SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1997.
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________ to _______.
Commission file number 0-11413
MERIDIAN INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1689161
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2955 North Meridian Street
P.O. Box 1980
Indianapolis, IN 46206
(Address of principal executive offices)
Registrant's telephone number, including area code: (317) 931-7000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
6,626,864 Common Shares at September 30, 1997
The Index of Exhibits is located at page 15 in the sequential
numbering system.
Total pages: 15
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. In the opinion of management, the financial
information reflects all adjustments (consisting only of
normal recurring adjustments) which are necessary for a
fair presentation of financial position, results of
operations and cash flows for the interim periods. The
results for the three and nine months ended September 30,
1997, are not necessarily indicative of the results to be
expected for the entire year.
These quarterly interim financial statements are
unaudited.
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
as of September 30, 1997 and December 31, 1996
September 30, December 31,
1997 1996
(Unaudited)
ASSETS
Investments:
Fixed maturities--available for sale, at market
(cost $240,342,000 and $234,356,000) $247,723,113 $238,343,040
Equity securities, at market
(cost $40,123,000 and $33,779,000) 54,986,038 40,629,633
Short-term investments, at cost, which
approximates market 3,295,869 1,326,634
Other invested assets 1,661,473 1,390,176
Total investments 307,666,493 281,689,483
Cash 60,675 3,128,154
Premiums receivable, net of allowance for bad debts 4,616,979 4,674,984
Accrued investment income 2,985,432 3,241,125
Deferred policy acquisition costs 18,337,698 16,690,275
Goodwill 15,661,971 16,848,829
Reinsurance receivables 44,477,347 45,850,830
Prepaid reinsurance premiums 4,107,486 5,020,605
Due from Meridian Mutual Insurance Company 10,168,192 8,973,672
Other assets 1,591,912 11,679,744
Total assets $409,674,185 $397,797,701
LIABILITIES AND SHAREHOLDERS' EQUITY
Losses and loss adjustment expenses $162,439,239 $161,309,239
Unearned premiums 87,836,305 84,065,751
Other post-retirement benefits 1,498,799 1,417,814
Bank loan payable 11,500,000 11,875,000
Reinsurance payables 9,098,526 8,664,358
Other liabilities 6,297,337 8,291,558
Total liabilities 278,670,206 275,623,720
Shareholders' equity:
Common shares, no par value, authorized 20,000,000
shares; issued 6,807,944 and 6,805,955, outstanding
6,626,864 and 6,779,375 at September 30, 1997 and
December 31, 1996, respectively 44,110,416 44,077,846
Treasury shares, at cost; 154,500 shares (2,308,188) --
Contributed capital 15,058,327 15,058,327
Unrealized appreciation of investment securities,
net of deferred income tax 14,718,732 7,141,846
Retained earnings 59,424,692 55,895,962
Total shareholders' equity 131,003,979 122,173,981
Total liabilities and shareholders' equity $409,674,185 $397,797,701
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
for the three and nine months ended September 30, 1997 and 1996
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Premiums earned $49,489,744 $44,165,128 $146,129,824 $119,593,174
Net investment income 4,062,313 3,795,862 12,170,112 11,052,696
Realized investment gains 998,272 890,618 2,760,074 2,482,868
Other income 41,943 138,359 967,032 523,145
Total revenues 54,592,272 48,989,967 162,027,042 133,651,883
Losses and loss adjustment
expenses 35,643,183 33,650,503 111,521,677 94,767,547
General operating expenses 4,030,990 3,794,045 12,731,726 10,157,668
Amortization expenses 10,831,023 9,735,046 31,828,277 26,061,557
Interest expense 195,648 120,000 549,026 120,000
Total expenses 50,700,844 47,299,594 156,630,706 131,106,772
Income before income taxes 3,891,428 1,690,373 5,396,336 2,545,111
Income taxes (benefit):
Current 558,117 468,141 785,117 560,141
Deferred 314,000 (584,000) (520,000) (1,118,000)
Total income taxes (benefit) 872,117 (115,859) 265,117 (557,859)
Net income $ 3,019,311 $ 1,806,232 $ 5,131,219 $ 3,102,970
Weighted average shares
outstanding 6,626,259 6,779,375 6,702,634 6,779,253
Per share results:
