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, 1998.
( ) 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. Employer Identification 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 5, 1999, based on the closing sales price, was $18.25.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
7,259,661 Common Shares at March 5, 1999.
The Index of Exhibits is located at page 53 in the sequential
numbering system. Total number of pages, including cover page: 290
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 1999
Annual Meeting of Shareholders
of Registrant
MERIDIAN INSURANCE GROUP, INC.
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1998
PART I PAGE
ITEM 1. BUSINESS 4
ITEM 2. PROPERTIES 15
ITEM 3. LEGAL PROCEEDINGS 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS 16
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 49
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 50
ITEM 11. EXECUTIVE COMPENSATION 50
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 50
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 50
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K 51
PART I
ITEM 1: BUSINESS
General
Meridian Insurance Group, Inc. ("the Company"), is a holding company
principally engaged in the business of underwriting property and
casualty insurance through its wholly-owned subsidiaries, Meridian
Security Insurance Company ("Meridian Security"), Meridian Citizens
Security Insurance Company ("Meridian Citizens Security"), formerly
known as Citizens Fund Insurance Company and Insurance Company of Ohio ("ICO").
Meridian Citizens Security and ICO, along with their holding company,
Citizens Security Group, Inc. ("CSGI"), were purchased by Meridian
Security on July 31, 1996. During the first quarter of 1997, the
Company dissolved CSGI. The assets and liabilities of CSGI were
merged into Meridian Security. The Company also owns a small service
support company, Meridian Service Corporation, whose results of
operations are insignificant to the total operations of the Company.
Approximately 47.8 percent of the Company's outstanding common shares
are owned by Meridian Mutual Insurance Company ("Meridian Mutual"), a
mutual property and casualty insurance company headquartered in
Indianapolis, Indiana. Since August 1, 1996, Meridian Security,
Meridian Citizens Security, ICO, Meridian Mutual and Meridian Citizens
Mutual Insurance Company ("Meridian Citizens Mutual"), formerly known
as Citizens Security Mutual Insurance Company, the former majority
shareholder of CSGI, have been parties to a reinsurance pooling
agreement ("pooling agreement") under which business written is shared
by the companies on the basis of their percentage participation
defined in the pooling agreement. Prior to August 1, 1996, Meridian
Security and Meridian Mutual were the only participants in this
pooling arrangement. Effective July 1, 1998, the pooling arrangement
was amended to include business solicited through direct response
marketing as well as the non-standard automobile product introduced
during 1998, effectively pooling all business written by the insurance
companies.
Collectively, the insurance companies ("Meridian") participating in
this reinsurance pooling arrangement write 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 1,370
independent insurance agencies in the states of Illinois, Indiana,
Iowa, Kentucky, Michigan, Minnesota, Missouri, North Dakota, Ohio,
Pennsylvania, South Dakota, Tennessee, Virginia, Washington and
Wisconsin.
Relationships with Meridian Mutual and Meridian Citizens Mutual
All of the Company's corporate officers are officers of Meridian
Mutual and six of the nine members that constitute the Company's Board
of Directors are also directors of Meridian Mutual. All of the
directors and officers of Meridian Citizens Mutual are corporate
officers of the Company. Effective January 1, 1997, the Company
became the employer for all of the employees of Meridian Mutual and
Meridian Citizens Mutual and the related employee benefit plans were
merged into the Company's plans. Prior to January 1, the Company had
no employees and was dependent upon Meridian Mutual and Meridian
Citizens Mutual for the sale and underwriting of insurance, the
servicing of policyholder claims and all other aspects of the
Company's operations. Underwriting expenses are shared under the
pooling agreement between each entity in accordance with the
participation percentages of the parties. Other expenses which can be
directly identified with Meridian Mutual, Meridian Citizens Mutual or
the Company are paid by the company to which the expense is
attributable. All other operating expenses relating to the business of
each 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 currently covers all of the property and
casualty insurance written by Meridian Mutual, Meridian Citizens
Mutual, Meridian Security, Meridian Citizens Security, and ICO. Under
the pooling agreement, premiums, losses, loss adjustment expenses and
other underwriting and administrative expenses of each company are
shared in accordance with the participation percentages established
under the pooling agreement. Since August 1, 1996, the participation
percentages of the Company's insurance subsidiaries totaled 74
percent. The participation rates were determined with reference to the
relative historical net written premiums of the companies. Therefore,
each company's relative share of underwriting revenues, losses, and
expenses was not significantly altered as an immediate result of the
CSGI acquisition. Prior to August 1, Meridian Mutual and Meridian
Security were the only participants in the pooling agreement, under
which Meridian Security had assumed 74 percent of the combined
underwriting income and expenses since May 1, 1993.
The Boards of Directors of the Company, Meridian Mutual and Meridian
Citizens Mutual have delegated to their respective Audit Committees
the responsibility of monitoring the relationships between each of the
participants 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 each company any decision to change the
participation percentages. Future events that could affect the
participation percentages among the parties include the receipt by
Meridian Mutual of dividends on the common shares it owns of the
Company, changes in the capital structure or asset values of Meridian
Mutual, Meridian Security, Meridian Citizens Mutual, Meridian Citizens
Security, or ICO, different effective rates of income taxation, or
other factors which disproportionately affect the surplus of any of
the participants.
The Company, Meridian Mutual and Meridian Citizens Mutual have
conflicting interests with respect to the establishment of the
respective ratios of each company under the pooling agreement, and
conflicts may arise between the Company, Meridian Mutual and Meridian
Citizens 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 largely
dependent upon the business and operations of Meridian Mutual and
Meridian Citizens Mutual. 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
and/or Meridian Citizens 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 and Meridian Citizens Mutual also owe fiduciary duties
to the policyholders of Meridian Mutual and Meridian Citizens 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 all 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, Meridian Citizens Security, ICO or Meridian Citizens Mutual
and Meridian Mutual. The pooling agreement may be amended or
terminated without the necessity of a vote by the shareholders of the
Company or the policyholders of any of the parties. In the event of a
termination of the pooling agreement, the terminating party or parties
would transfer back to Meridian Mutual the liabilities ceded to it by
Meridian Mutual and Meridian Mutual would transfer back to the
terminating party the liabilities ceded to it by the terminating
party, and each party would receive assets from the other in an amount
equal to the amount of the policy liabilities received. If the
pooling agreement had been terminated at December 31, 1998,
approximately 12% of the assets and liabilities subject to the
pooling agreement would have been transferred to the Company's
insurance subsidiaries. The Company would continue to own all of the
outstanding common shares of Meridian Security, Meridian Citizens
Security and ICO. The Company would maintain the employee force but
would have reduced sales operations through a smaller independent
agency force.
Regulatory approvals of the states of domicile are 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 the
participating companies and not for the protection of the Company's
shareholders. The Company intends that its insurance subsidiaries
will continue their 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
group rating of "A" (excellent) by A. M. Best Company, Inc. ("Best").
Subsequent to the July 31, 1996 acquisition, the Meridian group rating
of "A" was also given to Meridian Citizens Security, ICO and Meridian
Citizens Mutual. Best is an independent company which rates insurance
companies on the basis of their opinion as to 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
As a result of the Citizens Security Insurance Group acquisition in
1996, the Company's operating territory was expanded into four
additional states (Minnesota, Missouri, South Dakota, and North
Dakota) and the premium base was enlarged in the states of Iowa, Ohio
and Wisconsin. Meridian has also expanded organically into additional
states in recent years. Additional state expansion, including
Arizona, Georgia, Kansas and Maryland is planned for 1999. This
geographic expansion enables the Company to spread its risk across
a larger region. The Company has achieved certain economies of scale
by consolidating functions within its operations. During 1998, the
Meridian Citizens information systems, as well as two Meridian Mutual
regional claim offices, were consolidated into the Indianapolis
operation. Further operational consolidations may be considered over
time.
Underwriting
The underwriting functions are separated into personal, commercial and
farm lines of business. The Company's underwriting personnel are
responsible for establishing risk-selection guidelines for agents and
for the underwriting and monitoring of policy issuance in order to
insure adherence to established guidelines. The underwriting
departments also determine the product pricing and are responsible for
the development of new products and enhancements. The underwriting
personnel work closely with sales representatives and consult
regularly with agents to assess current market conditions.
In establishing prices, underwriting personnel analyze studies of
statistical and actuarial data concerning the impact of price changes
in the markets served and consider data compiled by industry
organizations. This allows for a more accurate assessment of the
anticipated costs of risks underwritten.
Over the last several years, the Company has continued efforts to
reduce the loss ratio by implementing underwriting programs related to
proper risk selection. The Company also continues to monitor rate
adequacy and agency profitability, taking action where appropriate.
The Company's 1998 statutory combined ratio of 102.9 percent was a 4.2
percentage point improvement from the 107.1 combined ratio reported in
1997. The improvement was achieved despite the record level of
catastrophic weather-related claims incurred in 1998 of approximately
$14.7 million, more than double the $7.3 million reported in 1997.
The Company continues to focus on reducing per-unit costs and other
expenses in order to improve its loss adjustment and underwriting
expense ratios through increased automation and expense consolidation.
The 1997 installation of the automated personal lines underwriting
system now enables the majority of applications to be processed by
computers via pre-set standards. Human intervention is only necessary
when an application falls outside of specified parameters. This
allows the Company to process a larger volume of business without
proportionally expanding the size of the underwriting staff, thereby
reducing per-unit costs. The Company currently issues most personal
automobile and homeowners policies via the automated underwriting
system.
Products and Marketing-Meridian
Meridian writes a broad line of property and casualty insurance
including personal, non-standard, and commercial automobile;
homeowners, farmowners and commercial multi-peril; and workers'
compensation. Meridian recently began to offer personal automobile
products through direct response marketing in the states of Washington
and Virginia. Meridian markets most of its insurance through
independent insurance agents. 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.
The Meridian agency network numbers approximately 1,370 independent
insurance agencies spread throughout 15 states. Meridian's
independent agencies are primarily small to medium-sized firms with no
agency producing more than 2 percent of the total written premium.
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 will be
rehabilitated or 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. Agencies also
collect/remit premiums and submit business subject to Meridian's
underwriting guidelines. 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. Approximately 80 percent of Meridian's net written
premium is derived from company-billed business. Meridian also offers
an agency profit-sharing agreement under which agencies attaining
designated premium volume and profitability requirements receive a
bonus.
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, offering broad coverages and
product enhancements, and relying on automation to improve efficiency
will increase penetration of existing markets.
Meridian is a leader in the area of agency interface automation.
Additionally, the company has an automated personal lines underwriting
system which processes a majority of personal lines new business.
Lower operating costs and strict adherence to underwriting guidelines
will allow Meridian to be competitive and grow in the personal lines
marketplace. By emphasizing and targeting select lines of business,
Meridian believes moderate growth in personal lines business is
achievable without significantly increasing risk exposure.
During 1998, Meridian launched a growth initiative by entering into a
marketing and sales arrangement with GROUPadvantage. This
arrangement makes Meridian's personal lines products available through
franchised indepedent agencies to Sam's Club members in certain
states. (GROUPadvantage is a registered service mark of Consumer
Insurance Services of America "CISA" and is used under license from
CISA.) During the fourth quarter, Meridian began marketing personal
lines products to members of Sam's Clubs in Michigan and Illinois,
with the expectation that several additional states will be added in
1999.
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 mid-sized accounts in the
$15,000 to $50,000 range of annual premium volume. Meridian also
writes commercial business through association programs. Over 35
associations have endorsed Meridian for their insurance program.
Association business is desired in agricultural, veterinary,
optometry, and funeral home associations, as well as four other
classes of business.
Meridian's farm strategy emphasizes increased penetration into
existing markets, as well as expanding its farm products
geographically into Iowa, Minnesota and Wisconsin. Meridian targets
medium to large farms which meet the Company's underwriting
guidelines. Management believes Meridian enjoys a competitive
advantage in the farmowners market because of its years of experience,
regional focus and 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 and loss
adjustment expense ("LAE") 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,
1998 1997 1996 1995 1994
(Dollars in thousands)
Net Premiums Written
Personal lines:
Automobile $ 81,219 $ 78,270 $ 68,219 $ 59,444 $ 54,325
Homeowners 24,260 28,051 21,964 19,526 17,080
Other 2,544 2,901 4,819 2,178 1,887
Total personal lines 108,023 109,222 95,002 81,148 73,292
Farmowners 10,961 10,826 9,417 8,775 7,892
Commercial lines:
Automobile 17,514 18,229 14,343 13,107 11,740
Workers' compensation 22,326 23,901 23,380 22,438 21,587
Commercial multi-peril 24,934 27,766 23,453 19,509 19,110
Other 4,313 4,575 3,600 3,764 2,525
Total commercial lines 69,087 74,471 64,776 58,819 54,961
Total premium written $188,071 $194,519 $169,195 $148,742 $136,145
Net Underwriting Loss $ (5,099) $(13,726) $(13,868) $ (1,610) $ (2,751)
Loss and Loss Adjustment Expense Ratio
Personal lines:
Automobile 69.3% 78.8% 75.0% 75.0% 69.2%
Homeowners 101.7 104.1 110.7 81.2 82.9
Other 43.2 60.9 63.0 34.0 56.0
Total personal lines 76.3% 84.5% 83.2% 75.5% 72.2%
Farmowners 73.4% 59.4% 95.0% 68.6% 62.7%
Commercial lines:
Automobile 84.0% 86.1% 77.5% 89.1% 80.0%
Workers' compensation 45.4 52.8 54.2 58.6 62.7
Commercial multi-peril 72.6 75.0 85.5 45.8 70.3
Other 38.1 46.1 36.9 47.1 27.4
Total commercial lines 64.7% 68.3% 68.7% 60.5% 67.5%
Total loss & LAE ratio 71.8% 76.8% 78.0% 69.2% 69.8%
Expense Ratio 31.1% 30.3% 30.0% 31.0% 32.0%
Combined Ratio 102.9% 107.1% 108.0% 100.2% 101.8%
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 the legal division.
During the fourth quarter of 1998, regional claim operations in
Louisville, Kentucky and East Lansing, Michigan were closed. All
claim services for Meridian are now handled through the claim service
centers in Indianapolis, Indiana. 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.
The Company's 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
$100,000 or more are reviewed by additional levels of claims divisions
management, and all claims in excess of $200,000 must be approved by
the claim division director. If litigation is involved, the legal
division director reviews all claims in excess of $100,000. A claim
review committee provides for the periodic evaluation of certain
claims, including those involving special circumstances, to enhance
the investigation and decision-making process.
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. Two principal methods are followed in establishing reserves.
For coverages which involve a large volume of claims for 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 periodically, based on claims experience.
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 is often 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 statistical models based
on historical experience. Reserves established pursuant to the
statistical models also are designed to correct historical
deficiencies or redundancies in the reserves established on an average
or a case-by-case basis. Meridian consults periodically with an
independent actuarial firm concerning the adequacy of reserves.
Management 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. The net reserves acquired through acquisition
represent the loss and loss adjustment expense reserves, net of
reinsurance, for Meridian Citizens Security and ICO at the date of
acquisition.
Year Ended December 31,
1998 1997 1996
(In thousands)
Balance at beginning of period $ 169,801 $ 161,309 $ 123,577
Less reinsurance recoverables 48,872 41,819 31,204
Net balance at beginning of period 120,929 119,490 92,373
Net reserves acquired through --- --- 20,685
acquisition
Incurred related to:
Current year 145,328 165,577 137,817
Prior years (8,708) (16,358) (7,716)
Total incurred 136,620 149,219 130,101
Paid related to:
Current year 93,790 97,448 93,199
Prior years 51,308 50,332 30,470
Total paid 145,098 147,780 123,669
Net balance at end of period 112,451 120,929 119,490
Plus reinsurance recoverables 41,802 48,872 41,819
Balance at end of period $ 154,253 $ 169,801 $ 161,309
The reconciliations for 1998 and 1997 show approximately $8.7 million
and $16.4 million reductions, respectively in previously established
loss reserves. Favorable loss developments resulting from decreases
in the frequency and severity of claims in prior accident years for
the Company's personal automobile liability, workers' compensation
lines and commercial multiple-peril lines of business were the primary
factors in the reductions.
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 top line of the table shows the
estimated reserves for losses and loss adjustment expenses, net of
reinsurance recoveries, 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 1998 but incurred in 1991 is included in the
cumulative redundancy amount for each of the years from 1991 through
1997. The table does not present accident or policy-year development
data. The Company's share of pooled losses increased from 62 percent
as of April 1, 1987, to the current level of 74 percent on May 1,
1993. In 1996, the Company acquired approximately $20.7 million in
loss and loss adjustment expense reserves from the acquisition of
Meridian Citizens Security and ICO. Additionally, payments received
on the acquired reserves since the acquisition were spread out over
the ten years based on the accident year in which the original
acquired reserve was established. 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>
Year Ended December 31,
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net reserves for losses
& loss adjustment
expenses $112,451 $120,929 $119,490 $92,373 $91,940 $89,630 $72,006 $68,102 $64,742 $62,281 $53,569
Cumulative paid as
a percent of year-
end reserves:
One year later 42.4% 42.1% 40.7% 39.0% 40.7% 29.0% 42.4% 46.6% 46.1% 47.2%
Two years later 61.1% 65.4% 59.0% 59.0% 51.7% 55.0% 68.5% 68.9% 68.1%
Three years later 78.1% 70.9% 68.9% 62.6% 67.5% 74.7% 81.3% 81.3%
Four years later 76.1% 74.6% 67.8% 74.9% 81.6% 84.1% 87.4%
Five years later 77.5% 71.3% 77.4% 85.7% 88.0% 88.6%
Six years later 73.7% 79.9% 87.5% 90.1% 90.7%
Seven years later 81.4% 88.9% 91.8% 92.3%
Eight years later 89.7% 93.0% 93.5%
Nine years later 93.6% 94.7%
Ten years later 95.1%
Reserves re-estimated
as a percent of
year-end reserves:
One year later 93.3% 91.1% 96.6% 92.9% 92.3% 93.6% 97.5% 103.2% 99.7% 102.3%
Two years later 90.8% 103.4% 94.9% 89.0% 84.6% 93.0% 99.0% 100.7% 100.6%
Three years later 101.9% 93.1% 89.2% 83.3% 89.0% 97.9% 99.2% 100.4%
Four years later 91.1% 89.2% 83.6% 89.3% 95.3% 99.3% 99.7%
Five years later 87.6% 83.8% 89.2% 96.3% 97.9% 100.3%
Six years later 83.0% 89.7% 95.4% 98.4% 99.5%
Seven years later 89.3% 96.5% 97.9% 100.0%
Eight years later 96.5% 99.5% 100.2%
Nine years later 99.9% 101.9%
Ten years later 101.9%
Redundancy (deficiency) 6.7% 9.2% -1.9% 8.9% 12.4% 17.0% 10.7% 3.5% 0.1% -1.9%
</TABLE>
Reinsurance
Meridian follows the customary industry practice of limiting 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 Meridian's principal
reinsurer providing property and liability excess of loss coverage.
Meridian uses a large number of reinsurers for property's 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 Company management.
The reinsurance purchased 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 which require specific agreement of the
reinsurer as to limits of coverage provided ("facultative
reinsurance"). Meridian Mutual, Meridian Security, Meridian Citizens
Mutual, Meridian Citizens Security, and ICO were each named as insured
parties under the treaty reinsurance contracts, and the coverages
under those contracts applied to all risks written by each of the
companies. Treaty reinsurance coverage was purchased to cover
property and liability exposures in excess of $200,000 and $350,000,
respectively, up to the limits set forth in the individual treaty. In
1997, the retention was $200,000 for property and $ 250,000 for
liability. Facultative reinsurance was purchased to cover exposures
on both property and liability coverages from losses over and above
the limits provided by the treaty reinsurance.
Catastrophe reinsurance provided coverage for multiple losses caused
by a single catastrophic event such as a windstorm or earthquake. The
combined retention under this contract was $6,000,000 plus five
percent of losses up to contractual limits for windstorms of
$65,000,000 and for earthquakes of $115,000,000. Two other
catastrophe reinsurance treaties provided coverage for 95 percent of
losses sustained from multiple catastrophic events which aggregated
beyond specified retentions and per event deductibles, up to the
contractual limits.
As of December 31, 1998, the Company had approximately $41.8 million
of reinsurance recoverable on unpaid losses. Of this amount,
approximately $22.9 million was recoverable from Employers Reinsurance
Corporation and approximately $12.9 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 the reinsurance contracts are negotiated annually. If the
relationships were to be terminated with the current reinsurers,
management believes that, under current circumstances, relationships
with other reinsurers could be established without a material adverse
effect on its business.
Meridian assumes a limited amount of reinsurance from third parties.
This business accounted for less than one percent of net premiums
written in 1998.
Investments
Investments of the Company are principally held by Meridian Security,
Meridian Citizens Security and ICO, which are subject to regulation by
their respective departments 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 six directors
of the Company, four 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, 1998 and 1997 were made up
entirely of securities classified as available for sale, which are
carried on the Company's balance sheet at fair market value. The
Company invests in both taxable and tax-exempt securities as part of
its investment strategy. This strategy considers, among other
factors, the impact of the alternative minimum tax. Tax-exempt bonds,
on a carrying value basis, made up approximately 17.9 percent and 29.5
percent of the total fixed maturity portfolio at December 31, 1998 and
1997, respectively. On a carrying value basis, sinking fund preferred
stocks made up approximately 9.2 percent and 14.2 percent of the total
fixed maturity portfolio of the Company at December 31, 1998 and 1997,
respectively.
The Company also holds investments in mortgage-backed pass-through
securities and collateralized mortgage obligations ("CMO") which had a
carrying value of $44.9 million and $43.4 million at December 31, 1998
and 1997, respectively. 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 number of early calls and prepayments, the
estimated weighted average duration of the fixed maturity portfolio is
approximately 4.4 years.
The Company, as approved by the Finance and Investment Committee, has
increased its equity security holdings over the past four years.
Equity securities primarily consist of common stocks and had a fair
market value of $64.0 million and $54.4 million at December 31, 1998
and 1997, respectively. Equity securities accounted for 20.4 percent
and 17.6 percent of the total investment portfolio at December 31,
1998 and 1997, respectively.
Regulation
Numerous aspects of the business and operations of the Company's
insurance subsidiaries and affiliates 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, Kansas, Kentucky, Michigan,
Minnesota, Ohio, Pennsylvania, Tennessee, Virginia, Washington, and
Wisconsin. Meridian Citizens Security and Meridian Citizens Mutual
hold licenses to write in Iowa, Minnesota, North Dakota, Ohio, South
Dakota, and Wisconsin. Meridian Citizens Mutual is also licensed to
write insurance in Illinois, Indiana, Kentucky, Michigan, Missouri,
Pennsylvania, and Tennessee. ICO is admitted as an insurer in the
state of Ohio. Under insolvency or guaranty laws in the states in
which the above companies operate, insurers doing business in those
states can be assessed up to prescribed limits for losses incurred by
policyholders of insolvent insurance companies. 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
specified percentage of the annual direct premiums written by the
company in the state in question with respect to the affected lines of
business. Additionally, the companies are required to participate in
various mandatory pools or underwriting associations.
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 14 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 state regulatory authorities in the insurance company's
state of domicile. 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 state regulatory authorities.
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.
Price competition has been particularly intense during recent years
and is expected to continue for the foreseeable future. Meridian
Mutual, Meridian Security, Meridian Citizens Mutual, Meridian Citizens
Security, and ICO all compete 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, Meridian Security,
Meridian Citizens Mutual, Meridian Citizens Security, and ICO 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 the
Company, Meridian Mutual and Meridian Citizens Mutual 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.
Employees
On January 1, 1997, the Company became the employer of all employees
that were formerly employed by Meridian Mutual and Meridian Citizens
Mutual. This transfer allows for more freedom in compensation
planning, such as flexibility in the use of the Company's common stock
as compensation, and improves internal efficiencies by combining
employee benefit plans. Prior to the change, the Company had no
employees and relied upon Meridian Mutual and Meridian Citizens Mutual
to provide all management and administrative services required by the
Company. The Company employs approximately 600 people and believes
that its relationship with its employees is satisfactory.
Audit Practices
The Board of Directors has an Audit Committee composed of four
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 the Company's
internal audit function.
The Company retains the firm of PricewaterhouseCoopers LLP 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 Committee.
ITEM 2: PROPERTIES
The headquarters building of the Company 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. Expansion efforts completed in 1995, have allowed the
Company and Meridian Mutual to consolidate the two Indianapolis
satellite offices, two regional claim offices, and the information
resources function for Meridian Citizens Mutual previously in Red
Wing, Minnesota into the home office facility.
The principal office space for the operations of Meridian Citizens
Security and Meridian Citizens Mutual is located in Red Wing,
Minnesota. The space consists of approximately 28,000 square feet
with the lease expiring on December 31, 2002. Approximately 10,325
feet of this space is subleased to the Red Wing Hotel Corporation.
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 March 5, 1999, approximately
47.8 percent of the common stock was owned by Meridian Mutual and the
balance was spread among approximately 240 common shareholders of
record, including many brokers holding shares for their individual
clients. The number of individual shareholders on the same date was
approximately 1,150. The number of Common Shares outstanding on March
5, 1999, totaled 7,259,661. Information relating to the common stock
is available through the NASDAQ Stock Market System and the following
table sets forth the high, low and closing sale prices of the common
stock for each quarter of 1998 and 1997.
