and shall remain in force until
December 31, 1996, both days inclusive.
B. If this Contract expires while a loss occurrence covered
hereunder is in progress, the Reinsurer's liability hereunder
shall, subject to the other terms and conditions of this
Contract, be determined as if the entire loss occurrence had
occurred prior to the expiration of this Contract, provided
that no part of such loss occurrence is claimed against any
renewal or replacement of this Contract.
Article III - Territory
The liability of the Reinsurer shall be limited to losses under
policies covering property located within the territorial limits
of the United States of America, its territories or possessions,
Puerto Rico, the District of Columbia and Canada; but this
limitation shall not apply to moveable property if the Company's
policies provide coverage when said moveable property is outside
the aforesaid territorial limits.
Article IV - Exclusions
This Contract shall not apply to:
1. Reinsurance accepted by the Company other than:
a. Facultative reinsurance on a share basis of risks
accepted individually and not forming part of any
agreement, or
b. Local agency reinsurance on a share basis accepted
in the normal course of business.
2. Nuclear incident per the following clauses attached
hereto:
a. "Nuclear Incident Exclusion Clause - Physical
Damage Reinsurance - U.S.A." (NMA 1119);
b. "Nuclear Incident Exclusion Clause - Physical
Damage Reinsurance - Canada" (NMA 1980);
c. "Nuclear Energy Risks Exclusion Clause
(Reinsurance) (1994) (Worldwide Excluding U.S.A. &
Canada)" (NMA 1975(a)).
3. Pool, association, or syndicate business as excluded
by the provisions of the "Pools, Associations and
Syndicates Exclusion Clause" attached to and forming part
of this Contract.
4. Any liability of the Company arising from its
participation or membership in any insolvency fund.
5. Credit, financial guarantee and insolvency business.
6. War risks as excluded in any standard policy.
7. Policies written to apply in excess of underlying
insurance or policies written with a deductible or
franchise of more than $10,000; however, this exclusion
shall not apply to policies which provide a percentage
deductible or franchise in connection with earthquake or
windstorm.
8. Insurance on growing crops.
9. Insurance against flood, surface water, waves, tidal
water or tidal wave, overflow of streams or other bodies
of water or spray from any of the foregoing, all whether
driven by wind or not, when written as such; however, this
exclusion shall not apply as respects the foregoing perils
included in Commercial Multiple Peril, Homeowners Multiple
Peril, Farmowners Multiple Peril, Inland Marine,
Businessowners, Mobile Homeowners, and Automobile Physical
Damage policies, and in endorsements to Fire and Extended
Coverage policies.
10. Mortgage impairment insurance and similar kinds of
insurance, howsoever styled, providing coverage to an
insured with respect to its mortgagee interest in property
or its owner interest in foreclosed property.
11. Difference in conditions insurance and similar kinds
of insurance, howsoever styled.
12. Risks which have a total insurable value of more than
$250,000,000.
13. Any collection of fine arts with an insurable value
of $5,000,000 or more.
14. Inland Marine business with respect to the following:
a. All bridges and tunnels;
b. Cargo insurance when written as such with respect
to ocean, lake, or inland waterways vessels;
c. Commercial negative film insurance and cast
insurance;
d. Drilling rigs, except water well drilling rigs;
e. Furriers' customers policies;
f. Garment contractors policies;
g. Insurance on livestock under so-called "mortality
policies," when written as such;
h. Jewelers' block policies and furriers' block
policies;
i. Mining equipment while underground;
j. Radio and television broadcasting towers;
k. Registered mail insurance when the limit of any
one addressee on any one day is more than $50,000;
l. Watercraft other than watercraft insured under
personal property floaters, yacht and/or outboard
policies, homeowners, farmowners, or recreational
vehicle policies.
15. Automobile physical damage business with respect to
the following:
a. Insurance against collision;
b. Insurance against theft or larceny;
c. Manufacturers' stocks at factories or warehouses.
16. Seepage and/or pollution and/or contamination.
17. Losses in respect of overhead transmission and
distribution lines and their supporting structures other
than those on or within 150 meters (or 500 feet) of the
insured premises.
It is understood and agreed that public utilities
extension and/or suppliers extension and/or contingent
business interruption coverages are not subject to this
exclusion provided that these are not part of a
transmitters' or distributors' policy.
18. Extra Contractual Obligations and Loss In Excess of
Policy Limits.
Article V - Retention and Limit
A. As respects each excess layer of reinsurance coverage provided
by this Contract, the Company shall retain and be liable for
the first amount of ultimate net loss, shown as "Company's
Retention" for that excess layer in Schedule A attached
hereto, arising out of each loss occurrence. The Reinsurer
shall then be liable, as respects each excess layer, for 95.0%
of the amount by which such ultimate net loss exceeds the
Company's applicable retention, but the liability of the
Reinsurer under each excess layer shall not exceed 95.0% of
the amount, shown as "Reinsurer's Per Occurrence Limit" for
that excess layer in Schedule A attached hereto, as respects
any one loss occurrence.
B. As respects each excess layer of reinsurance coverage provided
by this Contract, the Company shall retain, (net and
unreinsured elsewhere, as respects the Fourth and Fifth excess
layers), in addition to its initial retention for each loss
occurrence, 5.0% of the excess ultimate net loss to which the
excess layer applies. As respects the Second and Third excess
layers of reinsurance coverage, the Company's initial
retention and such additional retention shall be subject to
the reinsurance set forth in paragraph C below.
C. The Company shall be permitted to carry underlying aggregate
excess catastrophe reinsurance recoveries under which shall
inure solely to the benefit of the Company and be entirely
disregarded in applying all of the provisions of this
Contract.
Article VI - Reinstatement
A. In the event all or any portion of the reinsurance under any
excess layer of reinsurance coverage provided by this Contract
is exhausted by loss, the amount so exhausted shall be
reinstated immediately from the time the loss occurrence
commences hereon. For each amount so reinstated the Company
agrees to pay additional premium calculated as follows:
1. The percentage of the occurrence limit for the excess
layer reinstated (based on the loss paid by the Reinsurer
under that excess layer); times
2. The earned reinsurance premium for the excess layer
reinstated for the term of this Contract (exclusive of
reinstatement premium).
B. Whenever the Company requests payment by the Reinsurer of any
loss under any excess layer hereunder, the Company shall
submit a statement to the Reinsurer of reinstatement premium
due the Reinsurer for that excess layer. If the earned
reinsurance premium for any excess layer for the term of this
Contract has not been finally determined as of the date of any
such statement, the calculation of reinstatement premium due
for that excess layer shall be based on the annual deposit
premium for that excess layer and shall be readjusted when the
earned reinsurance premium for that excess layer for the term
of this Contract has been finally determined. Any
reinstatement premium shown to be due the Reinsurer for any
excess layer as reflected by any such statement (less prior
payments, if any, for that excess layer) shall be payable by
the Company concurrently with payment by the Reinsurer of the
requested loss for that excess layer. Any return
reinstatement premium shown to be due the Company shall be
remitted by the Reinsurer as promptly as possible after
receipt and verification of the Company's statement.
C. Notwithstanding anything stated herein, the liability of the
Reinsurer under any excess layer of reinsurance coverage
provided by this Contract shall not exceed either of the
following:
1. 95.0% of an amount, shown as "Reinsurer's Per
Occurrence Limit" for that excess layer in Schedule A
attached hereto, as respects loss or losses arising out of
any one loss occurrence; or
2. 95.0% of an amount, shown as "Reinsurer's Annual
Limit" for that excess layer in Schedule A attached
hereto, in all during the term of this Contract.
Article VII - Definition of Ultimate Net Loss
"Ultimate net loss" as used herein is defined as the sum or sums
(including interest on judgments, litigation expenses and all
other loss adjustment expenses, except office expenses and
salaries of the Company's regular employees) paid or payable by
the Company in settlement of claims and in satisfaction of
judgments rendered on account of such claims, after deduction of
all salvage, all recoveries and all claims on inuring insurance
or reinsurance, whether collectible or not. Nothing herein shall
be construed to mean that losses under this Contract are not
recoverable until the Company's ultimate net loss has been
ascertained.
Article VIII - Other Reinsurance
A. The Company shall maintain in force excess per risk
reinsurance, recoveries under which shall inure to the benefit
of this Contract.
B. The Company shall be permitted to carry underlying excess
catastrophe reinsurance, recoveries under which shall inure
solely to the benefit of the Company and be entirely
disregarded in applying all of the provisions of this
Contract.
Article IX - Loss Occurrence (NMA 2244/BRMA 27A)
A. The term "loss occurrence" shall mean the sum of all
individual losses directly occasioned by any one disaster,
accident or loss or series of disasters, accidents or losses
arising out of one event which occurs within the area of one
state of the United States or province of Canada and states or
provinces contiguous thereto and to one another. However, the
duration and extent of any one "loss occurrence" shall be
limited to all individual losses sustained by the Company
occurring during any period of 168 consecutive hours arising
out of and directly occasioned by the same event, except that
the term "loss occurrence" shall be further defined as
follows:
1. As regards windstorm, hail, tornado, hurricane,
cyclone, including ensuing collapse and water damage, all
individual losses sustained by the Company occurring
during any period of 72 consecutive hours arising out of
and directly occasioned by the same event. However, the
event need not be limited to one state or province or
states or provinces contiguous thereto.
2. As regards riot, riot attending a strike, civil
commotion, vandalism and malicious mischief, all
individual losses sustained by the Company occurring
during any period of 72 consecutive hours within the area
of one municipality or county and the municipalities or
counties contiguous thereto arising out of and directly
occasioned by the same event. The maximum duration of 72
consecutive hours may be extended in respect of individual
losses which occur beyond such 72 consecutive hours during
the continued occupation of an assured's premises by
strikers, provided such occupation commenced during the
aforesaid period.
3. As regards earthquake (the epicentre of which need
not necessarily be within the territorial confines
referred to in paragraph A of this Article) and fire
following directly occasioned by the earthquake, only
those individual fire losses which commence during the
period of 168 consecutive hours may be included in the
Company's "loss occurrence."
4. As regards "freeze," only individual losses directly
occasioned by collapse, breakage of glass and water damage
(caused by bursting frozen pipes and tanks) may be
included in the Company's "loss occurrence."
B. Except for those "loss occurrences" referred to in
subparagraphs 1 and 2 of paragraph A above, the Company may
choose the date and time when any such period of consecutive
hours commences, provided that it is not earlier than the date
and time of the occurrence of the first recorded individual
loss sustained by the Company arising out of that disaster,
accident or loss, and provided that only one such period of
168 consecutive hours shall apply with respect to one event.
C. However, as respects those "loss occurrences" referred to in
subparagraphs 1 and 2 of paragraph A above, if the disaster,
accident or loss occasioned by the event is of greater
duration than 72 consecutive hours, then the Company may
divide that disaster, accident or loss into two or more "loss
occurrences," provided that no two periods overlap and no
individual loss is included in more than one such period, and
provided that no period commences earlier than the date and
time of the occurrence of the first recorded individual loss
sustained by the Company arising out of that disaster,
accident or loss.
D. No individual losses occasioned by an event that would be
covered by 72 hours clauses may be included in any "loss
occurrence" claimed under the 168 hours provision.
Article X - Loss Notices and Settlements
A. Whenever losses sustained by the Company appear likely to
result in a claim hereunder, the Company shall notify the
Reinsurer, and the Reinsurer shall have the right to
participate in the adjustment of such losses at its own
expense.
B. All loss settlements made by the Company, provided they are
within the terms of the original policies (or within the terms
of extra contractual obligations coverage, if any, provided
under this Contract) and within the terms of this Contract,
shall be binding upon the Reinsurer. The Reinsurer agrees to
pay all amounts for which it may be liable upon receipt of
reasonable evidence of the amount paid (or scheduled to be
paid) by the Company. The Company shall be the sole judge of
what is covered by an original policy.
Article XI - Salvage and Subrogation
The Reinsurer shall be credited with salvage (i.e., reimbursement
obtained or recovery made by the Company, less the actual cost,
excluding salaries of officials and employees of the Company and
sums paid to attorneys as retainer, of obtaining such
reimbursement or making such recovery) on account of claims and
settlements involving reinsurance hereunder. Salvage thereon
shall always be used to reimburse the excess carriers in the
reverse order of their priority according to their participation
before being used in any way to reimburse the Company for its
primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation relating to any loss, a part of which loss
was sustained by the Reinsurer, and to prosecute all claims
arising out of such rights.