Net income $ 0.46 $ 0.27 $ 0.77 $ 0.46
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
<TABLE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
for the nine months ended September 30, 1997 and 1996
(Unaudited)
<CAPTION>
Unrealized
Appreciation
(Depreciation)
Common Treasury Contributed of Retained
Shares Shares Capital Investments Earnings
<S> <C> <C> <C> <C> <C>
Balance at January 1,
1996 $44,076,685 $ 0 $15,058,327 $ 6,842,245 $52,265,410
Net income -- -- -- -- 3,102,970
Unrealized depreciation of
investment securities,
net of deferred income
taxes -- -- -- (1,600,880) --
Dividends ($0.24 per share) -- -- -- -- (1,627,051)
Exercise of stock options
for 4,042 common shares 23,241 -- -- -- --
Repurchase and retirement
of 1,472 common shares (22,080) -- -- -- --
Balance at September 30,
1996 $44,077,846 $ 0 $15,058,327 $ 5,241,365 $53,741,329
Balance at January 1,
1997 $44,077,846 $ 0 $15,058,327 $ 7,141,846 $55,895,962
Net income -- -- -- -- 5,131,219
Unrealized appreciation of
investment securities,
net of deferred income
taxes -- -- -- 7,576,886 --
Dividends ($0.24 per share) -- -- -- -- (1,602,489)
Issuance of 1,989 common
shares 32,570 -- -- -- --
Repurchase 154,500 common
shares -- (2,308,188) -- -- --
Balance at September 30,
1997 $44,110,416 $(2,308,188) $15,058,327 $14,718,732 $59,424,692
<FN>
<F1>
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the nine months ended September 30, 1997 and 1996
(Unaudited)
September 30,
1997 1996
Cash flows from operating activities:
Net income $ 5,131,219 $ 3,102,970
Reconciliation of net income to net cash provided
by operating activities:
Amortization 31,828,277 26,061,557
Deferred policy acquisition costs (33,028,158) (26,746,748)
Increase in unearned premiums 3,770,554 5,146,765
Increase in losses and loss adjustment expenses 1,130,000 8,635,429
Increase in amount due from Meridian Mutual
Insurance Company (1,194,520) (15,747,994)
Decrease (increase) in reinsurance receivables 1,373,483 (18,372,200)
Decrease in other assets 6,738,257 7,117,380
Increase in other post-employment benefits 80,985 89,577
Increase in reinsurance payables 434,168 21,190,936
Decrease in accrued commissions and other expenses (1,180,325) (2,554,513)
Increase (decrease) in payable for federal income
taxes 111,382 (115,220)
Decrease in other liabilities (1,959,591) (755,054)
Net realized investment gains (2,760,074) (2,482,868)
Other, net 1,828,680 (1,626,941)
Net cash provided by operating activities 12,304,337 2,943,076
Cash flows from investing activities:
Purchase of fixed maturities (50,774,254) (26,133,061)
Proceeds from sale of fixed maturities 26,135,592 27,111,009
Proceeds from calls, prepayments and maturity of
fixed maturities 18,430,466 16,477,483
Purchase of equity securities (17,970,146) (13,468,404)
Proceeds from sale of equity securities 14,538,847 13,354,120
Net decrease (increase) in short-term investments (1,969,235) 1,117,429
Increase in other invested assets (271,297) (95,019)
Acquisition of subsidiary -- (30,209,343)
Increase (decrease) in payable for securities 806,089 (1,258,578)
Net cash used in investing activities (11,073,938) (13,104,364)
Cash flows from financing activities:
Dividends paid (1,614,690) (1,559,077)
Proceeds from bank loan -- 12,000,000
Repayment of bank loan (375,000) --
Repurchase of common shares (2,308,188) (22,080)
Exercise of stock options -- 23,241
Net cash provided by (used) in financing activities (4,297,878) 10,442,084
Increase (decrease) in cash (3,067,479) 280,796
Cash at beginning of period 3,128,154 935,098
Cash at end of period $ 60,675 $ 1,215,894
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited consolidated financial statements should be read in
conjunction with the following notes and with the Notes to
Consolidated Financial Statements of Meridian Insurance Group, Inc.,
for the year ended December 31, 1996. In the opinion of management,
the financial information reflects all adjustments (consisting only
of normal recurring adjustments) which are necessary for a fair
presentation of financial position, results of operations and cash
flows for the interim periods. The results for the three and nine
months ended September 30, 1997 are not necessarily indicative of
the results to be expected for the entire year.