1998 1997
Quarter Ended High Low Close High Low Close
March 31 $17.95 $15.00 $17.04 $14.66 $12.27 $12.73
June 30 $18.52 $16.25 $17.39 $14.21 $12.05 $13.86
September 30 $20.00 $16.25 $16.93 $17.50 $13.53 $16.48
December 31 $20.25 $14.54 $20.25 $17.05 $14.21 $15.23
Dividend Policy
Since the first quarter of 1996, and prior to the December 1998 ten
percent stock dividend, the Company paid a quarterly cash
dividend of $0.08 per common share. In 1995, the Company paid
quarterly dividends of $0.06 per share. Subsequent to the stock dividend,
the cash dividend rate remained at $0.08 per common share, effectively
increasing the dividend by ten percent. 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 14 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,
1998 1997 1996 1995 1994
(In thousands, except per share data and ratios)
Operating data:
Premiums earned $189,188 $194,587 $167,304 $143,866 $135,002
Net investment income 17,246 16,372 14,908 14,564 13,996
Realized investment gains 7,342 4,477 3,794 1,538 286
Other income (expense) (59) 1,042 563 (146) 54
Total revenues 213,717 216,478 186,569 159,822 149,338
Losses and loss
adjustment expenses 136,620 149,219 130,101 99,124 93,971
General operating expenses 16,686 16,505 13,767 14,156 14,527
Interest expense 672 732 308 --- ---
Amortization expenses 42,918 42,894 36,443 30,820 29,304
Total expenses 196,896 209,350 180,619 144,100 137,802
Income before taxes and
change in accounting
method 16,821 7,128 5,950 15,722 11,536
Income taxes 4,670 207 150 4,105 2,415
Net income $ 12,151 $ 6,921 $ 5,800 $ 11,617 $ 9,121
Weighted average shares
outstanding* 7,292 7,352 7,457 7,447 7,414
Basic earnings per share* $ 1.67 $ 0.94 $ 0.78 $ 1.56 $ 1.23
Diluted earnings per share*$ 1.65 $ 0.93 $ 0.77 $ 1.56 $ 1.23
Dividends declared per
share* $ 0.30 $ 0.29 $ 0.29 $ 0.26 $ 0.22
Underwriting ratios (statutory basis):
Loss and loss adjustment
expense ratio 71.8% 76.8% 78.0% 69.2% 69.8%
Expense ratio 31.1 30.3 30.0 31.0 32.0
Combined ratio 102.9% 107.1% 108.0% 100.2% 101.8%
Balance sheet data at end of period:
Total investments $313,822 $308,427 $281,689 $254,694 $219,461
Total assets 408,858 413,586 397,798 322,588 291,406
Total liabilities 266,889 281,692 275,624 204,346 197,154
Shareholders' equity 141,969 131,894 122,174 118,243 94,252
Shareholders' equity
per share* $ 19.60 $ 18.09 $ 16.38 $ 15.88 $ 12.71
* Retroactively restated to reflect the 10 percent stock dividend declared
in December 1998.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview:
Results of operations improved significantly during 1998 despite a record
level of weather-related catastrophe losses. This improvement results in
large part from actions taken in 1997 and 1998 to improve underwriting
profitability. Such efforts included underwriting programs related to
proper risk selection, certain premium rate changes, and various agency
management actions. These actions were necessary, even though in the short-
term they negatively affected growth in premium revenue. Given the
improved underwriting profitability of the Company's core business, the
focus is now on a number of growth initiatives including state expansion,
the continued roll-out of the non-standard auto product and affinity group
marketing.
During recent years, the Company has aggressively expanded its operations
into new states. At the end of 1994, Meridian operated in seven states,
entirely in the Midwest. The Company has significantly increased its
geographic diversification and presently operates in 15 states. Additional
state expansion, including Arizona, Georgia, Kansas and Maryland, is
planned for 1999.
During 1998, Meridian introduced its new non-standard automobile coverage.
Non-standard automobile insurance covers drivers with no prior insurance or
with driving records that do not qualify them for standard premium rates.
Non-standard policies are generally sold at higher premiums to offset
increased risk of loss. The non-standard auto policies are currently
marketed through the Company's independent agency force, key non-standard
specialty agents and direct sales.
Marketing products through independent agents has always been the Company's
primary source of distribution. The Company continues to build these
relationships, increasing the independent agency count from 1,300 to 1,370
during 1998. The Company's growth strategy requires adding additional
distribution methods. Meridian recently established an affinity marketing
relationship with a bank in Virginia and is actively seeking affiliations
with additional banks and other affinity partners, through which it will
use direct response techniques.
Participation in a marketing and sales partnership with GROUPadvantage
offers promising opportunities. This sales arrangement makes Meridian's
personal lines products available through franchised independent agencies
to Sam's Club members in certain states. Specifically, in October we began
marketing our products to Sam' Club members in Michigan. Shortly
thereafter, Illinois was added and we expect to make our products available
to Sam's Club members in several additional states during 1999.
(GROUPadvantage is a registered service mark of Consumer Insurance
Services of America (CISA) and is used under license from CISA.)
In addition to growth initiatives, the Company is working to increase
profitability through consistent exercise of underwriting discipline, sound
investment management, enhanced customer service and cost control.
Enhanced use of automated tools, such as the personal lines automated
underwriting system, is expected to add efficiency.
Operational consolidation is also expected to result in cost savings.
During the 1998 fourth quarter, the Company consolidated its two regional
claim centers into its Indianapolis claims operation. Additionally, the
information systems of the Meridian Citizens companies (formerly Citizens
Security Group companies) were centralized into the Company's Indianapolis
location. It is expected that the consolidation of the regional claims
offices and the Meridian Citizens information systems into the Company's
headquarters will lower operating expenses, while maintaining a high level
of service to agents and policyholders. The Company estimates annualized
cost savings of at least $1,000,000, or $0.09 per share after tax, to
result from these consolidation efforts.
Year 2000 disclosures
As we near the end of the century, many information technology products
will not recognize the year 2000. As a result, businesses are at risk for
possible calculation errors or system failures which could cause a
disruption in their operations. This is known as the Year 2000 ("Y2K")
issue. In 1995, Meridian began the initial planning phase to ensure that
all systems were Y2K compliant. As a result of this planning, it was
determined that Meridian would utilize internal resources to complete the
necessary remediation. This would allow Meridian to contain costs and
maintain control as well as provide consistency in system applications. As
a result of this decision, a team of programmers was hired under the
direction of experienced internal management to address the issue. It was
also determined that the Meridian Citizens project team would operate
independently utilizing contracted personnel to complete the project.
Such personnel, our contracted outside automation services providers, were
under contract to complete and test the Y2K programming efforts. This
process was supervised by internal Meridian staff to maintain consistency.
The next stage of the process was to identify those systems and programs
that contained date sensitive fields throughout the operating systems. The
Meridian approach taken to address the issue was field expansion. This
expansion would allow the date fields to be expanded and allow programs to
distinguish dates based upon an eight digit code as opposed to a six digit
code. The Meridian Citizens approach implemented by the outside
automation services provider, had to take into account the various
operating platforms used to process data. It was decided that a
combination of methods would be the best approach to solving the Y2K
dilemma. A combination of field expansion and "windowing" was utilized to
address the issue. The "windowing" approach utilizes a two digit year
currently in the date fields. For example, any result over 50 signifies
the 20th century and any under fifty, the 21st century.
Three years into the project, Meridian has made significant progress.
Prioritizing the effort was done by reviewing those systems and programs
which would require the effective date change prior to January 1, 2000 such
as policy processing systems which required renewal processing as early as
November of 1998. Extensive reprogramming now allows these internal policy
processing systems to recognize the difference between the 20th and the
21st century. Meridians' remediated policy processing systems have been in
production and compliant since November 1997. In July 1998, Meridian also
completed code remediation for the management reporting systems and front-
end client server systems. The Meridian Citizens companies which again
operate on a different platform, achieved Y2K compliance in August 1998 and
have been in production since that time. 1998 mainframe impact, front-end
client server, and critical network programming have also been completed.
Critical operating systems for the Company have been tested by our Quality
of Assurance Unit and were found to be compliant. There are a few internal
non-critical programming efforts which are still in the process of
remediation. The majority of these are expected to be completed and tested
by the end of 1998. A few are targeted for completion during the first
and second quarters of 1999. It is anticipated that these systems will be
remediated, tested, and moved into production by July 1999. As the Company
has already processed policies encompassing Y2K dates, the Company does not
feel at risk for Y2K difficulties and as such no contingency plans are
currently in place for the operating systems.
Meridian anticipates that the costs associated with Y2K remediation will
approximate $1.3 million upon completion. Such incremental costs have been
estimated at approximately $200,000 in 1996 and approximately $400,000 per
year for 1997-1998. It is also anticipated that approximately $300,000
will be spent in 1999. Approximately 50 percent of the total costs relate
to personnel such as custom programmers. The remainder relates to costs
for replacing certain software applications and equipment. Such costs have
been funded through operating revenues and represent less than 10 percent
of the information systems annual budgets. Costs associated with the
Meridian Citizens remediation were included under the automation
programming charges incurred by the Company on a monthly basis and were
therefore not distinguishable from normal programming fees. Due to the
complexity and impact of the Y2K project, the Company engaged independent
consultants to review the planning and remediation methods utilized within
the project for all subsidiaries. The written report received from the
independent consultants contained comments and suggestions which were
implemented and incorporated into the final Y2K action plans. At this
time the Company's policy processing and management reporting systems have
been corrected, thoroughly tested by our Quality Assurance team and moved
into full production. Actual policies have been processed which are
affected by the Y2K issue. Throughout 1999, the Company will double check
the systems to verify that the infrastructure will respond correctly to the
actual century date change. The Company has also addressed the facilities
Y2K issues by evaluating HVAC, security systems, elevators, the automobile
fleet, etc., to ascertain compliance.
As part of the readiness program, the Company also recognized the impact
that significant outside vendors, agents, and other business associates
could have on the ability to transact business. As a result, the Company
has reviewed vendor associated software and hardware products utilized
within the organization to determine the Y2K effort that would be necessary
to achieve readiness. The Company also identified specific hardware and
software that needed to be replaced as a result of the Y2K issue. It is
anticipated that the replacement process will be completed in early 1999.
Most are currently in compliance, scheduled for upgrade, or in the process
of being eliminated. In addition, the Company also established contact
with agents and certain vendors to highlight this issue. This contact was
established with the purpose of reasonably ascertaining the Y2K impact.
Where possible, the Company has reviewed plans received by outside
providers for their Y2K compliance effort. In some cases, these entities
have a lower level of readiness and preparation and as a result are not
able to provide this type of information. Should an agent be non-compliant
for Y2K, the Company's contingency plan is the current ability to process
or underwrite policies on a manual basis. While this may have a direct
impact on the timeliness of policy processing, the operating systems do
have the ability to process such data. Third party vendors which have
critical impact on the ability to process are currently anticipated to be
Y2K compliant. However, there can be no guarantee that the systems of
agents or other third parties will be converted on a timely basis, or that
a widespread failure to convert by others would not adversely affect the
Company. It is not anticipated that non-critical third party vendors who
fail to be Y2K compliant will impact the ability to complete necessary work
processes. No contingency plan is in place for these non-critical business
vendors at this time.
The Company does not issue insurance policies covering risks related to the
Year 2000 issue. However, there can be no certainty regarding future
judicial or legislative interpretations of coverage.
While the Company has utilized significant resources to secure its critical
operating systems, there are no contingency plans for things which effect
the general public such as electrical power, water, and etc. Failure for
these providers to perform Y2K compliance could be detrimental to company
operations.
No significant information technology projects having a material effect on
the Company's financial position or results of operations have been
deferred as a direct result of Year 2000 efforts.
Statements in this 10-K document that are not strictly historical may
be "forward looking" statements which involve risks and uncertainties.
Risk factors include the ability of the Company, suppliers, and agency
representatives to handle the Y2K computer issue; variation in
catastrophe losses due to changes in weather patterns or other natural
causes; changes in insurance regulations or legislation that may affect
the Company; and economic conditions or market changes affecting
pricing or demand for insurance products or the ability to generate
investment income. Growth and profitability have been and may be
affected by these and other factors.
Results of Operations:
1998 Compared to 1997
Net income for 1998 grew 76 percent to $12.2 million, or $1.65 diluted
earnings per share, up from $6.9 million, or $0.93 per diluted share for
1997. This improvement was achieved in spite of more than double the
amount of weather-related catastrophe losses in 1998, compared with 1997.
Net catastrophe losses were approximately $14.7 million in 1998 versus
approximately $7.3 million for 1997. The Company's combined ratio improved
to 102.9 percent for 1998 from 107.1 percent in 1997. Realized investment
gains for 1998 increased to $7.3 million, or $0.65 per share after tax,
from $4.5 million, or $0.40 per share after tax, for 1997.
The Company's total revenues for 1998 decreased 1.3 percent to $213.7
million from $216.5 million in 1997. Premiums earned decreased 2.8 percent
to $189.2 million for 1998 in comparison to $194.6 million for the previous
year. Net written premiums for the Company's personal lines of business
decreased by approximately 1.0 percent. This was the combination of a 3.8
percent increase in personal automobile premiums and a 13.5 decrease in
written premium for the homeowners line of business. The personal
automobile growth was favorably affected by the introduction of the new non-
standard automobile product. Net written premiums for the farmowners line
of business increased approximately 1.0 percent. Commercial lines net
written premium decreased approximately 7.0 percent. Underwriting actions
were taken in 1997 and early 1998 to improve profitability, negatively
affecting premium revenue growth in the short-term. Additionally, intense
competition and a soft pricing environment continued to affect market
conditions in the Company's operating territory, particularly for
commercial lines of business.
Net investment income of approximately $17.2 million for 1998 increased 5.3
percent in comparison to $16.4 million for 1997. This increase was due in
part to a larger invested asset base for much of the year. The Company's
pre-tax net investment yield was enhanced by a reduction in the tax-
advantaged portfolio allocation and a reduced allocation to investment
expense. For the years ended December 31, 1998 and 1997, the Company
realized net investment gains of approximately $7.3 and $4.5 million,
respectively. The current year's realized gains resulted largely from the
sale of certain equity securities, as well as from certain municipal bond
sales motivated by tax planning strategies.
Loss and loss adjustment expenses decreased from the $149.2 million
reported at year-end 1997 to $136.6 million in 1998. The improvement was
achieved despite the high level of weather-related catastrophe losses which
hit the midwest. Many of the Company's operating states reported
significant weather-related damage. Most significantly, industry
statistics indicated Minnesota, the largest state of operation for the
Meridian Citizens companies, incurred more such losses in 1998 than in the
last 49 years combined. This caused the Meridian Citizens companies to
incur approximately half of the Company's consolidated catastrophe losses,
while generating less than 20 percent of the Company's premium volume. The
Company estimated weather-related losses to approximate $14.7 million in
1998 compared to $7.3 million in 1997. Despite the record level of
catastrophe weather-related claims, the statutory loss and loss adjustment
expense ratio improved for nearly all lines of business when compared to
1997. The personal lines loss ratio of 75.8 percent improved 7.6
percentage points from 1997. Personal automobile, the Company's largest
line of business, had a 1998 loss ratio of 69.2 percent, compared to 78.7
percent for 1997. The 1998 commercial lines loss ratio of 66.3 percent is
also an improvement over the 1997 result of 68.8 percent. Worker's
compensation continues to be very profitable for the Company reporting a
49.5 percent loss ratio in 1998 versus 52.5 percent for 1997. Much of the
improvement in the Company's core book of business is attributed to
underwriting actions implemented in late 1997 and early 1998. The Company
generally experienced favorable trends during 1998 in both the frequency
and severity of claims incurred.
General operating and amortization expenses of $59.6 million in 1998
slightly increased from the $59.4 million recorded during 1997. Relative
to earned premium volume, the Company's 1998 expense ratio increased to
31.5 percent compared to 30.5 percent for 1997. The reduction in premium
volume over which to spread fixed costs was a factor behind this increase,
as were costs to initiate new growth strategies. During the fourth quarter
of 1998, the Company consolidated two regional claims centers and the
Meridian Citizens information systems into the Company's Indianapolis
location. While expected to produce cost savings beginning in 1999,
incremental costs to implement these changes were estimated at
approximately $0.04 per share after tax in 1998.
For the year ended December 31, 1998, the Company recorded income tax
expense of $4.7 million compared to $0.2 million for the same 1997 period.
The higher level of pre-tax income and a reduction in the tax-advantaged
portfolio allocation to municipal bonds and sinking fund preferred stocks
were the primary factors in the increase.
1997 Compared to 1996
For the year ended December 31, 1997, the Company recorded net income
of $6.9 million, or $.94 basic earnings per common share ($.93 diluted
earnings per share). This compares to 1996 net income of $5.8
million, or $0.78 basic earnings per share ($0.77 diluted earnings per
share). Included in the 1997 results was an entire year of operations
from the 1996 acquisition of the Citizens Security companies, compared
to five months of Citizens Security operations for the prior period.
Earnings for both periods were negatively impacted by a large volume
of property damage claims associated with severe weather that occurred
throughout the Company's operating territory. Weather-related
catastrophe losses were estimated to be approximately $7.2 million, or
$0.65 per share, in 1997 and $10.6 million, or $.94 per share, in
1996. The Company's 1997 statutory combined ratio was 107.1 percent
versus 108.0 percent for 1996.
The Company's total revenues for 1997 increased 16.0 percent to $216.5
million from $186.6 million for 1996. Premiums earned increased 16.3
percent to $194.6 million for 1997 in comparison to $167.3 million for
the previous year. The acquisition of the Citizens Security Group
accounted for approximately $25.0 million of the increase. Aside from
the acquisition, net premiums earned from the Meridian book of
business increased approximately 3.3 percent, excluding its
participation in the National Workers' Compensation Pool ("NWCP").
Personal and farm lines of business were the primary contributors to
the increase with 6.1 percent growth, offset partially by a 1.7
percent decline in commercial lines. Commercial lines of business
continue to be affected by highly competitive market conditions in the
Company's operating territory. The earned premium volume in the
Company's workers' compensation line was reduced by an approximately
$2.6 million decline in assumed earned premiums from its 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
during 1997 experienced growth of 3.1 percent and 1.8 percent,
respectively, when compared to 1996 volume.
Net investment income for 1997 increased 9.8 percent to $16.4 million
in comparison to $14.9 million for 1996. This was attributed to a
larger asset base resulting primarily from the acquisition of Citizens
Security Group. The Company's pre-tax net investment yield for 1997
improved slightly to 6.0 percent from 5.9 percent one year ago. The
average yield of the Company's fixed maturity portfolio at December
31, 1997 was 6.7 percent compared to 6.8 percent at year end 1996.
During 1997, the Company realized net gains on the sale of investments
of $4.5 million, or approximately $0.44 per common share, versus $3.8
million, or $0.37 per share in 1996. Nearly all of the realized gains
recognized over these two years were generated from the sale of equity
securities and have an insignificant effect on future investment
yields.
Losses and loss adjustment expenses incurred of $149.2 million for
1997 were 14.7 percent higher than the previous year's $130.1 million.
Approximately $33.8 million of the 1997 incurred amount relates to the
operations of Citizens Security Group, versus approximately $9.1
million for the five months of operations in the 1996 total. The
statutory loss and loss adjustment expense ratio of the Citizens
Security companies for the 1997 period was 85.1 percent compared to
70.9 percent for the five months of operations in 1996. Deteriorations
in the Citizens Security homeowners, private passenger automobile and
commercial multi-peril lines of business were the primary factors in
the loss and loss adjustment expense increase. Partially offsetting
these increases were improved experience in the commercial automobile
and workers' compensation lines. Exclusive of Citizens Security's
operations, incurred losses and loss adjustment expenses for the
Meridian book of business reflected a 4.6 percent reduction from
approximately $121.0 million in 1996 to $115.4 million in 1997. The
Meridian lines of business for 1997 produced a statutory loss and loss
adjustment expense ratio of 74.7 percent, a 4.0 percentage point
improvement from 78.7 percent for 1996. Meridian's farmowners,
homeowners and commercial multi-peril lines of business were the major
contributors to the reduced loss and loss adjustment expense ratio,
due largely to a reduction in weather-related catastrophe losses. The
impact of such catastrophes on the Company's loss ratio in 1997 and
1996 was estimated to be 3.7 and 6.4 percentage points, respectively.
General operating and amortization expenses of $59.4 million for the
year ended December 31, 1997 increased 18.3 percent over the
comparable 1996 total of $50.2 million. Substantially contributing to
the increase was an additional seven months of operating expenses in
1997 related to the Citizens Security companies. Also contributing to
the increased expenses were higher costs related to the Company's
employee medical plan, and programming and other system costs
associated with Year 2000 compliance. Relative to net earned
premiums, the Company's expense ratio for 1997 was approximately 30.5
percent compared to 30.0 percent for 1996. The Company also incurred
approximately $732,000 of interest expense in 1997 on the bank loan
used to finance the Citizens Security Group acquisition.
For the year ended December 31, 1997, the Company recorded income tax
expense of $207,000 compared to $150,000 for 1996. The low effective
tax rate resulted primarily from the amount of tax-exempt investment
income in relation to pre-tax income.
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. During 1998, Meridian Security declared and paid
dividends to the Company of $5.0 million. In 1997 and 1996, dividends
paid to the Company were $5.0 million and $3.9 million, respectively.
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. The average duration of the
fixed maturity portfolio is approximately 4.4 years. Over the next
year, a relatively small portion of the Company's bond portfolio is
scheduled to mature. Given the current interest rate environment,
reinvestment of the matured proceeds is likely to be at somewhat lower
yields.
Approximately 77 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 19 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'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 carried at
market value. The Company at December 31, 1998 recorded unrealized
gains in the bond portfolio of approximately $4.8 million, net of
deferred income taxes. At year-end 1997, the Company recorded
unrealized gains on the bond portfolio of approximately $5.7 million,
net of deferred income taxes. The Company's equity security
portfolio, which accounts for approximately 20.4 percent of invested
assets, produced unrealized gains, net of deferred income taxes, of
approximately $10.2 million in 1998, compared to approximately $8.4
million in 1997. Net unrealized appreciation of investments added
$2.10 to the Company's $19.60 book value per share at December 31,
1998. Net unrealized appreciation added $1.97 per share to the $18.09
book value at December 31, 1997.
The Company does have exposure to market rates and prices. The
Company's primary market risk exposures are changes in price for
equity securities and changes in interest rates and credit ratings for
fixed maturity securities. The Company, with the Board of Directors,
administers and oversees investment risk through the Investment
Committee, which provides executive oversight of investment
activities. The Company has specific investment guidelines and
policies that define the overall framework used daily by investment
portfolio managers to limit the Company's exposure to market risk.
The Company does not own or currently utilize derivative financial
instruments for the purpose of hedging, enhancing the overall return
of its investment portfolio, or reducing the cost of its bank debt.
Meridian, through its outside professional portfolio managers, employs
traditional investment management tools and techniques to address the
yield and valuation exposures of its invested assets. The long term
fixed maturity investment portfolio is managed so as to limit various
risks inherent in the bond market. Credit risk is addressed through
adequate diversification and the purchase of investment grade
securities. Reinvestment rate risk is controlled through asset-
liability matching practices and by addressing call characteristics in
security selection. Market value risk is addressed through maturity
selection. The market value of the Company's long term fixed maturity
investment portfolio is sensitive to fluctuations in the level of
interest rates. The impact of interest rate movements on the long
term fixed maturity investment portfolio generally affects net
realized gains or losses when securities are sold. The Company
estimates that a 100 basis point increase in interest rates from
current levels would result in a possible decline in the $242.0
million market value of the long term fixed maturity investment
portfolio of approximately 4.0 percent, or $9.7 million. With regard
to its $64.0 million equity security portfolio, the Company does not
own nor engage in any type of option writing. A 10% decrease in the
U.S. equity market prices could result in a decrease of $6.4 million
in the market value of the Company's common equities. These possible
declines in values for the bond and stock portfolios would, net of
deferred income taxes, negatively affect the common shareholders'
equity at any point in time, but would not necessarily result in the
recognition of realized investment losses as long as operating cash
flow and the ongoing emergence of bond maturities continued to provide
sufficient funds to meet obligations to policyholders and claimants,
as well as debt service and cash dividend requirements at the holding
company level.
On May 6, 1997, the Company announced that its Board of Directors had
authorized the repurchase of up to 350,000 common shares, or
approximately five percent of the Company's outstanding common stock.
As of December 31, 1998, the Company had repurchased 212,800 shares,
or approximately 61 percent of the authorized total, at a cost of $3.3
million.
In July 1996, the Company completed the acquisition of Citizens
Security Group Inc. of Red Wing, Minnesota. The Company purchased all
of the outstanding shares of Citizens Security Group Inc. and its
wholly-owned property and casualty insurance subsidiaries, Meridian
Citizens Security Insurance Company and Insurance Company of Ohio, for
approximately $30.3 million in cash, including capitalized acquisition
costs, and became affiliated with Meridian Citizens Mutual Insurance
Company. Approximately 60 percent of the purchase price was generated
from the sale of a portion of the Company's investment portfolio. The
remaining $12 million was financed through bank debt and is being
amortized over seven years with a variable interest rate of LIBOR plus
50 basis points. 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 of approximately $14.5 million was
recorded as goodwill, which is being amortized on a straight-line
basis over a 25 year period.
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. The adjusted capital of the Company's insurance
subsidiaries is well above 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 available may partially offset
potentially higher claims and expenses.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS Page
Report of Independent Accountants 26
Financial Statements:
Consolidated Statement of Income 27
Consolidated Balance Sheet 28
Consolidated Statement of Shareholders' Equity 29
Consolidated Statement of Cash Flows 30
Notes to Consolidated Financial Statements 31
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Meridian Insurance Group, Inc.