Article XII - Premium
A. As premium for each excess layer of reinsurance coverage
provided by this Contract, the Company shall pay the Reinsurer
the greater of the following:
1. The amount, shown as "Annual Minimum Premium" for
that excess layer in Schedule A attached hereto; or
2. The percentage, shown as "Premium Rate" for that
excess layer in Schedule A attached hereto, of the
Company's net earned premium for the term of this
Contract.
B. The Company shall pay the Reinsurer an annual deposit premium
for each excess layer of an amount, shown as "Annual Deposit
Premium" for that excess layer in Schedule A attached hereto,
in four equal installments of an amount, shown as "Quarterly
Deposit Premium" for that excess layer in Schedule A attached
hereto, on January 1, April 1, July 1 and October 1 of 1996.
C. Within 60 days after the expiration of this Contract, the
Company shall provide a report to the Reinsurer setting forth
the premium due hereunder for each excess layer, computed in
accordance with paragraph A, and any additional premium due
the Reinsurer or return premium due the Company for each such
excess layer shall be remitted promptly.
D. "Net earned premium" as used herein is defined as gross earned
premium of the Company for the classes of business reinsured
hereunder, less the earned portion of premiums ceded by the
Company for reinsurance which inures to the benefit of this
Contract. For purposes of calculating net earned premium, 90%
of the total basic policy premium as respects Homeowners,
Mobilehomeowners and Farmowners business, 70% of the total
basic policy premium as respects Businessowners and Commercial
Multiple Peril, and 100% of the Comprehensive portion of the
premium for Automobile Physical Damage business shall be
considered subject premium.
Article XIII - Offset (BRMA 36C)
The Company and the Reinsurer shall have the right to offset any
balance or amounts due from one party to the other under the
terms of this Contract. The party asserting the right of offset
may exercise such right any time whether the balances due are on
account of premiums or losses or otherwise.
Article XIV - Access to Records (BRMA 1D)
The Reinsurer or its designated representatives shall have access
at any reasonable time to all records of the Company which
pertain in any way to this reinsurance.
Article XV - Net Retained Lines (BRMA 32E)
A. This Contract applies only to that portion of any policy which
the Company retains net for its own account (prior to
deduction of any underlying reinsurance specifically permitted
in this Contract), and in calculating the amount of any loss
hereunder and also in computing the amount or amounts in
excess of which this Contract attaches, only loss or losses in
respect of that portion of any policy which the Company
retains net for its own account shall be included.
B. The amount of the Reinsurer's liability hereunder in respect
of any loss or losses shall not be increased by reason of the
inability of the Company to collect from any other
reinsurer(s), whether specific or general, any amounts which
may have become due from such reinsurer(s), whether such
inability arises from the insolvency of such other
reinsurer(s) or otherwise.
Article XVI - Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with
this Contract or any transaction hereunder shall not relieve
either party from any liability which would have attached had
such delay, error or omission not occurred, provided always that
such error or omission is rectified as soon as possible after
discovery.
Article XVII - Currency (BRMA 12A)
A. Whenever the word "Dollars" or the "$" sign appears in this
Contract, they shall be construed to mean United States
Dollars and all transactions under this Contract shall be in
United States Dollars.
B. Amounts paid or received by the Company in any other currency
shall be converted to United States Dollars at the rate of
exchange at the date such transaction is entered on the books
of the Company.
Article XVIII - Taxes (BRMA 50C)
In consideration of the terms under which this Contract is
issued, the Company will not claim a deduction in respect of the
premium hereon when making tax returns, other than income or
profits tax returns, to any state or territory of the United
States of America, the District of Columbia or Canada.
Article XIX - Federal Excise Tax (BRMA 17A)
(Applicable to those reinsurers, excepting Underwriters at
Lloyd's London and other reinsurers exempt from Federal Excise
Tax, who are domiciled outside the United States of America.)
A. The Reinsurer has agreed to allow for the purpose of paying
the Federal Excise Tax the applicable percentage of the
premium payable hereon (as imposed under Section 4371 of the
Internal Revenue Code) to the extent such premium is subject
to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder
the Reinsurer will deduct the applicable percentage from the
return premium payable hereon and the Company or its agent
should take steps to recover the tax from the United States
Government.
Article XX - Unauthorized Reinsurers
A. If the Reinsurer is unauthorized in any state of the United
States of America or the District of Columbia, the Reinsurer
agrees to fund its share of the Company's ceded United States
outstanding loss and loss adjustment expense reserves by:
1. Clean, irrevocable and unconditional letters of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
bank or banks meeting the NAIC Securities Valuation Office
credit standards for issuers of letters of credit and
acceptable to said insurance regulatory authorities;
and/or
2. Escrow accounts for the benefit of the Company;
and/or
3. Cash advances;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved. The Reinsurer,
at its sole option, may fund in other than cash if its method
and form of funding are acceptable to the insurance regulatory
authorities involved.
B. If the Reinsurer is unauthorized in any province or
jurisdiction of Canada, the Reinsurer agrees to fund 115% of
its share of the Company's ceded Canadian outstanding loss and
loss adjustment expense reserves by:
1. A clean, irrevocable and unconditional letter of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
Canadian bank or banks meeting the NAIC Securities
Valuation Office credit standards for issuers of letters
of credit and acceptable to said insurance regulatory
authorities, for no more than 15/115ths of the total
funding required; and/or
2. Cash advances for the remaining balance of the
funding required;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved.
C. With regard to funding in whole or in part by letters of
credit, it is agreed that each letter of credit will be in a
form acceptable to insurance regulatory authorities involved,
will be issued for a term of at least one year and will
include an "evergreen clause," which automatically extends the
term for at least one additional year at each expiration date
unless written notice of non-renewal is given to the Company
not less than 30 days prior to said expiration date. The
Company and the Reinsurer further agree, notwithstanding
anything to the contrary in this Contract, that said letters
of credit may be drawn upon by the Company or its successors
in interest at any time, without diminution because of the
insolvency of the Company or the Reinsurer, but only for one
or more of the following purposes:
1. To reimburse itself for the Reinsurer's share of
losses and/or loss adjustment expenses paid under the
terms of policies reinsured hereunder, unless paid in cash
by the Reinsurer;
2. To reimburse itself for the Reinsurer's share of any
other amounts claimed to be due hereunder, unless paid in
cash by the Reinsurer;
3. To fund a cash account in an amount equal to the
Reinsurer's share of any ceded outstanding loss and loss
adjustment expense reserves funded by means of a letter of
credit which is under non-renewal notice, if said letter
of credit has not been renewed or replaced by the
Reinsurer 10 days prior to its expiration date;
4. To refund to the Reinsurer any sum in excess of the
actual amount required to fund the Reinsurer's share of
the Company's ceded outstanding loss and loss adjustment
expense reserves, if so requested by the Reinsurer.
In the event the amount drawn by the Company on any letter of
credit is in excess of the actual amount required for C(1) or
C(3), or in the case of C(2), the actual amount determined to
be due, the Company shall promptly return to the Reinsurer the
excess amount so drawn.
Article XXI - Insolvency
A. In the event of the insolvency of one or more of the reinsured
companies, this reinsurance shall be payable directly to the
company or to its liquidator, receiver, conservator or
statutory successor immediately upon demand, with reasonable
provision for verification, on the basis of the liability of
the company without diminution because of the insolvency of
the company or because the liquidator, receiver, conservator
or statutory successor of the company has failed to pay all or
a portion of any claim. It is agreed, however, that the
liquidator, receiver, conservator or statutory successor of
the company shall give written notice to the Reinsurer of the
pendency of a claim against the company indicating the policy
or bond reinsured which claim would involve a possible
liability on the part of the Reinsurer within a reasonable
time after such claim is filed in the conservation or
liquidation proceeding or in the receivership, and that during
the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses
that it may deem available to the company or its liquidator,
receiver, conservator or statutory successor. The expense
thus incurred by the Reinsurer shall be chargeable, subject to
the approval of the Court, against the company as part of the
expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the company
solely as a result of the defense undertaken by the Reinsurer.
B. Where two or more reinsurers are involved in the same claim
and a majority in interest elect to interpose defense to such
claim, the expense shall be apportioned in accordance with the
terms of this Contract as though such expense had been
incurred by the company.
C. It is further understood and agreed that, in the event of the
insolvency of one or more of the reinsured companies, the
reinsurance under this Contract shall be payable directly by
the Reinsurer to the company or to its liquidator, receiver or
statutory successor, except as provided by Section 4118(a) of
the New York Insurance Law or except (a) where this Contract
specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (b) where the
Reinsurer with the consent of the direct insured or insureds
has assumed such policy obligations of the company as direct
obligations of the Reinsurer to the payees under such policies
and in substitution for the obligations of the company to such
payees.
Article XXII - Arbitration (BRMA 6J)
A. As a condition precedent to any right of action hereunder, in
the event of any dispute or difference of opinion hereafter
arising with respect to this Contract, it is hereby mutually
agreed that such dispute or difference of opinion shall be
submitted to arbitration. One Arbiter shall be chosen by the
Company, the other by the Reinsurer, and an Umpire shall be
chosen by the two Arbiters before they enter upon arbitration,
all of whom shall be active or retired disinterested executive
officers of insurance or reinsurance companies or Lloyd's
London Underwriters. In the event that either party should
fail to choose an Arbiter within 30 days following a written
request by the other party to do so, the requesting party may
choose two Arbiters who shall in turn choose an Umpire before
entering upon arbitration. If the two Arbiters fail to agree
upon the selection of an Umpire within 30 days following their
appointment, each Arbiter shall nominate three candidates
within 10 days thereafter, two of whom the other shall
decline, and the decision shall be made by drawing lots.
B. Each party shall present its case to the Arbiters within 30
days following the date of appointment of the Umpire. The
Arbiters shall consider this Contract as an honorable
engagement rather than merely as a legal obligation and they
are relieved of all judicial formalities and may abstain from
following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but
failing to agree, they shall call in the Umpire and the
decision of the majority shall be final and binding upon both
parties. Judgment upon the final decision of the Arbiters may
be entered in any court of competent jurisdiction.
C. If more than one reinsurer is involved in the same dispute,
all such reinsurers shall constitute and act as one party for
purposes of this Article and communications shall be made by
the Company to each of the reinsurers constituting one party,
provided, however, that nothing herein shall impair the rights
of such reinsurers to assert several, rather than joint,
defenses or claims, nor be construed as changing the liability
of the reinsurers participating under the terms of this
Contract from several to joint.
D. Each party shall bear the expense of its own Arbiter, and
shall jointly and equally bear with the other the expense of
the Umpire and of the arbitration. In the event that the two
Arbiters are chosen by one party, as above provided, the
expense of the Arbiters, the Umpire and the arbitration shall
be equally divided between the two parties.
E. Any arbitration proceedings shall take place at a location
mutually agreed upon by the parties to this Contract, but
notwithstanding the location of the arbitration, all
proceedings pursuant hereto shall be governed by the law of
the state in which the Company has its principal office.
Article XXIII - Service of Suit (BRMA 49C)
(Applicable if the Reinsurer is not domiciled in the United
States of America, and/or is not authorized in any State,
Territory or District of the United States where authorization is
required by insurance regulatory authorities)
A. It is agreed that in the event the Reinsurer fails to pay any
amount claimed to be due hereunder, the Reinsurer, at the
request of the Company, will submit to the jurisdiction of any
court of competent jurisdiction within the United States.
Nothing in this Article constitutes or should be understood to
constitute a waiver of the Reinsurer's rights to commence an
action in any court of competent jurisdiction in the United
States, to remove an action to a United States District Court,
or to seek a transfer of a case to another court as permitted
by the laws of the United States or of any state in the United
States.
B. Further, pursuant to any statute of any state, territory or
district of the United States which makes provision therefor,
the Reinsurer hereby designates the party named in its
Interests and Liabilities Agreement, or if no party is named
therein, the Superintendent, Commissioner or Director of
Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, as its true
and lawful attorney upon whom may be served any lawful process
in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of
this Contract.
