[ARTICLE] 7
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] JUN-30-1998
[DEBT-HELD-FOR-SALE] 242,834
[DEBT-CARRYING-VALUE] 0
[DEBT-MARKET-VALUE] 5,820
[EQUITIES] 59,841
[MORTGAGE] 0
[REAL-ESTATE] 0
[TOTAL-INVEST] 309,952
[CASH] 470
[RECOVER-REINSURE] 55,576
[DEFERRED-ACQUISITION] 17,646
[TOTAL-ASSETS] 421,762
[POLICY-LOSSES] 171,799
[UNEARNED-PREMIUMS] 82,255
[POLICY-OTHER] 0
[POLICY-HOLDER-FUNDS] 0
[NOTES-PAYABLE] 10,750
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 41,998
[OTHER-SE] 95,381
[TOTAL-LIABILITY-AND-EQUITY] 421,762
[PREMIUMS] 95,121
[INVESTMENT-INCOME] 8,609
[INVESTMENT-GAINS] 3,212
[OTHER-INCOME] 35
[BENEFITS] 69,798
[UNDERWRITING-AMORTIZATION] 21,552
[UNDERWRITING-OTHER] 8,968
[INCOME-PRETAX] 6,660
[INCOME-TAX] 1,649
[INCOME-CONTINUING] 5,011
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 5,011
[EPS-PRIMARY] 0.76
[EPS-DILUTED] 0.75
[RESERVE-OPEN] 169,801
[PROVISION-CURRENT] 74,179
[PROVISION-PRIOR] (4,381)
[PAYMENTS-CURRENT] 41,683
[PAYMENTS-PRIOR] 33,384
[RESERVE-CLOSE] 171,799
[CUMULATIVE-DEFICIENCY] (4,381)
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1998.
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:
6,641,519 Common Shares at June 30, 1998
The Index of Exhibits is located at page 16 in the sequential numbering system.
Total pages: 16
<PAGE> 2
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. In the opinion of management, the financial information reflects all
adjustments (consisting only of normal recurring adjustments) which are
necessary for a fair presentation of financial position, results of
operations and cash flows for the interim periods. The results for the three
and six months ended June 30, 1998, are not necessarily indicative of the
results to be expected for the entire year.
These quarterly interim financial statements are unaudited.
<PAGE> 3
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
as of June 30, 1998 and December 31, 1997
June 30, December 31,
1998 1997
(Unaudited)
ASSETS
Investments:
Fixed maturities--available for sale, at market
(cost $234,886,000 and $239,662,000) $242,834,321 $248,404,304
Equity securities, at market
(cost $44,145,000 and $41,430,000) 59,841,266 54,378,947
Short-term investments, at cost, which
approximates market 5,819,500 3,996,232
Other invested assets 1,457,185 1,647,102
Total investments 309,952,272 308,426,585
Cash 470,045 1,188,423
Premiums receivable, net of allowance for bad debts 4,678,453 4,343,157
Accrued investment income 3,076,314 3,130,712
Deferred policy acquisition costs 17,646,208 17,651,544
Goodwill 15,127,212 15,479,456
Reinsurance receivables 55,576,456 48,850,066
Prepaid reinsurance premiums 3,569,891 3,861,507
Due from Meridian Mutual Insurance Company 9,716,388 7,723,277
Other assets 1,949,191 2,931,077
Total assets $421,762,430 $413,585,804
LIABILITIES AND SHAREHOLDERS' EQUITY
Losses and loss adjustment expenses $171,798,854 $169,801,326
Unearned premiums 82,255,387 82,839,333
Other post-retirement benefits 2,009,945 1,933,181
Bank loan payable 10,750,000 11,375,000
Reinsurance payables 12,135,099 9,078,076
Other liabilities 6,034,524 6,664,653
Total liabilities 284,383,810 281,691,569
Shareholders' equity:
Common shares, no par value, authorized 20,000,000
shares; issued 6,796,019 and 6,781,364, outstanding
6,641,519 and 6,626,864 at June 30, 1998 and
December 31, 1997, respectively 44,306,119 44,110,416
Treasury shares, at cost; 154,500 shares (2,308,188) (2,308,188)
Contributed capital 15,058,327 15,058,327
Retained earnings 64,632,998 60,684,448
Accumulated other comprehensive income 15,689,364 14,349,232
Total shareholders' equity 137,378,620 131,894,235
Total liabilities and shareholders' equity $421,762,430 $413,585,804
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 4
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
for the three and six months ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Premiums earned $ 47,131,856 $ 48,693,566 $ 95,121,494 $ 96,640,080
Net investment income 4,381,075 4,183,563 8,608,938 8,107,799
Realized investment gains 2,830,864 1,368,947 3,212,265 1,761,802