In our opinion, the consolidated financial statements listed in the
index appearing under Item 14(a)(1) present fairly, in all material
respects, the financial position of Meridian Insurance Group, Inc. and
its subsidiaries at December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally
accepted accounting principles. In addition, in our opinion, the
financial statement schedules listed in the index appearing under Item
14(a)(2) present fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated
statements. These financial statements and financial statement
schedules are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statement
schedules based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards
which 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,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 24, 1999
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
for the Years Ended December 31, 1998, 1997 and 1996
December 31,
1998 1997 1996
Premiums earned $189,188,422 $194,586,632 $167,304,414
Net investment income 17,245,684 16,371,711 14,908,285
Net realized investment gains 7,342,074 4,477,580 3,793,778
Other income (expense) (59,017) 1,042,350 562,198
Total revenues 213,717,163 216,478,273 186,568,675
Losses and loss adjustment
expenses 136,619,991 149,218,731 130,101,192
General operating expenses 16,686,387 16,505,515 13,766,868
Interest expense 672,630 732,047 307,887
Amortization expenses 42,917,642 42,893,857 36,442,635
Total expenses 196,896,650 209,350,150 180,618,582
Income before taxes 16,820,513 7,128,123 5,950,093
Income taxes (benefit)
Current 2,514,968 1,067,000 702,141
Deferred 2,155,000 (860,000) (552,000)
Total income taxes 4,669,968 207,000 150,141
Net income $ 12,150,545 $ 6,921,123 $ 5,799,952
Weighted average shares
outstanding 7,292,077 7,351,890 7,457,212
Per share data:
Basic earnings per share $ 1.67 $ 0.94 $ 0.78
Diluted earnings per share $ 1.65 $ 0.93 $ 0.77
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, 1998 and 1997
December 31,
1998 1997
ASSETS
Investments:
Fixed maturities--available for sale,
at market value (cost $234,632,000
and $239,662,000) $241,993,962 $248,404,304
Equity securities, at market
(cost $48,338,000 and $41,430,000) 64,020,661 54,378,947
Short-term investments, at cost, which
approximates market 6,431,482 3,996,232
Other invested assets 1,375,463 1,647,102
Total investments 313,821,568 308,426,585
Cash 854,522 1,188,423
Premium receivable, net of allowance
for bad debts 5,625,470 4,343,157
Accrued investment income 2,950,290 3,130,712
Deferred policy acquisition costs 17,671,856 17,651,544
Goodwill 14,775,426 15,479,456
Reinsurance receivables 41,803,624 48,850,066
Prepaid reinsurance premiums 3,362,441 3,861,507
Due from Meridian Mutual Insurance Company 7,528,333 7,723,277
Other assets 463,990 2,931,077
Total assets $408,857,520 $413,585,804
LIABILITIES AND SHAREHOLDERS' EQUITY
Losses and loss adjustment expenses $154,252,671 $169,801,326
Unearned premiums 81,223,095 82,839,333
Other post-employment benefits 1,935,616 1,933,181
Bank loan payable 10,125,000 11,375,000
Payable for securities 3,061,898 ---
Reinsurance payables 9,811,976 9,078,076
Other liabilities 6,478,431 6,664,653
Total liabilities 266,888,687 281,691,569
Shareholders' equity:
Common shares, no par value, Authorized-
20,000,000 Issued-7,456,512 and
7,444,050, Outstanding-7,243,712
and 7,289,550 at December 31, 1998
and 1997, respectively (including
10% stock dividend issued on
January 6, 1999, 658,493 shares) 44,336,679 44,110,416
Treasury shares, at cost; 212,800
and 154,500 shares at
December 31, 1998 and 1997,
respectively (3,277,781) (2,308,188)
Contributed capital 25,923,462 15,058,327
Retained earnings 59,796,235 60,684,448
Accumulated other comprehensive income 15,190,238 14,349,232
Total shareholders' equity 141,968,833 131,894,235
Total liabilities and shareholders'
equity $408,857,520 $413,585,804
The accompanying notes are an integral part of the consolidated
financial statements.
<TABLE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
for the Years Ended December 31, 1998, 1997 and 1996
<CAPTION>
Accumulated
Other
Common Treasury Contributed Retained Comprehensive Comprehensive
Shares Shares Capital Earnings Income Income
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $44,076,685 $ 0 $15,058,327 $52,265,410 $6,842,245
Comprehensive income:
Net income -- -- -- 5,799,952 -- $ 5,799,952
Other Comprehensive
income, net of tax:
Unrealized gain on securities,
net of reclassification
adjustment -- -- -- -- 299,601 299,601
Comprehensive income -- -- -- -- -- $ 6,099,553
Dividends ($0.29 per share) -- -- -- (2,169,400) --
Exercise of stock options
4,402 shares 23,241
Repurchase and retirement of
1,472 common shares (22,080) -- -- -- --
Balance at December 31, 1996 44,077,846 0 15,058,327 55,895,962 7,141,846
Comprehensive income:
Net income -- -- -- 6,921,123 -- $ 6,921,123
Other Comprehensive
income, net of tax:
Unrealized gain on securities,
net of reclassification
adjustment -- -- -- -- 7,207,386 7,207,386
Comprehensive income -- -- -- -- -- $14,128,509
Dividends ($0.29 per share) -- -- -- (2,132,637) --
Issuance of 1,989 common shares 32,570
Repurchase of 154,000
common shares -- (2,308,188) -- -- --
Balance at December 31, 1997 44,110,416 (2,308,188) 15,058,327 60,684,448 14,349,232
Comprehensive income:
Net income -- -- -- 12,150,545 -- $12,150,545
Other comprehensive
income, net of tax:
Unrealized gain on securities,
net of reclassification
adjustment -- -- -- -- 841,006 841,006
Comprehensive income -- -- -- -- -- $12,991,551
Stock dividend (shares issued
658,493) 10,865,135 (10,865,135)
Dividends ($0.30 per share) -- -- -- (2,173,623) --
Repurchase of 58,300 common shares (969,593)
Issuance of 16,655
common shares 226,263 -- -- -- --
Balance at December 31, 1998 $ 44,336,679 $(3,277,781) $25,923,462 $59,796,235 $15,190,238
</TABLE>
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 Years Ended December 31, 1998, 1997 and 1996
December 31,
1998 1997 1996
Cash flows from operating activities:
Net income $12,150,545 $ 6,921,123 $ 5,799,952
Reconciliation of net income to
net cash provided by
operating activities:
Realized investment gains (7,342,074) (4,477,580) (3,793,778)
Amortization 42,917,642 42,893,857 36,442,635
Deferred policy acquisition costs (42,686,105) (43,475,066) (39,321,446)
Deferred income taxes 2,155,000 (860,000) (552,000)
Increase (decrease) in unearned
premiums (1,616,238) (1,226,418) 2,034,199
Increase (decrease) in loss and
loss adjustment expenses (15,548,655) 8,492,087 11,054,147
Decrease in amount due from
Meridian Mutual 194,944 1,250,395 385,131
Decrease (increase) in reinsurance
receivables 7,046,442 (2,999,236) (7,352,448)
Decrease (increase) in prepaid
reinsurance premiums 499,066 1,159,098 (349,547)
Decrease in other assets 1,143,489 5,549,960 2,064,651
Increase in other post-employment
benefits 2,435 515,367 119,436
Increase in reinsurance payables 733,900 413,718 1,800,732
Decrease in other liabilities (1,794,478) (1,839,705) (1,866,664)
Other, net (1,905,950) 1,629,010 490,268
Net cash provided by (used in)
operating activities (4,050,037) 13,946,610 6,955,268
Cash flows from investing activities:
Purchase of fixed maturities (99,643,783) (54,141,776) (47,518,736)
Proceeds from sale of fixed
maturities 78,138,240 26,135,592 38,131,207
Proceeds from calls, prepayments
and maturity of fixed maturities 29,141,214 22,393,353 24,843,739
Purchase of equity securities (21,960,794) (33,956,533) (19,794,358)
Proceeds from sale of equity
securities 21,316,297 31,160,867 18,633,656
Net (increase) decrease in
short-term investments (2,435,250) (2,669,598) 3,300,088
Decrease (increase) in other
invested assets 271,640 (256,926) (336,271)
Acquisition of subsidiary --- --- (30,262,442)
Increase (decrease) in securities
payable 3,071,384 401,707 (1,533,830)
Net cash provided by (used in)
investing activities 7,898,948 (10,933,314) (14,536,947)
Cash flows from financing activities:
Repurchase of common stock (969,593) (2,308,188) (22,080)
Exercise of stock options 161,055 --- 23,241
Proceeds from bank loan --- --- 12,000,000
Repayment of bank loan (1,250,000) (500,000) (125,000)
Dividends paid (2,124,274) (2,144,839) (2,101,426)
Net cash provided by (used in)
financing activities (4,182,812) (4,953,027) 9,774,735
Increase (decrease) in cash (333,901) (1,939,731) 2,193,056
Cash at beginning of year 1,188,423 3,128,154 935,098
Cash at end of year $ 854,522 $ 1,188,423 $ 3,128,154
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 47.8 percent of the outstanding common shares of the
Company. The Company is a holding company principally engaged in
the business of underwriting property and casualty insurance
through its wholly-owned subsidiaries, Meridian Security Insurance
Company ("Meridian Security"), Meridian Citizens Security Insurance
Company ("Meridian Citizens Security", formerly Citizens Fund
Insurance Company) and Insurance Company of Ohio ("ICO"). Both
Meridian Citizens Security and ICO, along with their holding
company, Citizens Security Group Inc. ("CSGI"), were acquired by
the Company on July 31, 1996. CSGI was subsequently dissolved on
February 7, 1997.
Effective August 1, 1996, Meridian Citizens Security, ICO and
Meridian Citizens Mutual Insurance Company ("Meridian Citizens
Mutual", formerly Citizens Security Mutual Insurance Company), the
former majority shareholder of CSGI, became participants in a
reinsurance pooling arrangement with Meridian Mutual and Meridian
Security, in which the underwriting income and expenses of each
entity are shared. The participation percentages of the Company's
insurance subsidiaries total 74 percent. Prior to the change,
Meridian Security and Meridian Mutual were the only participants in
the reinsurance pooling arrangement, of which Meridian Security
assumed 74 percent of the combined underwriting income and expenses
of the two companies. (See Note 7-Related Party Transactions.)
Collectively, the insurance companies participating in this
reinsurance pooling arrangement write 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 1,370
independent insurance agencies in the states of Illinois, Indiana,
Iowa, Kentucky, Michigan, Minnesota, Missouri, North Dakota, Ohio,
Pennsylvania, South Dakota, Tennessee, Virginia, Washington and Wisconsin.
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 significant intercompany balances and transactions have been
eliminated.
Investments:
Fixed maturity investments include bonds, notes, mortgage backed
pass-through securities, collateralized mortgage obligations, other
asset backed securities and sinking fund preferred stocks. The
fixed maturity portfolio is invested entirely in securities
classified as available for sale and is carried at quoted market
values. Equity securities, consisting of unaffiliated common and
perpetual preferred stocks, are reported at quoted market values.
Short-term investments are recorded at cost, approximating market
value. Other investments include limited partnerships 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 as
a component of other comprehensive income, 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.
In connection with the acquisition of Meridian Citizens Security
and ICO, the Company allocated a portion of its cost to an asset
representing the estimated equity in the unearned premium reserve
of the acquired book of business. The asset was amortized in 1996
and 1997 as the related premium revenue was recognized.
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. The Company continually monitors the value of its
goodwill based on estimates of future earnings of the subsidiaries
that were acquired. If it is determined that changes in such
projected earnings no longer supports the recoverability of
goodwill over the remaining amortization period, the carrying value
would be reduced with a corresponding charge to expense or the
amortization period would be shortened. As of December 31, 1998,
no material changes have occurred.
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.
Income Taxes:
Deferred income taxes are provided to reflect the estimated future
tax effects of temporary differences between the tax basis of an
asset or liability and the basis recorded in financial statements.
The deferred tax asset or liability is measured by using enacted
tax rates expected to apply to future taxable income in the periods
in which the temporary differences are expected to be recovered or
settled. Accordingly, changes in future tax rates cause immediate
adjustments to deferred taxes.
Earnings Per Share:
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "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. 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 became effective
for financial statements with fiscal years ending after December
15, 1997. All prior period information presented has been
restated.
Stock Dividend:
On December 9, 1998 a ten percent stock dividend was declared that
was effective for shareholders of record as of December 21, 1998.
The financial statements, notes, and other references to share and
per share data have been retroactively restated to reflect the
stock dividend for all periods presented.
Impact of New Accounting Pronouncements:
In June 1998 the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The Statement is effective for fiscal years beginning
after June 15, 1999. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments (including
derivative instruments that are embedded in other contracts) and
hedging activities. All items that are required to be recognized
must be displayed according to accounting standards in the
statement of financial position at fair value. The Company does
not hold any derivative instruments and does not participate in
hedging activities. The Company does not anticipate a material
impact upon adoption of this statement.
SOP 97-3 "Accounting by Insurance and Other Enterprises for
Insurance-Related Assessments" is effective for financial
statements with fiscal years beginning after December 15, 1998.
This statement requires that a liability for insurance-related
assessments be recognized when the assessments have been imposed or
it is probable that an assessment will be imposed, the event
obligating the Company has occurred, and the amount can be
reasonably estimated. SOP 97-3 requires that a liability for the
current calendar year experience be recognized and that the initial
application be treated as a cumulative effect type accounting
change. The Company anticipates that an additional liability and
a charge to the statement of income of approximately $300,000 net
of income tax will be recognized upon implementation in the first
quarter of 1999.
2.Investments:
The Company's net investment income for the periods ended
December 31, 1998, 1997 and 1996 are summarized as follows:
1998 1997 1996
Interest on fixed maturities:
Tax-exempt securities $ 2,531,304 $ 3,909,985 $ 3,875,822
Taxable securities 11,883,195 9,905,146 8,686,144
Dividends on redeemable
preferred stock 1,769,286 2,078,536 2,489,104
Dividends on equity securities 1,011,335 879,579 773,238
Interest on short-term investments 229,347 156,128 243,837
Other investment income 149,589 187,159 93,861
Total investment income 17,574,056 17,116,533 16,162,006
Investment expenses 328,372 744,822 1,253,721
Net investment income $17,245,684 $16,371,711 $14,908,285
Net realized and unrealized gains on investments are summarized as
follows:
1998 1997 1996
Realized gains (losses):
Fixed maturities $ 2,628,256 $ 14,108 $ (456,602)
Equity securities 6,263,104 5,052,295 4,559,381
Other investments (701,038) --- ---
Total realized investment
gains 8,190,322 5,066,403 4,102,778
Investment expenses 848,248 588,823 309,000
Net realized investment gains $ 7,342,074 $ 4,477,580 $ 3,793,778
Net change in unrealized appreciation (depreciation):
Fixed maturities, available
for sale $(1,379,804) $ 4,755,339 $(2,234,493)
Equity securities 2,734,114 6,098,280 2,692,197
Limited partnerships (61,304) 235,767 83,897
Deferred income tax expense (452,000) (3,882,000) (242,000)
Net change in unrealized
appreciation $ 841,006 $7,207,386 $ 299,601
The amortized cost and estimated market values of investments in
fixed maturity securities at December 31, 1998 and 1997, are as
follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
December 31, 1998
Available for sale:
Government and agency
domestic bonds $ 3,681,320 $ 107,949 $ 9,855 $ 3,779,414
Municipal bonds 42,585,763 1,669,262 143,068 44,111,957
Corporate bonds 123,432,824 3,797,535 334,305 126,896,053
Mortgage-backed
securities 44,234,647 789,650 95,072 44,929,225
Sinking fund preferred
stocks 20,697,205 1,622,315 42,207 22,277,313
Total fixed maturity
securities $234,631,759 $7,986,711 $624,507 $241,993,962
December 31, 1997
Available for sale:
Government and agency
domestic bonds $ 9,992,300 $ 494,746 $ 13,916 $10,473,130
Municipal bonds 71,000,487 3,345,436 118,097 74,227,826
Corporate bonds 82,661,920 2,381,660 7,448 85,036,132
Mortgage-backed
securities 42,479,390 972,915 99,833 43,352,472
Sinking fund preferred
stocks 33,528,199 1,822,517 35,972 35,314,744
Total fixed maturity
securities $239,662,296 $9,017,274 $275,266 $248,404,304
The amortized cost and estimated market value of fixed maturity
securities available for sale at December 31, 1998, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers 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 $ 3,956,944 $ 3,986,769
Due after one year through five years 43,008,654 44,235,400
Due after five years through ten years 44,173,456 46,753,160
Due after ten years through
fifteen years 40,673,916 41,386,618
Due after fifteen years
through twenty years 8,996,874 9,167,923
Due after twenty years 50,024,177 51,995,112
Subtotal 190,834,021 197,524,982
Mortgage-backed securities 43,797,738 44,468,980
Total fixed maturity securities $234,631,759 $241,993,962
Proceeds from sales of investments in fixed maturity securities
during 1998, 1997 and 1996, respectively, were $78,138,240,
$26,135,592 and $38,131,207. During 1998, 1997 and 1996,
respectively, gross gains of $2,672,721, $338,920 and $197,320 and
gross losses of $44,464, $324,812 and $653,922 were realized on
those sales.
Unrealized appreciation of equity securities at December 31, 1998
totaled $15,682,983 representing $19,023,288 of gains on certain
securities and $3,340,305 of losses on other securities.
3. Other Comprehensive Income:
The Company has adopted SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for the reporting and
displaying of comprehensive income and its components. 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
gain (losses) on securities for the periods ending December 31,
1998 and 1997 consist of the following:
Twelve Months Ended
December 31,
1998 1997 1996
Unrealized holding gains before
deferred income taxes $10,797,051 $16,155,789 $ 4,254,590
Deferred income tax expense (3,778,000) (5,655,000) (1,489,000)
Less: Reclassification adjustment
for realized gains 9,504,045 5,066,403 3,793,988
Income tax expense related
to realized gains (3,326,000) (1,773,000) (1,328,000)
Other Comprehensive Income 841,006 7,207,386 299,601
4. Segment Reporting:
The Company has adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information":, which establishes
standards for the reporting and displaying of business segments.
SFAS No. 131. 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 following tables display the Company's reportable segments, a
reconciliation of segment data to total consolidated financial
data, and related disclosure information concerning revenues as
required by SFAS No. 131. Segments were defined based upon the
Company's structure and decision making processes. Personal,
commercial and farm lines are segmented within all internal
reporting mechanisms to aid chief decision makers in achieving
profitable results within each business segment. Amortization was
allocated by segment based upon a ratio of premium. Investment
income was determined consistent with the statutory modeling
requirements for the Insurance Expense Exhibit. These guidelines
rely on historical reserve patterns by line of business. Asset
information by reportable segment is not reported, since the
Company does not internally produce such information.
<TABLE>
1998
<CAPTION>
Segment Non-segment
Personal Farmowners Commercial Total Total Total
<S> <C> <C> <C> <C> <C> <C>
Premiums earned $107,806,522 $10,878,882 $70,503,018 $189,188,422 $ --- $189,188,422
Net investment income 9,554,172 936,329 6,755,183 17,245,684 --- 17,245,684
Net realized gains --- --- --- --- 7,342,074 7,342,074
Other income (expense) --- --- --- --- (59,017) (59,017)
Total revenues $117,360,694 $11,815,211 $77,258,201 $206,434,106 $ 7,283,057 $213,717,163
Loss and LAE expense $ 82,258,735 $ 7,976,382 $46,384,874 $136,619,991 $ --- $136,619,991
General operating
expense 8,694,496 1,013,191 6,978,700 16,686,387 --- 16,686,387
Interest expense --- --- --- --- 672,630 672,630
Amortization expenses 22,362,375 2,605,943 17,949,324 42,917,642 --- 42,917,642
Total expenses $113,315,606 $11,595,516 $71,312,898 $196,224,020 $ 672,630 $196,896,650
Income before taxes $ 4,045,088 $ 219,695 $ 5,945,303 $ 10,210,086 $6,610,427 $ 16,820,513
Income taxes 1,123,059 60,995 1,650,626 2,834,680 1,835,288 4,669,968
Net income $ 2,922,029 $ 158,700 $ 4,294,677 $ 7,375,406 $4,775,138 $ 12,150,545
1997
Segment Non-segment
Personal Farmowners Commercial Total Total Total
Premiums earned $107,801,599 $10,564,810 $76,220,223 $194,586,632 $ --- $194,586,632
Net investment income 9,069,988 888,878 6,412,845 16,371,711 --- 16,371,711
Net realized gains --- --- --- --- 4,477,580 4,477,580
Other income --- --- --- --- 1,042,350 1,042,350
Total revenues $116,871,587 $11,453,688 $82,633,068 $210,958,343 $5,519,930 $216,478,273
Loss and LAE expense $ 90,861,513 $ 6,269,043 $52,088,175 $149,218,731 $ --- $149,218,731
General operating
expense 8,680,147 954,436 6,870,932 16,505,515 --- 16,505,515
Interest expense --- --- --- --- 732,047 732,047
Amortization expenses 22,557,610 2,480,349 17,855,898 42,893,857 --- 42,893,857
Total expenses $122,099,270 $ 9,703,828 $76,815,005 $208,618,103 $ 732,047 $209,350,150
Income (loss)
before taxes $ (5,227,683) $ 1,749,859 $ 5,818,063 $ 2,340,240 $4,487,883 $ 7,128,123
Income taxes (benefit) (151,811) 50,816 168,956 67,960 139,040 207,000
Net income (loss) $ (5,075,872) $ 1,699,044 $ 5,649,107 $ 2,272,280 $4,648,843 $ 6,921,123
1996
Segment Non-segment
Personal Farmowners Commercial Total Total Total
Premiums earned $ 90,868,003 $ 9,998,705 $66,437,706 $167,304,414 $ --- $167,304,414
Net investment income 8,097,133 890,972 5,920,180 14,908,285 --- 14,908,285
Net realized gains --- --- --- --- 3,793,778 3,793,778
Other income --- --- --- --- 562,198 562,198
Total revenues $ 98,965,136 $10,889,677 $72,357,886 $182,212,699 $4,355,976 $186,568,675
Loss and LAE expense $ 74,980,181 $ 9,501,666 $45,619,345 $130,101,192 $ --- $130,101,192
General operating
expense 7,477,195 822,757 5,466,916 13,766,868 --- 13,766,868
Interest expense --- --- --- --- 307,887 307,887
Amortization expenses 19,793,079 2,177,941 14,471,615 36,442,635 --- 36,442,635
Total expenses $102,250,455 $12,502,364 $65,557,876 $180,310,695 $ 307,887 $180,618,582
Income (loss)
before taxes $ (3,285,319) $(1,612,687) $ 6,800,010 $ 1,902,004 $ 4,048,089 $ 5,590,093
Income taxes (benefit) (82,900) (40,693) 171,587 47,994 102,147 150,141
Net income (loss) $ (3,202,419) $(1,571,994) $ 6,628,423 $ 1,854,010 $ 3,945,942 $ 5,799,952
</TABLE>
As required by SFAS No. 131, the following table delineates the
Company's products and revenues in a manner which is consistent with
segment reporting:
1998 1997 1996
Personal Lines:
Automobile $ 79,438,864 $ 78,609,066 $ 67,326,591
Homeowners 25,649,226 26,262,790 21,072,110
Other 2,718,432 2,929,743 2,469,302
Total Personal Lines $ 107,806,522 $ 107,801,599 $ 90,868,003
Commercial Lines:
Automobile $ 17,666,781 $ 17,826,255 $ 14,215,305
Worker's Compensation 22,442,522 25,586,297 24,437,027
Commercial Multi-Peril 25,983,425 28,041,002 22,879,659
Other 4,410,290 4,766,669 4,881,296
Total Commercial Lines $ 70,503,018 $ 76,220,223 $ 66,413,286
Farm Lines:
Farmowners 10,878,882 10,564,810 9,998,705
Total Farm Lines $ 10,878,882 $ 10,564,810 $ 9,998,705
Total All Lines Combined $ 189,188,422 $ 194,586,632 $ 167,304,414
5. Acquisition:
On July 31, 1996, the Company acquired Citizens Security Group Inc.
and its property and casualty insurance subsidiaries, Meridian
Citizens Security Insurance Company and Insurance Company of Ohio,
for a cash purchase price of $30,262,442, including capitalized
acquisition costs. Approximately 60 percent of the purchase price
was generated from the sale of a portion of the Company's
investment portfolio and the remainder was financed through bank
debt. 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 $14,501,000, which is being amortized over a 25 year
period on the straight-line basis.
The consolidated financial statements include the results of
operations of the acquired entities from the date of acquisition.
Unaudited pro-forma condensed consolidated results of operations
presented below assume the acquisition and financing of the
transaction had occurred January 1, 1996:
1996
Premiums earned $185,808,000
Total revenues $206,201,000
Net income $ 4,138,000
Basic and diluted
earnings per share $ 0.56
These unaudited pro-forma results are not necessarily indicative of
the results of operations that would have occurred had the
acquisition taken place at January 1, 1996.