Article XXIV - Intermediary (BRMA 23A)
E. W. Blanch Co. is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All
communications (including but not limited to notices, statements,
premium, return premium, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating
thereto shall be transmitted to the Company or the Reinsurer
through E. W. Blanch Co., Reinsurance Services, 3500 West 80th
Street, Minneapolis, Minnesota 55431. Payments by the Company to
the Intermediary shall be deemed to constitute payment to the
Reinsurer. Payments by the Reinsurer to the Intermediary shall
be deemed to constitute payment to the Company only to the extent
that such payments are actually received by the Company.
In Witness Whereof, the Company by its duly authorized
representative has executed this Contract as of the date
undermentioned at:
Indianapolis, Indiana,this _______ day of ____________________________________
199___.
__________________________________________________
___
Meridian Mutual Group
Schedule A
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
Second Third Fourth Fifth
Excess Excess Excess Excess
Company's Retention $6,000,000 $10,000,000 $18,000,000 $30,000,000
Reinsurer's Per $4,000,000 $ 8,000,000 $12,000,000 $35,000,000
Occurrence Limit
(95.0% of)
Reinsurer's Annual $8,000,000 $16,000,000 $24,000,000 $70,000,000
Limit (95.0% of)
Annual Minimum
Premium $403,120 $456,000 $456,000 $824,800
Premium Rate .711% .804% .804% 1.455%
Annual Deposit
Premium $504,000 $570,000 $570,000 $1,030,000
Quarterly Deposit $126,000 $142,500 $142,500 $257,500
Premium
The figures listed above for each excess layer shall apply to
each Subscribing Reinsurer in the percentage share for that
excess layer as expressed in its Interests and Liabilities
Agreement attached hereto.
Table of Contents
Article Page
Preamble 1
I Classes of Business Reinsured 1
II Term 2
III Territory 2
IV Exclusions 2
V Retention and Limit 4
VI Reinstatement 5
VII Definition of Ultimate Net Loss 6
VIII Other Reinsurance 6
IX Loss Occurrence (NMA 2244/BRMA 27A) 6
X Loss Notices and Settlements 7
XI Salvage and Subrogation 8
XII Premium 8
XIII Offset (BRMA 36C) 9
XIV Access to Records (BRMA 1D) 9
XV Net Retained Lines (BRMA 32E) 9
XVI Errors and Omissions (BRMA 14F) 9
XVII Currency (BRMA 12A) 10
XVIII Taxes (BRMA 50C) 10
XIX Federal Excise Tax (BRMA 17A) 10
XX Unauthorized Reinsurers 10
XXI Insolvency 12
XXII Arbitration (BRMA 6J) 12
XXIII Service of Suit (BRMA 49C) 13
XXIV Intermediary (BRMA 23A) 14
Schedule A
Interests and Liabilities Agreement
of
The Aetna Casualty and Surety Company
Hartford, Connecticut
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
7.00% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hartford, Connecticut,this ________ day of _______________________199___.
__________________________________________________
___
The Aetna Casualty and Surety Company
Interests and Liabilities Agreement
of
Albingia Versicherungs AG
Hamburg, Germany
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
2.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamburg, Germany,this _______ day of ___________________________199___.
__________________________________________________
___
Albingia Versicherungs AG
Interests and Liabilities Agreement
of
AXA RE
Paris, France
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
6.00% of the Fourth Excess Catastrophe Reinsurance
5.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Paris, France,this _______ day of ______________________________199___.
__________________________________________________
___
AXA RE
Interests and Liabilities Agreement
of
AXA Reinsurance Company
Wilmington, Delaware
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
5.00% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
1.25% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of _________________________ 199___.
__________________________________________________
___
AXA Reinsurance Company
Interests and Liabilities Agreement
of
Bayerische Ruckversicherung A.G.
Munich, Germany
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
5.00% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
5.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Munich, Germany,this _______ day of ____________________________199___.
__________________________________________________
___
Bayerische Ruckversicherung A.G.
Interests and Liabilities Agreement
of
Cie Transcontinentale de Reassurance
Paris, France
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
4.00% of the Second Excess Catastrophe Reinsurance
2.50% of the Third Excess Catastrophe Reinsurance
2.50% of the Fourth Excess Catastrophe Reinsurance
1.25% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Paris, France,this _______ day of ______________________________199___.
__________________________________________________
___
Cie Transcontinentale de Reassurance
Interests and Liabilities Agreement
of
Constitution Reinsurance Corporation
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
5.00% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of _________________________199___.
__________________________________________________
___
Constitution Reinsurance Corporation
Interests and Liabilities Agreement
of
Country Mutual Insurance Company
Bloomington, Illinois
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
6.58% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Bloomington, Illinois,this _______ day of _______________________
199___.
__________________________________________________
___
Country Mutual Insurance Company
Interests and Liabilities Agreement
of
Dorinco Reinsurance Company
Midland, Michigan
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
10.00% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
6.00% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Midland, Michigan,this _______ day of __________________________199___.
__________________________________________________
___
Dorinco Reinsurance Company
Interests and Liabilities Agreement
of
Employers Mutual Casualty Company
Des Moines, Iowa
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
2.00% of the Third Excess Catastrophe Reinsurance
0.60% of the Fourth Excess Catastrophe Reinsurance
1.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Des Moines, Iowa,this _______ day of ___________________________199___.
__________________________________________________
___
Employers Mutual Casualty Company
Interests and Liabilities Agreement
of
Erie Insurance Exchange
Erie, Pennsylvania
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
1.50% of the Second Excess Catastrophe Reinsurance
2.00% of the Third Excess Catastrophe Reinsurance
1.25% of the Fourth Excess Catastrophe Reinsurance
1.25% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Erie, Pennsylvania,this _______ day of __________________________ 199___.
__________________________________________________
___
Erie Insurance Exchange
Interests and Liabilities Agreement
of
Farmers Mutual Hail Insurance Company of Iowa
Des Moines, Iowa
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
1.50% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0.35% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Des Moines, Iowa,this _______ day of ___________________________ 199___.
__________________________________________________
___
Farmers Mutual Hail Insurance Company of Iowa
Interests and Liabilities Agreement
of
First Excess and Reinsurance Corporation
Overland Park, Kansas
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
6.00% of the Third Excess Catastrophe Reinsurance
2.00% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Overland Park, Kansas,this _______ day of _______________________199___.
__________________________________________________
___
First Excess and Reinsurance Corporation
Interests and Liabilities Agreement
of
GIO Insurance Ltd.
trading as GIO Reinsurance
Sydney, Australia
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
7.50% of the Second Excess Catastrophe Reinsurance
7.50% of the Third Excess Catastrophe Reinsurance
4.25% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Sydney, Australia,this _______ day of __________________________199___.
__________________________________________________
___
GIO Insurance Ltd.
trading as GIO Reinsurance
Interests and Liabilities Agreement
of
Global Capital Re
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
5.00% of the Third Excess Catastrophe Reinsurance
7.50% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamilton, Bermuda,this _______ day of __________________________199___.
__________________________________________________
___
Global Capital Re
Interests and Liabilities Agreement
of
Great Lakes American Reinsurance Company
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
5.25% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of _________________________199___.
__________________________________________________
___
Great Lakes American Reinsurance Company
Interests and Liabilities Agreement
of
Grinnell Mutual Reinsurance Company
Grinnell, Iowa
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
1.50% of the Fourth Excess Catastrophe Reinsurance
0.35% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Grinnell, Iowa,this _______ day of _____________________________199___.
__________________________________________________
___
Grinnell Mutual Reinsurance Company
Interests and Liabilities Agreement
of
Helvetia Swiss Insurance Company, Ltd.
St. Gallen, Switzerland
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
1.00% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
St. Gallen, Switzerland,this _______ day of _____________________
______________199___.
__________________________________________________
___
Helvetia Swiss Insurance Company, Ltd.
Interests and Liabilities Agreement
of
Insurance Corporation of Hannover
Chicago, Illinois
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
3.50% of the Second Excess Catastrophe Reinsurance
2.50% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Los Angeles, California,this _______ day of _____________________199___.
__________________________________________________
___
Insurance Corporation of Hannover
Interests and Liabilities Agreement
of
International Property Catastrophe Reinsurance Company, Ltd.
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
3.67% of the Second Excess Catastrophe Reinsurance
2.00% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
2.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamilton, Bermuda,this _______ day of __________________________199___.
__________________________________________________
___
International Property Catastrophe Reinsurance
Company, Ltd.
Interests and Liabilities Agreement
of
La Mutuelle Du Mans Assurances I.A.R.D.
LeMans, France
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
2.00% of the Third Excess Catastrophe Reinsurance
1.50% of the Fourth Excess Catastrophe Reinsurance
1.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
LeMans, France,this _______ day of _____________________________199___.
__________________________________________________
___
La Mutuelle Du Mans Assurances I.A.R.D.
Interests and Liabilities Agreement
of
LaSalle Re Limited
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
15.75% of the Third Excess Catastrophe Reinsurance
10.52% of the Fourth Excess Catastrophe Reinsurance
2.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamilton, Bermuda,this _______ day of ___________________________199___.
__________________________________________________
___
LaSalle Re Limited
Interests and Liabilities Agreement
of
Mapfre Re Compania de Reaseguros, S.A.
Madrid, Spain
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
2.00% of the Second Excess Catastrophe Reinsurance
2.00% of the Third Excess Catastrophe Reinsurance
1.50% of the Fourth Excess Catastrophe Reinsurance
2.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Madrid, Spain,this _______ day of _______________________________ 199___.
__________________________________________________
___
Mapfre Re Compania de Reaseguros, S.A.
Interests and Liabilities Agreement
of
Nationwide Mutual Insurance Company
Columbus, Ohio
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
3.50% of the Second Excess Catastrophe Reinsurance
3.50% of the Third Excess Catastrophe Reinsurance
3.00% of the Fourth Excess Catastrophe Reinsurance
2.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Columbus, Ohio,this _______ day of _____________________________199___.
__________________________________________________
___
Nationwide Mutual Insurance Company
Interests and Liabilities Agreement
of
Reinsurance Australia Corporation Limited
Sydney, Australia
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
3.00% of the Second Excess Catastrophe Reinsurance
7.50% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Sydney, Australia,this _______ day of __________________________199___.
__________________________________________________
___
Reinsurance Australia Corporation Limited
Interests and Liabilities Agreement
of
Renaissance Reinsurance Ltd.
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
10.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamilton, Bermuda,this _______ day of __________________________199___.
__________________________________________________
___
Renaissance Reinsurance Ltd.
Interests and Liabilities Agreement
of
St. Paul Fire and Marine Insurance Company
St. Paul, Minnesota
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
2.00% of the Third Excess Catastrophe Reinsurance
2.50% of the Fourth Excess Catastrophe Reinsurance
1.10% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of _________________________199___.
__________________________________________________
___
St. Paul Fire and Marine Insurance Company
St. Paul Reinsurance Management Corporation,
Reinsurance Managers
Interests and Liabilities Agreement
of
Shelter Reinsurance Company
Columbia, Missouri
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
1.00% of the Second Excess Catastrophe Reinsurance
0.75% of the Third Excess Catastrophe Reinsurance
1.00% of the Fourth Excess Catastrophe Reinsurance
0.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Columbia, Missouri,this _______ day of _________________________199___.
__________________________________________________
___
Shelter Reinsurance Company
Interests and Liabilities Agreement
of
Sirius International Insurance Corporation
Stockholm, Sweden
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
1.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Stockholm, Sweden,this _______ day of __________________________199___.
__________________________________________________
___
Sirius International Insurance Corporation
Interests and Liabilities Agreement
of
SOREMA North America Reinsurance Company
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
15.00% of the Fourth Excess Catastrophe Reinsurance
7.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of _________________________199___.
__________________________________________________
___
SOREMA North America Reinsurance Company
Interests and Liabilities Agreement
of
The Sumitomo Marine & Fire Insurance Co., Ltd.
(U.S. Branch)
New York, New York
through
Sumitomo Marine Re Management, Inc.
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
1.75% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
1.00% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of _________________________199___.