Other income 1,026 280,820 34,738 925,089
Total revenues 54,344,821 54,526,896 106,977,435 107,434,770
Losses and loss adjustment
expenses 35,977,829 37,566,764 69,797,650 75,878,494
General operating expenses 4,243,131 4,390,759 8,624,269 8,700,736
Amortization expenses 10,650,092 10,660,429 21,551,898 20,997,254
Interest expense 159,443 169,100 343,424 353,378
Total expenses 51,030,495 52,787,052 101,317,241 105,929,862
Income before income taxes 3,314,326 1,739,844 6,660,194 1,504,908
Income taxes (benefit):
Current 419,000 611,000 1,124,000 227,000
Deferred 401,000 (673,000) 525,000 (834,000)
Total income taxes(benefit) 820,000 (62,000) 1,649,000 (607,000)
Net income $ 2,494,326 $ 1,801,844 $ 5,011,194 $ 2,111,908
Weighted average shares
outstanding 6,641,519 6,703,952 6,635,912 6,741,455
Per share results:
Basic earnings per share $ 0.38 $ 0.27 $ 0.76 $ 0.31
Diluted earnings
per share $ 0.37 $ 0.27 $ 0.75 $ 0.31
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 5
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
for the six months ended June 30, 1998 and 1997
(Unaudited)
<CAPTION>
Accumulated
Other
Common Treasury Contributed Retained Comprehensive Comprehensive
Shares Shares Capital Earnings Income (Loss) Income (Loss)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $ 44,077,846 $ 0 $ 15,058,327 $ 55,895,962 $ 7,141,846
Comprehensive income:
Net income -- -- -- 2,111,908 -- $ 2,111,908
Other Comprehensive
income, net of tax:
Unrealized gain on securities,
net of reclassification
adjustment -- -- -- -- 3,207,191 3,207,191
Comprehensive income (loss) -- -- -- -- -- $ 5,319,099
Dividends ($0.16 per share) -- -- -- (1,072,339) --
Repurchase of 154,000
common shares -- (2,308,188) -- -- --
Balance at June 30, 1997 $ 44,077,846 $ (2,308,188) $ 15,058,327 $ 56,935,531 $ 10,349,037
Balance at January 1, 1998 $ 44,110,416 $ (2,308,188) $ 15,058,327 $ 60,684,448 $ 14,349,232
Comprehensive income:
Net income -- -- -- 5,011,194 -- $ 5,011,192
Other comprehensive
income, net of tax:
Unrealized gain on securities,
net of reclassification
adjustment -- -- -- -- 1,340,132 1,340,132
Comprehensive income -- -- -- -- -- $ 6,351,324
Dividends ($0.16 per share) -- -- -- (1,062,644) --
Issuance of 14,655
common shares 195,703 -- -- -- --
Balance at June 30, 1998 $ 44,306,119 $ (2,308,188) $ 15,058,327 $ 64,632,998 $ 15,689,364
<PAGE> 6
The accompanying notes are an integral part of the consolidated financial
statements
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended June 30, 1998 and 1997
(Unaudited)
June 30,
1998 1997
Cash flows from operating activities:
Net income $ 5,011,194 $ 2,111,908
Reconciliation of net income to net cash provided by
operating activities:
Amortization 21,551,898 20,997,254
Deferred policy acquisition costs (21,546,562) (22,007,742)
Increase (decrease) in unearned premiums (583,946) 2,847,957
Increase in losses and loss adjustment expenses 1,397,528 3,101,571
Increase in amount due from Meridian Mutual Ins Co (1,993,110) (804,060)
(Increase) decrease in reinsurance receivables (6,726,390) 1,995,239
Decrease in prepaid reinsurance premiums 291,616 --
Decrease in other assets 973,000 6,358,906
Increase in other post-employment benefits 76,764 55,422
Increase in reinsurance payables 3,057,023 448,949
Decrease in accrued commissions and other expenses (842,182) (1,202,510)
Increase (decrease) in payable for federal inc taxes (600) 192,578
Decrease in other liabilities (1,034,519) (1,669,181)
Net realized investment gains (3,212,265) (1,761,802)
Issuance of restricted common stock 65,209 --
Other, net 708,346 616,439
Net cash provided (used) by operating activities (2,806,996) 11,280,928
Cash flows from investing activities:
Purchase of fixed maturities (50,223,777) (38,771,536)
Proceeds from sale of fixed maturities 41,795,113 16,063,001
Proceeds from calls, prepayments and
maturity of fixed maturities 14,343,845 13,994,271
Purchase of equity securities (8,811,270) (8,250,865)
Proceeds from sale of equity securities 9,175,201 10,257,279
Net increase in short-term investments (1,823,268) (3,524,936)