Supplemental cash flow information for the acquisition is as
follows:
1996
Fair value of assets acquired $77,440,427
Cash paid 30,262,442
Liabilities assumed $47,177,985
6. Bank Loan Payable:
The Citizens Security Group acquisition was funded in part through a
$12,000,000 bank loan. The debt has a variable interest rate of LIBOR
plus 50 basis points, which was 5.7388 percent and 6.375 percent at
December 31, 1998 and 1997, respectively. The bank loan will mature
on August 1, 2003. The Company is required to make principal payments
in accordance with the following schedule:
1999 1,625,000
2000 2,000,000
2001 2,125,000
Thereafter 4,375,000
Total payments outstanding $10,125,000
The principal balance of the bank loan as of December 31, 1998 approximates
its market value. Interest paid on the loan during 1998 and 1997 amounted
to $672,000 and $732,000, respectively. The bank debt includes certain
financial covenants, the most significant of which concern the amounts of
risk based capital, statutory policyholders' surplus, total debt, debt
to capitalization and debt service coverage (the relationship of dividends
available from the Company's insurance subsidiaries to required principal
and interest payments).
7. Related Party Transactions:
Meridian Security, Meridian Citizens Security, ICO, Meridian Mutual
and Meridian Citizens Mutual are parties to a reinsurance pooling
agreement ("pooling agreement") under which essentially all
premiums, losses and loss adjustment expenses as well as other
underwriting expenses are shared by the companies on the basis of
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 and Meridian Citizens 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.
Since the acquisition of Citizens Security Group on August 1, 1996,
the reinsurance pool 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.
For the year ended December 31, 1998, approximately 86 percent of
the Company's total premium volume was derived from its
participation in the pooling agreement. In 1997 and 1996,
approximately 88 percent was derived from the pooling arrangement.
Effective January 1, 1997, the Company became the employer of all
employees that were formerly employed by Meridian Mutual and
Meridian Citizens Mutual. This transfer of employees allowed for
the integration of benefit plans, thus increasing management
efficiencies and allowing for enhanced benefit options, such as the
use of the Company's common stock as compensation.
Also as a result of the employee transfer, the Company assumed the
operations of the previously established benefit plans of Meridian
Mutual. Included in these benefit plans was a non-contributory
pension plan that covers substantially all employees, a non-tax
qualified supplemental retirement plan for certain key employees,
and a multi-employer plan for other post-retirement benefits. (See
Note 11-Pension and Other Post-Retirement Benefit Plans) The
Company also assumed a 401(k) plan whereby employees can contribute
up to 16 percent of their compensation, with the Company
contributing 50 percent of the employee contribution on the first 6
percent. Costs related to these benefit plans are allocated to
each company in accordance with their percentage participation
under the pooling agreement.
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.
8. Liability for Losses and Loss Adjustment Expenses:
Activity in the liability for losses and loss adjustment expenses
is summarized as follows:
1998 1997 1996
Balance at beginning of period $169,801,326 $161,309,239 $ 123,577,240
Less reinsurance recoverables 48,872,464 41,819,308 31,204,462
Net balance at beginning of period 120,928,862 119,489,931 92,372,778
Net reserves acquired --- --- 20,685,369
Incurred related to:
Current year 145,328,331 165,576,734 137,817,367
Prior years (8,708,340) (16,358,003) (7,716,175)
Total incurred 136,619,991 149,218,731 130,101,192
Paid related to:
Current year 93,790,286 97,447,542 93,199,000
Prior years 51,307,350 50,332,258 30,470,408
Total paid 145,097,636 147,779,800 123,669,408
Net balance at end of period 112,451,217 120,928,862 119,489,931
Plus reinsurance recoverables 41,801,454 48,872,464 41,819,308
Balance at end of period $ 154,252,671 $169,801,326 $161,309,239
The reconciliations for 1998 and 1997 show approximately $8.7 million and
$16.4 million reductions, respectively, in previously established loss
reserves. Favorable loss developments resulting from decreases in the
frequency and severity of claims in prior accident years for the Company's
personal automobile liability, workers' compensation and commercial
multi-peril lines of business were the primary factors in the reductions.
9. Reinsurance:
The companies that participate in the reinsurance pooling agreement
reduce the maximum net loss that can arise from large risks or
risks in concentrated areas of exposure by reinsuring their
insurance business with unrelated third party 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 reinsurance purchased 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 which require a specific
agreement of the reinsurer as to limits of coverage provided
("facultative reinsurance"). Meridian Mutual, Meridian Security,
Meridian Citizens Mutual, Meridian Citizens Security, and ICO were
each named as insured parties under the treaty reinsurance
contracts, and the coverage under those contracts applied to all
risks written by each of the companies. Treaty coverage was
purchased to cover property and liability exposures in excess of
$200,000 and $350,000, respectively, up to the limits set forth in
the individual treaty. (In 1997, the retention was $200,000 for
property and $250,000 for liability.) Facultative reinsurance was
purchased to cover exposures on both property and liability
coverages from losses over and above the limits provided by the
treaty reinsurance.
Catastrophe reinsurance provided coverage for multiple losses
caused by a single catastrophic event such as a windstorm or
earthquake. The combined retention under this contract was
$6,000,000 plus five percent of losses up to contractual limits for
windstorms of $65,000,000 and for earthquakes of $115,000,000.
Two other catastrophe reinsurance treaties provided
coverage for 95% of losses sustained from multiple catastrophic
events which aggregated beyond specified retentions and per event
deductibles up to the contractual limits.
Approximately 90 percent of the Company's ceded reserves for losses
and loss adjustment expenses were with Employers Reinsurance
Corporation, Michigan Catastrophic Claims Association and Dorinco
Reinsurance America Corporation. The effect of reinsurance on
premiums written, premiums earned and losses and loss adjustment
expenses for the years ended December 31, 1998, 1997 and 1996 were
as follows:
1998 1997 1996
Premiums written:
Direct $204,046,222 $210,393,552 $181,680,624
Assumed 486,305 718,004 3,730,504
Cede (16,461,276) (16,592,247) (16,216,479)
Net $188,071,251 $194,519,309 $169,194,649
Premiums earned:
Direct $205,534,750 $211,105,812 $176,718,644
Assumed 614,042 1,232,165 6,425,316
Ceded (16,960,370) (17,751,345) (15,839,546)
Net $189,188,422 $194,586,632 $167,304,414
Losses and loss adjustment expenses incurred:
Direct $151,184,461 $168,173,120 $154,237,419
Assumed 624,892 1,355,214 2,857,470
Ceded (15,189,362) (20,309,603) (26,993,697)
Net $136,619,991 $149,218,731 $130,101,192
10.Deferred Policy Acquisition Costs:
Changes in deferred policy acquisition costs are summarized as follows:
1998 1997 1996
Deferred, beginning of period $17,651,544 $16,690,275 $13,354,600
Additions:
Commissions 31,845,030 32,391,959 30,593,227
Equity in acquired unearned
premium reserve --- --- 2,312,841
Premium taxes 2,416,582 2,375,996 2,458,670
Other 7,972,312 8,357,111 4,222,123
Total additions 42,233,924 43,125,066 39,586,861
Amortization expense 42,213,612 42,163,797 36,251,186
Deferred, end of period $17,671,856 $17,651,544 $16,690,275
11.Pension Plan and Other Post-Retirement Benefits:
Effective January 1, 1997, the Company became the employer of all
employees who were formerly employed by Meridian Mutual and Meridian
Citizens Mutual. As a result of this transfer, all employee benefit
plans that were previously under Meridian Mutual and Meridian
Citizens Mutual were merged into the Company plans.
The Company maintains a defined benefit pension plan for the benefit
of eligible employees. Under the plan, all employees of the Company
completing more than 1,000 hours of employment in a 12-month period
become eligible to participate. The plan provides for a pension
annuity beginning at age 65 based on the employee's average monthly
base pay during the five highest consecutive salary years out of the
last ten. Provisions for delayed retirement benefits, early
retirements benefits after age 55, disability and death benefits,
optional methods for benefit payment, payments to an employee who
leaves after a certain number of years of service, and payments to
an employee's surviving spouse are also covered under the plan.
The Company also maintains a non-tax qualified supplemental
retirement income plan for certain key employees who participate in
the defined benefit pension plan. The plan provides additional
benefits in excess of the limitations imposed by Section 401(a)(17)
and Section 415 of the Internal Revenue Code on plans to which those
sections apply. The benefit is in the form of a straight life
annuity over the lifetime of the participant and commences on the
participant's normal retirement date.
The following table presents a reconciliation of the funded status
for the Company's defined benefit pension plan and the amounts
recognized in the Company's consolidated balance sheet as of
December 31, 1998 and 1997 per FASB 132 requirements:
1998 1997
Reconciliation of benefit obligation:
Obligation at January 1 $23,432,716 $20,402,465
Service cost 1,067,292 953,881
Interest cost 1,608,088 1,484,846
Plan amendments 1,131,954 ---
Actuarial loss 1,165,040 1,783,756
Benefit payments (1,287,468) (1,192,232)
Obligation at December 31 $27,117,622 $23,432,716
Reconciliation of fair value of plan assets:
Fair value of plan assets
at January 1 $31,582,957 $28,482,573
Actual return on plan assets 4,105,537 4,292,616
Benefit payments (1,287,468) (1,192,232)
Fair value of plan assets
at December 31 $34,401,026 $31,582,957
Funded Status
Funded status at December 31 $7,283,404 $8,150,241
Unrecognized asset obligation (7,015,956) (7,548,032)
Unrecognized prior service cost 1,058,321 ---
Unrecognized gain (603,345) (208,920)
Accrued asset at December 31 $ 722,424 $ 393,289
The following table presents a reconciliation of the funded status
for the Company's supplemental retirement income plan and the
amounts recognized in the Company's consolidated balance sheet as of
December 31, 1998 and 1997:
1998 1997
Reconciliation of benefit obligation:
Obligation at January 1 $ 760,102 $ 612,911
Service cost 37,193 28,919
Interest cost 59,987 45,968
Actuarial loss 193,341 72,304
Obligation at December 31 $ 1,050,623 $ 760,102
Funded Status
Funded status at December 31 $(1,050,623) $(760,102)
Unrecognized prior service cost 216,599 239,676
Unrecognized loss 260,908 74,012
Accrued liability at December 31 $ (573,116) $(446,414)
A 6.5 and 7.0 percent weighted average discount rate was assumed for
1998 and 1997, respectively, in determining the accumulated benefit
obligation and a 5.0 percent average salary increase was used to
project the additional pay increase on all plans. The expected
return on assets for the defined pension plan was assumed to be 8.25
percent. Net periodic pension costs for the defined benefit pension
plan for the year ended December 31, 1998 and 1997 included the
following components:
1998 1997
Service costs $ 789,796 $ 705,872
Interest costs 1,189,985 1,098,786
Expected return on assets (1,884,093) (1,701,956)
Amortization of asset obligation (393,736) (393,736)
Amortization of prior-service cost 54,488 ---
Net periodic benefit cost/(income) $ (243,560) $ (291,034)
Net periodic pension costs for the supplemental retirement income
plan for the years ended December 31, 1998 and 1997 were approximately
$94,000 and $72,000 respectively.
In addition to pension benefits, the Company provides certain health
care and life insurance benefits ("post-retirement benefits") for
retired employees. Substantially all employees may become eligible
for these benefits if they reach retirement age while working for
the Company. The Company also provides medical benefits for early
retirees (eligible upon attainment of age 55 and five years service
up to age 65) and group term life insurance that phases out over a
five year period from the retirement date.
The following table presents a reconciliation of the funded status
for the Company's post retirement benefit obligation and the amounts
recognized in the Company's consolidated balance sheet as of
December 31, 1998 and 1997:
1998 1997
Reconciliation of benefit obligation:
Obligation at January 1 $ 1,952,474 $ 1,451,197
Service cost 211,586 145,017
Interest cost 133,691 102,484
Actuarial (gain) loss (324,893) 346,098
Benefit payments (63,580) (92,322)
Obligation at December 31 $ 1,909,278 $ 1,952,474
Reconciliation of fair value of plan assets:
Fair value of plan assets at
January 1 $ --- $ ---
Employer contributions 63,580 92,322
Benefit payments (63,580) (92,322)
Fair value of plan assets at
December 31 $ --- $ ---
Funded Status
Funded status at December 31 $(1,909,278) $(1,952,474)
Unrecognized gain (loss) (26,338) 72,418
Accrued liability at December 31 $(1,935,616) $(1,880,856)
A 6.5 and 7.0 percent weighted average discount rate was used for
1998 and 1997, respectively, to determine the accumulated post-
retirement benefit obligation at December 31, 1998. Net periodic
pension costs for the post-retirement plan for the year ended
December 31, 1998 and 1997 included the following components:
1998 1997
Service costs $ 156,574 $ 107,313
Interest costs 98,931 75,838
Amortization of net loss (11,864) (29,704)
Net periodic benefit cost $ 243,641 $ 153,447
The assumed rate of future increases in per capita cost of health
care benefits was 7.0 percent for the first year and 4.0 percent for
all years thereafter in 1998, and 8.0 percent for the first year and
6.0 percent for all years thereafter in 1997. The health care cost
trend rate assumption has an effect on the amounts reported. For
example, increasing the assumed health care cost trend rates by one
percentage point would increase the accumulated post-retirement
benefit obligation by approximately $184,000 and the aggregate of
the service and interest cost components of net periodic post-
retirement benefit cost by approximately $48,000. A decrease in the
assumed health care cost trend rates by one percentage point would
decrease the accumulated post-retirement benefit obligation by
approximately $160,000 and the aggregate of the service and interest
cost components of net periodic post-retirement benefit cost by
approximately $39,000.
Prior to January 1, 1997, Meridian Citizens Security and ICO had no
employees and were dependent on the business and operations of
Meridian Mutual and Meridian Citizens Mutual. Meridian Mutual had 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 were immaterial to the
results of operations for the year ended December 31,1996. The
Company also participated in the multi-employer plan of other post-
retirement benefits offered by Meridian Mutual to employees,
including medical benefits for early retirees and group term life
insurance. Related costs allocated to the Company were approximately
$ 53,000 for 1996.
12.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:
1998 1997 1996
Tax at statutory rate $ 5,719,000 $ 2,381,000 $ 2,023,000
Tax-exempt interest (757,000) (1,131,000) (1,134,000)
Dividends received deduction (370,000) (613,000) (619,000)
Loss, LAE and salvage and
subrogation fresh start --- (137,000) (17,000)
Nondeductible expenses 277,000 277,000 168,000
Other (199,032) (570,000) (270,859)
Total income taxes $ 4,669,968 $ 207,000 $ 150,141
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, which was to
be amortized over the life of the reserves. The impact of this
provision resulted in an aggregate tax benefit of approximately
$923,000.
The Tax Reform Act of 1986 allowed for a fresh start deduction for
reserve discounting requirements, which was to be amortized over
the life of the reserve. This produced an aggregate tax benefit of
approximately $900,000. The remainder of the unamortized fresh
start was fully recognized in 1997, resulting in a tax reduction of
approximately $137,000. In 1996, the tax effect on the recognized
amortization amounted to approximately $17,000.
Under SFAS No. 109, "Accounting For Income Taxes", the Company
recorded net deferred tax liabilities in 1997 and a deferred tax
asset in 1996. The net deferred tax asset/liability at December
31, 1998, 1997 and 1996, is comprised of the following:
1998 1997 1996
Deferred tax assets:
Unearned premium reserves $ 5,450,000 $ 5,528,000 $ 5,533,000
Loss and loss adjustment
expense reserves and
salvage and subrogation 5,414,000 6,248,000 6,336,000
Other post-employment benefits 677,000 677,000 496,000
Other 258,000 1,431,000 875,000
Total deferred tax assets 11,799,000 13,884,000 13,240,000
Deferred tax liabilities:
Deferred policy acquisition
costs 6,185,000 6,178,000 5,842,000
Investments 209,000 144,000 327,000
Unrealized appreciation on
investment securities 8,183,000 7,731,000 3,849,000
Other 54,000 56,000 425,000
Total deferred tax
liabilities 14,631,000 14,109,000 10,443,000
Net deferred tax asset (liability) $(2,832,000) $ (225,000) $ 2,797,000
The Company has paid income taxes during the last three preceding
years of $3,215,000 in 1998, $1,110,000 in 1997, and $1,678,000 in
1996.
13.Earnings Per Share:
The following table reflects 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 years ended December 31, 1998, 1997 and
1996.
Income Shares Per Share
(Numerator) (Denominator) Amount
December 31, 1998
Basic earnings per share
Income available to common
stockholders $12,150,545 7,292,077 $ 1.67
Effect of dilutive securities
Stock options --- 82,675
Diluted earnings per share
Income available to
common stockholders $12,150,545 7,374,752 $ 1.65
December 31, 1997
Basic earnings per share
Income available to common
stockholders $ 6,921,123 7,351,890 $ 0.94
Effect of dilutive securities
Stock options --- 50,515
Diluted earnings per share
Income available to
common stockholders $ 6,921,123 7,402,405 $ 0.93
December 31, 1996
Basic earnings per share
Income available to common
stockholders $ 5,799,952 7,457,212 $ 0.78
Effect of dilutive securities
Stock options --- 30,982
Diluted earnings per share
Income available to
common stockholders $ 5,799,952 7,488,194 $ 0.77
14.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. 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 $5,000,000 in 1998, $5,000,000 in 1997 and $3,900,000 in 1996.
As of December 31, 1998, approximately $13,300,000 was available for
distribution to the Company without prior approval of insurance
regulatory authorities.
Meridian Security's subsidiaries, Meridian Citizens Security and
ICO, also pay dividends to their parent. Each company's retained
earnings available for distribution as dividends are limited
by laws in their states of domicile, Minnesota and Ohio, respectively.
Meridian Citizens Security declared and paid dividends to Meridian
Security of $600,000 in 1998 and $ 300,000 in 1997. ICO declared and
paid dividends to Meridian Security of $ 300,000 in 1998. Dividends were
not paid by either company in 1996, nor by ICO in 1997.
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 their
state of domicile:
1998 1997 1996
Statutory capital and surplus $ 133,322,000 $ 115,280,000 $ 105,506,000
Statutory net investment income $ 16,156,000 $ 15,212,000 $ 15,809,000
Statutory net income $ 15,716,000 $ 6,140,000 $ 3,307,000
15. Shareholders' Equity:
In May 1997, the Shareholders of Meridian Insurance Group, Inc.
approved an amendment to the Company's Articles of Incorporation to
increase the number of authorized shares from 20,000,000 to
20,500,000, with the additional shares being preferred stock. The
amendment provides that the preferred shares may be issued from time
to time in one or more series. The Board of Directors, without
further approval of the holders of common shares, would be
authorized to fix the dividend rights and terms, liquidation
preferences, sinking funds and any other rights, preferences,
privileges, and restrictions applicable to each such series of
preferred shares. On September 8, 1998, the Board of Directors of
Meridian Insurance Group Inc., adopted a Shareholders Rights Plan.
Under the Plan, a dividend of one preferred share purchase right was
paid to shareholders of record on September 28, 1998 for each
outstanding common share. Each Right entitles the holder to
purchase one-thousandth of a share Series A Junior Participating
Preferred Stock of the Company at a price of $75.00 per one-
thousandth of a Preferred Share. If a person or group acquires 20%
or more of the outstanding Common Shares (thereby becoming an
Acquiring Person), each holder of a Right (except those held by the
Acquiring Person and its affiliates and associates) will generally
have the right to purchase Common Shares having equal to two times
the purchase price of the Right. In other words, the Right's
holders, other than the Acquiring Person, may purchase common shares
or their equivalent at a 50 percent discount. The Rights will
expire on September 18, 2008, unless the expiration date is extended
by amendment or unless the Rights are earlier redeemed or exchanged
by the Company.
On December 9, 1998, the Board of Directors of Meridian Insurance
Group, Inc. declared a ten percent stock dividend. Each shareholder
of record as of December 21, 1998 received one additional share of
the company's common stock for every ten shares held on that date.
The ten percent stock dividend was distributed on January 6, 1999
with the Company issuing 658,493 shares. Fractional shares were paid
by the Company in cash. All share and prior per share amounts have
been retroactively restated to give effect for the stock dividend.
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. The maximum number of
common shares to be authorized for issuance was limited to 750,000
shares over a 10 year term. 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. Restricted stock awards may be
granted subject to terms and conditions as prescribed by the
committee which administers the Plan. Under the 1987 Plan, which
expired on January 21, 1997, total options with respect to 477,144
shares were granted and 272,856 options had expired. In early 1996,
the Board of Directors and Shareholders approved the 1996 Employee
Incentive Stock Plan, which would eventually replace the 1987 Plan.
Under the 1996 Plan, which became effective on May 8, 1996, the
maximum number of shares authorized for issuance is 750,000 shares
over the next ten years. During 1998 and 1997, options with respect to
13,200 and 271,994 shares, respectively, were granted under the 1996 Plan.
The Company also has a Director's Stock Plan that provides for an
aggregate maximum of up to 150,000 common shares to be issued upon
the exercise of stock options granted to outside directors, who are
defined as non-employee directors of the Company or Meridian Mutual.
Each outside director will automatically be granted an option to
purchase 1,000 common shares on the date of each annual meeting of
shareholders up until 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. Each option will be
exercisable commencing one year after the date of the grant and will
expire no later than 10 years after the date of the grant. As of
December 31, 1998, total options with respect to 64,000 shares have
been granted.
In November 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". 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 continues
to account for stock options in accordance with Accounting
Principles Board Opinion No. 25. Had compensation cost been
determined using the fair value of the options at the grant dates in
accordance with SFAS No. 123, the Company's net income and earnings
per share for the periods ended December 31, 1998, 1997 and 1996
would have been reduced by the following pro-forma amounts:
$186,000, $640,000 and $143,000 and $0.03, $0.09 and $0.02,
respectively. The weighted average grant date fair value of options
granted during the year was estimated to be $18.78, $18.99 and
$16.58 using the Black-Scholes model with the following assumptions
for 1998, 1997 and 1996, respectively: risk free interest rates of
5.31 percent, 6.29 percent and 6.55 percent; dividend yield of 1.80
percent, 2.29 percent and 2.15 percent; and volatility of 38.10
percent, 26.38 percent and 31.38 percent. As of December 31, 1998,
options outstanding under these plans had an exercise price that
ranged from $9.09 to $17.05 and a remaining weighted average
contractual life of 6 years.
Stock options granted by the Company for the periods ended
December 31, 1998, 1997 and 1996 are summarized in the following
table:
<TABLE>
<CAPTION>
1998 1997 1996
Weighted Weighted Weighted
Price Shares Price Shares Price Shares
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 $12.74 554,502 $11.16 333,976 $10.63 345,479
Granted 17.04 13,200 14.59 285,194 12.76 34,100
Exercised during the year 12.40 (14,288) --- --- 5.23 (4,446)
Canceled during the year --- --- 12.80 (64,668) 8.65 (41,157)
Outstanding at December 31 12.46 553,414 12.74 554,502 11.16 333,976
Portion thereof exercisable
at December 31 $17.04 526,414 $12.44 507,982 $11.18 299,556
Available for future grants 634,406 647,606 1,232,942
</TABLE>
16. Unaudited Selected Quarterly Financial Data:
(Amounts in thousands except per-share data)
Quarter Ended
March 31 June 30 September 30 December 31
1998
Revenues $ 52,633 $ 54,345 $ 53,833 $ 52,906
Net income $ 2,517 $ 2,494 $ 2,940 $ 4,199
Basic earnings per share $ 0.35 $ 0.34 $ 0.40 $ 0.58
Diluted earnings per share $ 0.34 $ 0.34 $ 0.40 $ 0.57
1997
Revenues $ 52,908 $ 54,527 $ 54,592 $ 54,451
Net income $ 310 $ 1,802 $ 3,019 $ 1,790
Basic earnings per share $ 0.04 $ 0.24 $ 0.41 $ 0.25
Diluted earnings per share $ 0.04 $ 0.24 $ 0.41 $ 0.24
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 5, 1999.
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 5, 1999.
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 5, 1999.
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 5, 1999.
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, 1998, 1997 and 1996
Consolidated Balance Sheet as of December 31, 1998 and 1997
Consolidated Statement of Shareholders' Equity for the years
ended December 31, 1998, 1997 and 1996
Consolidated Statement of Cash Flows for the years ended
December 31, 1998, 1997 and 1996
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
A report on Form 8-K under Item 5 dated September 18, 1998, was filed.
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
17, 1999, 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 Director
Officer and Director
/s/ Timothy J. Hanrahan /s/ James D. Price
Timothy J. Hanrahan James D. Price
Senior Vice President Director
/s/ Carl W. Buedel /s/ Sarah W. Rowland
Carl W. Buedel Sarah W. Rowland
Senior Vice President Director
/s/ J. Mark McKinzie /s/ Thomas H. Sams
J. Mark McKinzie Thomas H. Sams
Senior Vice President, Director
Secretary and General Counsel
/s/ Harold C. McCarthy
Harold C. McCarthy
Director
/s/ Joseph D. Barnette, Jr.
Joseph D. Barnette, Jr.
Director
MERIDIAN INSURANCE GROUP, INC.
FORM 10-K
for the fiscal year ended December 31, 1998
Index to Exhibits
Exhibit Number
Assigned in
Regulation S-K
Item 601 Description of Exhibit
(2) 2.01 Acquisition and Affiliation Agreement by and among
Citizens Security Group, Inc., Citizens Security
Mutual Insurance Company and Meridian Insurance
Group, Inc. (Incorporated by reference to Exhibit
2.01 to the registrant's Form 10-K for the fiscal year
ended December 31, 1996; Commission File No. 0-11413.)
(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 Amendment to Restated Articles of Incorporation of
Meridian Insurance Group, Inc. effective May 14, 1997
(Incorporated by reference to Exhibit 3.02 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1997; Commission File No. 0-11413.)