__________________________________________________
___
The Sumitomo Marine & Fire Insurance Co., Ltd.
(U.S. Branch)
By: Sumitomo Marine Re Management, Inc.
Interests and Liabilities Agreement
of
United Fire & Casualty Company
Cedar Rapids, Iowa
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0.75% of the Fourth Excess Catastrophe Reinsurance
0.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Cedar Rapids, Iowa,this _______ day of _________________________199___.
__________________________________________________
___
United Fire & Casualty Company
Interests and Liabilities Agreement
of
United States Fidelity and Guaranty Company
Baltimore, Maryland
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
5.25% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
5.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Morristown, New Jersey,this _______ day of _____________________ 199___.
United States Fidelity and Guaranty Company
By:
_________________________________________________
Attorney-In-Fact
Interests and Liabilities Agreement
of
Unione Italiana di Riassicurazione S.P.A.
Rome, Italy
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
1.50% of the Second Excess Catastrophe Reinsurance
1.00% of the Third Excess Catastrophe Reinsurance
1.00% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Rome, Italy,this _______ day of ________________________________199___.
__________________________________________________
___
Unione Italiana di Riassicurazione S.P.A.
Interests and Liabilities Agreement
of
Vesta Fire Insurance Corporation
Birmingham, Alabama
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
5.50% of the Fourth Excess Catastrophe Reinsurance
5.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Birmingham, Alabama,this _______ day of _________________________199___.
__________________________________________________
___
Vesta Fire Insurance Corporation
Interests and Liabilities Agreement
of
Certain Underwriting Members of Lloyd's
shown in the Signing Schedule(s) attached hereto
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
31.50% of the Second Excess Catastrophe Reinsurance
12.00% of the Third Excess Catastrophe Reinsurance
15.63% of the Fourth Excess Catastrophe Reinsurance
28.95% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In any action, suit or proceeding to enforce the Subscribing
Reinsurer's obligations under the attached Contract, service of
process may be made upon Mendes and Mount, 750 Seventh Avenue,
New York, New York 10019.
Signed for and on behalf of the Subscribing Reinsurer in the
Signing Schedule(s) attached hereto.
Interests and Liabilities Agreement
of
SOREMA North America Reinsurance Company
New York, New York
as the fronting company for P.R.A.M. subscriptions
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
7.00% of the Second Excess Catastrophe Reinsurance
6.00% of the Third Excess Catastrophe Reinsurance
4.50% of the Fourth Excess Catastrophe Reinsurance
3.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it
being understood that the Subscribing Reinsurer shall in no event
participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
New York, New York,this _______ day of __________________________ 199___.
__________________________________________________
___
SOREMA North America Reinsurance Company
for and on behalf of P.R.A.M.
____________________________________
Interests and Liabilities Agreement
of
Mid Ocean Reinsurance Company Ltd.
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts the following percentage
shares in the interests and liabilities of the "Reinsurer" as set
forth in the attached Contract captioned above:
0% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
7.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
The following Article shall apply to the Subscribing Reinsurer's
share in the attached Contract, in lieu of the provisions of
Article XXIV - Intermediary - of the Contract:
"Article XXIV - Intermediaries
E. W. Blanch Co. and Park International Limited are hereby
recognized as the Intermediaries negotiating this Contract for
all business hereunder. All communications (including but not
limited to notices, statements, premium, return premium,
commissions, taxes, losses, loss adjustment expense, salvages
and loss settlements) relating thereto shall be transmitted to
the Company or the Reinsurer through E. W. Blanch Co.,
Reinsurance Services, 3500 West 80th Street, Minneapolis,
Minnesota 55431, and Park International Limited, Insurance
Brokers and Managers, 44 Church Street, Hamilton HM12,
Bermuda. Payments by the Company to either of the
Intermediaries shall be deemed to constitute payment to the
Reinsurer. Payments by the Reinsurer to either of the
Intermediaries shall be deemed to constitute payment to the
Company only to the extent that such payments are actually
received by the Company."
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamilton, Bermuda,this _______ day of _______________________________199___.
__________________________________________________
___
Mid Ocean Reinsurance Company Ltd.
Excess Catastrophe Reinsurance Contract
Effective: January 1, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
E. W. BLANCH CO.
Reinsurance Services
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
by
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the "Reinsurer")
Preamble
The "Meridian Mutual Group" for purposes of this Contract shall
consist of Meridian Mutual Insurance Company, Meridian Security
Insurance Company and Vernon Fire and Casualty Insurance Company,
all of Indianapolis, Indiana. It is understood that Meridian
Mutual Insurance Company shall be deemed the agent of the other
reinsured companies for purposes of sending or receiving notices
required by the terms and conditions of this Contract, and for
purposes of remitting or receiving any monies due any party.
Article I - Classes of Business Reinsured
By this Contract the Reinsurer agrees to reinsure the excess
liability which may accrue to the Company under its policies,
contracts and binders of insurance or reinsurance (hereinafter
called "policies") in force at the effective date hereof or
issued or renewed on or after that date, and classified by the
Company as Fire, Allied Lines, Homeowners (property perils only),
Mobile Homeowners (property perils only), Farmowners (property
perils only), Commercial Multiple Peril (property perils only),
Businessowners (property perils only), Earthquake, Inland Marine
and Automobile Physical Damage (comprehensive coverage only)
business, subject to the terms, conditions and limitations
hereinafter set forth.
Article II - Term
A. This Contract shall become effective on January 1, 1996, with
respect to losses arising out of loss occurrences commencing
on or after that date, and shall remain in force until
December 31, 1996, both days inclusive.
B. If this Contract expires while a loss occurrence covered
hereunder is in progress, the Reinsurer's liability hereunder
shall, subject to the other terms and conditions of this
Contract, be determined as if the entire loss occurrence had
occurred prior to the expiration of this Contract, provided
that no part of such loss occurrence is claimed against any
renewal or replacement of this Contract.
Article III - Territory
The liability of the Reinsurer shall be limited to losses under
policies covering property located within the territorial limits
of the United States of America, its territories or possessions,
Puerto Rico, the District of Columbia and Canada; but this
limitation shall not apply to moveable property if the Company's
policies provide coverage when said moveable property is outside
the aforesaid territorial limits.
Article IV - Exclusions
This Contract shall not apply to:
1. Reinsurance accepted by the Company other than:
a. Facultative reinsurance on a share basis of risks
accepted individually and not forming part of any
agreement, or
b. Local agency reinsurance on a share basis accepted
in the normal course of business.
2. Nuclear incident per the following clauses attached
hereto:
a. "Nuclear Incident Exclusion Clause - Physical
Damage Reinsurance - U.S.A." (NMA 1119);
b. "Nuclear Incident Exclusion Clause - Physical
Damage Reinsurance - Canada" (NMA 1980);
c. "Nuclear Energy Risks Exclusion Clause
(Reinsurance) (1994) (Worldwide Excluding U.S.A. &
Canada)" (NMA 1975(a)).
3. Pool, association, or syndicate business as excluded
by the provisions of the "Pools, Associations and
Syndicates Exclusion Clause" attached to and forming part
of this Contract.
4. Any liability of the Company arising from its
participation or membership in any insolvency fund.
5. Credit, financial guarantee and insolvency business.
6. War risks as excluded in any standard policy.
7. Policies written to apply in excess of underlying
insurance or policies written with a deductible or
franchise of more than $10,000; however, this exclusion
shall not apply to policies which provide a percentage
deductible or franchise in connection with earthquake or
windstorm.
8. Insurance on growing crops.
9. Insurance against flood, surface water, waves, tidal
water or tidal wave, overflow of streams or other bodies
of water or spray from any of the foregoing, all whether
driven by wind or not, when written as such; however, this
exclusion shall not apply as respects the foregoing perils
included in Commercial Multiple Peril, Homeowners Multiple
Peril, Farmowners Multiple Peril, Inland Marine,
Businessowners, Mobile Homeowners, and Automobile Physical
Damage policies, and in endorsements to Fire and Extended
Coverage policies.
10. Mortgage impairment insurance and similar kinds of
insurance, howsoever styled, providing coverage to an
insured with respect to its mortgagee interest in property
or its owner interest in foreclosed property.
11. Difference in conditions insurance and similar kinds
of insurance, howsoever styled.
12. Risks which have a total insurable value of more than
$250,000,000.
13. Any collection of fine arts with an insurable value
of $5,000,000 or more.
14. Inland Marine business with respect to the following:
a. All bridges and tunnels;
b. Cargo insurance when written as such with respect
to ocean, lake, or inland waterways vessels;
c. Commercial negative film insurance and cast
insurance;
d. Drilling rigs, except water well drilling rigs;
e. Furriers' customers policies;
f. Garment contractors policies;
g. Insurance on livestock under so-called "mortality
policies," when written as such;
h. Jewelers' block policies and furriers' block
policies;
i. Mining equipment while underground;
j. Radio and television broadcasting towers;
k. Registered mail insurance when the limit of any
one addressee on any one day is more than $50,000;
l. Watercraft other than watercraft insured under
personal property floaters, yacht and/or outboard
policies, homeowners, farmowners, or recreational
vehicle policies.
15. Automobile physical damage business with respect to
the following:
a. Insurance against collision;
b. Insurance against theft or larceny;
c. Manufacturers' stocks at factories or warehouses.
16. Seepage and/or pollution and/or contamination.
17. Losses in respect of overhead transmission and
distribution lines and their supporting structures other
than those on or within 150 meters (or 500 feet) of the
insured premises.
It is understood and agreed that public utilities
extension and/or suppliers extension and/or contingent
business interruption coverages are not subject to this
exclusion provided that these are not part of a
transmitters' or distributors' policy.
18. Extra Contractual Obligations and Loss in Excess of
Policy Limits.
Article V - Retention and Limit
A. No claim shall be made hereunder until the Company's subject
ultimate net loss arising out of loss occurrences commencing
during the term of this Contract exceeds 2.5% of net earned
premium for the term of this Contract, subject to a minimum
retention of $4,975,000. The Reinsurer shall then be liable
for 95.0% of the amount by which the Company's subject
ultimate net loss for the contract year exceeds the Company's
retention, but the liability of the Reinsurer shall not exceed
95.0% of $8,000,000 in all during the term of this Contract.
B. "Subject ultimate net loss" as used herein shall mean:
1. The Company's ultimate net loss in excess of $175,000
arising out of any one loss occurrence, not to exceed
$6,000,000 in any one loss occurrence; plus,
2. The Company's 5.0% co-participation under their per
occurrence catastrophe coverage of $12,000,000 excess of
$6,000,000 per loss occurrence.
No loss occurrence shall be included in subject ultimate net
loss unless said loss occurrence involves at least two risks.
C. The Company shall maintain in force excess per risk
reinsurance, recoveries under which shall inure to the benefit
of this Contract.
Article VI - Definition of Ultimate Net Loss
"Ultimate net loss" as used herein is defined as the sum or sums
(including interest on judgments, litigation expenses and all
other loss adjustment expenses, except office expenses and
salaries of the Company's regular employees) paid or payable by
the Company in settlement of claims and in satisfaction of
judgments rendered on account of such claims, after deduction of
all salvage, all recoveries and all claims on inuring insurance
or reinsurance, whether collectible or not. Nothing herein shall
be construed to mean that losses under this Contract are not
recoverable until the Company's ultimate net loss has been
ascertained.
Article VII - Loss Occurrence (NMA 2244/BRMA 27A)
A. The term "loss occurrence" shall mean the sum of all
individual losses directly occasioned by any one disaster,
accident or loss or series of disasters, accidents or losses
arising out of one event which occurs within the area of one
state of the United States or province of Canada and states or
provinces contiguous thereto and to one another. However, the
duration and extent of any one "loss occurrence" shall be
limited to all individual losses sustained by the Company
occurring during any period of 168 consecutive hours arising
out of and directly occasioned by the same event, except that
the term "loss occurrence" shall be further defined as
follows:
1. As regards windstorm, hail, tornado, hurricane,
cyclone, including ensuing collapse and water damage, all
individual losses sustained by the Company occurring
during any period of 72 consecutive hours arising out of
and directly occasioned by the same event. However, the
event need not be limited to one state or province or
states or provinces contiguous thereto.