Decrease (increase) in other invested assets 189,917 (136,410)
Increase in payable for securities (999,995) 477,557
Net cash used in investing activities (3,645,766) (9,891,639)
Cash flows from financing activities:
Dividends paid (1,062,642) (1,084,700)
Repayment of bank loan (625,000) (250,000)
Repurchase of common shares -- (2,308,188)
Exercise of stock options 130,494 --
Net cash used in financing activities (1,557,148) (3,642,888)
Decrease in cash (718,378) (2,253,599)
Cash at beginning of period 1,188,423 3,128,154
Cash at end of period $ 470,045 $ 874,555
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 7
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,
1997. In the opinion of management, the financial information reflects all
adjustments (consisting only of normal recurring adjustments) which are
necessary for a fair presentation of financial position, results of operations
and cash flows for the interim periods. The results for the three and six
months ended June 30, 1998 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"), Meridian Citizens Fund Insurance
Company (formerly Citizens Fund Insurance Company) and Insurance Company
of Ohio ("ICO"). Since August 1, 1996, the companies have participated
in a pooling arrangement with Meridian Mutual Insurance Company
("Meridian Mutual"), the principal shareholder of the Company, and
Meridian Citizens Mutual Insurance Company (formerly Citizens Security
Mutual Insurance Company), in which the underwriting income and expenses
of each entity are shared. The participation percentages of the
Company's insurance subsidiaries for the periods ended June 30, 1998 and
1997 total 74 percent.
2. Reinsurance
For the three and six months ended June 30, 1998 and 1997, the effects of
reinsurance on the Company's premiums written, premiums earned and losses
and loss adjustment expenses are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Premiums written:
Direct $ 52,511,112 $ 55,505,976 $102,688,889 $107,785,211
Assumed 120,764 396,742 300,152 738,886
Ceded (4,290,130) (4,622,510) (8,159,877) (8,032,125)
Net $ 48,341,746 $ 51,280,208 $ 94,829,164 $100,491,972
Premiums earned:
Direct $ 51,249,318 $ 52,759,164 $103,205,357 $104,502,417
Assumed 155,739 422,673 367,633 1,173,725
Ceded (4,273,200) (4,488,271) (8,451,495) (9,036,062)
Net $ 47,131,857 $ 48,693,566 $ 95,121,495 $ 96,640,080
Losses and loss adjustment expenses:
Direct $ 46,218,306 $ 41,621,253 $ 81,198,466 $ 81,247,895
Assumed 60,183 323,450 89,803 788,645
Ceded (10,300,660) (4,377,939) (11,490,619) (6,158,046)
Net $ 35,977,829 $ 37,566,764 $ 69,797,650 $ 75,878,494
<PAGE> 8
3. Earnings Per Share
The following table represents the reconciliation of the numerators and
denominators of the Company's basic earnings per share and diluted
earnings per share computations reported on the Consolidated Statement of
Income for the three and six month periods ended June 30, 1998 and 1997:
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Basic earnings per share computation:
Numerator (net income) $2,494,326 $1,801,844 $5,011,194 $2,111,908
Denominator:
Common shares outstanding 6,641,519 6,703,952 6,635,912 6,741,455
Basic earnings per share $ 0.38 $ 0.27 $ 0.76 $ 0.31
Diluted earnings per share computation:
Numerator (net income) $2,494,326 $1,801,844 $5,011,194 $2,111,908
Denominator:
Common shares outstanding 6,641,519 6,703,952 6,635,912 6,741,455
Stock options 84,577 46,689 77,106 32,741
Total shares 6,726,096 6,750,641 6,713,018 6,774,196
Diluted earnings per share $ 0.37 $ 0.27 $ 0.75 $ 0.31
4. Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income", which establishes
standards for the reporting and displaying of comprehensive income and
its components. All items required to be recognized as components of
comprehensive income must be reported in a financial statement that is
displayed with the same prominence as other financial statements. SFAS
No. 130 became effective for financial statements with fiscal years
beginning after December 15, 1997. All prior period information
presented has been restated to conform with this pronouncement.