3.03 Articles of Amendment to Meridian Insurance Group,
Inc. Articles of Incorporation regarding Series A
Junior Participating Preferred Stock. (Incorporated
by reference to Exhibit 3.01 to the registrant's Form
10-Q for quarter ended September 30, 1998; Commission
File No. 0-11413.)
3.04 Bylaws of Meridian Insurance Group, Inc. as amended
through December 4, 1996. (Incorporated by reference
to Exhibit 3.02 to the registrant's Form 10-K for the
fiscal year ended December 31, 1996; Commission File
No. 0-11413.)
3.05 Amendment to Bylaws of Meridian Insurance Group, Inc.
effective December 9, 1998. *Page 67
(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.)
4.02 Additional text of newly issued Certificates for
Common Shares of Meridian Insurance Group, Inc *Page 68
4.03 Rights Agreement, dated as of September 18, 1998, between
Meridian Insurance Group, Inc. and Harris Trust and
Savings Bank, as Rights Agent. The Rights Agreement includes
the form of Articles of Amendment setting forth terms of
Series A Junior Participating Preferred Stock as Exhibit A, the
form Right Certificate as Exhibit B and the Summary of
Rights to Purchase Preferred Shares as Exhibit C
(Incorporated herein by reference to Exhibit 1 to the
Company's report on Form 8-K dated September 18,
1998.)
(9) No exhibit.
(10) 10.01 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.) **
10.02 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.) **
10.03 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.) **
10.04 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 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.) **
10.06 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.) **
10.07 Form of 1995 Non-qualified Stock Option Agreement under
1987 Meridian Insurance Group, Inc., Employee Incentive
Stock Plan. (Incorporated by reference to Exhibit 10.38 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1995; Commission File No. 0-11413.) **
10.08 Meridian Insurance Group, Inc., 1996 Employee Incentive
Stock Plan. (Incorporated by reference to Exhibit
10.39 to the registrant's Form 10-K for the fiscal year ended
December 31, 1995; Commission File No. 0-11413.) **
10.09 First and Second Amendments to Meridian Insurance
Group, Inc. 1996 Employee Incentive Stock Plan.
(Incorporated by reference to Exhibit 10.09 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1997; Commission File No. 0-11413.)**
10.10 Form of March 3, 1997 Non-Qualified Stock Option
Agreement under Meridian Insurance Group, Inc., 1996 Employee
Incentive Stock Plan. (Incorporated by reference to Exhibit
10.50 to the registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.) **
10.11 Form of Amendment No. 1 to the March 3, 1997 Non-
Qualified Stock Option Agreement under Meridian
Insurance Group, Inc., 1996 Employee Incentive Stock
Plan. (Incorporated by reference to Exhibit 10.11 to
the registrant's Form 10-K for the fiscal year ended
December 31, 1997; Commission File No. 0-11413.)**
10.12 Form of March 3, 1997 Incentive Stock Option Agreement
under Meridian Insurance Group, Inc., 1996 Employee
Incentive Stock Plan. (Incorporated by reference to Exhibit
10.51 to the registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.) **
10.13 Form of Amendment No. 1 to the March 3, 1997 Incentive Stock
Option Agreement under Meridian Insurance Group, Inc., 1996
Employee Incentive Stock Plan. (Incorporated by
reference to Exhibit 10.13 to the registrant's Form 10-
K for the fiscal year ended December 31, 1997;
Commission File No. 0-11413.)**
10.14 Form of December 1, 1997 Non- Qualified Stock Option Agreement
under Meridian Insurance Group, Inc., 1996 Employee
Incentive Stock Plan. (Incorporated by reference to Exhibit
10.14 to the registrant's Form 10-K for the fiscal year ended
December 31, 1997; Commission File No. 0-11413.)**
10.15 Written Description of 1998 Meridian Insurance Group, Inc.,
Executive Incentive Plan. (Incorporated by reference to
Exhibit 10.16 to the registrant's Form 10-K for the fiscal
year ended December 31, 1997; Commission File No. 0-11413.)**
10.16 Written Description of 1999 Meridian Insurance Group, Inc.,
Executive Incentive Plan.** *Page 69
10.17 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.) **
10.18 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.) **
10.19 Form of Directors' Non-qualified Stock Option Agreement.
(Incorporated by reference to Exhibit 10.53 to the registrant's
Form 10-K for the fiscal year ended December 31, 1996;
Commission File No. 0-11413.) **
10.20 Meridian Insurance Group, Inc. 401(k) Plan effective
January 1, 1997. (Incorporated by reference to
Exhibit 10.21 to the registrant's Form 10-K for the
fiscal year ended December 31, 1997; Commission File
No. 0-11413.)**
10.21 Form of Termination Benefits Agreement executed
between Meridian Insurance Group, Inc. and Norma J.
Oman, Steven R. Hazelbaker, J. Mark McKinzie, Timothy
J. Hanrahan, and Carl W. Buedel. (Incorporated by
reference to Exhibit 10.23 to the registrant's Form 10-
K for the fiscal year ended December 31, 1997;
Commission File No. 0-11413.)**
10.22 Form of Termination Benefits Agreement executed
between Meridian Insurance Group, Inc. and all other
Executive Officers of Meridian Mutual Insurance
Company not mentioned in Exhibit 10.20 above.
(Incorporated by reference to Exhibit 10.24 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1997; Commission File No. 0-11413.)**
10.23 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.)
10.24 Reinsurance Pooling Agreement Amended and Restated as
of October 1, 1997, by and among Meridian Mutual
Insurance Company, Meridian Security Insurance
Company, Meridian Citizens Mutual Insurance Company,
Meridian Citizens Security Insurance Company, and
Insurance Company of Ohio. (Incorporated by reference
to Exhibit 10.27 to the registrant's Form 10-K for the
fiscal year ended December 31, 1997; Commission File
No. 0-11413.)
10.25 Reinsurance Pooling Agreement Amended and Restated as
of July 1, 1998, by and among Meridian Mutual
Insurance Company, Meridian Security Insurance
Company, Meridian Citizens Mutual Insurance Company,
Meridian Citizens Security Insurance Company, and
Insurance Company of Ohio *Page 71
10.26 Management Services Agreement among Meridian Insurance Group,
Inc., Meridian Mutual Insurance Company and their Affiliates
effective January 1, 1997. (Incorporated by reference to
Exhibit 10.32 to the registrant's Form 10-K for the fiscal
year ended December 31, 1996; Commission File No. 0-
11413.)
10.27 Term Loan Agreement and Business Credit Note between
NBD Bank, N.A., and Meridian Insurance Group, Inc., dated
July 29, 1996. (Incorporated by reference to Exhibit 10.49
to the registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.)
10.28 Form of Modification of Term Loan Agreement between NBD Bank,
N.A., and Meridian Insurance Group, Inc., effective
December 31, 1997. (Incorporated by reference to
Exhibit 10.31 to the registrant's Form 10-K for the
fiscal year ended December 31, 1997; Commission File
No. 0-11413.)
10.29 Form of Meridian Insurance Agency Profit-Sharing Agreement.
(Incorporated by reference to Exhibit 10.37 to the registrant's
Form 10-K for the fiscal year ended December 31, 1996;
Commission File No. 0-11413.)
10.30 Form of Meridian Insurance Agency Profit-Sharing Agreement.
(Incorporated by reference to Exhibit 10.33 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1997; Commission File No. 0-11413.)
10.31 Form of Meridian Insurance Agency Agreement *Page 77
10.32 Form of Meridian Insurance New Agent's Incentive Compensation
Agreement *Page 81
10.33 Form of Meridian Insurance Non-Standard Automobile
Contingent Commission Agreement *Page 84
10.34 Form of Meridian Insurance Farm Lines Contingent
Commission Agreement. *Page 87
10.35 Property Per Risk Excess of Loss Reinsurance Agreement between
Employers Reinsurance Corporation, Meridian Mutual Insurance
Company and Meridian Security 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.)
10.36 Form of Amendment No. 2 to Property Per Risk Excess of Loss
Reinsurance Agreement between Employers Reinsurance
Corporation, Meridian Mutual Insurance Company,
Meridian Security Insurance Company and Vernon Fire &
Casualty Insurance Company effective January 1, 1997.
(Incorporated by reference to Exhibit 10.37 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1997; Commission File No. 0-11413.)
10.37 Form of Amendment No. 3 to Property Per Risk Excess of Loss
Reinsurance Agreement between Employers Reinsurance
Corporation, Meridian Mutual Insurance Company,
Meridian Security Insurance Company, Vernon Fire &
Casualty Insurance Company, and the Citizens Security
Group effective January 1, 1998. (Incorporated by
reference to Exhibit 10.38 to the registrant's Form 10-
K for the fiscal year ended December 31, 1997;
Commission File No. 0-11413.)
10.38 Multiple Layer Reinsurance Agreement between Employers
Reinsurance Corporation, Meridian Mutual Insurance Company and
Meridian Security 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.) Amendment No. 5 to the Multiple Layer
Reinsurance Agreement effective January 1, 1997.
(Incorporated by reference to Exhibit 10.40 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.)
10.39 Commercial and Personal Umbrella Reinsurance Agreement
between Employers Reinsurance Corporation and Meridian
Mutual Insurance Company. (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.)
Amendment No. 9 to the Commercial and Personal
Umbrella Reinsurance Agreement effective January 1,
1997. (Incorporated by reference to Exhibit 10.41 to
the registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.)
10.40 Personal Excess Liability Reinsurance Agreement between
Employers Reinsurance Corporation and Meridian Mutual
Insurance Company. (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.)
Amendment No. 7 to the Personal Excess Liability
Reinsurance Agreement effective January 1, 1997.
(Incorporated by reference to Exhibit 10.39 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.)
10.41 Basket Reinsurance Agreement effective January 1,
1997, among Employers Reinsurance Corporation,
Meridian Mutual Insurance Company, Meridian Security
Insurance Company and Citizens Security Group.
(Incorporated by reference to Exhibit 10.42 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.)
10.42 Excess Catastrophe Reinsurance Contract effective January 1,
1998, issued to Meridian Mutual Group by the
Subscribing Reinsurers Executing the Interests and
Liabilities Agreements identified therein.
(Incorporated by reference to Exhibit 10.45 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1997; Commission File No. 0-11413.)
10.43 Sixth Excess Catastrophe Reinsurance Program effective
January 1, 1997, issued to Meridian Mutual Group by
the Subscribing Reinsurers Executing the Interests and
Liabilities Agreements identified therein.
(Incorporated by reference to Exhibit 10.47 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.)
10.44 Form of Addendum No. 1 to the Sixth Excess Catastrophe
Reinsurance Contract effective January 1, 1997, issued
to the Meridian Mutual Group. (Incorporated by
reference to Exhibit 10.47 to the registrant's Form 10-
K for the fiscal year ended December 31, 1997;
Commission File No. 0-11413.)
10.45 Seventh Excess Catastrophe Reinsurance Program effective
January 1, 1998, issued to Meridian Mutual Group by
the Subscribing Reinsurers Executing the Interests and
Liabilities Agreements identified therein.
(Incorporated by reference to Exhibit 10.49 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1997; Commission File No. 0-11413.)
10.46 Underlying Aggregate Excess Catastrophe Reinsurance
Contract effective January 1, 1998, issued to Meridian
Mutual Group by the Subscribing Reinsurers Executing
the Interests and Liabilities Agreements identified
therein. (Incorporated by reference to Exhibit 10.51
to the registrant's Form 10-K for the fiscal year
ended December 31, 1997; Commission File No. 0-11413.)
10.47 Second Underlying Aggregate Excess Catastrophe Reinsurance
Contract issued to Meridian Mutual Group effective
May, 1996, and Addendum No. 1 effective January
1,1997. (Incorporated by reference to Exhibit 10.46
to the registrant's Form 10-K for the fiscal year
ended December 31, 1996; Commission File No. 0-11413.)
10.48 Form of Addendum No. 2 to the Second Underlying Aggregate
Excess Catastrophe Reinsurance Contract effective May
10, 1996 (Incorporated by reference to Exhibit 10.55
to the registrant's Form 10-K for the fiscal year
ended December 31, 1997; Commission File No. 0-11413.)
10.49 Property Excess of Loss Reinsurance Binding Agreement between
Meridian Mutual Group and NAC Reinsurance Corporation
effective June 15, 1995 and Endorsement No.1 effective
January 1, 1996. (Incorporated by reference to
Exhibit 10.44 to the registrant's Form 10-K for the
fiscal year ended December 31, 1995; Commission File
No. 0-11413.)
10.50 Form of Endorsement No. 2, which became effective
January 1, 1997, and Form of Endorsement No. 3, which
became effective June 15, 1996, to the Property Excess
of Loss Reinsurance Binding Agreement. (Incorporated
by reference to Exhibit 10.55 to the registrant's Form
10-K for the fiscal year ended December 31, 1997;
Commission File No. 0-11413.)
10.51 Endorsement No. 4, Property Excess of Loss Reinsurance
Binding Agreement, effective June 1, 1998 *Page 90
10.52 Seventh Excess Catastrophe Reinsurance Contract
effective January 1, 1999, issued to Meridian Mutual
Insurance Company by the Subscribing Reinsurers
Executing the Interest and Liabilities Agreements
identified therein. *Page 93
10.53 Underlying Aggregate Excess Catastrophe Reinsurance
Contract, effective January 1, 1999, issued to
Meridian Mutual Insurance Company by the Subscribing
Reinsurers Executing the Interest and Liabilities
Agreements identified therein. *Page 120
10.54 Form of Addendum No. 2 to the Sixth Excess Catastrophe
Reinsurance Contract effective January 1, 1999, issued
to Meridian Mutual Group *Page 147
10.55 Excess Catastrophe Reinsurance Contract effective
January 1, 1999, issued to Meridian Mutual Insurance
Company by the Subscribing Reinsurers Executing the
Interest and Liabilities Agreements identified therein
*Page 153
10.56 Software and Hardware Support Agreement by and among Meridian
Citizens Mutual Insurance Company, Meridian Citizens
Security Insurance Company, Insurance Company of Ohio,
and VIS'N, Inc. (Incorporated by reference to Exhibit
10.36 to the registrant's Form 10-K for the fiscal
year ended December 31, 1996; Commission File No. 0-
11413.)
10.57 Form of Agreement for the Transfer of Claim Processing
Services effective December 1, 1997 between the
Citizens Security Companies and VIS'N, Inc.
(Incorporated by reference to Exhibit 10.58 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1997; Commission File No. 0-11413.)
10.58 Form of Citizens Security Group Agency Agreement.
(Incorporated by reference to Exhibit 10.55 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.)
10.59 Form of Citizens Security Mutual Insurance Company Agency
Agreement. (Incorporated by reference to Exhibit
10.56 to the registrant's Form 10-K for the fiscal
year ended December 31, 1996; Commission File No. 0-
11413.)
10.60 Form of Citizens Security Group Limited Agency Agreement.
(Incorporated by reference to Exhibit 10.58 to the
registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.)
10.61 Form of Citizens Security Mutual Insurance Company Personal
Partner Agency Agreement. (Incorporated by reference
to Exhibit 10.59 to the registrant's Form 10-K for the
fiscal year ended December 31, 1996; Commission File
No. 0-11413.)
10.62 Form of Citizens Security Group Personal Partner Contingency
Plan. (Incorporated by reference to Exhibit 10.60 to
the registrant's Form 10-K for the fiscal year ended
December 31, 1996; Commission File No. 0-11413.)
10.63 Form of Citizens Security Group Network Agencies Profit
Sharing Plan. (Incorporated by reference to Exhibit
10.61 to the registrant's Form 10-K for the fiscal
year ended December 31, 1996; Commission File No. 0-
11413.)
10.64 Form of Citizens Security Group Individual Agency Profit
Sharing Plan. (Incorporated by reference to Exhibit
10.62 to the registrant's Form 10-K for the fiscal
year ended December 31, 1996; Commission File No. 0-
11413.)
10.65 Form of Meridian Citizens Agency Profit-Sharing Agreement
*Page 210
(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.
*Page 215
(22) No exhibit.
(23) 23.01 Consent of Independent Accountants dated March 26, 1998
*Page 216
(24) No exhibit.
(27) 27.01 Financial Data Schedule for Meridian Insurance Group,
Inc., for the year ended December 31, 1998 *Page 217
27.02 Restated Financial Data Schedule for Meridian
Insurance Group, Inc., for the year ended December 31,
1997 *Page 218
27.03 Restated Financial Data Schedule for Meridian
Insurance Group, Inc., for the year ended December 31,
1996. *Page 219
27.04 Restated Financial Data Schedule for Meridian
Insurance Group, Inc., for the period ended September 30, 1998.
*Page 220
(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, 1998 *Page 221
* 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.
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 58
Schedule II Condensed Financial Information of Registrant 59
Schedule IV Reinsurance 61
Schedule VI Supplemental Information Concerning Property-
Casualty Insurance Operations 62
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
SCHEDULE I--SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 1998
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 $ 14,569,208 $ 14,854,647 $ 14,854,647
States, municipalities, and
political subdivisions 67,150,826 68,207,690 68,207,690
Public utilities 5,521,956 6,659,950 6,659,950
All other corporate bonds 126,692,564 129,994,362 129,994,362
Redeemable preferred stocks 20,697,205 22,277,313 22,277,313
Total fixed maturities 234,631,759 241,993,962 241,993,962
Equity securities
Common stocks
Public utilities 6,425,049 8,881,034 8,881,034
Banks, trust, and insurance
companies 4,759,792 7,498,762 7,498,762
Industrial, miscellaneous,
and all other 37,152,836 47,640,865 47,640,865
Total equity securities 48,337,677 64,020,661 64,020,661
Other long-term investments 1,040,309 1,375,463 1,375,463
Short-term investments 6,431,482 6,431,482 6,431,482
Total other investments 7,471,791 7,806,945 7,806,945
Total investments $290,441,227 $ 313,821,568 $ 313,821,568
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY)
BALANCE SHEET
as of December 31, 1998 and 1997
ASSETS
1998 1997
Cash and short-term investments $ 2,271,945 $ 2,247,120
Investment in subsidiaries (eliminated
in consolidation) 153,261,543 144,339,653
Other assets 265,973 85,749
Total assets $155,799,461 $146,672,522
LIABILITIES AND SHAREHOLDERS' EQUITY
Due to Meridian Mutual Insurance Company $ 1,045,989 $ 807,194
Post-employment benefits 1,935,616 1,933,181
Bank loan payable 10,125,000 11,375,000
Dividends payable 579,497 530,149
Other liabilities 144,526 132,763
Total liabilities 13,830,628 14,778,287
Shareholders' equity:
Common shares 44,336,679 44,110,416
Treasury Shares, at cost;
212,800 shares (3,277,781) (2,308,188)
Contributed capital 25,923,462 15,058,327
Accumulated other comprehensive income 15,190,238 14,349,232
Retained earnings 59,796,235 60,684,448
Total shareholders' equity 141,968,833 131,894,235
Total liabilities and
shareholders' equity $155,799,461 $146,672,522
STATEMENT OF INCOME
For the Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
Dividend income from subsidiaries $ 5,000,000 $ 5,000,000 $ 3,900,000
Other income 23,115 24,537 24,656
Less: General operating expenses 619,405 773,888 727,648
Interest expense 672,630 732,047 307,887
Current federal income tax benefit (338,581) (191,110) (265,508)
Income before equity in net
income of subsidiaries 4,069,661 3,709,712 3,154,629
Equity in undistributed net
income of subsidiaries 8,080,884 3,211,411 2,645,323
Net income $12,150,545 $ 6,921,123 $ 5,799,952
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT, Continued
STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
Cash flows from operation:
Net income $12,150,545 $ 6,921,123 $ 5,799,952
Reconciliation of net income to net
cash provided by operations:
Equity in undistributed net
income of subsidiaries (8,080,884) (3,211,411) (2,645,323)
(Increase) decrease in
other assets (180,224) (66,859) 5,521
Increase in due to Meridian Mutual
Insurance Company 238,795 779,677 20,966
Increase in post-employment
benefits 2,435 515,367 119,436
Increase (decrease) in other
liabilities 11,763 (524) 132,425
Other, net --- 35,579 (21,848)
Net cash provided by operation 4,142,430 4,972,952 3,411,129
Cash flows from investing activities:
Capital contribution to subsidiary --- --- (12,000,000)
Net cash used by investing activities --- --- (12,000,000)
Cash flows from financing activities:
Proceeds from stock options 226,263 --- 23,241
Repurchase of common stock (969,593) (2,308,188) (22,080)
Proceeds from bank loan --- --- 12,000,000
Repayment of bank loan (1,250,000) (500,000) (125,000)
Dividends paid (2,124,275) (2,144,839) (2,101,426)
Net cash provided (used)
by financing activities (4,117,605) (4,953,027) 9,774,735
Net increase in cash 24,825 19,925 1,185,864
Cash at beginning of year 2,247,120 2,227,195 1,041,331
Cash at end of $ 2,271,945 $ 2,247,120 $ 2,227,195
<TABLE>
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
SCHEDULE IV--REINSURANCE
For the Years Ended December 31, 1998, 1997 and 1996
<CAPTION>
Percentage
Ceded Assumed of Amount
Gross to Other from Other Net Assumed
Amount Companies(1) Companies(1) Amount to Net
Property and liability
insurance premiums:
<S> <C> <C> <C> <C> <C>
Year ended
December 31, 1998 $ 205,534,750 $ 16,960,370 $ 614,042 $ 189,188,422 0.3%
Year ended
December 31, 1997 $ 211,105,812 $ 17,751,345 $ 1,232,165 $ 194,586,632 0.6%
Year ended
December 31, 1996 $ 176,718,644 $ 15,839,546 $ 6,425,316 $ 167,304,414 3.8%
</TABLE>
_____________
(1) The amounts for the years ended December 31, 1998, 1997 and
1996 represents the Company's insurance subsidiaries share of third
party reinsurance transactions pursuant to the pooling agreement.
MERIDIAN INSURANCE GROUP, INC., AND SUBSIDIARIES
SCHEDULE VI--SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY-CASUALTY INSURANCE OPERATIONS
For the Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
Deferred policy acquisition costs $ 17,671,856 $ 17,651,544 $ 16,690,275
Reserves for losses and loss
adjustment expenses $154,252,671 $169,801,326 $161,309,239
Unearned premiums $ 81,223,095 $ 82,839,333 $ 84,065,751
Earned premiums $189,188,422 $194,586,632 $167,304,414
Investment income $ 17,245,684 $ 16,371,711 $ 14,908,285
Losses and loss adjustment expenses
incurred related to:
Current years $145,328,331 $165,576,734 $137,817,367
Prior years $ (8,708,340) $(16,358,003) $ (7,716,175)
Amortization of deferred policy
acquisition costs $ 42,213,612 $ 42,163,797 $ 36,251,186
Paid losses and loss adjustment
expenses $145,097,636 $147,779,800 $123,669,408
Premiums written $188,071,251 $194,519,309 $169,194,649
EXHIBIT 3-05
MERIDIAN INSURANCE GROUP, INC.
AMENDMENT TO BYLAWS
Article III, Section 2, has been amended to read as follows effective
December 9, 1998:
Section 2. Number and Terms of Office. There shall be at least
eight (8) directors of its Corporation who shall be divided into
three (3) classes containing, as nearly as possible, an equal
number of directors in each class. The term of office of each of
the directors in each class shall expire in the same year so that
each class shall be elected at succeeding annual meetings for a
three-year term; except as shorter terms may be required for
individual directors so as to maintain, as nearly as possible, an
equal number of directors in each class.
EXHIBIT 4-02
MERIDIAN INSURANCE GROUP, INC.
Text of Certificate for Common Shares
The following legends will be added to the reverse side of the Meridian
Insurance Group, Inc., Common Share Certificates issued on or after
September 28, 1998:
A SUMMARY OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS APPLICABLE TO EACH CLASS OF SHARES AND THE VARIATIONS
IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES
(AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE
VARIATIONS FOR FUTURE SERIES) OF SHARES THAT THE CORPORATION IS
AUTHORIZED TO ISSUE WILL BE FURNISHED WITHOUT CHARGE TO ANY
SHAREHOLDERS UPON WRITTEN REQUEST.
THE CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN
MERIDIAN INSURANCE GROUP, INC., (THE "COMPANY") AND THE RIGHTS
AGENT THEREUNDER (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE
HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON
FILE AT THE PRINCIPAL OFFICES OF THE COMPANY. UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS
WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE
EVIDENCED BY THIS CERTIFICATE. THE COMPANY WILL MAIL TO THE
HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT
CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER
CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS ISSUED TO ANY PERSON WHO BECOMES AN ACQUIRING PERSON (AS
DEFINED IN THE RIGHTS AGREEMENT), INCLUDING SUCH RIGHTS HELD BY A
SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
EXHIBIT 10-16
MERIDIAN INSURANCE
PARTICIPANT DESCRIPTION
FISCAL YEAR 1999 ANNUAL INCENTIVE PLAN
Participant Name:
Title:
PURPOSE
Meridian's 1999 Annual Incentive Plan is designed to provide you with a
very competitive opportunity to increase your cash compensation and your
ownership of MIGI stock for the attainment of the annual financial
objectives.
You have been selected to participate in this plan because you are in a
position to substantially influence the accomplishment of the corporate
objectives.
1999 ANNUAL PLAN CONCEPTS
The Plan is structured to pay an award based on meeting or exceeding the
1999 consolidated pre-tax income goals of the property-casualty operations.
Each plan participant's total award is based on how well the companies do
overall.