2. As regards riot, riot attending a strike, civil
commotion, vandalism and malicious mischief, all
individual losses sustained by the Company occurring
during any period of 72 consecutive hours within the area
of one municipality or county and the municipalities or
counties contiguous thereto arising out of and directly
occasioned by the same event. The maximum duration of 72
consecutive hours may be extended in respect of individual
losses which occur beyond such 72 consecutive hours during
the continued occupation of an assured's premises by
strikers, provided such occupation commenced during the
aforesaid period.
3. As regards earthquake (the epicentre of which need
not necessarily be within the territorial confines
referred to in paragraph A of this Article) and fire
following directly occasioned by the earthquake, only
those individual fire losses which commence during the
period of 168 consecutive hours may be included in the
Company's "loss occurrence."
4. As regards "freeze," only individual losses directly
occasioned by collapse, breakage of glass and water damage
(caused by bursting frozen pipes and tanks) may be
included in the Company's "loss occurrence."
B. Except for those "loss occurrences" referred to in
subparagraphs 1 and 2 of paragraph A above, the Company may
choose the date and time when any such period of consecutive
hours commences, provided that it is not earlier than the date
and time of the occurrence of the first recorded individual
loss sustained by the Company arising out of that disaster,
accident or loss, and provided that only one such period of
168 consecutive hours shall apply with respect to one event.
C. However, as respects those "loss occurrences" referred to in
subparagraphs 1 and 2 of paragraph A above, if the disaster,
accident or loss occasioned by the event is of greater
duration than 72 consecutive hours, then the Company may
divide that disaster, accident or loss into two or more "loss
occurrences," provided that no two periods overlap and no
individual loss is included in more than one such period, and
provided that no period commences earlier than the date and
time of the occurrence of the first recorded individual loss
sustained by the Company arising out of that disaster,
accident or loss.
D. No individual losses occasioned by an event that would be
covered by 72 hours clauses may be included in any "loss
occurrence" claimed under the 168 hours provision.
Article VIII - Loss Notices and Settlements
A. Whenever losses sustained by the Company appear likely to
result in a claim hereunder, the Company shall notify the
Reinsurer, and the Reinsurer shall have the right to
participate in the adjustment of such losses at its own
expense.
B. All loss settlements made by the Company, provided they are
within the terms of the original policies (or within the terms
of extra contractual obligations coverage, if any, provided
under this Contract) and within the terms of this Contract,
shall be binding upon the Reinsurer. The Reinsurer agrees to
pay all amounts for which it may be liable upon receipt of
reasonable evidence of the amount paid (or scheduled to be
paid) by the Company. The Company shall be the sole judge of
what is covered by an original policy.
C. If the aggregate subject excess ultimate net paid losses
occurring during the term of this Contract exceed the
provisional retention, the reinsurer shall make preliminary
payment of the Reinsurer's portion of such subject ultimate
net losses. The provisional retention shall be calculated
based upon 2.5% of the estimated net earned premium for the
term of this Contract, as estimated at the inception hereof.
Any such preliminary payment shall be adjusted to actual as
soon as the Company's net earned premium is known.
Article IX - Salvage and Subrogation
The Reinsurer shall be credited with salvage (i.e., reimbursement
obtained or recovery made by the Company, less the actual cost,
excluding salaries of officials and employees of the Company and
sums paid to attorneys as retainer, of obtaining such
reimbursement or making such recovery) on account of claims and
settlements involving reinsurance hereunder. Salvage thereon
shall always be used to reimburse the excess carriers in the
reverse order of their priority according to their participation
before being used in any way to reimburse the Company for its
primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation relating to any loss, a part of which loss
was sustained by the Reinsurer, and to prosecute all claims
arising out of such rights.
Article X - Premium
A. As premium for the reinsurance provided hereunder, the Company
shall pay the Reinsurer .86% of its net earned premium for the
term of this Contract, subject to a minimum premium of
$1,480,000.
B. The Company shall pay the Reinsurer a deposit premium of
$1,850,000 in four equal installments of $462,500 on January
1, April 1, July 1 and October 1, 1996.
C. Within 60 days after the expiration of this Contract, the
Company shall provide a report to the Reinsurer setting forth
the premium due hereunder, computed in accordance with
paragraph A, and any additional premium due the Reinsurer or
return premium due the Company shall be remitted promptly.
D. "Net earned premium" as used herein is defined as gross earned
premium of the Company for the classes of business reinsured
hereunder, less the earned portion of premiums ceded by the
Company for reinsurance which inures to the benefit of this
Contract. For purposes of calculating net earned premium, 90%
of the total basic policy premium as respects Homeowners,
Mobilehomeowners and Farmowners business, 70% of the total
basic policy premium as respects Businessowners and Commercial
Multiple Peril, and 100% of the Comprehensive portion of the
premium for Automobile Physical Damage business shall be
considered subject premium.
Article XI - Profit Sharing
A. If this reinsurance Contract is renewed for calendar years
1997 and 1998, and the premiums paid for this Contract, and
such 1997 and 1998 Contracts exceed the losses incurred under
said contracts, then the Company will be entitled to a "Return
Premium." The "Return Premium" shall be equal to the greater
of zero or 25% of the "Profit Balance" under said contracts in
the aggregate. The "Profit Balance" shall be equal to 80% of
the total premiums, including reinstatement premiums paid (if
any) during the terms of said contracts, less losses incurred
under said contracts
B. At the date that such a "Return Premium" is mutually
determined by the Company and the Reinsurer and the payment is
made by the Reinsurer to the Company, such contracts shall be
considered commuted, and such payment, once effected, shall be
regarded as a full and final release of the Reinsurer from all
liability under such contracts.
C. Should the Reinsurer decline to offer a renewal of this
reinsurance for 1997 and/or 1998 at similar terms to this
Contract, in relation to the exposure presented, then the
"Return Premium" shall be calculated based on the period
during which this Contract and whichever (if any) other
contracts as are described in paragraph A were in effect,
subject to the above mentioned conditions.
Article XII - Offset (BRMA 36C)
The Company and the Reinsurer shall have the right to offset any
balance or amounts due from one party to the other under the
terms of this Contract. The party asserting the right of offset
may exercise such right any time whether the balances due are on
account of premiums or losses or otherwise.
Article XIII - Access to Records (BRMA 1D)
The Reinsurer or its designated representatives shall have access
at any reasonable time to all records of the Company which
pertain in any way to this reinsurance.
Article XIV - Net Retained Lines (BRMA 32B)
A. This Contract applies only to that portion of any policy which
the Company retains net for its own account, and in
calculating the amount of any loss hereunder and also in
computing the amount or amounts in excess of which this
Contract attaches, only loss or losses in respect of that
portion of any policy which the Company retains net for its
own account shall be included.
B. The amount of the Reinsurer's liability hereunder in respect
of any loss or losses shall not be increased by reason of the
inability of the Company to collect from any other
reinsurer(s), whether specific or general, any amounts which
may have become due from such reinsurer(s), whether such
inability arises from the insolvency of such other
reinsurer(s) or otherwise.
Article XV - Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with
this Contract or any transaction hereunder shall not relieve
either party from any liability which would have attached had
such delay, error or omission not occurred, provided always that
such error or omission is rectified as soon as possible after
discovery.
Article XVI - Currency (BRMA 12A)
Whenever the word "Dollars" or the "$" sign appears in this
Contract, they shall be construed to mean United States Dollars
and all transactions under this Contract shall be in United
States Dollars.
Amounts paid or received by the Company in any other currency
shall be converted to United States Dollars at the rate of
exchange at the date such transaction is entered on the books of
the Company.
Article XVII - Taxes (BRMA 50C)
In consideration of the terms under which this Contract is
issued, the Company will not claim a deduction in respect of the
premium hereon when making tax returns, other than income or
profits tax returns, to any state or territory of the United
States of America, the District of Columbia or Canada.
Article XVIII - Federal Excise Tax (BRMA 17A)
(Applicable to those reinsurers, excepting Underwriters at
Lloyd's London and other reinsurers exempt from Federal Excise
Tax, who are domiciled outside the United States of America.)
A. The Reinsurer has agreed to allow for the purpose of paying
the Federal Excise Tax the applicable percentage of the
premium payable hereon (as imposed under Section 4371 of the
Internal Revenue Code) to the extent such premium is subject
to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder
the Reinsurer will deduct the applicable percentage from the
return premium payable hereon and the Company or its agent
should take steps to recover the tax from the United States
Government.
Article XIX - Unauthorized Reinsurers
A. If the Reinsurer is unauthorized in any state of the United
States of America or the District of Columbia, the Reinsurer
agrees to fund its share of the Company's ceded United States
outstanding loss and loss adjustment expense reserves by:
1. Clean, irrevocable and unconditional letters of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
bank or banks meeting the NAIC Securities Valuation Office
credit standards for issuers of letters of credit and
acceptable to said insurance regulatory authorities;
and/or
2. Escrow accounts for the benefit of the Company;
and/or
3. Cash advances;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved. The Reinsurer,
at its sole option, may fund in other than cash if its method
and form of funding are acceptable to the insurance regulatory
authorities involved.
B. If the Reinsurer is unauthorized in any province or
jurisdiction of Canada, the Reinsurer agrees to fund 115% of
its share of the Company's ceded Canadian outstanding loss and
loss adjustment expense reserves by:
1. A clean, irrevocable and unconditional letter of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
Canadian bank or banks meeting the NAIC Securities
Valuation Office credit standards for issuers of letters
of credit and acceptable to said insurance regulatory
authorities, for no more than 15/115ths of the total
funding required; and/or
2. Cash advances for the remaining balance of the
funding required;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved.
C. With regard to funding in whole or in part by letters of
credit, it is agreed that each letter of credit will be in a
form acceptable to insurance regulatory authorities involved,
will be issued for a term of at least one year and will
include an "evergreen clause," which automatically extends the
term for at least one additional year at each expiration date
unless written notice of non-renewal is given to the Company
not less than 30 days prior to said expiration date. The
Company and the Reinsurer further agree, notwithstanding
anything to the contrary in this Contract, that said letters
of credit may be drawn upon by the Company or its successors
in interest at any time, without diminution because of the
insolvency of the Company or the Reinsurer, but only for one
or more of the following purposes:
1. To reimburse itself for the Reinsurer's share of
losses and/or loss adjustment expenses paid under the
terms of policies reinsured hereunder, unless paid in cash
by the Reinsurer;
2. To reimburse itself for the Reinsurer's share of any
other amounts claimed to be due hereunder, unless paid in
cash by the Reinsurer;
3. To fund a cash account in an amount equal to the
Reinsurer's share of any ceded outstanding loss and loss
adjustment expense reserves funded by means of a letter of
credit which is under non-renewal notice, if said letter
of credit has not been renewed or replaced by the
Reinsurer 10 days prior to its expiration date;
4. To refund to the Reinsurer any sum in excess of the
actual amount required to fund the Reinsurer's share of
the Company's ceded outstanding loss and loss adjustment
expense reserves, if so requested by the Reinsurer.
In the event the amount drawn by the Company on any letter of
credit is in excess of the actual amount required for C(1) or
C(3), or in the case of C(2), the actual amount determined to
be due, the Company shall promptly return to the Reinsurer the
excess amount so drawn.
Article XX - Insolvency
A. In the event of the insolvency of one or more of the reinsured
companies, this reinsurance shall be payable directly to the
company or to its liquidator, receiver, conservator or
statutory successor immediately upon demand, with reasonable
provision for verification, on the basis of the liability of
the company without diminution because of the insolvency of
the company or because the liquidator, receiver, conservator
or statutory successor of the company has failed to pay all or
a portion of any claim. It is agreed, however, that the
liquidator, receiver, conservator or statutory successor of
the company shall give written notice to the Reinsurer of the
pendency of a claim against the company indicating the policy
or bond reinsured which claim would involve a possible
liability on the part of the Reinsurer within a reasonable
time after such claim is filed in the conservation or
liquidation proceeding or in the receivership, and that during
the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses
that it may deem available to the company or its liquidator,
receiver, conservator or statutory successor. The expense
thus incurred by the Reinsurer shall be chargeable, subject to
the approval of the Court, against the company as part of the
expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the company
solely as a result of the defense undertaken by the Reinsurer.