The Company's other comprehensive income consists solely of net
unrealized gains (losses) on securities. The total net unrealized gains
(losses) on securities for the periods ended June 30, 1998 and 1997
consist of the following:
Six Months Ended
June 30,
1998 1997
Unrealized holding gains (losses) before
deferred income taxes $ 6,612,732 $ 6,975,491
Deferred income tax (expense) or benefit (2,305,000) (2,489,000)
Less: Reclassification adjustment for
realized gains 4,551,600 1,951,800
Income tax expense related to
realized gains (1,584,000) (672,500)
Net unrealized gains (losses) on securities $ 1,340,132 $ 3,207,191
5. Segment Information
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131,"Disclosures about Segments of an Enterprise and Related
Information", which establishes standards for the financial statement
reporting of information regarding operating segments. SFAS No. 131
also sets standards for related disclosures about products and services,
activities in geographic areas and reliance on major customers.
As permitted by SFAS No. 131, the Company has elected not to disclose the
segment information for the interim periods in the initial year of
implementation. The Company plans to adopt SFAS No. 131 in the fourth
quarter of 1998. Interim period information will be included for
comparative purposes beginning in 1999.
<PAGE> 9
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
Item 2:Management's Discussion and Analysis of Financial Condition
and Results of Operations:
Financial Position
Total assets for Meridian Insurance Group, Inc. at June 30,1998 were
$421.8 million, an increase of 2.0 percent from $413.6 million reported
at December 31, 1997. The increase was primarily due to an increase in
reinsurance receivables related to heavy weather-related catastrophe
losses incurred during the first and second quarters of 1998. As of
June 30, 1998, the Company recorded unrealized appreciation before
deferred income taxes on equity securities of approximately $15.7
million compared to $12.9 million at year-end 1997. The Company's
unrealized appreciation on its fixed maturity portfolio declined from
$8.7 million at December 31, 1997 to $7.9 million at the end of the
1998 second quarter. This reduction resulted primarily from the
Company realizing gains on the sale of a portion of its tax-exempt
bond portfolio during the year.
Total liabilities at June 30, 1998 of $284.3 million were 1.0 percent
higher than the $281.7 million reported at December 31, 1997. Loss
reserves increased 1.2 percent compared with year-end 1997, principally
because heavy wind and hail storms in May and June which generated
higher property claim reserves at June 30, 1998.
The Company's shareholders' equity at June 30, 1998 grew 4.2 percent
to $137.4 million compared to the December 31, 1997 total of $131.9
million. The primary factors leading to this increase were net income
of $5.0 million and unrealized appreciation of investment securities,
net of deferred income taxes, of $1.3 million. The Company's book
value per share at June 30, 1998 totaled $20.68, an increase of $0.78
from the $19.90 book value per share at year-end 1997.