1. Related Party Transactions
Meridian Insurance Group, Inc. (the "Company") is an insurance
holding company principally engaged in underwriting property and
casualty insurance through its wholly-owned subsidiaries,
Meridian Security Insurance Company ("Meridian Security"),
Citizens Fund Insurance Company ("Citizens Fund") and Insurance
Company of Ohio ("ICO"). Citizens Fund and ICO were purchased by
the Company on July 31, 1996 (see Note 3 below). Effective
August 1, 1996, Meridian Security, Citizens Fund and ICO all
participated in a pooling arrangement with Meridian Mutual
Insurance Company ("Meridian Mutual"), the principal shareholder
of the Company, and Citizens Mutual Insurance Company, the former
majority shareholder of Citizens Security Group, Inc., in which
the underwriting income and expenses of each entity are shared.
Beginning August 1, 1996, the participation percentages of the
Company's insurance subsidiaries totaled 74 percent. Prior to
August 1, Meridian Security and Meridian Mutual were the only
participants in the aforementioned pooling arrangement, of which
Meridian Security assumed 74 percent of the combined underwriting
income and expenses of the two companies.
2. Reinsurance
For the three and nine months ended September 30, 1997 and 1996,
the effects of reinsurance on the Company's premiums written,
premiums earned and losses and loss adjustment expenses are as
follows:
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Premiums written:
Direct $54,540,746 $50,034,447 $162,325,957 $132,586,215
Assumed (176,124) 480,095 562,762 3,303,422
Ceded (4,043,100) (4,911,833) (12,075,225) (11,512,365)
Net $50,321,522 $45,602,709 $150,813,494 $124,377,272
Premiums earned:
Direct $53,545,307 $47,544,817 $158,047,724 $125,181,623
Assumed (103,281) 1,344,998 1,070,444 5,382,276
Ceded (3,952,282) (4,724,687) (12,988,344) (10,916,725)
Net $49,489,744 $44,165,128 $146,129,824 $119,593,174
Losses and loss adjustment expenses:
Direct $39,658,435 $40,982,719 $120,906,330 $112,833,268
Assumed 81,468 457,933 870,113 2,387,752
Ceded (4,096,720) (7,790,149) (10,254,766) (20,453,473)
Net $35,643,183 $33,650,503 $111,521,677 $ 94,767,547
For the three and nine month periods ended September 30, 1997,
net premiums written and earned were increased by approximately
$863,000 resulting from a refund of premiums previously ceded to the
Minnesota Workers' Compensation Reinsurance Association.
<PAGE>
3. Acquisition
On July 31, 1996, the Company acquired Citizens Security Group Inc. and
its property and casualty insurance subsidiaries, Citizens Fund
Insurance Company and Insurance Company of Ohio, for a cash purchase
price of approximately $30,262,000, including capitalized acquisition
costs. The acquisition was accounted for as a purchase with the
assets acquired and liabilities assumed being recorded at their
estimated fair value at the date of acquisition. The excess
cost over the fair value of the net assets resulted in goodwill
of approximately $15,140,000, which is being amortized over 25
years on the straight-line basis.
The consolidated financial statements include the results of operations
of the acquired entities from the date of acquisition. The following
unaudited pro-forma condensed consolidated results of operations for the
three and nine months ended September 30, 1996 assume the
acquisition and financing of the transaction had occurred at
January 1, 1996:
Three months ended Nine months ended
September 30, 1996 September 30, 1996
Premiums $47,022,000 $138,347,000
Revenues $51,998,000 $153,583,000
Net income $ 911,000 $ 1,109,000
Net income per share $ 0.13 $ 0.16
These unaudited pro-forma results are not necessarily indicative
of the results of operations that would have occurred had the
acquisition taken place at the beginning of each period, or of
future operations of the combined companies.