The size of your award may vary from X percent to X percent of your annual
base salary as of December 31, 1999, and is based on meeting at least the
threshold goal.
PLAN DETAILS
The target award amount is calculated as a percent of your 1999 year-end
salary. For example, your target bonus is X percent. Using your salary as
of December 1, 1998, your target award would be $X.
The award is payable in cash, in stock of Meridian Insurance Group, Inc.,
or a combination of both payment methods. Upon confirmation of a bonus
earned, you will be given the opportunity to choose the payment method.
No incentive plan payment shall be made to any plan participant in years
when the pre-tax income result fails to meet a minimum acceptable level.
For fiscal year 1999, no incentives shall be paid if the consolidated pre-
tax income is less than $X.
Applicable company goals and your accompanying awards are as follows:
CORPORATE FINANCIAL PERFORMANCE
Award Payout Schedule as a % of Base Salary
Pre-Tax Income Your Award
Potential
Maximum (% of goal) $X X% of base salary
Target (% of goal) $X X% of base salary
Threshold (% of $X X% of base salary
goal)
Pre-tax income results must fully reach the threshold level to result in an
award payout. The award will be pro-rated for results between threshold
and maximum pre-tax income levels. For example, if pre-tax income is $X
(halfway between target and maximum), then your bonus would be
(ExamplePercent) percent (or halfway between the target and maximum award).
The Company has been motivated to adopt this plan, in part, to encourage
and allow participants to increase their equity holdings in MIGI. As
always, the timing of stock purchases(s) should be consistent with the safe
harbor periods permitted by insider trading requirements. The Legal
Department or Human Resources should be contacted in advance of any MIGI
stock transaction to verify permissible timeframes.
AWARD PAYMENT
Barring unforeseen circumstances, individual awards will be finalized after
the close of the fiscal year for payment in March. All appropriate taxes
will be deducted from the award payment.
TERMINATION OF EMPLOYMENT
No bonuses are payable in the event of a participant's termination during
the Plan year other than by death, permanent disability or normal
retirement, in which event a discretionary payment may be made. Generally,
in order to be eligible for a bonus payout, the participant must be a full-
time active employee of the Company at the time of the bonus payment. An
employee for whom a formal leave of absence has been granted by the Company
may be construed to be a full-time active employee of the Company at the
time of bonus payment with the approval of the President.
The Joint Compensation Committee reserves the right to modify or terminate
this incentive plan as necessary.
EXHIBIT 10-25
REINSURANCE POOLING AGREEMENT
AMENDED AND RESTATED AS OF JULY 1, 1998
THIS REINSURANCE POOLING AGREEMENT (the "Agreement") made by and among
Meridian Mutual Insurance Company ("Mutual"), Meridian Security Insurance
Company ("Security"), Citizens Security Mutual Insurance Company
("Citizens"), Citizens Fund Insurance Company ("Fund"), and Insurance
Company of Ohio ("ICO")is amended and restated effective 12:01 a.m. on the
first day of July, 1998, (the "Effective Time") and shall remain in force
continuously thereafter until cancelled at any time by mutual consent.
WHEREAS Mutual and Security have been parties to this Agreement since
January 1, 1981; and
WHEREAS Citizens, Fund, and ICO became parties to this Agreement
effective August 1, 1996, when Meridian Insurance Group, Inc., acquired
Fund and ICO and became affiliated with Citizens; and
WHEREAS the parties to this Agreement desire to include under this
Agreement all types of insurance written by the parties;
NOW, THEREFORE, do Mutual, Security, Citizens, Fund, and ICO
agree to amend and restate this Agreement as follows as witnessed by their
signatures affixed to this Agreement.
ARTICLE I
The Companies are engaged in the insurance business and maintain a mutual
relationship having certain incidents of common management, and desire to
bring about for each other added economies of operation, uniform
underwriting results, diversification as respects the classes of insurance
business written, and maximization of capacity. To accomplish the
aforesaid, the Companies do by means of this Agreement, pool all of their
insurance business in force as of the Effective Time of this Agreement or
thereafter and agree to share in the fortunes of their pooled insurance
business.
ARTICLE II
Mutual hereby reinsures and Security, Citizens, Fund, and ICO hereby cede
and transfer to Mutual all liabilities incurred under or in connection with
all contracts and policies of insurance issued by Security, Citizens, Fund,
and ICO outstanding and in force as of the Effective Time of this
Agreement, or thereafter issued by them. Such liabilities shall include
Security's, Citizens', Fund's, and ICO's reserves for unearned premiums,
outstanding losses and loss expenses (including unreported losses), all
other underwriting and administrative expenses which shall include service
fee income and premium balances charged off as uncollected receivables, and
policyholder dividends as evidenced by their books and records, but shall
not include inter-company balances, service fee income, liabilities for
Federal Income Taxes, or liabilities incurred in connection with
Security's, Citizens', Fund's, and ICO's investment transactions.
ARTICLE III
Security, Citizens, Fund, and ICO hereby assign and transfer to Mutual all
right, title and interest in and to reinsurance ceded to reinsurers, other
than the parties hereto, outstanding and in force with respect to the
liabilities reinsured by Mutual under Article II hereof.
ARTICLE IV
Each of Security, Citizens, Fund, and ICO agrees to pay to Mutual amounts
equal to the aggregate of all of its liabilities reinsured by Mutual under
Article II hereof.
ARTICLE V
Security, Citizens, Fund, and ICO hereby reinsure, and Mutual hereby cedes
and transfers to each of them the following percentage of Mutual's net
liabilities under all contracts and policies of insurance (including those
reinsured by Mutual under Article II hereof) on which Mutual is subject to
liability and which are outstanding and in force as of the Effective Time
of
this Agreement, or which are issued thereafter:
61 percent ceded to Security;
4 percent ceded to Citizens;
9 percent ceded to Fund;
4 percent ceded to ICO.
Such liabilities shall include Mutual's reserves for unearned premiums,
outstanding losses and loss expense (including unreported losses), all
other underwriting and administrative expenses which shall include service
fee income and premium balances charged off as uncollected receivables, and
policyholder dividends but shall not include inter-company balances,
service fee income, liabilities for Federal Income Taxes or liabilities
incurred in connection with Mutual's investment transactions.
ARTICLE VI
Mutual hereby assigns and transfers to each of Security, Citizens, Fund,
and ICO assets in the amount equal to the aggregate of all liabilities of
Mutual reinsured by that specific company under Article V hereof.
ARTICLE VII
Mutual agrees to pay to Security, Citizens, Fund, and ICO their specified
participation, as listed in Article V, of all premiums written by the
companies after first deducting premiums on all reinsurance ceded to
reinsurers (other than the parties hereto). Similarly, it is further agreed
that all losses, loss expenses and other underwriting and administrative
expenses which shall include service fee income and premium balances
charged off as uncollected receivables, (with the exceptions noted in
Article II and V hereof) of the companies, less all losses and expenses
recovered and recoverable under reinsurance ceded to reinsurers (other than
the parties hereto), shall be pro-rated among all five parties on the basis
of their respective participations.
ARTICLE VIII
The obligation of the companies under this Agreement to exchange
reinsurance between themselves may be offset by the reciprocal obligations
so that the net amount only shall be required to be transferred. An
accounting on all transactions shall be rendered quarterly, or more often
as may be mutually agreed, and shall be settled within a reasonable time
thereafter. Except as otherwise required by the context of this Agreement,
the amount of all payments between the companies under this Agreement shall
be determined on the basis of the convention form of annual statements of
the companies. Notwithstanding anything herein contained, this Agreement
shall not apply to the investment
operations of the companies, but this provision shall not prohibit other
agreements pertaining to the intercompany allocation or sharing of
investment expense.
ARTICLE IX
The conditions of reinsurance hereunder shall in all cases be identical
with the conditions of the original insurance or as changed during the term
of such insurance.
ARTICLE X
Each of the companies hereto, as the assuming insurer, hereby agrees that
all reinsurance made, ceded, renewed or otherwise becoming effective under
this Agreement shall be payable by the assuming insurer on the basis of the
liability of the ceding insurer under the policy or contract reinsured
without diminution because of the insolvency of the ceding insurer;
provided that such reinsurance shall be payable directly to the ceding
insurer or to its liquidator, receiver or other statutory successor,
except(a) where the contract specifically provided another payee for such
reinsurance in the event of the insolvency of the ceding insurer and (b)
where the assuming insurer, with the consent of the direct insured or
insureds and with the approval of the appropriate insurance department if
such approval is required by state law, has assumed such policy obligations
of the ceding insurer as direct obligations of the assuming insurer to the
payees under such policies and in substitution for the obligations of the
ceding insurer to such payee; and further provided that the liquidator,
receiver or statutory successor of the ceding insurer shall give written
notice of the pendency of any claim against the insolvent ceding insurer on
the policy or contract reinsured within a reasonable time after such claim;
and the assuming insurer may investigate such claim and interpose, at its
own expense, in the proceeding where such claim is to be adjudicated, any
defense or defenses which it may deem available to the ceding insurer or
its liquidator, receiver or statutory successor, the expense thus incurred
by the assuming insurer to be chargeable, subject to court approval,
against the insolvent
ceding insurer as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the ceding insurer
solely as a result of the defense undertaken by the assuming insurer.
ARTICLE XI
This Agreement has no fixed term and is terminable with respect to any one
of Security, Citizens, Fund, or ICO (herein the "terminating party") by the
mutual consent of Mutual and the terminating party or parties. This
Agreement may be amended or terminated without the necessity of a vote by
the shareholders or the policyholders of any of the parties. In the event
of termination of this Agreement, the terminating party shall transfer back
to Mutual the liabilities ceded to it by Mutual, and Mutual shall transfer
back to the terminating party the liabilities ceded to it by the
terminating party, and each party shall receive from the other assets in an
amount equal to the amount of the policy liabilities received by it.
IN WITNESS WHEREOF, this Agreement is entered into as of the date written
above.
MERIDIAN MUTUAL INSURANCE COMPANY
By______________________________
Norma J. Oman, President
Attest:____________________________
J. Mark McKinzie, Secretary
MERIDIAN SECURITY INSURANCE COMPANY
By______________________________
Norma J. Oman, President
Attest:____________________________
J. Mark McKinzie, Secretary
CITIZENS SECURITY MUTUAL INSURANCE COMPANY
By______________________________
Norma J. Oman, President
Attest:____________________________
J. Mark McKinzie, Secretary
CITIZENS FUND INSURANCE COMPANY
By____________________________
Norma J. Oman, President
Attest:____________________________
J. Mark McKinzie, Secretary
INSURANCE COMPANY OF OHIO
By____________________________
Norma J. Oman, President
Attest:____________________________
J. Mark McKinzie, Secretary
EXHIBIT 10-31
AGENCY AGREEMENT
I. AUTHORITY OF AGENT:
Whereas it is the intent of the Company to engage profitably in the
business of insurance through independent agents, the following
section of this Agreement is intended to establish the nature of the
relationship between the Company and the Agent and to specify
conditions thereof.
The Agent is an independent contractor, not an employee of the
Company and, subject to rquirements imposed by law, the terms of this
Agreement, and the underwriting rules and regulations of the Company,
is authorized to:
A. Solicit, receive and transmit to the Company proposals for
such insurance contracts as the Compay is licensed to write and to
bind the Company only on such classes of risks and to such limits
as the Company may from time to time authorize by letter of
instructions, underwriting guide, manual or other written
instruction;
B. Collect and issue receipts for all premiums, except as
hereinafter provided, on insurance written by the Agent or tendered
by the Agent to the Company and, as full compensation, to retain
out of premiums so collected commissions at the rates or terms set
forth on the then current Schedule of Commissions or as may be
authorized in writing hereafter from time to time;
C. Exercise exclusive and independent control of working hours
and conduct of the Agency;
D. Exercise the authority granted under this Agreement,
personally or through authorized employees or representatives and
is responsible for the acts of such employees and representatives;
E. Represent other companies.
II. AGENCY BILL POLICIES:
Whereas, the orderly transfer of premiums from the policyholder to
the Company through the Agent as a fiduciary is the responsibility of
the Agent, the following section of this Agreement is intended to
protect the interests of the policyholder, Agent and Company in such
transactions and to provide proper procedures therefor.
On business placed by the Agent with the Company and while handled
as Agency Bill, the following provisions apply:
A. The Agent agrees to accept in a fiduciary capacity all
premiums collected and that the privilege of retaining commissions
in accord with the then current Schedule of Commissions shall not
be construed as changing such fiduciary capacity;
B. With respect to premiums collected by the Agent for or on
behalf of the Company and other insurance carriers:
1. A trust account will be maintained in a bank under
the name of the Agent as an Agency Premium Trust Account in which
the Agent agrees to deposit all premiums hereafter received, each
such premium to be held and deposited in trust for the respective
insurance carrier with whom such business is placed.
2. Checks may be drawn from said trust account only
for the following purposes:
a. to pay net balances due insurance companies
on business written by or through the Agent;
b. to pay to policyholders return premiums due;
c. to pay the Agent the amount of Agent's
commission in accord with the then current Schedule of
Commissions on premiums deposited in said trust account.
C. If any final additional premiums developed by audit or under
reporting form policies cannot be collected by the Agent, the
Company shall undertake direct collection; and the Agent shall not
be responsible for such premiums provided the Agent notifies the
Company of his inability to collect such premium within 60 days of
the Company's initial notification to the Agent of such additional
premiums due. No commission shall be paid to the Agent on such
premiums collected by the Company.
D. An itemized statement of premiums due shall be rendered to the
Agent monthly by the Company or, when mutually agreed, the Agent
may on or before the 10th day of each month, render to the Company
a statement of all business transacted the previous month.
E. The balance, shown in the statement due the Company or due the
Agent, shall be paid not later than 45 days after the end of the
account month for which such statement was prepared. The omission
of any item(s) shall not affect the responsibility of either party
to account for an pay all accounts due the other, nor shall it
prejudice the rights of either party to collect all such amounts
due from the other.
III. COMPANY BILL POLICIES:
Whereas, the collection of premiums from the policyholder by the
Company may be agreed upon by the Agent and the Company, the following
section of this Agreement is intended to evidence the continuing
responsibility of the Agent as part of the Company Bill system, to
guarantee that the Agent receives all commissions due him in accord
with the then current Schedule of commissions, and to assure that the
Agent is identified as a party to each such transaction.
On business placed by the Agent with the Company and designated as
Company Bill, the following provisions apply:
A. Submission of applications, binding of coverage and Agent's
involvement in payment of premiums shall be in accordance with the
provisions of the Company Bill Program.
B. Commissions on premiums shall be paid to the Agent within 30
days after the end of the month in which such premiums are received
and recorded by the Company.
C. Commissions payable to the Agent may be offset by any amounts
due any Company of the Meridian Insurance Group.
D. The Company shall clearly and prominently identify the Agent
by name when transmitting policies, premium notices, cancellation
notices, and such other documents as practicable to policyholders.
E. The Company will not knowingly communicate to the policyholder
in any way so as to obviate or violate the agent-policyholder
relationship.
IV. Whereas, the Agent, being an independent contractor, is in
complete control of the conduct of the Insurance agency, the following
section of this Agreement is intended to identify those aspects of
agency operation in which the Company is vitally concerned and to
provide needed procedures and guidelines, for the protection of the
Company.
THE AGENT FURTHER AGREES:
A. To forward promptly to the Company copies of all evidence of
insurance effected by the Agent or modifications thereof, and to
maintain a complete record of transactions with the Company and
with policyholders, which shall be open to the company's inspection
at any reasonable time;
B. The Company shall not be responsible for the Agent's expenses;
C. The Agent shall sponsor no advertisement in which the Company
name is mentioned nor otherwise cause to be circulated any printed
information identifying the Company without prior written approval
of the Company;
D. The Company has the right to reject, cancel, refuse to renew
or decline to continue any policy of insurance, subject to policy
provisions, with notification to the Agent at the same time as the
policyholder.
E. Supplies and equipment furnished by the Company shall remain
the property of the Company and shall be returned upon request;
F. To prepare annually and make available to the Company on
request a financial statement of the Agent, prepared in accordance
with generally accepted accounting principles;
G. If the Agent is a corporation, to provide the Company with
notice of any change in the schedule of shareholders of record and
any actual or beneficial owners of shares of the corporation.
H. To assist and cooperate with the Company in its continuing
underwriting evaluation and in any effort deemed necessary by the
Company, including but not limited to, inspecting, modifying, or re-
rating individually and/or collectively any insurance placed by the
Agent with the Company.
I. To waive any statutory right to advance notice of the
Company's obligation to mail or deliver notice of cancellation for
nonpayment of premium to the named insured on any policy placed by
the Agent with the Company;
J. The Schedule of Commissions may be revised from time to time
by the Company and such a revision shall not be considered as
termination of this agreement. Any change in the Schedule of
Commissions shall be effected by the mailing by the Company to the
Agent of a revised Schedule of Commissions not less than ninety
days prior to the effective date of the revised Schedule. Such
revisions shall apply to a class or category of the Company's Agent
as such a class or category may now exist or hereafter be
established by the Company but no revision of the Schedule of
Commissions shall be applicable solely to the Agent. This
agreement shall not prohibit the negotiation of special commission
rates on indivdiual policies;
K. To refund return commissions to the Company on policy
cancellations or return premiums in each case at the same rate at
which such commissions were originally retained or paid, and to
refund return commissions on policies on wihch the Agent has filed
an Agent of Record letter as if the original commission had been
retained by or paid to the Agent.
L. To provide all usual and customary services of an insurance
agent on insurance contracts placed by the Agent with the Company.
V. Whereas, it is the intent of this section to reaffirm the Agent's
ownership of the sole right to use and control of the records and
expirations of the business written by the Agent and to protect the
Agent from legal obligations incurred solely as a result of Company
error.
THE COMPANY FURTHER AGREES:
A. That unless authorized by the Agent, the Company shall not
use, or permit the use of, its records of business placed by the
Agent with the Company to solicit individual policyholders for the
sale of other lines of insurance or other products or services.
When the Agent grants such authorization, he shall be allowed such
commission or fee as may be agreed upon for such sales resulting
from the use of such records;
B. To hold the Agent harmless against all claims or damages which
the Agent may become legally obligated to pay to or on behalf of
any policyholder caused solely by error of the Company in the
processing or handling of Company Bill policies, including failure
to send to any insured before due date a notice of premium due;
C. To indemnity and hold the Agent harmless from and against all
sums, including costs and expenses of defense and settlement, which
the Agent shall become legally obligated to pay by reason of civil
liability based on the Company's failure to comply with the
requirements of the Fair Credit Reporting Act in the procurement or
use of consumer reports, as defined in the Act, ordered by the
Company or upon its express authorization; provided that this
Agreement does not apply to civil liability the Agent may incur as
the result of his wilfull non-compliance with the requirements of
the Act.
VI. SALE OR TRANSFER:
Whereas, it is vital to the strength and growth of the Company that
the high quality of its agency representation be maintained, this
section of this Agreement is intended to assert the sole right of the
Company to select the Agents who represent it.
The Agent agrees to give 60 days' advance notice to the Company of
any sale or other transfer in any manner whatsoever of any ownership
interest in the Agency, or its consolidation with a successor firm, or
transfer of any interest whatsoever in the shares of corporate stock
of the Agent in order that the Company may at its election:
A. Permit this Agreement to terminate as provided in Section VII; or
B. Enter into a new Agency Agreement with the Agent or its
successor; or
C. Place in effect a Limited Agency Agreement with the successor
in order to provide continued servicing of existing policyholders.
VII. TERMINATION:
Whereas, both parties recognize the right of the other to terminate
this agreement, and in such cases the necessity of providing for the
orderly and unprejudicial transfer of business to another company, it
is the intent of the following section of this Agreement to support
the Agent's need for a stable and dependable market, under specified
conditions as stated below; ensure the right of the Company to select
the insurance risks written by it; and set forth procedures and
conditions which will apply if termination of this Agreement does
occur.
A. This Agreement shall terminate:
1. At the Agent's request giving at least 60 days' advance
written notice to the Company;
2. At the Company's request, giving at least 60 days'
advance written notice to the Agent;
3. Automatically, if any public authority cancels or
declines to renew the Agent's license or certificate of authority
or if the Company ceases to do business in the state in which the
Agent is licensed;
4. At the Company's discretion, if any public authority
suspends or otherwise limits the Agent's license or certificate
of authority;
5. Automatically on the effective date of the sale or
transfer of the Agent's business or its consolidation with a
successor unless this Agreement is assigned as provided in
Section VI;
6. Automatically in the event of transfer of the actual or
beneficial ownership of any shares of the stock of an
incorporated agency, unless this Agreement is assigned as
provided in Section VI;
7. Immediately upon either party's giving written notice
to the other in the event of abandonment, bankruptcy,
receivership, fraud, insolvency or gross and willful misconduct
on the part of such other party or of any partner or actual or
beneficial owner of any shares of such other party;
8. At the Company's request, upon written notice to the
Agent that the Agent is delinquent in either accounting for or
payment of fiduciary funds or other monies due the Company,
provided that minor differences between the Agent's and Company's
records shall not constitute failure to pay under the foregoing
provision;
9. At the option of the Company in the event of death,
retirement, disability or other termination from active
employment by, or cessation of active participation in, the
regular operation of the Agency by any person signatory as a
party or in a representative capacity to this contract.
B. The Company's refusal to accept or renew insurance written by
any Agent owner, principal, employee, solicitor, or anyone acting
on behalf of the Agent, shall not be construed as termination of
this Agreement.
C. In the event of termination of this Agreement:
1. The Agent's records, use and control of expirations,
including Company Bill business and continuous term policies,
shall remain the property of the Agent and left in his undisputed
possession, provided the Agent has then rendered, and continues
to render, timely accounts and payments of all amounts due the
Company as provided in paragraph II. E. or provides security
therefor acceptable to the Company; otherwise the records, use
and control of expirations shall become vested in the Company,
and Agent shall hold all such records and lists of expirations
for the use and benefit of the Company; and upon demand by the
Company, all such records, use and control of expirations will be
surrendered to the Company or its representative.
If in disposing of such records and expirations the
Company does not realize sufficient money to discharge in full
the Agent's indebtedness to the Company, the Agent shall remain
liable for the balance of such indebtedness. Any amount realized
in excess of such indebtedness, less expense incurred in
disposing of such records and expirations, shall be returned to
the Agent.
2. The Agent not being in default, the Company shall
furnish to the Agent basic information on Company Bill policies,
if such information has not been regularly provided, and shall
notify all Company Bill insureds of an intent not to renew.
3. After the termination date of this Agreement, the Agent
shall have no authority to solicit insurance on behalf of the
Company, to bind the Company on any insurance, or identify with
the Company in any form of advertising except;
a. With respect to insurance contracts of the
Company which were issued through the Agent, the Agent has full
authority after the effective date of termination to: (1)
renew policies (I) which will be renewed within 60 days from
the termination date of this Agreement and which meet the
Company's then current underwriting standards, but only for one
policy term and in no event for a policy term in excess of one
year or, (ii) as is required by law; (2) issue and countersign
endorsements which do not increase the Company's liability or
risk of loss and any other endorsement with prior approval of
the Company; and (3) collect, receive and receipt for premiums
on any such policies or endorsements.
b. The limited authority provided under this
subparagraph (3) shall terminate automatically upon the
cancellation, expiration or other termination of all insurance
contracts issued by the Company through the Agent, or if the
Agent breaches any of the terms or provisions of this section,
provided that this subparagraph VII. C., 3. a. shall not apply
in any case where this Agency Agreement has been terminated
pursuant to subparagraphs A. 3. through A. 8. of this section.
VIII. CONDITIONS
Whereas, it is the intent of the Company and the Agent to operate
according to the terms of this Agreement, the Company recognizes the
possibility that the parties may fail to follow the Agreement
completely at all times, and sets forth conditions intended to guide
the parties to the Agreement in that event.
A. The failure of the Company to enforce at any time any of the
provisions of this Agreement or to require at any time performance
by the Agent of any of the provisions shall not be construed to be
a waiver of such provisions, nor in any way affect the right of the
Company to thereafter enforce each and every such provision.
B. All matters arising under this Agreement will be goverened by
the laws of the state in which the Company is domiciled.
C. This agreement and the attachments hereto contain the entire
Agreement of the parties, and supersede all previous Agency
Contracts, whether written or oral, between the Company and the
Agent, and shall be effective on the date indicated on the first
page of this Agreement and shall remain in force until terminated.
In witness whereof, Agent and Company have executed this Agreement
on __________________________________ to be effective_____________________,
and thereafter until terminated as provided herein.
herein referred to as "Agent"
by __________________________________
Title _______________________________
___Meridian Mutual Insurance Company
___Meridian Security Insurance Company
Meridian Mutual Insurance Company and
___Meridian Security Insurance Company Jointly
Herein referred to as "Company"
by __________________________________
Title _______________________________
EXHIBIT 10-32
MERIDIAN INSURANCE
NEW AGENT'S INCENTIVE COMPENSATION PLAN
I. PURPOSE
The purpose of this Plan is to provide the Agent who is newly
appointed with the Company with incentive compensation in addition to
the commissions otherwise paid by the Company. This incentive
compensation is based on Annual Written Premium and growth in Annual
Written Premium during the first four years of the Agent's
appointment.
II. DEFINITIONS
A."Annual Written Premium" means the total of all written
premiums for the applicable calendar year on Qualified Business
less return premiums as computed on the Agency Production and
Experience Report.