<PAGE> 10
Results of Operations
Quarter
For the three months ended June 30, 1998, the Company recorded net
income of $2.5 million, or $0.38 basic earnings per share and $0.37
diluted earnings per share. This compares to net income of $1.8
million, or $0.27 per share, basic and diluted, for the corresponding
1997 period. Realized gains were $1.5 million higher in the second
quarter of 1998 than in the preceding year, accounting for $0.27 of
diluted earnings per share in this year's second quarter compared with
$0.14 for the second quarter of 1997.
The Company's total revenues for the 1998 second quarter of $54.3
million compared to $54.5 million reported for the corresponding 1997
period. Earned premium declined by $1.5 million, partially as a
result of underwriting actions taken by the Company in effort to
improve profitability in the Citizens Security book of business.
The very competitive, soft market in commercial lines continues to
affect Meridian's premiums which are down $1.4 million compared to the
1997 second quarter. Personal and Farm lines for the Meridian book
increased by 3.3 and 2.4 percent respectively, which was offset by a
decrease in commercial lines premiums of 7.3 percent. In addition,
commercial lines volume was also negatively affected by a reduction
of approximately $.4 million in assumed premiums from the Company's
mandatory participation in the National Workers' Compensation Pool.
Net earned premium volume from the Citizens Security operations
reflected a decrease of 14.1 percent for the 1998 second quarter in
comparison to the same 1997 period. Personal lines premiums for the
Citizens book dropped by $1.8 million or 26.6 percent. Commercial
lines premiums were flat for the Citizens Security book during the
second quarter. Total consolidated premiums written for the quarter
by the Meridian and Citizens Security companies decreased 5.7 percent
when compared to the 1997 second quarter. Underwriting actions taken
in 1997 and early 1998 helped to improve underwriting profitability,
exclusive of catastrophe losses, but negatively impacted the volume
of premium reported during the quarter. Certain sales initiatives were
implemented late in the quarter to help generate profitable premium
growth for the remainder of 1998.
Net investment income of approximately $4.4 million for the 1998 second
quarter increased 4.8 percent in comparison to $4.2 million for the
same 1997 period. A larger invested asset base and a slight increase
in the Company's net investment yield were contributors to the
increased investment income. The Company sold a portion of its tax
advantaged securities to improve investment yields. For the quarters
ended June 30, 1998 and 1997, the Company realized net investment
gains of approximately $2.8 and $1.4 million, respectively.
The Company's total incurred losses and loss adjustment expenses for
the 1998 second quarter decreased 4.3 percent to $36.0 million from
$37.6 million for the comparable 1997 quarter. The Company reported
a slight improvement of 0.8 percentage points in its loss and loss
adjustment expense ratio from 77.1 to 76.3 percent. Several major
lines of business contributed to the improved loss experience. This
improvement was achieved in spite of a higher level of catastrophe
losses during the quarter. Net weather-related catastrophe losses
incurred by the Company during the second quarter of 1998 were
estimated to be $6.8 million, arising principally from April
hailstorms in Kentucky, May tornadoes in Minnesota, and June
tornadoes in Indiana. For the comparable 1997 second quarter,
approximately $3.7 million in weather-related catastrophe losses were
incurred by the Company. The impact of such catastrophes on the
Company's loss ratio for the 1998 and 1997 periods was estimated to be
approximately 14.4 and 7.6 percentage points, respectively.
The Company's total expenses, which includes general operating,
amortization, and interest expenses, of $15.1 million for the 1998
second quarter remained steady with a comparable 1997 total of $15.2
million. A slight decrease in general operating expenses was
attributed to the lower premium volume.
For the quarter ended June 30, 1998, the Company recorded income tax
expense of approximately $0.8 million which corresponds to an effective
tax rate of 24.7 percent. Tax exempt interest and the dividends
received deduction were the principal factors behind this effective
rate.
<PAGE> 11
Six Months
For the six months ended June 30, 1998, the Company recorded net income
of $5.0 million, or $0.76 basic earnings per share and $0.75 per share
diluted earnings. This compares to net income of $2.1 million, or
$0.31 basic and diluted earnings per share for the corresponding 1997
period. Improvement in the Company's loss and loss adjustment expense
ratio of 4.9 percentage points from 78.5 percent in the 1997 second
quarter to 73.4 percent for the 1998 six month period was one of the
primary factors in improved earnings. Realized gains of $3.2 million,
or $0.31 per share in 1998, compared to $1.8 million, or $0.17 per
share, recorded for the the same six month period in 1997.