4. Earnings Per Share
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share", which requires changes in the
computation, presentation, and disclosure of earnings per share.
This Statement requires dual presentation of basic and diluted
earnings per share on the face of the income statement for all
companies with complex capital structures, regardless of whether
both computations are the same. SFAS No. 128 also replaces the
presentation of primary earnings per share with a basic earnings
per share computation and eliminates the modified treasury stock
method and the three percent materiality provision as was
required under the Accounting Principles Board Opinion No. 15.
This Statement becomes effective for financial statements with
fiscal years ending after December 15, 1997 and does not allow
for early adoption. The impact of this pronouncement is not expected to
have a material effect on the Company's financial statements.
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations:
Financial Position
At September 30, 1997, Meridian Insurance Group, Inc.
recorded total assets of $409.7 million, a 3.0 percent
increase from the December 31, 1996 total of $397.8 million.
This increase was attributed to 8.0 percent growth in cash
and invested assets, including unrealized appreciation of
fixed maturity and equity security investments. The Company
recorded approximately $22.2 million of net unrealized
appreciation before deferred income taxes at September 30,
1997 compared to $10.8 million at year-end 1996. Partially
offsetting the invested asset growth was a decrease in other
assets resulting from the receipt of certain year-end
receivables and a reduction of the Company's deferred
federal income tax asset, which occurred as a result of the
increase in unrealized appreciation of the investment
portfolio.
The Company's total liabilities of $278.7 million at
September 30, 1997 reflected an increase of 1.1 percent over
the year-end 1996 total of $275.6 million. The liability
growth was attributed primarily to an increase in the
reserve for unearned premiums, which was reflective of the
Company's increased premium volume. The reserves for losses
and loss adjustment expenses, which is the Company's largest
component of total liabilities, reflected a slight increase
to $162.4 million in comparison to December 31, 1996's
$161.3 million. Reserves associated with the increased
volume of business were nearly offset by favorable
development of prior accident year losses, primarily in the
Company's commercial multiple peril and homeowners lines of
business.
Shareholders' equity at September 30, 1997 was $131.0
million, a growth of 7.2 percent over the December 31, 1996
total of $122.2 million. Unrealized appreciation of
investment securities, net of deferred income taxes, of
approximately $7.6 million and net income of $5.1 million
were the major contributors to the increase. On May 6,
1997, the Company announced that its Board of Directors had
authorized the repurchase of up to 350,000 shares, or
approximately five percent of the Company's outstanding
common stock. As of September 30, 1997, the Company had
repurchased 154,500 shares, or approximately 44 percent of
the authorized total, at a cost of $2.3 million. The
Company's book value per share of $19.77 at September 30,
1997 increased $1.75, or 9.7 percent, over the December 31,
1996 total of $18.02.
Results of Operations
Quarter
For the three-month period ended September 30, 1997, the
Company recorded net income of $3.0 million, or $0.46 per
common share. This compares to net income of $1.8 million,
or $0.27 per share for the corresponding 1996 period. A
reduction in the Company's loss and loss adjustment expense
ratio of approximately 4.2 percentage points was the primary
factor leading to the improved earnings. The Company's
combined ratio for the 1997 third quarter was 102.4 percent
compared to 107.1 percent for the same 1996 period. The
results of operations for the prior year third quarter
included just two months of operations from the Citizens
Security companies following the July 31, 1996 acquisition
of Citizens Security Group, Inc.