B."Excluded Business" means business excluded from incentive
compensation by law, business administered by underwriting
associations, syndicates, or pools or assigned-risk plans, special
reinsurance placed by or at the request of the Agent, health
insurance, premiums produced or placed through commercial group
methods, retrospective rating premium through operation of the
retrospective rating plan, and any other premium or line of
business determined to be Excluded Business by mutual agreement
between the Agent and the Company. Business written by the Agent
in the State of Michigan under what is presently referred to as the
Essential Insurance Plan shall not constitute Excluded Business.
C."Qualified Business" means all business placed with the
Company through the Agent except Excluded Business.
III. INCENTIVE COMPENSATION PAYMENT
A.Following the close of each calendar year, the Company will
compute the Incentive Compensation Payment for the previous
calendar year in accordance with the following schedule and report
to the Agent.
B. SCHEDULE
1. Calendar Year 1--(Calendar year in which Agent is
appointed). Five percent (5%) of the Annual Written Premium
provided Annual Written Premium averages $5,000 per month.
2. Calendar Year 2--Five percent (5%) of the Increase
in Annual Written Premium in Calendar year 2 over Calendar Year
1, provided the increase equals $100,000 or more.
3. Calendar Year 3--Five percent (5%) of the increase
in Annual Written Premium in Calendar Year 3 over Calendar Year
2, provided the increase equals $75,000 or more.
4. Calendar Year 4--Five percent (5%) of the increase
in Annual Written Premium in Calendar Year 4 over Calendar Year 3
provided the increase equals $75,000 or more.
C.The Incentive Compensation Payment payable under the above
Schedule is limited to a maximum of $25,000 for any one calendar
year.
D.The Company agrees that the Incentive Compensation Report
shall be in writing and delivered to the Agent within 90 days after
the close of the calendar year.
E.Any incentive Compensation payment shall be made within 90
days after the close of the calendar year, provided the Agent has
paid all premiums outstanding for the year. No charge or deduction
for Incentive Compensation shall be made or claimed by the Agent in
his accounts.
IV. OTHER PROVISIONS
A.The Agreement supersedes all additional commission, bonus
commission, growth bonus, contingent or profit-sharing agreements
of any kind and any such previous agreements are terminated.
B.The failure of the Company to enforce or apply at any time,
any of the provisions of this Agreement, shall in no way be
construed to be a waiver of such provisions, nor in any way to
affect the right of the Company thereafter to enforce or apply each
and every such provision.
C.No Incentive Compensation shall be payable for any calendar
year in which the Agent's monthly account with the Company is
delinquent in accordance with the Agency Agreement and the Agent is
suspended as a result of such delinquency.
D.The Agent and the Company recognize that the Company must
record its transactions and activities in accordance with rules and
regulations of insurance regulatory agencies. In addition, the
parties recognize that their records may vary as regards the timing
and accounting treatment of transaction entries. It is agreed that
all definition and computations under this Agreement shall reflect
the records of the Company which are conclusively presumed to be
correct. The Company will make a good faith effort to correct any
errors in its records disclosed by computations under the
Agreement, to the extent and in the manner permitted by insurance
accounting regulations.
E.This Agreement may be terminated by either party following
ninety (90) days' prior written notice, or shall terminate
automatically concurrent with the effective date of termination of
the Agency Agreement with the Company. Upon termination, only
Incentive Compensation accrued and unpaid at the end of the
calendar year prior to the year of termination shall be payable to
the Agent. This Agreement shall automatically terminate on
December 31 of the fourth year of appointment, unless otherwise
terminated as provided in this paragraph, at which time the Agent
becomes eligible for the Agency Profit-Sharing Agreement.
IN WITNESS WHEREOF, Agent and Company have executed this Agreement
on to be effective and thereafter until terminated as provided herein.
THIS AGREEMENT WILL TERMINATE on_______________________
___________________________ herein referred to as "Agent"
by _____________________________
Title __________________________
____Meridian Mutual Insurance Company
____Meridian Security Insurance Company
____Meridian Mutual Insurance Company and
Meridian Security Insurance Company jointly
____Meridian Citizens Mutual Insurance Company
____Meridian Citizens Security Insurance Company
____Meridian Citizens Mutual Insurance Company and
Meridian Citizens Security Insurance Company jointly
Herein referred to as "Company"
by _____________________________
Title __________________________
EXHIBIT 10-33
NON-STANDARD AUTOMOBILE
CONTINGENT COMMISSION AGREEMENT
THE COMPANY AND THE AGENT AGREE THAT:
I. In addition to the commissions otherwise paid by the Company to
the Agent and subject to requirements imposed by law and conditions
set forth in this Agreement, the Company agrees to pay Agent a
Contingent Commission based on the following schedules and formula:
A. Schedule:
1. WRITTEN PREMIUM $50,000--$149,999
Percent of Calendar
Loss Ratio Year
Earned Premium
Payable
50.1% to 55% 1.0%
45.1% to 50% 1.5%
40.1% to 45% 2.0%
35.1% to 40% 2.5%
35% and less 3.0%
2. WRITTEN PREMIUM $150,000 and Greater
Percent of Calendar
Loss Ratio Year
Earned Premium
Payable
50.1% to 55% 1.5%
45.1% to 50% 2.0%
40.1% to 45% 2.5%
35.1% to 40% 3.0%
35% and less 4.0%
B. Formula
The Contingent Commission payable under this Agreement will
be determined by multiplying the amount of the Agent's Earned Premium
times the applicable percent based upon the Agent's Loss Ratio.
II. DEFINITIONS
A. "Written Premium" means the total of all non-standard
automobile written premium less return premium during a
calendar year.
B. "Loss Ratio" will be determined from the Company's records
by dividing Incurred Losses by Earned Premium.
C. "Incurred Losses" means losses paid less salvage received
and subrogations recovered plus reserves for losses at the end
of the year, less reserves for losses at the beginning of the year.
D. "Earned Premiums" shall be computed by the Company from its
records.
III. CONDITIONS
A. This Agreement applies only to non-standard automobile as
shown on Company records.
B. Any Contingent Commission payment shall be made by the Company
within ninety (90) days after the close of the year. No charge or
deduction for Contingent Commission shall be made or claimed by
the Agent in his accounts.
C. No Contingent Commission shall be payable for any calendar
year in which the Agent's monthly account with the Company is
delinquent in accordance with the Agency Agreement and the Agent is
suspended as a result of such delinquency.
D. The failure of the Company to enforce or apply at any time,
any of the provisions of this Agreement, shall in no way be construed
to be a waiver of such provisions, nor in any way to affect the right
of the Company thereafter to enforce or apply each and every such
provision.
E. The Agent and the Company recognize that the Company must
record its transactions and activities in accordance with rules
and regulations of insurance regulatory agencies. In addition,
the parties recognize that their records may vary as regards the
timing and accounting treatment of transaction entries.
It is agreed that all definitions and computations under this
Agreement shall reflect the records of the Company which are
conclusively presumed to be correct. The Company will make a good
faith effort to correct any errors in its records disclosed by
computations under the Agreement, to the extent and in the manner
permitted by insurance accounting regulations.
F. This Agreement may be terminated by either party following
ninety (90) days' prior written notice, or will terminate
automatically concurrent with the effective date of termination
of the Agency Agreement or Agent's Contract with the Company.
Upon termination, only Contingent Commission accrued and
unpaid at the end of the year prior to the year of termination
shall be payable to Agent.
G. This Agreement shall be construed according to the laws of the
State of Indiana.
IN WITNESS WHEREOF, Agent and Company have executed this Agreement
on __________________________________ to be
effective___________________________, and thereafter until terminated as
provided herein.
herein referred to as "Agent"
by _____________________________
Title __________________________
MERIDIAN MUTUAL INSURANCE COMPANY
Herein referred to as "Company"
by _____________________________
Title __________________________
EXHIBIT 10-34
FARM LINES CONTINGENT COMMISSION AGREEMENT
THE COMPANY AND THE AGENT AGREE THAT:
I. In addition to the commissions otherwise paid by the Company to
the Agent and subject to requirements imposed by law and conditions
set forth in this Agreement, the Company agrees to pay Agent a
Contingent Commission based on the following schedules and formula:
A. Schedule:
1. WRITTEN PREMIUM $50,000--$99,999
Percent of Calendar Year
Loss Ratio Earned Premium Payable
50.1% to 55% 1.0%
45.1% to 50% 1.5%
40.1% to 45% 2.0%
35.1% to 40% 2.5%
35% and less 3.0%
2. WRITTEN PREMIUM $100,000 and Greater
Percent of Calendar Year
Loss Ratio Earned Premium Payable
50.1% to 55% 1.5%
45.1% to 50% 2.0%
40.1% to 45% 2.5%
35.1% to 40% 3.0%
35% and less 4.0%
B. Formula
The Contingent Commission payable under this Agreement will be
determined by multiplying the amount of the Agent's Earned Premium
times the applicable percent based upon the Agent's Loss Ratio.
II. DEFINITIONS
A. "Written Premium" means the total of all farm lines
of written premium less return premium during a calendar year.
B. "Loss Ratio" will be determined from the Company's
records by dividing Incurred Losses by Earned Premium.
C. "Incurred Losses" means losses paid less salvage
received and subrogations recovered plus reserves for
losses at the end of the year, less reserves for losses at the
beginning of the year.
D. "Earned Premiums" shall be computed by the Company from its
records.
III. CONDITIONS
A. This Agreement applies only to farm lines as shown on
Company records.
B. Any Contingent Commission payment shall be made by the
Company within ninety (90) days after the close of the year.
No charge or deduction for Contingent Commission shall be
made or claimed by the Agent in his accounts.
C. No Contingent Commission shall be payable for any calendar
year in which the Agent's monthly account with the Company is
delinquent in accordance with the Agency Agreement and
the Agent is suspended as a result of such delinquency.
D. The failure of the Company to enforce or apply at any time,
any of the provisions of this Agreement, shall in no way be
construed to be a waiver of such provisions, nor in any way to
affect the right of the Company thereafter to enforce or apply
each and every such provision.
E. The Agent and the Company recognize that the Company must
record its transactions and activities in accordance with rules
and regulations of insurance regulatory agencies. In addition,
the parties recognize that their records may vary as regards the
timing and accounting treatment of transaction entries. It is
agreed that all definitions and computations under this
Agreement shall reflect the records of the Company which are
conclusively presumed to be correct. The Company will make a good
faith effort to correct any errors in its records disclosed by
computations under the Agreement, to the extent and in the manner
permitted by insurance accounting regulations.
F. This Agreement may be terminated by either party following
ninety (90) days' prior written notice, or will terminate
automatically concurrent with the effective date of termination
of the Agency Agreement or Agent's Contract with the Company.
Upon termination, only Contingent Commission accrued and
unpaid at the end of the year prior to the year of termination
shall be payable to Agent.
G. This Agreement shall be construed according to the laws of the
State of Indiana.
IN WITNESS WHEREOF, Agent and Company have executed this Agreement
on __________________________________ to be effective
__________________________, and thereafter until terminated as provided
herein.
herein referred to as "Agent"
by ____________________________
Title _________________________
MERIDIAN SECURITY INSURANCE COMPANY
MERIDIAN MUTUAL INSURANCE COMPANY
Herein referred to as "Company"
by ____________________________
Title _________________________
EXHIBIT 10-51
Endorsement No. 4
to the
Property Excess of Loss Reinsurance Binding Agreement
between
Meridian Insurance
CITIZENS SECURITY GROUP
of Indianapolis, Indiana
(both hereinafter referred to as the "COMPANY")
and
NAC Reinsurance Corporation
New York, NY
(hereinafter referred to as the "REINSURER")
IT IS MUTUALLY AGREED that effective 12:01 a.m. Central Standard Time,
June 1, 1998, the following changes are made a part of this Agreement:
Article 5 - Territory is deleted in its entirety and replaced
by the following:
ARTICLE 5
TERRITORY
This agreement shall apply to policies covering risks located in Illinois,
Indiana, Kentucky, Michigan, Ohio, Wisconsin, Tennessee, Iowa,
Pennsylvania, South Dakota, North Dakota, Missouri, Minnesota, Virginia and
Maryland 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 7 - Binding Authority is deleted in its entirety and replaced by
the following:
ARTICLE 7
BINDING AUTHORITY
Authority to bind the Reinsurer is granted to all Meridian underwriters
above the Level Two underwriting designation. Specific authority is granted
to Jenny Pagano and John Newman for an additional 10% overline of the
limit for Total Insurable Values and for NAC maximum limit.
Article 12 - Profit Commission, is deleted in its entirety and replaced by
the following:
ARTICLE 12
SLIDING SCALE COMMISSION
Subject to a minimum reinsurance premium of $400,000 for the period of
June 1, 1998 to June 1, 2000, the Reinsurer shall allow the Company a
28.5% provisional commission on all premiums ceded to the Reinsurer hereunder.
The Company shall allow the Reinsurer return commission on return premiums
at the same rate.
The provisional commission allowed the Company shall be adjusted
periodically in accordance with the provisions set forth herein. The first
adjustment period shall be from June 1, 1998 to June 1, 2000, and each
subsequent 24 month period shall be a separate adjustment period. However,
if this Contract is terminated, the final adjustment period shall be from
the beginning of the then current adjustment period through the effective
date of termination.
The adjusted commission rate shall be calculated as follows and be applied
to premiums earned for the period under consideration:
A. If the ratio of losses incurred to premiums earned is 75% or greater,
the adjusted commission rate for the period under consideration shall be
0%;
B. If the ratio of losses incurred to premiums earned is less than 75%,
but not less than 66%, the adjusted commission rate for the period under
consideration shall be 25.0%;
C. If the ratio of losses incurred to premiums earned is less than 66%,
but not less than 41%, the adjusted commission rate for the period under
consideration shall be 28.5%;
D. If the ratio of losses incurred to premiums earned is less than 41%,
the adjusted commission rate for the period under consideration shall be
35.0%.
If the ratio of losses incurred to premiums earned for any period is
greater than 75%, the difference in percentage points between the actual
ratio of losses incurred to premiums earned and 75% shall be multiplied
by premiums earned for the period and the product shall be carried forward
to the next adjustment period as a debit to losses incurred.
The Company shall calculate and report the adjusted commission on premiums
earned within 45 following six months after the end of each adjustment
period, and within 45 days after the end of each 12 month period
thereafter until all losses subject hereto have been finally settled.
Each such calculation shall be based on cumulative transactions
hereunder from the beginning of the adjustment period under consideration
through the date of adjustment, including, as respects losses incurred,
any debit from the preceding adjustment period. If the adjusted commission
on premiums earned for the adjustment period as of the date of adjustment
is less than commissions previously allowed by the Reinsurer
on premiums earned for the same period, the Company shall remit the
difference to the Reinsurer with its report. If the adjusted commission
on premiums earned for the adjustment period as of the date of adjustment
is greater than commissions previously allowed by the Reinsurer on premiums
earned for the same period, the Reinsurer shall remit the difference to the
Company as promptly as possible after receipt and verification of the
Company's report.
If this Agreement is canceled at any time prior to the expiration of the
adjustment period, no sliding scale commission will be due the Company.
"Losses incurred" as used herein shall mean ceded losses and loss
adjustment expense paid as of the effective date of calculation, plus
the ceded reserves for losses and loss adjustment expense outstanding as of
the same date, plus the debit from the preceding adjustment period, it being
understood and agreed that all losses and related loss adjustment
expense under policies with effective or renewal dates during an
adjustment period shall be charged to that adjustment
period, regardless of the date said losses actually occur.
"Premiums earned" as used herein shall mean ceded net written premiums for
policies with effective or renewal dates during the adjustment period, less
the unearned portion thereof as of the effective date of calculation, it being
understood and agreed that all premiums for policies and with effective or
renewal dates during an adjustment period shall be credited to that
adjustment period. It is understood that premiums earned will include all
premiums ceded to the Reinsurer under all individual property facultative
certificates which are written by the Reinsurer to indemnify the Company
and which certificates have effective or renewal dates during the adjustment
period.
It is expressly agreed that the ceding commission allowed the Company
includes provision for all dividends, commissions, taxes, assessments,
and all other expenses of whatever nature, except loss adjustment expense.
The following Exclusion is added to the Exhibit entitled EXCLUSIONS of
this Agreement:
The peril of wind for any risk on any island, located in first tier
counties from the State of Texas to and including the state of
Virginia or located within one mile from any tidal waters from the state
of New Jersey to and including Maine.
All other terms and conditions remain unchanged.
The parties hereto have caused this Endorsement No. 4 to the Property
Excess of Loss Reinsurance Binding Agreement to be executed in duplicate
in Indianapolis, Indiana, this _____ day of _____________, 1998.
MERIDIAN INSURANCE COMPANY
CITIZENS SECURITY GROUP
By:_______________________________
and in Greenwich, Connecticut, Illinois, this _____ day of _____________,
1998.
NAC REINSURANCE CORPORATION
By:________________________________
EXHIBIT 10-52
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to
Meridian Mutual Insurance 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 Insurance Group" for purposes of this Contract shall
consist of Meridian Mutual Insurance Company, Indianapolis, Indiana,
Meridian Security Insurance Company, Indianapolis, Indiana, Meridian
Citizens Security Insurance Company, Red Wing, Minnesota, Meridian Citizens
Mutual Insurance Company, Red Wing, Minnesota, and Insurance Company of
Ohio, Mansfield, Ohio. The application of this Contract shall be to the
parties comprising the Meridian Mutual Insurance Group as a group and not
separately to each.
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 and 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, 1999, with respect to
losses arising out of loss occurrences commencing on or after that date,
and shall remain in force until December 31, 2001, 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.
C. "Contract year" as used in this Contract shall mean the period from
January 1, 1999 to December 31, 1999, both days inclusive, and each
respective twelve-month period thereafter that this Contract continues
in force.
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 does not apply to and specifically excludes the following:
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);
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. This Contract excludes loss and/or damage and/or costs and/or
expenses arising from seepage and/or pollution and/or contamination,
other than contamination from smoke. Nevertheless, this exclusion
does not preclude payment of the cost of removing debris of property
damaged by a loss otherwise covered hereunder, subject always to a
limit of 25% of the Company's property loss under the applicable
original policy.
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.
"Loss in excess of policy limits" and "extra contractual
obligations" as used herein shall be defined as follows:
a. "Loss in excess of policy limits" shall mean any amount paid
or payable by the Company in excess of its policy limits, but
otherwise within the terms of its policy, as a result of an
action against it by its insured or its insured's assignee to
recover damages the insured is legally obligated to pay because
of the Company's alleged or actual negligence or bad faith in
rejecting a settlement within policy limits, or in discharging
its duty to defend or prepare the defense in the trial of an
action against its insured, or in discharging its duty to prepare
or prosecute an appeal consequent upon such an action.
b. "Extra contractual obligations" shall mean any punitive,
exemplary, compensatory or consequential damages, other than loss
in excess of policy limits, paid or payable by the Company as a
result of an action against it by its insured or its insured's
assignee, which action alleges negligence or bad faith on the
part of the Company in handling a claim under a policy subject to
this Contract.
Article V - Retention and Limit
A. Coverage A: As respects losses arising from the perils of earthquake
and fire following earthquake subject to this Contract, the Company
shall retain and be liable for the first $90,000,000 of ultimate net
loss arising out of each loss occurrence. The Reinsurer shall then be
liable for 95% of the amount by which such ultimate net loss exceeds the
Company's retention, but the liability of the Reinsurer shall not exceed
95% of $18,000,000 as respects any one loss occurrence.
B. Coverage B: As respects all other losses subject to this Contract, the
Company shall retain and be liable for the first $10,000,000 of ultimate
net loss arising out of each loss occurrence. The Reinsurer shall then
be liable for 95% of the amount by which such ultimate net loss exceeds
the Company's retention, but the liability of the Reinsurer shall not
exceed 95% of $8,000,000 as respects any one loss occurrence, nor shall
it exceed 95% of $8,000,000 in all during any one contract year.
However, no claim shall be made under this Coverage B, for loss
occurrences commencing during any one contract year, until the amount of
ultimate net loss for which the Reinsurer would otherwise be liable
under this Coverage exceeds 95.0% of $16,000,000 for that contract year.
C. In no event shall the Reinsurer's liability for ultimate net loss, under
Coverages A and B combined, exceed $18,000,000, as respects all loss
occurrences commencing during any one contract year.
D. As respects each coverage section provided under this Contract, the
Company shall retain, in addition to its initial retention each loss
occurrence, 5% of the excess ultimate net loss to which the coverage
section applies.
E. No claim shall be made under any coverage section provided under this
Contract in any one loss occurrence unless at least two risks insured or
reinsured by the Company are involved in such loss occurrence. For
purposes of this Article, the Company shall be the sole judge of what
constitutes one risk.
Article VI - Definitions
A. "Ultimate net loss" as used herein is defined as the sum or sums
(including any loss adjustment expense, as hereinafter defined) 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.
B. "Loss adjustment expense" as used herein shall mean expenses assignable
to the investigation, appraisal, adjustment, settlement, litigation,
defense and/or appeal of specific claims, regardless of how such
expenses are classified for statutory reporting purposes. Loss
adjustment expense shall include, but not be limited to, interest on
judgments, expenses of outside adjusters, legal expenses incurred in
connection with coverage questions and legal actions related thereto, a
pro rata share of salaries and expenses of the Company's field employees
according to the time occupied in adjusting a subject loss and expenses
of the Company's officials incurred in connection with the loss, but
shall not include office expenses or salaries of the Company's
officials. For purposes of this Contract, legal expenses incurred in
connection with coverage questions and legal actions related thereto
arising out of any one loss occurrence shall not exceed 25.0% of the
contractual loss under all policies involved in the loss occurrence.
Legal expenses incurred in connection with coverage questions and legal
actions related thereto shall be deemed to have occurred on the same
date as the loss covered or alleged to be covered under the policy.
Article VII - 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 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 VIII - Loss Occurrence
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. The
change in date to the year 2000, or any other date change, including
leap year calculations, shall not in and of itself be regarded as an
event. 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 above) 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.
E. Losses arising from the date change to the year 2000, or any other date
change, including leap year calculations, shall not in and of themselves
be regarded as a "loss occurrence" for purposes of this Contract. Such
losses shall include any loss, damage, cost, claim or expense, whether
preventative, remedial or otherwise, directly or indirectly arising out
of or relating to:
1. The calculation, comparison, differentiation, sequencing or
processing of data involving the date change to the year 2000, or
any other date change, including leap year calculations, by any
computer system, hardware, program or software and/or any microchip,
integrated circuit or similar device in computer equipment or non-
computer equipment, whether the property of the insured or not; or
2. Any change, alteration or modification involving the date
change to the year 2000 or any other date change, including leap
year calculations, to any such computer system, hardware, program or
software or any microchip, integrated circuit or similar device in
computer equipment or non-computer equipment, whether the property
of the insured or not.
This paragraph applies regardless of any other cause or event that
contributes concurrently or in any sequence to the loss, damage, cost
claim or expense.
However, this paragraph shall not apply in respect of physical damage
occurring at the insured's premises arising out of the perils covered
under this Contract. None of the circumstances described in
subparagraphs 1 and 2 above shall, in and of themselves, constitute an
event for purposes of this Contract.
Notwithstanding the foregoing, the costs and expenses whether
preventative, remedial or otherwise, arising out of or relating to
change, alteration or modification of any computer system, hardware,
program or software or any microchip, integrated circuit or similar
device in computer or non-computer equipment, whether the property of
the insured or not shall not be included in the definition of loss
occurrence hereunder.
Article IX - 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 X - 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 XI - Premium
A. As premium for the reinsurance provided hereunder during each contract
year, the Company shall pay the Reinsurer 0.66% of its net earned
premium for the contract year.
B. The Company shall pay the Reinsurer an annual minimum and deposit
premium of $1,800,000 in four equal installments of $450,000 on January
1, April 1, July 1 and October 1 of each contract year.
C. Within 60 days after the end of each contract year, the Company shall
provide a report to the Reinsurer setting forth the premium due
hereunder for the contract year, computed in accordance with
paragraph A, and if the premium so computed is greater than the
previously paid minimum and deposit premium, the balance shall be
remitted by the Company with its report.
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.
Article XII - Late Payments
A. The provisions of this Article shall not be implemented unless
specifically invoked, in writing, by one of the parties to this
Contract.
B. In the event any premium, loss or other payment due either party is not
received by the intermediary named in Article XXV (hereinafter referred
to as the "Intermediary") by the payment due date, the party to whom
payment is due may, by notifying the Intermediary in writing, require
the debtor party to pay, and the debtor party agrees to pay, an interest
penalty on the amount past due calculated for each such payment on the
last business day of each month as follows:
1. The number of full days which have expired since the due date
or the last monthly calculation, whichever the lesser; times
2. 1/365ths of the 12-month United States Treasury Bill Rate, as
quoted in The Wall Street Journal on the first business day of the
month for which the calculation is made; times
3. The amount past due, including accrued interest.
It is agreed that interest shall accumulate until payment of the
original amount due plus interest penalties have been received by the
Intermediary.
C. The establishment of the due date shall, for purposes of this Article,
be determined as follows:
1. As respects the payment of routine deposits and premiums due
the Reinsurer, the due date shall be as provided for in the
applicable section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due
30 days after the date of transmittal by the Intermediary of the
initial billing for each such payment.
2. Any claim or loss payment due the Company hereunder shall be
deemed due 10 business days after the proof of loss or demand for
payment is transmitted to the Reinsurer or received by the
Reinsurer, whichever is soonest. If such loss or claim payment is
not received within the 10 days, interest will accrue on the payment
or amount overdue in accordance with paragraph B above, from the
date the proof of loss or demand for payment, in accordance with the
provisions of Article X, was transmitted to the Reinsurer.