B. Where two or more reinsurers are involved in the same claim
and a majority in interest elect to interpose defense to such
claim, the expense shall be apportioned in accordance with the
terms of this Contract as though such expense had been
incurred by the company.
C. It is further understood and agreed that, in the event of the
insolvency of one or more of the reinsured companies, the
reinsurance under this Contract shall be payable directly by
the Reinsurer to the company or to its liquidator, receiver or
statutory successor, except as provided by Section 4118(a) of
the New York Insurance Law or except (a) where this Contract
specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (b) where the
Reinsurer with the consent of the direct insured or insureds
has assumed such policy obligations of the company as direct
obligations of the Reinsurer to the payees under such policies
and in substitution for the obligations of the company to such
payees.
Article XXI - Arbitration (BRMA 6J)
A. As a condition precedent to any right of action hereunder, in
the event of any dispute or difference of opinion hereafter
arising with respect to this Contract, it is hereby mutually
agreed that such dispute or difference of opinion shall be
submitted to arbitration. One Arbiter shall be chosen by the
Company, the other by the Reinsurer, and an Umpire shall be
chosen by the two Arbiters before they enter upon arbitration,
all of whom shall be active or retired disinterested executive
officers of insurance or reinsurance companies or Lloyd's
London Underwriters. In the event that either party should
fail to choose an Arbiter within 30 days following a written
request by the other party to do so, the requesting party may
choose two Arbiters who shall in turn choose an Umpire before
entering upon arbitration. If the two Arbiters fail to agree
upon the selection of an Umpire within 30 days following their
appointment, each Arbiter shall nominate three candidates
within 10 days thereafter, two of whom the other shall
decline, and the decision shall be made by drawing lots.
B. Each party shall present its case to the Arbiters within 30
days following the date of appointment of the Umpire. The
Arbiters shall consider this Contract as an honorable
engagement rather than merely as a legal obligation and they
are relieved of all judicial formalities and may abstain from
following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but
failing to agree, they shall call in the Umpire and the
decision of the majority shall be final and binding upon both
parties. Judgment upon the final decision of the Arbiters may
be entered in any court of competent jurisdiction.
C. If more than one reinsurer is involved in the same dispute,
all such reinsurers shall constitute and act as one party for
purposes of this Article and communications shall be made by
the Company to each of the reinsurers constituting one party,
provided, however, that nothing herein shall impair the rights
of such reinsurers to assert several, rather than joint,
defenses or claims, nor be construed as changing the liability
of the reinsurers participating under the terms of this
Contract from several to joint.
D. Each party shall bear the expense of its own Arbiter, and
shall jointly and equally bear with the other the expense of
the Umpire and of the arbitration. In the event that the two
Arbiters are chosen by one party, as above provided, the
expense of the Arbiters, the Umpire and the arbitration shall
be equally divided between the two parties.
E. Any arbitration proceedings shall take place at a location
mutually agreed upon by the parties to this Contract, but
notwithstanding the location of the arbitration, all
proceedings pursuant hereto shall be governed by the law of
the state in which the Company has its principal office.
Article XXII - Service of Suit (BRMA 49C)
(Applicable if the Reinsurer is not domiciled in the United
States of America, and/or is not authorized in any State,
Territory or District of the United States where authorization is
required by insurance regulatory authorities)
A. It is agreed that in the event the Reinsurer fails to pay any
amount claimed to be due hereunder, the Reinsurer, at the
request of the Company, will submit to the jurisdiction of any
court of competent jurisdiction within the United States.
Nothing in this Article constitutes or should be understood to
constitute a waiver of the Reinsurer's rights to commence an
action in any court of competent jurisdiction in the United
States, to remove an action to a United States District Court,
or to seek a transfer of a case to another court as permitted
by the laws of the United States or of any state in the United
States.
B. Further, pursuant to any statute of any state, territory or
district of the United States which makes provision therefor,
the Reinsurer hereby designates the party named in its
Interests and Liabilities Agreement, or if no party is named
therein, the Superintendent, Commissioner or Director of
Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, as its true
and lawful attorney upon whom may be served any lawful process
in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of
this Contract.
Article XXIII - Intermediary (BRMA 23A)
E. W. Blanch Co. is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All
communications (including but not limited to notices, statements,
premium, return premium, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating
thereto shall be transmitted to the Company or the Reinsurer
through E. W. Blanch Co., Reinsurance Services, 3500 West 80th
Street, Minneapolis, Minnesota 55431. Payments by the Company to
the Intermediary shall be deemed to constitute payment to the
Reinsurer. Payments by the Reinsurer to the Intermediary shall
be deemed to constitute payment to the Company only to the extent
that such payments are actually received by the Company.
In Witness Whereof, the Company by its duly authorized
representative has executed this Contract as of the date
undermentioned at:
Indianapolis, Indiana,this _______ day of ___________________________199___.
__________________________________________________
___
Meridian Mutual Group
Table of Contents
Article Page
Preamble 1
I Classes of Business Reinsured 1
II Term 2
III Territory 2
IV Exclusions 2
V Retention and Limit 5
VI Definition of Ultimate Net Loss 5
VII Loss Occurrence (NMA 2244/BRMA 27A) 5
VIII Loss Notices and Settlements 7
IX Salvage and Subrogation 7
X Premium 7
XI Profit Sharing 8
XII Offset (BRMA 36C) 8
XIII Access to Records (BRMA 1D) 9
XIV Net Retained Lines (BRMA 32B) 9
XV Errors and Omissions (BRMA 14F) 9
XVI Currency (BRMA 12A) 9
XVII Taxes (BRMA 50C) 9
XVIII Federal Excise Tax (BRMA 17A) 10
XIX Unauthorized Reinsurers 10
XX Insolvency 11
XXI Arbitration (BRMA 6J) 12
XXII Service of Suit (BRMA 49C) 13
XXIII Intermediary (BRMA 23A) 14
Interests and Liabilities Agreement
of
Dorinco Reinsurance Company
Midland, Michigan
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 23.0% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Midland, Michigan,this _______ day of _____________________________199___.
__________________________________________________
___
Dorinco Reinsurance Company
Interests and Liabilities Agreement
of
The Nissan Fire & Marine Insurance Co., Ltd.
Tokyo, Japan
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 2.5% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Tokyo, Japan,this _______ day of __________________________________ 199___.
__________________________________________________
___
The Nissan Fire & Marine Insurance Co., Ltd.
Interests and Liabilities Agreement
of
Renaissance Reinsurance Ltd.
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 67.5% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamilton, Bermuda,this _______ day of _____________________________199___.
__________________________________________________
___
Renaissance Reinsurance Ltd.
Interests and Liabilities Agreement
of
Albingia Versicherung AG
Hamburg, Germany
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 3.0% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Hamburg, Germany,this _______ day of ______________________________199___.
__________________________________________________
____
Albingia Versicherung AG
Interests and Liabilities Agreement
of
Cie Transcontinentale de Reassurance
Paris, France
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1996
issued to and duly executed by
Meridian Mutual Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 4.0% share in the
interests and liabilities of the "Reinsurer" as set forth in the
attached Contract captioned above.
This Agreement shall become effective on January 1, 1996, and
shall continue in force until December 31, 1996, both days
inclusive.
The Subscribing Reinsurer's share in the attached Contract shall
be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers,
it being understood that the Subscribing Reinsurer shall in no
event participate in the interests and liabilities of the other
reinsurers.
In Witness Whereof, the Subscribing Reinsurer by its duly
authorized representative has executed this Agreement as of the
date undermentioned at:
Paris, France,this _______ day of _________________________________ 199___.
__________________________________________________
___
Cie Transcontinentale de Reassurance
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1996
issued to
Meridian Mutual Group
Indianapolis, Indiana
Reinsurers Participations
Dorinco Reinsurance Company 23.0%
The Nissan Fire & Marine Insurance Co., Ltd. 2.5
Renaissance Reinsurance, Ltd. 67.5
Through Swire Blanch (Copenhagen Office)
Albingia Versicherung AG 3.0
Cie Transcontinentale de Reassurance 4.0
Total 100.0%
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
March 7, 1996
E. W. BLANCH CO.
3500 West 80th Street
Minneapolis, Minnesota 55431
Reinsurance Confirmation
RE: Excess Catastrophe Reinsurance Contract
Underlying Aggregate Excess Reinsurance Contract
Effective: January 1, 1996
Reinsurance Confirmations
This confirms that Meridian Mutual Group accepts the terms
and conditions outlined in E. W. Blanch Co.'s Reinsurance
Confirmation package of December 27, 1995.
In addition, this confirms that Meridian Mutual Group, has
authorized and directed E. W. Blanch Co. to place the
subject business with those reinsurers listed in E. W.
Blanch Co.'s Reinsurance Confirmation package of December
27, 1995.
Sincerely,
Meridian Mutual Group
By:
Title: Vice President
Corporate Underwriting Director
Date: January 2, 1996
ENDORSEMENT
#1
Property Excess of Loss Reinsurance Binding Agreement
between
Meridian Insurance Company
of Indianapolis, Indiana
and
NAC Reinsurance Corporation
New York, NY
Article 5, entitled "TERRITORY" is amended to include the state
of Iowa and Pennsylvania effective January 1, 1996.
Accepted by:
CARL W. BUEDEL
Meridian Insurance
Date:
DEBBIE BOUSSO
NAC Resinsurance Corporation
Date:
Property Excess of Loss Reinsurance Binding Agreement
between
Meridian Insurance
of Indianapolis, Indiana
(both hereinafter referred to as the "COMPANY")
and
NAC Reinsurance Corporation
New York, NY
(hereinafter referred to as the "REINSURER")
ARTICLE 1
PARTIES TO THE AGREEMENT
This Agreement is solely between the Company and the Reinsurer.
When more than one Company is named as a party to this Agreement,
the first Company named shall be the agent of the other companies
as to all matters pertaining to this Agreement. Performance of
the obligations of each party under this Agreement shall be
rendered solely to the other party. In no instance shall any
insured of the Company, and claimant against an insured of the
Company, or any other third party have any rights under this
Agreement.
The rights and obligations of the parties to this Agreement shall
not be affected by the termination of this Agreement and all
necessary transactions relating to this Agreement will continue
in accordance with the terms and conditions stipulated herein
until all obligations of either party to the other are fully
concluded.
ARTICLE 2
TERMS AND CANCELLATION
Anything contained herein to the contrary notwithstanding,
coverage is continuous for all new and renewal policies attaching
from 12:01 a.m. Central Daylight Time, June 15, 1995, until
canceled by either party at any time with 90 days prior written
notice by certified mail.
In the event this agreement is terminated by either party, the
Reinsurer shall be liable for all original policies or portions
thereof in force as of the date of termination up to the natural
expiration or prior termination date of said policies, plus odd
time, but not to exceed eighteen months in total.
ARTICLE 3
BUSINESS COVERED
By this Agreement and subject to the terms and conditions herein
contained, the Reinsurer agrees to indemnify the Company in
respect to the net excess liability stipulated in this Agreement
which may accrue to the Company as a result of each loss
occurrence during the term of this Agreement under any and all
written binders, policies, or contracts of insurance issued by
the Company and classified by the Company as Commercial Property
business, including Garage Keepers Legal Liability, in accordance
with the Meridian Commercial Lines Underwriting Guide (CLUG).
Binding authority for risks ceded hereunder is granted to the
Company subject to all terms and conditions herein. Any changes
to the terms and conditions of this Agreement must be made by
endorsement to the Agreement and countersigned by a duly
authorized representative of the Reinsurer.
ARTICLE 4
PERILS COVERED
The policies ceded to this Agreement are reinsured for All Risks
of physical loss including Earthquake, excluding Flood, covering
Property Damage and Time Element in accordance with the terms of
the Company's policy and this Agreement for single amount subject
risks individually ceded to the Agreement. All Risks, including
Flood and Earthquake coverage, are provided for those risks
classified as Inland Marine.
Risks located in ISO Earthquake Zones 1 and 2 are excluded for
the peril of Earthquake.