The Company's total revenues of $54.6 million for the three months
ended September 30, 1997 increased 11.4 percent over the
$49.0 million reported for the comparable 1996 period. The
increased revenues were attributed primarily to the
Company's earned premium growth of $5.3 million, or 12.1
percent, from $44.2 million in the 1996 third quarter to
$49.5 million for the most recent quarter. Approximately
$4.5 million of the earned premium growth resulted from the
July 31, 1996 Citizens Security Group acquisition. Aside
from the acquisition, premiums earned for the Meridian book
of business increased approximately 2.0 percent, excluding
its involuntary participation in the National Workers'
Compensation Pool ("NWCP"), for the 1997 third quarter when
compared to the same 1996 period. This resulted from a 6.4
percent growth in Meridian's personal and farm lines of
business, partially offset by a 5.5 percent reduction in its
commercial volume. Premium volume associated with
commercial lines of business continues to be hampered by the
highly competitive market conditions in the Company's
operating territories. The Company's assumed earned premium
volume from its participation in the NWCP declined by
approximately $877,000 for the three months ended September
30, 1997 in comparison with the corresponding 1996 period.
This was offset by a $863,000 refund of premiums previously
ceded to the Minnesota Workers' Compensation Reinsurance
Association.
Net investment income of approximately $4.1 million for the
1997 three month period reflected an increase of 7.0 percent
when compared to $3.8 million for the same 1996 quarter.
The net investment income growth resulted primarily from an
increase in the Company's invested asset base. During the
three-month period ended September 30, 1997, the Company
realized net investment gains of $1.0 million, or
approximately $0.10 per share, compared to $0.9 million, or
approximately $0.09 per share, for the same 1996 period.
The Company's incurred losses and loss adjustment expenses
of $35.6 million for the quarter ended September 30, 1997
were 5.9 percent higher than the $33.6 million reported for
the 1996 third quarter. This increase was attributed to the
July 1996 acquisition of Citizens Security Group. Exclusive
of the acquisition, net incurred losses and loss adjustment
expenses for the Meridian book of business declined
approximately $2.6 million. Improved experience primarily
resulted from property coverages in Meridian's homeowners,
farmowners, and commercial multiple peril lines of business
due to a reduction in third quarter weather-related
catastrophe losses. The consolidated loss and loss
adjustment expense ratio of 72.0 percent for the three
months ended September 30, 1997 improved 4.2 percentage
points from the 1996 third quarter ratio of 76.2 percent.
Total expenses, which includes general operating,
amortization, and interest expenses, of $15.1 million for
the 1997 three-month period increased 10.3 percent over the
comparable 1996 total of $13.6 million. Contributing to the
increase was the one additional month of expenses in 1997
related to the acquisition of Citizens Security Group.
Relative to net premiums earned, the Company's expense ratio
improved to 30.4 percent for the 1997 third quarter from
30.9 percent for the 1996 three-month period.
For the quarter ended September 30, 1997, the Company
recorded income tax expense of approximately $0.9 million
which corresponds to an effective tax rate of 22.4 percent.
This compares to an income tax benefit of $0.1 million being
recorded for the corresponding 1996 period. This resulted
from a larger pre-tax operating income amount for the
current three-month period in which the Company's non-
taxable interest income and dividends received deductions
had less relative impact in proportion to the 1996 third
quarter pre-tax income.
Nine Months
For the nine months ended September 30, 1997, Meridian
Insurance Group, Inc. recorded net income of $5.4 million,
or $0.77 per common share. This compares to net income of
$3.1 million, or $0.46 per share, for the corresponding 1996
period. Included in the 1997 results were nine months of
operations from the Citizens Security companies, which were
acquired by the Company on July 31, 1996, compared to two
months of operations for the same 1996 period. The
Company's results for both periods were negatively impacted
by the large volume of property damage claims associated
with severe storms that occurred throughout the Company's
operating territory. Weather-related catastrophe losses
were estimated to be approximately $6.4 million in the 1997
period and $9.6 million for the previous nine-month period.
The after-tax impact of these claims was approximately $0.63
per share and $0.93 per share for the first nine months of
1997 and 1996, respectively.
The Company's total revenues of $162.0 million for the nine
months ended September 30, 1997 increased 21.2 percent over
the $133.7 million reported for the same 1996 period.
Premiums earned, the Company's largest component of
revenues, increased $26.5 million, or 22.2 percent, to
$146.1 million for the first nine months of 1997 in
comparison with $119.6 million in 1996. The acquisition of
Citizens Security Group accounted for approximately $24.5
million of the increase. The remainder of the increase was
attributed to Meridian's major lines of business, with the
exception of workers' compensation. The earned premium
volume in the workers' compensation line was reduced by a
$2.1 million decrease in assumed reinsurance from the
Company's involuntary participation in the NWCP. This was
principally due to reduced participation in the assigned
risk pools for the states of Kentucky and Tennessee.