The Company's total revenues for the six months ended June 30, 1998
were $107.0 million compared to $107.4 million for the corresponding
1997 period. Earned premium decreased by $1.5 million. The Meridian
book of business reported flat earned premium through June of 1998.
Personal lines premiums grew by $2.4 million or 3.9 percent. Farm
lines produced modest growth of $0.2 million or 3.3 percent.
The commercial lines market, which continues to be soft, reported a
$2.5 million decline in volume for the first six months or a 6.7
percentage point decrease. Commercial lines volume was also
negatively affected by a reduction of approximately $0.9 million in
assumed premiums from the Company's mandatory participation in the
National Workers' Compensation Pool. Net earned premium volume from
the Citizens Security operations reflected a decrease of 8.4 percent
for the first half of 1998, in comparison to the same 1997 period.
Consolidated year-to-date net premiums written decreased by $7.7
million. Agency incentives and various sales initiatives were
implemented during the second quarter to stimulate profitable growth
in future months.
Net investment income of approximately $8.6 million for the six months
ended June 30,1998 increased 6.2 percent in comparison to $8.1 million
for the same 1997 period. A larger invested asset base and a slight
increase in the Company's net investment yield were contributors to the
increased investment income. The Company has sold a portion of its
tax-advantaged investment portfolio to favorably affect investment
yield.
<PAGE> 12
The Company's total incurred losses and loss adjustment expenses for
the six months ended June 30, 1998 decreased 8.0 percent to $69.8
million from $75.9 million for the comparable 1997 period. Improved
loss experience in the personal automobile, worker's compensation line,
and commercial multi-peril lines of business were the primary factors
for the improved results. The Meridian lines of business produced a
year-to-date loss and loss adjustment expense ratio of 68.5 at June 30,
1998 compared to 76.9 percent for the 1997 period. The operations of
the Citizens Security companies experienced an increase in incurred
losses of approximately 7.8 percent through the first half of 1998
when compared to the same 1997 period. Catastrophe losses on the
Citizen's book of approximately $5.3 million compares to $0.8 million
reported through June of 1997. Minnesota, Citizen Security's largest
state of operation, has been particularly hard hit with record levels
of losses, and through the first half of the year led the nation in
insured property damage. Consolidated net weather-related catastrophe
losses incurred by the Company through June of 1998 were estimated to
be $10.0 million. For the comparable 1997 period, approximately $5.5
million in weather related catastrophe losses were incurred by the
Company. The impact of such catastrophes on the Company's loss ratio
for the 1998 and 1997 six month periods was estimated to be
approximately 10.5 and 5.7 percentage points, respectively.
The Company's total expenses, which includes general operating,
amortization, and interest expenses, of $30.5 million for the six
months ended June 30, 1998 increased 1.6 percent over the comparable
1997 total of $30.1 million. Salary expense increased by $0.2 million
for the six month period primarily due to the addition of loss control
consultants and district sales managers related to state expansion
efforts. State and local taxes were also up $0.2 million during the
six months ended June 30, 1998.
For the six months ended June 30, 1998, the Company recorded income tax
expense of approximately $1.6 million which corresponds to an effective
tax rate of 24.8 percent. This compares to an income tax benefit of
$0.6 million recorded for the corresponding 1997 period. The 1998
effective tax rate largely results from the relative impact of tax
exempt interest and the dividends received deduction.
<PAGE> 13
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> 14
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: July 24, 1998 By: /s/ Norma J. Oman
Norma J. Oman, President and
Chief Executive Officer
DATE: July 24, 1998 By: /s/ Steven R. Hazelbaker
Steven R. Hazelbaker, Vice President,
Chief Financial Officer and Treasurer
<PAGE> 15
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
FORM 10-Q
For the quarter ended June 30, 1998
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> 16
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: July 20, 1998 By:
Norma J. Oman, President and
Chief Executive Officer
DATE: July 20, 1998 By:
Steven R. Hazelbaker, Vice President,
Chief Financial Officer, and Treasurer
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