ARTICLE 5
TERRITORY
This agreement shall apply to policies covering risks located in
Illinois, Indiana, Kentucky, Michigan, Ohio, Wisconsin, and
Tennessee in accordance with the Company's regulatory filing.
The Company shall notify the Reinsurer in advance of any
regulatory filing to insure risks in additional states, and
subject to the Reinsurer's approval, the territory clause of this
Agreement will be amended.
ARTICLE 6
LIMIT OF LIABILITY OF THE REINSURER
Reinsurance Accepted for Protected Risks defined as Meridian CLUG
Classifications 1, 2, 3, and 4, in ISO Protection Classes 1
through 8 shall be limits up to two times the Company's maximum
net and treaty retention as outlined in the Commercial Lines
Divisional Authority Level section of the CLUG. Reinsurance
limits shall be subject to a maximum limit of $6,000,000 any one
risk.
Reinsurance Accepted for Unprotected Risks defined as Meridian
CLUG Classifications 1, 2, 3, and 4 located in ISO Protection
Classes 9 and 10 shall be limits up to three times the Company's
maximum net and treaty retention as outlined in the Commercial
Lines Divisional Authority Level section of the CLUG.
Reinsurance limits shall be subject to a maximum limit of
$3,750,000 for any one risk. These reinsurance limits are
subject to a $10,000,000 limitation in any one occurrence.
Garage Keepers Legal Liability is included with a maximum
sublimit of $500,00 to be written by Meridian.
ARTICLE 7
BINDING AUTHORITY
Authority to bind the Reinsurer is granted to all Meridian
underwriters above the Level Two underwriting designation.
ARTICLE 8
TOTAL INSURED VALUE LIMITATION
Total Insured Values for any one risk ceded to the agreement
shall not exceed $10,000,000 for Protected Risks and $5,000,000
for Unprotected Risks. Reinsurance rates for this agreement are
designed to reinsurer excess of the company's net and treaty
retention up to 100% of the total risk values. Risks which
require additional limits should be submitted to the Reinsurer
for Special Acceptance or for individual risk certificate
coverage.
The Agreement includes only those accounts insured 100% by
Meridian Insurance. Any policy which otherwise satisfies the
terms and conditions of this agreement must be cleared with the
Reinsurer prior to binding if the Company participates jointly
with any other insurer.
ARTICLE 9
RATES
Reinsurance Premium for individual risks ceded to this agreement
shall be calculated in accordance with the schedule of
Reinsurance rates below which shall be applied to the Company's
100% gross location premium for each risk. Reinsurance rates for
Protected and Unprotected Risks are as follows:
PROTECTED RISKS
PC 1 - 8
NET AND TREATY RETENTION AS NET REINSURANCE RATE
PERCENTAGE OF TOTAL LOCATION VALUES
33% - 39% 23.5%
40% - 49% 20.2%
50% - 59% 16.1%
60% - 69% 12.0%
70% - 79% 8.2%
80% - 89% 4.8%
90% - 99% 2.5%
UNPROTECTED RISKS
PC9 and 10
NET AND TREATY RETENTION AS NET REINSURANCE RATE
PERCENTAGE OF TOTAL LOCATION VALUES
25% - 34% 42.5%
35% - 44% 30.5%
45% - 54% 26.1%
55% - 64% 23.7%
65% - 74% 16.8%
75% - 84% 12.5%
85% - 94% 7.0%
95% - 99% 2.9%
ARTICLE 10
RIGHT OF REJECTION
The Reinsurer may reject any individual cession and shall so
notify the Company in writing of its declination within 15
working days of receipt of Bordereau. The Company shall replace
the reinsurance promptly, but within a period not to exceed one
hundred twenty (120) days after receipt by the Company of the
notice of declination from the Reinsurer.
ARTICLE 11
REPORTING AND PAYMENT PROCEDURES
Risk Summary Sheets for each risk and a monthly Bordereaux of all
risks ceded shall be submitted to the Reinsurer within 20 working
days after the last day of each month. Any premium amounts due
the Reinsurer shall be paid with the Bordereaux.
Risk Summary Sheets for each insured shall include the following
information:
1. Total Insured Values
2. Construction
3. CLUG Classification
4. Protection Class
5. 100% of Meridian's Gross Premium for the Risk
6. Net Resinsurance Rate
7. Net Reinsurance Premium
Bordereaux for all risks ceded during the preceding month shall
list the following information:
1. Named Insured
2. Reinsurance Premium
3. Reinsurance Period
4. Policy Number
ARTICLE 12
PROFIT COMMISSION
The Reinsurer shall pay the Company a profit commission equal to
25% of the net profit, if any, accruing to the Reinsurer during
the adjustment period, subject to a minimum reinsurance premium
of $350,000 during the 24-month adjustment period. The
Reinsurer's net profit during the adjustment period shall be
calculated in accordance with the following formula, it being
understood that a positive balance equals net profit and a
negative balance equals net loss:
1. Earned reinsurance premium for the adjustment period; less
2. Expenses incurred by the Reinsurer at 15% of earned
reinsurance premium for the adjustment period; less
3. Losses incurred for the adjustment period.
With respect to the calculation and payment of profit commission,
the following interpretations and reporting terms and conditions
shall apply:
1. Adjustment Period
"Adjustment period" as used herein shall be defined as the 24
months following inception, and as each 24-month period
thereafter, while this agreement remains in effect.
2. Statement of Profit Commission
Within 45 days following 6 months after the adjustment period,
the Company shall calculate and render an initial statement of
the Reinsurer's net profit for the entire adjustment period.
Within 45 days after the end of the 12-month period
thereafter, a revised statement shall be rendered by the
Company to the Reinsurer to reflect any changes in the
original statement. Any return profit commission shown to be
due the Reinsurer shall be paid by the Company with the
revised statement.
Any profit commission shown to be due the Company upon receipt
of either the initial statement or the revised statement shall
be paid by the Reinsurer as promptly as possible after the
receipt and verification of the Company's statement.
3. Short-term Cancellation
If this Agreement is canceled at any time prior to the
expiration of the adjustment period, no profit commission will
be due the Company.
4. Losses Incurred
"Losses incurred" as used herein shall mean ceded losses and
loss adjustment expenses paid as of the effective date of
calculation, plus the ceded reserves for losses and loss
adjustment expenses outstanding as of the same date.
ARTICLE 13
LOSS NOTIFICATION, NET LOSS, LOSS ADJUSTMENT EXPENSES AND
RECOVERIES
Loss Notification
The Company shall give prompt written notice to the Reinsurer of
any claim or loss which in the sound judgment of the Company may
result in a net loss to the Reinsurer.
While the Reinsurer does not have the duty to investigate or
defend claims or suits, it shall nevertheless have the right and
the opportunity, with the full cooperation of the Company, to
associate with the Company at its own expense in the defense of
any claim, suit, or proceeding which involves or is like to
involve this Agreement.
All loss settlements, provided they are within the terms and
conditions of the Company's policy and this Agreement, shall be
binding upon the Reinsurer. Upon receipt of satisfactory proof
of loss payment, the Reinsurer shall promptly pay the Company for
amounts due under this Agreement.
Net Loss
The term "net loss" as used herein shall be understood to mean
the sum actually paid or to be paid by the COMPANY in settlement
of losses reinsured hereunder for which it is liable after making
deductions for all other insuring reinsurance, whether
collectible or not, and all salvages and other recoveries,
including subrogation recoveries; provided however, that in the
event of insolvency of the COMPANY, "net loss" shall be
determined in accordance with the provisions of the Clause
entitled INSOLVENCY of this agreement. Net Loss shall not
include loss adjustment expenses.
It is agreed that the existence of underlying reinsurance, if
any, shall be entirely disregarded in determining the Company's
net loss.
Nothing in this Clause shall imply that losses are not
recoverable under this Agreement until the Company's net loss has
been finally ascertained.
Loss Adjustment Expenses
The term "loss adjustment expenses" shall mean expenses of the
Company, including court costs, prejudgment interest and post
judgment interest, incurred in the investigation, adjustment, and
defense of claims under the terms of policies subject to this
Agreement, which expenses are allocable to a specific net loss,
but shall not include administrative and office expenses and
salaries and expenses of employees and officials of the Company.
The Reinsurer shall indemnify the Company for the Reinsurer's
proportionate share of loss adjustment expenses which shall be in
addition to its Limit of Liability. In the event a verdict or
judgment is reduced by an appeal or a settlement, subsequent to
the entry of a judgment, resulting in an ultimate savings to the
REINSURER, or a judgment is reversed outright, the expenses
incurred in securing such reduction or reversal shall be prorated
between the COMPANY and the REINSURER in the proportion that each
benefits from such reduction or reversal, and the expenses
incurred up to the time of the original verdict or judgment shall
be prorated in proportion to each party's interest in such
original verdict or judgment.
Recoveries
The Reinsurer shall be subrogated, as respects to any loss for
which the Reinsurer shall actually pay or become liability to
pay, to all the rights of the Company against any person or other
entity who may be legally responsible in damages for said loss.
The Company hereby agrees to enforce such rights, but in case the
Company shall refuse or neglect to do so, the Reinsurer is hereby
authorized and empowered to enforce such rights.
Any recoveries, salvages, or reimbursements applying to risks
covered under this Agreement shall always be used to reimburse
the excess reinsurer, according to their participation, before
being used in any way to reimburse the Company for its primary
loss.
All salvages, recoveries, or received subsequent to a loss
settlement under this Agreement shall be applied as if recovered
or received prior to the aforesaid settlement and all necessary
adjustments shall be made by the parties hereto.
ARTICLE 14
AUDITS
The Company shall place at the disposal of the Reinsurer and the
Reinsurer shall have the right to inspect, through its authorized
representatives, at all reasonable times during the currency of
this Agreement and thereafter, the books, records, and papers of
the Company pertaining to the reinsurance provided hereunder and
all claims made in connection therewith.
ARTICLE 15
OFFSET
The Company and The Reinsurer may offset any balance or amount
due from one party to the other under this Agreement or any other
reinsurance agreement of any kind heretofore or hereafter entered
into between the Company and the Reinsurer, whether acting as
assuming reinsurer or ceding company. If the Company (including
all affiliates and/or subsidiaries, whether or not covered by
this Agreement) is comprised of more than one entity, all such
entities will be considered the Company for purposes of offset.
In the event of insolvency of either the Company or the
Reinsurer, offset shall be permitted in accordance with the terms
of this Clause and as otherwise permitted by law.
ARTICLE 16
INSOLVENCY
In the event of the insolvency of the Company and the appointment
of a liquidator or receiver, reinsurance due under this Agreement
shall be payable, with reasonable provision for verification, on
the basis of the liability of the Company resulting from claims
allowed against the Company in the liquidation proceeding without
diminution because such liquidator or receiver has failed to pay
all or a portion of any claims.
Payment by the Reinsurer as set forth above shall be made
directly and exclusively to the Company or its liquidator or
receiver, except as provided by subsection (a) of Section 4118 of
New York Insurance Law or except (a) where this Agreement
specifies another payee in the event of the insolvency, and (b)
the Reinsurer, with the consent of the direct insureds, has
assumed such policy obligations of the Company as direct
obligations to the payees under such policies in substitution for
the obligations of the Company to such payees.
In the event of the insolvency of the Company, the liquidator or
receiver shall give written notice of the pendency of claim
against the Company under policies reinsured within a reasonable
time after such claim is filed in the insolvency proceeding.
During the pendency of such claim, the Reinsurer has the right
but not the duty to investigate said claim and interpose in the
proceeding where the claim is to be adjudicated, at its own
expense, any defense that it may deem available to the Company,
or its liquidator or receiver. The expense thus incurred by the
Reinsurer will be chargeable against the Company, subject to
court approval, against the insolvent Company as part of the
expense of liquidation to the extent of a proportionate share of
the benefit which may accrue to the Company solely as a result of
the defense undertaken by the Reinsurer.
Where two or more Reinsurers are involved in the same claim and a
majority in interest elect to interpose defense to such claim,
the expense shall be apportioned in accordance with the terms of
this Agreement as though such expense had been incurred by the
Company.