Partially offsetting the NWCP reduction was a refund of
premiums previously ceded to the Minnesota Workers'
Compensation Reinsurance Association of approximately
$863,000. Direct written premiums for the Meridian and
Citizens Security insurance companies have experienced
growth of approximately 3.7 percent and 6.9 percent,
respectively, over the first nine months of 1997.
Year-to-date net investment income at September 30, 1997 was
$12.2 million, or 10.1 percent more than last year's total
of $11.1 million. This growth was primarily attributed to a
larger invested asset base resulting primarily from the
acquisition of Citizens Security Group. The Company's pre-
tax net investment yield of approximately 5.9 percent
remained similar for the two periods. Over the first three
quarters of 1997, the Company realized net gains on the sale
of investments of $2.8 million, or approximately $0.26 per
share, versus $2.5 million, or $0.24 per share, for the
comparable period one year ago.
The Company's total incurred losses and loss adjustment
expenses of $111.5 million for the nine months ended
September 30, 1997 were 17.7 percent higher than 1996's
total of $94.8 million. Approximately $24.4 million of the
1997 losses relate to the operations of Citizens Security
versus approximately $3.6 million for the two months of
operations included in the 1996 total. Exclusive of
Citizens' operations, incurred losses and loss adjustment
expenses for the Meridian book of business reflected a 4.5
percent reduction from approximately $91.2 million for the
1996 period to $87.1 million for the nine months of 1997.
The Meridian lines of business produced a statutory loss and
loss adjustment expense ratio of 74.8 percent for the 1997
period compared to 80.0 percent for the same 1996 period.
The primary lines of business contributing to this
improvement were farmowners, homeowners, and commercial
multiple-peril. Partially offsetting these favorable trends
were deteriorations in Meridian's personal and commercial
automobile lines of business, which resulted from an
increase in claim severity. The Company's consolidated
statutory loss and loss adjustment expense ratio declined
3.6 percentage points to 76.0 percent for the 1997 nine-
month period versus 79.6 percent ratio for the comparable
1996 period.
The Company's general operating and amortization expenses of
$44.6 million for the nine months ended September 30, 1997
resulted in an increase of 23.0 percent over 1996's nine-
month total of $36.2 million. This increase resulted
primarily from the acquisition of Citizens Security Group
which includes nine months of operations in 1997 versus two
months for the previous year. Also contributing to the
increased expenses were higher costs relating to the
Company's employee medical plan and programming and other
systems costs associated with Year 2000 compliance.
Relative to net earned premiums, the Company's expense ratio
for the 1997 nine-month period was 30.9 percent compared to
30.4 percent for the comparable 1996 period. Interest
expense of $0.5 million was recorded in 1997 on the debt
incurred in connection with the acquisition of Citizens
Security Group compared to $0.1 million for the same 1996
period.
For the nine months ended September 30, 1997, the Company
recorded income tax expense of $265,000 resulting primarily
from the amount of tax-exempt investment income relative to
pre-tax income.
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. a. Exhibits. See index to exhibits.
b. No reports on Form 8-K were filed during the period
covered by this statement.
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MERIDIAN INSURANCE GROUP, INC.
DATE: October 24, 1997 By: /s/ Norma J. Oman
Norma J. Oman, President and
Chief Executive Officer
DATE: October 24, 1997 By: /s/ Steven R. Hazelbaker
Steven R. Hazelbaker,
Vice President, Chief Financial
Officer and Treasurer
<PAGE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
FORM 10-Q
For the quarter ended September 30, 1997
Index to Exhibits
Exhibit Number
Assigned in Regulation S-K
Item 601 Description of Exhibit
(4) 4.01 Text of Certificate for Common Shares of
Meridian Insurance Group, Inc.
(Incorporated by reference to Exhibit 4.01
to the registrant's Form S-1 Registration
Statement No. 33-11413.)
(27) 27.01 Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
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0
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