ARTICLE 17
TAXES
The Company shall be liable for paying all taxes, other than
income or profit taxes, levied on the Reinsurer for business
reinsured under this Agreement. If the Reinsurer is obligated to
pay taxes other than income or profit taxes for business
reinsured under this Agreement, the Company shall reimburse the
Reinsurer, provided that the Company shall not be required to pay
the same tax twice.
EXCLUSIONS
1. Grain Risks - including feed mixing, grain elevators, and
train terminals;
2. Petro Chemical Risks and High Hazard Chemical -
including manufacturing and storage. High Hazard chemical
business is defined as a chemical exposure consisting of
acids, coal chemicals, industrial gases, petrochemical
(including, but not limited to, polypropylene, polyethylene
phenols, and polymers) petroleum and synthetic fuel refining,
chlorine, methane, caustic soda, electrolytic, and electro
thermal chemical manufacturing, ammonia, urea, and nitrogen
compounds (including nitric acid). In general, any chemical
with over 250 psig would be classified as high hazard.
3. Damage to Growing Crops or Standing Timber;
4. Satellites, Aerospace, and Aviation;
5. Boiler and Machinery when written as such;
6. Transmission and Distribution Liens except coverage provided
within 1,000 feet of insured's building;
7. Underground Mines, Tunnels, and Storage Facilities;
8. Wind and/or Solar Powered Electrical Generation Facilities;
9. Railroad Rolling Stock;
10. Builders Risks Contracts written for a term in excess
of 36 months;
11. Jewelers' and Furriers' Block;
12. Auto Physical Damage and Dealer's Open Lot, except for
Garage Keepers Legal Liability;
13. Ocean Marine;
14. Covered Stadiums and Domes
15. Flood and Earthquake when written as such;
16. Animal Mortality;
17. Strike Insurance;
18. Offshore Drilling Rigs, Pipeline Risks and Property
belonging thereto;
19. Fidelity and Surety;
20.Losses arising out of seepage and/or pollution as per the
Company's standard pollution and seepage exclusion. However,
this exclusion will not apply when the Company includes its
standard pollution exclusion on a policy and the judicial
entity having legal jurisdiction invalidates the Company's
exclusion thereby obligating the Company for liability
arising out of seepage and/or pollution when such liability
was intended to be excluded from coverage;
21. Insolvency Funds and Financial Guaranty Funds;
22. Retroactive Liability including IBNR an known losses;
23. Extra Contractual Obligation and Loss in Excess of Policy
Limits;
24. United States Longshoremen and Harbor Workers and Jones Act
business;
25.War Risks as per the North American War Exclusion Clause
(Reinsurance), BRMA Clause Number 56A;
26.Business included in the Nuclear Incident Exclusion Clause
attached hereto (BRMA Clause No. 35B);
27. Assumed Resinsurance except for reinsurance assumed from
subsidiaries;
28. Business Produced By Managing General agents;
29.The Company's liability as a member, subscriber, or reinsurer
of any pool, syndicate, or association including, but not
limited to, Fair Plans and Coastal Pools;
EXCLUSIONS CONTINUED
30.Losses arising out of asbestos as per the Company's standard
asbestos exclusion. However, this exclusion will not apply
when the Company includes its standard asbestos exclusion on
a policy, or when the Company includes its standard asbestos
exclusion on a policy and the judicial entity having legal
jurisdiction invalidates the Company's exclusion policy and
the judicial entity having legal jurisdiction invalidates the
Company's exclusion thereby obligating the Company for
liability arising out of asbestos such liability was intended
to be excluded from coverage.
31. Meridian Insurance CLUG Risk Classification 5.
The exclusions enumerated above, with the exception of 21, 22,
23, 24, 25, 26, 27, 28, and 29, will not apply when they are
merely incidental to the main operations of the insured, provided
such main operations are covered by the Company and are not
themselves excluded from the scope of this Agreement. The
Company shall be sole judge of what is "incidental".
Errors and omissions on the part of the Company, shall not
invalidate the reinsurance under this Agreement, provided such
errors or omissions are corrected promptly after discovery
thereof, but the liability of the Reinsurer under this Agreement
or any exhibits or endorsements attached thereto shall in no
event exceed the limits specified herein.
Risks which are specifically excluded by the Agreement may be
individually submitted hereunder, and, if accepted by the
Reinsurer, such business shall then be covered under the terms of
this Agreement, except as such terms shall be modified by such
acceptance.
35 B
NUCLEAR INCIDENT EXCLUSION CLAUSE--PHYSICAL DAMAGE--REINSURANCE
U.S.A.
1. This Reinsurance does not cover any loss or liability
accruing to the Reassured, directly or indirectly, and
whether as Insurer or Reinsurer, from any Pool of Insurers or
Reinsurers formed for the purpose of covering Atomic or
Nuclear Energy risks.
2. Without in any way restricting the operation of
Paragraph (1) of this Clause, this Reinsurance does not cover
any loss or liability accruing to the Reassured, directly or
indirectly and whether as Insurer or Reinsurer, from any
insurance against Physical Damage (including business
interruption or consequential loss arising out of such
Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary
property on the site, or
II. Any other nuclear reactor installation, including
laboratories handling radioactive materials in connection
with reactor installations, and "critical facilities" as
such, or
III. Installations for fabricating complete fuel
elements or for processing substantial quantities of
"special nuclear material", and for reprocessing,
salvaging, chemically separating, storing or disposing of
"spent" nuclear fuel or waste materials, or
IV. Installations other than those listed in Paragraph
(2) III above using substantial quantities of radioactive
isotopes or other products of nuclear fission.
3. Without in any way restricting the operations of
Paragraphs (1) and (2) hereof, this Reinsurance does not
cover any loss or liability by radioactive contamination
accruing to the Reassured, directly or indirectly, and
whether as Insurer or Reinsurer, from any insurance on
property which is on the same site as a nuclear reactor power
plant or other nuclear installation and which normally would
be insured therewith except that this Paragraph (3) shall not
operate
(a) where Reassured does not have knowledge of such
nuclear reactor power plant of nuclear installation, or
(b) where said insurance contains a provision
excluding coverage for damage to property cused by or
resulting from radioactive contamination, however caused.
However, on and after 1st January 1960, this subparagraph
(b) shall only apply provided the said radioactive
contamination exclusion provision has been approved by the
Governmental Authority having jurisdiction thereof.
4.Without in any way restricting the operations of Paragraph
(1), (2), and (3) hereof, this Reinsurance does not cover any
loss or liability by radioactive contamination accruing to
the Reassured, directly or indirectly, and whether as Insurer
or Reinsurer, when such radioactive contamination is a named
hazard specifically insured against.
5.It is understood and agreed that this Clause shall not
extend to risks using radioactive isotopes in any form where
the nuclear exposure is not considered by the Reassured to be
the primary hazard.
35B
6.The term "special nuclear material" shall have the meaning
given it in the Atomic Energy Act of 1954 or by any law
amendatory thereof.
7. Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant, or site.
Note: Without in any restricting the operation of Paragraph (1)
hereof, it is understood and agreed that:
(a) all policies issued by the Reassured on or before
31st December 1957 shall be free from the application of
the other provisions of this Clause until expiry date or
31st December 1960 whichever first occurs whereupon all
the provisions of this Clause shall apply.
(b) with respect to any risk located in Canada policies
issued by the Reassured on or before 31st December 1958
shall be free from the application of the other provisions
of this Clause until expiry date or 31st December 1960
whever first occurs whereupon all the provisions of this
Clause shall apply.
56 A
NORTH AMERICAN WAR EXCLUSION CLAUSE (REINSURANCE)
As regards interests which at time of loss or damage are on
shore, no liability shall attach hereto in respect of any loss or
damage which is occasioned by war, invasion, hostilities, acts of
foreign enemies, civil war, rebellion, insurrection, military or
usurped power, or martial law or confiscation by order of any
government or public authority.
This War Exclusion Clause shall not, however, apply to interests
which at time of loss or damage are within the territorial limits
of the United States of America (comprising the fifty States of
the Union and the District of Columbia and including Bridges
between the U.S.A. and Mexico provided they are under United
States ownership), Canada, St. Pierre and Miquelon, provided such
interests are insured under policies, endorsements, or binders
containing a standard war or hostilities or warlike operations
exclusion clause.
DEFINITION OF LOCATION
The Company shall be the sole judge of what constitutes a single
location provided that:
1. One location shall always be determined from the standpoint
of the peril of fire, whether or not the fire insurance is
written by the Company;
2. A non-fire resistive building and its contents shall never
be considered as constituting more than one location, nor shall
time element coverages be considered a separate location apart
from the building and its contents.
3. When two or more buildings and personal property are
situated at the same general location, with no single building
located farther than 100 yards from the nearest other building,
the Company shall identify on its records at the time of
acceptance by the Company those two or more original buildings
which are deemed to constitute a single location. If such
identification is not made, each building and its contents shall
be considered to be a separate location.
4. The term building shall mean each structure which is within
the local fire insurance rating organization's definition of a
separate building or fire division for rate making purposes.
With respect to those structures not within such definition(s),
the term "building" shall mean each separately roofed structure
enclosed within exterior walls.
LOSS OCCURRENCE DEFINITION
The term "Loss Occurrence" shall mean the sum of all individual
losses directly occasioned by any one disaster, accident, or loss
or series of disaster, accidents or losses arising out of one
event which occurs within the area of one state of the United
States or province of Canada and states or provinces contingous
thereto and to one another. However, the duration and extent of
any one "Loss Occurrence" shall be limited to all individual
losses sustained by the Company occurring during any period of
168 consecutive hours arising out of and directly occasioned by
the same event except that the term "Loss Occurrence" shall be
further defined as follows:
(i) As regard windstorm, hail, tornado, hurricane,
cyclone, including ensuing collapse and water damage, all
individual losses sustained by the Company occurring
during any period of 72 consecutive hours arising out of
and directly occasioned by the same event. However, the
event need not be limited to one state or province or
states or provinces contiguous thereto.
(ii) As regards riot, riot attending a strike, civil
commotion, vandalism and malicious mischief, all
individual losses sustained by the Company occurring
during any period of 72 consecutive hours within the area
of one municipality or county and the municipalities or
counties contiguous thereto arising out of and directly
occasioned by the same event. The maximum duration of 72
consecutive hours may be extended in respect of individual
losses which occur beyond such 72 consecutive hours during
the continued occupation of an assured's premises by
strikers, provided such occupation commenced during the
aforesaid period.
(iii) As regards earthquake (the epicenter of which
need not necessarily be within the territorial confines
referred to in the opening paragraph of this Article) and
fire following directly occasioned by the earthquake, only
those individual fire losses which commence during the
period of 168 consecutive hours may be included in the
Company's "Loss Occurrence".
(iv) As regards to "Freeze", only individual losses
directly occasioned by collapse, breakage of glass and
water damage (caused by bursting of frozen pipes and
tanks) may be included in the Company's "Loss Occurrence".
For all "Loss Occurrences" the Company may choose the date
and time when any such period of consecutive hours
commences provided that it is not earlier than the date
and time of the occurrence of the first recorded
individual loss sustained by the Company arising out of
that disaster, accident, or loss, and provided that only
one such period of 168 consecutive hours shall apply with
respect to one event, except for those "Loss Occurrences"
referred to in Subparagraphs (i) and (ii) above where only
one such period of 72 consecutive hours shall apply with
respect to one event, regardless of the duration of the
event.
No individual losses occasioned by an event that would be
covered by 72 hours Clauses may be included in any "Loss
Occurrence" claimed under the 168 hours provision.
Accepted By:
CARL W. BUEDEL
MERIDIAN INSURANCE
Date:
EUGENE M. MANDERINO
NAC REINSURANCE CORPORATION
Date:
Consent of Independent Public Accountants
We consent to the incorporation by reference in Registration
Statement No. 33-11413 on Form S-1 as amended by Post-
Effective Amendment No. 1 effective March 19, 1987; and in
Registration Statement No. 33-58406 on Form S-2 effective
April 27, 1993 of Meridian Insurance Group, Inc. of our
report, dated February 16, 1996, on our audits of the
consolidated financial statements and financial statement
schedules of Meridian Insurance Group, Inc. as of December
31, 1995 and 1994 and for each of the three years in the
period ended December 31, 1995, which report is included in
this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Indianapolis, Indiana
March 26, 1996
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