3. As respects any payment, adjustment or return due either party
not otherwise provided for in subparagraphs 1 and 2 of paragraph C
above, the due date shall be as provided for in the applicable
section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due 10
business days following transmittal of written notification that the
provisions of this Article have been invoked.
For purposes of interest calculations only, amounts due hereunder shall
be deemed paid upon receipt by the Intermediary.
D. Nothing herein shall be construed as limiting or prohibiting a
subscribing reinsurer from contesting the validity of any claim, or from
participating in the defense or control of any claim or suit, or
prohibiting either party from contesting the validity of any payment or
from initiating any arbitration or other proceeding in accordance with
the provisions of this Contract. If the debtor party prevails in an
arbitration or other proceeding, then any interest penalties due
hereunder on the amount in dispute shall be null and void. If the
debtor party loses in such proceeding, then the interest penalty on the
amount determined to be due hereunder shall be calculated in accordance
with the provisions set forth above unless otherwise determined by such
proceedings. If a debtor party advances payment of any amount it is
contesting, and proves to be correct in its contestation, either in
whole or in part, the other party shall reimburse the debtor party for
any such excess payment made plus interest on the excess amount
calculated in accordance with this Article.
E. Interest penalties arising out of the application of this Article that
are $100 or less from any party shall be waived unless there is a
pattern of late payments consisting of three or more items over the
course of any 12-month period.
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 (including all case reserves plus any
reasonable amount estimated to be unreported from known loss
occurrences) 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
(including all case reserves plus any reasonable amount estimated to be
unreported from known loss occurrences) 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 expense 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 (including all case reserves plus any reasonable amount
estimated to be unreported from known loss occurrences) 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 (including all
case reserves plus any reasonable amount estimated to be unreported
from known loss occurrences), 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 (1) where this
Contract specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (2) 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
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, the two Arbiters shall request the
American Arbitration Association to appoint the Umpire. If the American
Arbitration Association fails to appoint the Umpire within 30 days after
it has been requested to do so, either party may request a justice of a
Court of general jurisdiction of the state in which the arbitration is
to be held to appoint the Umpire.
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 a 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 - Agency Agreement
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 XXV - 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 Insurance 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 Definitions 6
VII Other Reinsurance 6
VIII Loss Occurrence 6
IX Loss Notices and Settlements 8
X Salvage and Subrogation 9
XI Premium 9
XII Late Payments 10
XIII Offset (BRMA 36C) 11
XIV Access to Records (BRMA 1D) 11
XV Net Retained Lines (BRMA 32E) 11
XVI Errors and Omissions (BRMA 14F) 12
XVII Currency (BRMA 12A) 12
XVIII Taxes (BRMA 50C) 12
XIX Federal Excise Tax (BRMA 17A) 12
XX Unauthorized Reinsurers 13
XXI Insolvency 14
XXII Arbitration 15
XXIII Service of Suit (BRMA 49C) 16
XXIV Agency Agreement 16
XXV Intermediary (BRMA 23A) 17
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to
Meridian Mutual Insurance Group
Indianapolis, Indiana
Reinsurers Participations
Dorinco Reinsurance Company 5.0%
Erie Insurance Exchange 2.0
The Nissan Fire & Marine Insurance Co., Ltd. 2.5
Odyssey Reinsurance Corporation 4.0
Renaissance Reinsurance, Ltd. 70.5
Shelter Reinsurance Company 10.0
SOREMA North America Reinsurance Company 6.0
Total 100.0%
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
Interests and Liabilities Agreement
of
Dorinco Reinsurance Company
Midland, Michigan
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 5.0% 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, 1999, and shall
continue in force until December 31, 2001, 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
Erie Insurance Exchange
Erie, Pennsylvania
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 2.0% 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, 1999, and shall
continue in force until December 31, 2001, 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
By: Erie Indemnity Company
(Attorney-In-Fact)
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
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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, 1999, and shall
continue in force until December 31, 2001, 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
Odyssey Reinsurance Corporation
Wilmington, Delaware
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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, 1999, and shall
continue in force until December 31, 2001, 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___.
_____________________________________________________
Odyssey Reinsurance Corporation
Interests and Liabilities Agreement
of
Renaissance Reinsurance, Ltd.
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 70.5% 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, 1999, and shall
continue in force until December 31, 2001, 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
Shelter Reinsurance Company
Columbia, Missouri
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 10.0% 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, 1999, and shall
continue in force until December 31, 2001, 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
SOREMA North America Reinsurance Company
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Seventh Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 6.0% 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, 1999, and shall
continue in force until December 31, 2001, 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
EXHIBIT 10-53
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to
Meridian Mutual Insurance 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 Insurance Group" for purposes of this Contract shall
consist of Meridian Mutual Insurance Company, Indianapolis, Indiana,
Meridian Security Insurance Company, Indianapolis, Indiana, Meridian
Citizens Security Insurance Company, Red Wing, Minnesota, Meridian Citizens
Mutual Insurance Company, Red Wing, Minnesota, and Insurance Company of
Ohio, Mansfield, Ohio. The application of this Contract shall be to the
parties comprising the Meridian Mutual Insurance Group as a group and not
separately to each.
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 and 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, 1999, with respect to
losses arising out of loss occurrences commencing on or after that date,
and shall remain in force until December 31, 1999, 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.
C. In the event this Contract is under termination notice and renewal
negotiations for this Contract are not completed by January 1, 2000, the
expiration date of this Contract may, at the Company's option, be
extended to March 31, 2000.
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).
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,
Boatowners, 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. This Contract excludes loss and/or damage and/or costs and/or
expenses arising from seepage and/or pollution and/or contamination,
other than contamination from smoke. Nevertheless, this exclusion
does not preclude payment of the cost of removing debris of property
damaged by a loss otherwise covered hereunder, subject always to a
limit of 25% of the Company's property loss under the applicable
original policy.
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.
"Loss in excess of policy limits" and "extra contractual
obligations" as used herein shall be defined as follows:
a. "Loss in excess of policy limits" shall mean any amount paid
or payable by the Company in excess of its policy limits, but
otherwise within the terms of its policy, as a result of an
action against it by its insured or its insured's assignee to
recover damages the insured is legally obligated to pay because
of the Company's alleged or actual negligence or bad faith in
rejecting a settlement within policy limits, or in discharging
its duty to defend or prepare the defense in the trial of an
action against its insured, or in discharging its duty to prepare
or prosecute an appeal consequent upon such an action.
b. "Extra contractual obligations" shall mean any punitive,
exemplary, compensatory or consequential damages, other than loss
in excess of policy limits, paid or payable by the Company as a
result of an action against it by its insured or its insured's
assignee, which action alleges negligence or bad faith on the
part of the Company in handling a claim under a policy subject to
this Contract.
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 3.75% of net earned premium for the term of this
Contract, subject to a minimum retention of $10,275,000. The Reinsurer
shall then be liable for 95.0% of the amount by which the Company's
subject ultimate net loss for the term of this Contract exceeds the
Company's retention, but the liability of the Reinsurer shall not exceed
95.0% of $10,000,000 during the term of this Contract.
B. "Subject ultimate net loss" as used herein shall mean the Company's
ultimate net loss in excess of $1,000,000 arising out of any one loss
occurrence, not to exceed $3,000,000 in any one loss occurrence. No
loss occurrence shall be included in subject ultimate net loss unless
said loss occurrence involves at least two risks. The Company shall be
the sole judge of what constitutes "one risk."
C. The Company shall maintain in force excess per risk reinsurance,
recoveries under which shall inure to the benefit of this Contract.
Article VI - Definitions
A. "Ultimate net loss" as used herein is defined as the sum or sums
(including any loss adjustment expense, as hereinafter defined) 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.
B. "Loss adjustment expense" as used herein shall mean expenses assignable
to the investigation, appraisal, adjustment, settlement, litigation,
defense and/or appeal of specific claims, regardless of how such
expenses are classified for statutory reporting purposes. Loss
adjustment expense shall include, but not be limited to, interest on
judgments, expenses of outside adjusters, legal expenses incurred in
connection with coverage questions and legal actions related thereto, a
pro rata share of salaries and expenses of the Company's field employees
according to the time occupied in adjusting a subject loss and expenses
of the Company's officials incurred in connection with the loss, but
shall not include office expenses or salaries of the Company's
officials. For purposes of this Contract, legal expenses incurred in
connection with coverage questions and legal actions related thereto
arising out of any one loss occurrence shall not exceed 25.0% of the
contractual loss under all policies involved in the loss occurrence.
Legal expenses incurred in connection with coverage questions and legal
actions related thereto shall be deemed to have occurred on the same
date as the loss covered or alleged to be covered under the policy.
Article VII - Loss Occurrence
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. The
change in date to the year 2000, or any other date change, including
leap year calculations, shall not in and of itself be regarded as an
event. 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 above) 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.
E. Losses arising from the date change to the year 2000, or any other date
change, including leap year calculations, shall not in and of themselves
be regarded as a "loss occurrence" for purposes of this Contract. Such
losses shall include any loss, damage, cost, claim or expense, whether
preventative, remedial or otherwise, directly or indirectly arising out
of or relating to:
1. The calculation, comparison, differentiation, sequencing or
processing of data involving the date change to the year 2000, or
any other date change, including leap year calculations, by any
computer system, hardware, program or software and/or any microchip,
integrated circuit or similar device in computer equipment or non-
computer equipment, whether the property of the insured or not; or
2. Any change, alteration or modification involving the date
change to the year 2000 or any other date change, including leap
year calculations, to any such computer system, hardware, program or
software or any microchip, integrated circuit or similar device in
computer equipment or non-computer equipment, whether the property
of the insured or not.
This paragraph applies regardless of any other cause or event that
contributes concurrently or in any sequence to the loss, damage, cost
claim or expense.
However, this paragraph shall not apply in respect of physical damage
occurring at the insured's premises arising out of the perils covered
under this Contract. None of the circumstances described in
subparagraphs 1 and 2 above shall, in and of themselves, constitute an
event for purposes of this Contract.
Notwithstanding the foregoing, the costs and expenses whether
preventative, remedial or otherwise, arising out of or relating to
change, alteration or modification of any computer system, hardware,
program or software or any microchip, integrated circuit or similar
device in computer or non-computer equipment, whether the property of
the insured or not shall not be included in the definition of loss
occurrence hereunder.
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 3.75% 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 1.2% of its net earned premium for the term of this
Contract, subject to a minimum premium of $3,300,000 (or $4,125,000 if
this Contract is extended to 15 months as provided in paragraph C of
Article II).
B. The Company shall pay the Reinsurer a deposit premium of $3,300,000 in
four equal installments of $825,000 on January 1, April 1, July 1 and
October 1 of 1999. In the event this Contract is extended to 15 months
as provided in paragraph C of Article II, the deposit premium shall be
increased to $4,125,000, and the Company will pay an additional
installment of $825,000 on January 1, 2000.
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 all classes of business issued by the Company, less
the earned portion of premiums ceded by the Company for reinsurance
which inures to the benefit of this Contract.
Article XI - Late Payments
A. The provisions of this Article shall not be implemented unless
specifically invoked, in writing, by one of the parties to this
Contract.
B. In the event any premium, loss or other payment due either party is not
received by the intermediary named in Article XXIV (hereinafter referred
to as the "Intermediary") by the payment due date, the party to whom
payment is due may, by notifying the Intermediary in writing, require
the debtor party to pay, and the debtor party agrees to pay, an interest
penalty on the amount past due calculated for each such payment on the
last business day of each month as follows:
1. The number of full days which have expired since the due date
or the last monthly calculation, whichever the lesser; times
2. 1/365ths of the 12-month United States Treasury Bill Rate, as
quoted in The Wall Street Journal on the first business day of the
month for which the calculation is made; times
3. The amount past due, including accrued interest.
It is agreed that interest shall accumulate until payment of the
original amount due plus interest penalties have been received by the
Intermediary.
C. The establishment of the due date shall, for purposes of this Article,
be determined as follows:
1. As respects the payment of routine deposits and premiums due
the Reinsurer, the due date shall be as provided for in the
applicable section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due 30
days after the date of transmittal by the Intermediary of the
initial billing for each such payment.
2. Any claim or loss payment due the Company hereunder shall be
deemed due 10 business days after the proof of loss or demand for
payment is transmitted to the Reinsurer or received by the
Reinsurer, whichever is soonest. If such loss or claim payment is
not received with the 10 days, interest will accrue on the payment
or amount overdue in accordance with paragraph B above, from the
date the proof of loss or demand for payment, in accordance with the
provisions of Article VIII, was transmitted to the Reinsurer.
3. As respects any payment, adjustment or return due either party
not otherwise provided for in subparagraphs 1 and 2 of paragraph C
above, the due date shall be as provided for in the applicable
section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due 10
business days following transmittal of written notification that the
provisions of this Article have been invoked.
For purposes of interest calculations only, amounts hereunder shall be
deemed paid upon receipt by the Intermediary.
D. Nothing herein shall be construed as limiting or prohibiting a
subscribing reinsurer from contesting the validity of any claim, or from
participating in the defense or control of any claim or suit, or
prohibiting either party from contesting the validity of any payment or
from initiating any arbitration or other proceeding in accordance with
the provisions of this Contract. If the debtor party prevails in an
arbitration or other proceeding, then any interest penalties due
hereunder on the amount in dispute shall be null and void. If the
debtor party loses in such proceeding, then the interest penalty on the
amount determined to be due hereunder shall be calculated in accordance
with the provisions set forth above unless otherwise determined by such
proceedings. If a debtor party advances payment of any amount it is
contesting, and proves to be correct in its contestation, either in
whole or in part, the other party shall reimburse the debtor party for
any such excess payment made plus interest on the excess amount
calculated in accordance with this Article.
E. Interest penalties arising out of the application of this Article that
are $100 or less from any party shall be waived unless there is a
pattern of late payments consisting of three or more items over the
course of any 12-month period.
Article XII - Offset (BRMA 36C)
The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under the terms of this Contract.
The party asserting the right of offset may exercise such right any time
whether the balances due are on account of premiums or losses or otherwise.
Article XIII - Access to Records (BRMA 1D)
The Reinsurer or its designated representatives shall have access at any
reasonable time to all records of the Company which pertain in any way to
this reinsurance.
Article XIV - Net Retained Lines (BRMA 32B)
A. This Contract applies only to that portion of any policy which the
Company retains net for its own account, and in calculating the amount
of any loss hereunder and also in computing the amount or amounts in
excess of which this Contract attaches, only loss or losses in respect
of that portion of any policy which the Company retains net for its own
account shall be included.
B. The amount of the Reinsurer's liability hereunder in respect of any loss
or losses shall not be increased by reason of the inability of the
Company to collect from any other reinsurer(s), whether specific or
general, any amounts which may have become due from such reinsurer(s),
whether such inability arises from the insolvency of such other
reinsurer(s) or otherwise.
Article XV - Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with this
Contract or any transaction hereunder shall not relieve either party from
any liability which would have attached had such delay, error or omission
not occurred, provided always that such error or omission is rectified as
soon as possible after discovery.
Article XVI - Currency (BRMA 12A)
A. Whenever the word "Dollars" or the "$" 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 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 (including all case reserves plus any
reasonable amount estimated to be unreported from known loss
occurrences) 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
(including all case reserves plus any reasonable amount estimated to be
unreported from known loss occurrences) 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 expense 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 (including all case reserves plus any reasonable amount
estimated to be unreported from known loss occurrences) 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 (including all
case reserves plus any reasonable amount estimated to be unreported
from known loss occurrences), 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 (1) where this
Contract specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (2) 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
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, the two Arbiters shall request the
American Arbitration Association to appoint the Umpire. If the American
Arbitration Association fails to appoint the Umpire within 30 days after
it has been requested to do so, either party may request a justice of a
Court of general jurisdiction of the state in which the arbitration is
to be held to appoint the Umpire.
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 a 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 - Agency Agreement
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 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 Insurance 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 Definitions 5
VII Loss Occurrence 6
VIII Loss Notices and Settlements 8
IX Salvage and Subrogation 8
X Premium 9
XI Late Payments 9
XII Offset (BRMA 36C) 11
XIII Access to Records (BRMA 1D) 11
XIV Net Retained Lines (BRMA 32B) 11
XV Errors and Omissions (BRMA 14F) 11
XVI Currency (BRMA 12A) 11
XVII Taxes (BRMA 50C) 12
XVIII Federal Excise Tax (BRMA 17A) 12
XIX Unauthorized Reinsurers 12
XX Insolvency 14
XXI Arbitration 14
XXII Service of Suit (BRMA 49C) 15
XXIII Agency Agreement 16
XXIV Intermediary (BRMA 23A) 16
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, 1999
issued to and duly executed by
Meridian Mutual Insurance Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 19.0% 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
Erie Insurance Exchange
Erie, Pennsylvania
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 2.0% 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
By: Erie Indemnity Company
(Attorney-In-Fact)
Interests and Liabilities Agreement
of
Gerling Global Reinsurance
Corporation of America
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 3.5% 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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___.
_____________________________________________________
Gerling Global Reinsurance Corporation of America
Interests and Liabilities Agreement
of
Odyssey Reinsurance Corporation
Wilmington, Delaware
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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___.
_____________________________________________________
Odyssey Reinsurance Corporation
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
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, 1999
issued to and duly executed by
Meridian Mutual Insurance Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 2.0% 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
USF RE Insurance Company
Boston, Massachusetts
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance Group
Indianapolis, Indiana
The Subscribing Reinsurer hereby accepts a 2.0% 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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:
Costa Mesa, California,this _______ day of ______________________
199___.
_____________________________________________________
USF RE Insurance Company
Underlying Aggregate Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to
Meridian Mutual Insurance Group
Indianapolis, Indiana
Reinsurers Participations
Dorinco Reinsurance Company 19.0%
Erie Insurance Exchange 2.0
Gerling Global Reinsurance Corporation of America 3.5
The Nissan Fire & Marine Insurance Co., Ltd. 2.0
Odyssey Reinsurance Corporation 4.0
Renaissance Reinsurance, Ltd. 67.5
USF RE Insurance Company 2.0
Total 100.0%
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
EXHIBIT 10-54
Addendum No. 2
to the
Sixth Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to
Meridian Mutual Group
Indianapolis, Indiana
It Is Hereby Agreed, effective January 1, 1999, that this Contract shall be
amended as follows:
1. The name of the "Company" hereunder shall be amended to read "Meridian
Mutual Insurance Group, Indianapolis, Indiana."
2. The Preamble shall be deleted and the following substituted therefor:
"Preamble
The `Meridian Mutual Insurance Group'" for purposes of this Contract
shall consist of Meridian Mutual Insurance Company, Indianapolis,
Indiana, Meridian Security Insurance Company, Indianapolis, Indiana,
Meridian Citizens Security Insurance Company, Red Wing, Minnesota,
Meridian Citizens Mutual Insurance Company, Red Wing, Minnesota, and
Insurance Company of Ohio, Mansfield, Ohio. The application of this
Contract shall be to the parties comprising the Meridian Mutual Group as
a group and not separately to each."
3. The following paragraph shall be added to and made part of Article II -
Term:
"D. In the event this Contract is under termination notice and
renewal negotiations for this Contract are not completed by January
1, 2000, the expiration date of this Contract may, at the Company's
option, be extended to March 31, 2000."
It Is Further Agreed, effective January 1, 1999, with respect to losses
arising out of loss occurrences commencing on or after that date, that this
Contract shall be amended as follows:
1. Subparagraph 2(c) of Article V - Exclusions - shall be deleted from this
Contract.
2. Paragraph C of Article VIII - Definitions (as added by Addendum No. 1) -
shall be deleted and the following substituted therefor:
"C. `Loss adjustment expense' as used herein shall mean expenses
assignable to the investigation, appraisal, adjustment, settlement,
litigation, defense and/or appeal of specific claims, regardless of
how such expenses are classified for statutory reporting purposes.
Loss adjustment expense shall include, but not be limited to,
interest on judgments, expenses of outside adjusters, legal expenses
incurred in connection with coverage questions and legal actions
related thereto, a pro rata share of salaries and expenses of the
Company's field employees according to the time occupied in
adjusting a subject loss and expenses of the Company's officials
incurred in connection with the loss, but shall not include office
expenses or salaries of the Company's officials. For purposes of
this Contract, legal expenses incurred in connection with coverage
questions and legal actions related thereto arising out of any one
loss occurrence shall not exceed 25.0% of the contractual loss under
all policies involved in the loss occurrence. Legal expenses
incurred in connection with coverage questions and legal actions
related thereto shall be deemed to have occurred on the same date as
the loss covered or alleged to be covered under the policy."
3. Article X - Loss Occurrence - shall be deleted and the following
substituted therefor:
"Article X - Loss Occurrence
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. The change in date to the year 2000, or any other date
change, including leap year calculations, shall not in and of itself
be regarded as an event. 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, as regards earthquake (the epicentre of
which need not necessarily be within the territorial confines
referred to in paragraph A above) 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.'
B. 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. Losses arising from the date change to the year 2000, or any
other date change, including leap year calculations, shall not in
and of themselves be regarded as a `loss occurrence' for purposes of
this Contract. Such losses shall include any loss, damage, cost,
claim or expense, whether preventative, remedial or otherwise,
directly or indirectly arising out of or relating to:
1. The calculation, comparison, differentiation, sequencing or
processing of data involving the date change to the year 2000, or
any other date change, including leap year calculations, by any
computer system, hardware, program or software and/or any
microchip, integrated circuit or similar device in computer
equipment or non-computer equipment, whether the property of the
insured or not; or
2. Any change, alteration or modification involving the date
change to the year 2000 or any other date change, including leap
year calculations, to any such computer system, hardware, program
or software or any microchip, integrated circuit or similar
device in computer equipment or non-computer equipment, whether
the property of the insured or not.
This paragraph applies regardless of any other cause or event
that contributes concurrently or in any sequence to the loss,
damage, cost claim or expense.
However, this paragraph shall not apply in respect of physical
damage occurring at the insured's premises arising out of the perils
covered under this Contract. None of the circumstances described in
subparagraphs 1 and 2 above shall, in and of themselves, constitute
an event for purposes of this Contract.
Notwithstanding the foregoing, the costs and expenses whether
preventative, remedial or otherwise, arising out of or relating to
change, alteration or modification of any computer system, hardware,
program or software or any microchip, integrated circuit or similar
device in computer or non-computer equipment, whether the property
of the insured or not shall not be included in the definition of
loss occurrence hereunder."
It Is Also Agreed, effective January 1, 1999, that this Contract shall be
amended as follows:
1. Paragraphs A and B of Article XIII - Premium (as amended by Addendum No.
1) - shall be deleted and the following substituted therefor:
"A. As premium for the reinsurance provided hereunder for each
contract year, the Company shall pay the Reinsurer .00782% of its
Insurance In Force calculated on June 30 of each respective contract
year, subject to an annual minimum premium of $432,000 (or $540,000
if the expiration date of this Contract is extended to March 31,
2000, as provided in paragraph D of Article II).
B. The Company shall pay the Reinsurer a deposit premium of
$540,000 for each contract year, payable in four equal installments
of $135,000 on January 1, April 1, July 1 and October 1, of each
contract year. In the event the term of this Contract is extended
to March 31, 2000, as provided in paragraph D of Article II, the
deposit premium shall be
increased to $675,000, and the Company shall pay an additional
installment of $135,000 on January 1, 2000."
2. The heading and paragraph A of Article XXIII - Arbitration - shall be
deleted and the following substituted therefor:
"Article XXIII - Arbitration
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, the two Arbiters shall request the American Arbitration
Association to appoint the Umpire. If the American Arbitration
Association fails to appoint the Umpire within 30 days after it has
been requested to do so, either party may request a justice of a
Court of general jurisdiction of the state in which the arbitration
is to be held to appoint the Umpire."
The provisions of this Contract shall remain otherwise unchanged.
In Witness Whereof, the Company by its duly authorized representative has
executed this Addendum as of the date undermentioned at:
Indianapolis, Indiana,this _______ day of _______________________
_____________ 199___.
_____________________________________________________
Meridian Mutual Insurance Group
Addendum No. 2
to the
Interests and Liabilities Agreement
of
Munchener Ruckversicherungs-Gesellschaft
Munich, Germany
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Sixth Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to
Meridian Mutual Group
Indianapolis, Indiana
(hereinafter referred to collectively as the "Company")
The Subscribing Reinsurer hereby accepts Addendum No. 2, as duly executed
by the Company, as part of the Contract, effective January 1, 1999.
In Witness Whereof, the Subscribing Reinsurer by its duly authorized
representative has executed this Addendum as of the date undermentioned at:
Munich, Germany,this ________ day of ____________________________
199___.
_____________________________________________________
Munchener Ruckversicherungs-Gesellschaft
EXHIBIT 10-55
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to
Meridian Mutual Insurance 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 Insurance Group" for purposes of this Contract shall
consist of Meridian Mutual Insurance Company, Indianapolis, Indiana,
Meridian Security Insurance Company, Indianapolis, Indiana, Meridian
Citizens Security Insurance Company, Red Wing, Minnesota, Meridian Citizens
Mutual Insurance Company, Red Wing, Minnesota, and Insurance Company of
Ohio, Mansfield, Ohio. The application of this Contract shall be to the
parties comprising the Meridian Mutual Insurance Group as a group and not
separately to each.
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 and 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, 1999, with respect to
losses arising out of loss occurrences commencing on or after that date,
and shall remain in force until December 31, 1999, 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.
C. In the event this Contract is under termination notice and renewal
negotiations for this Contract are not completed by January 1, 2000, the
expiration date of this Contract may, at the Company's option, be
extended to March 31, 2000.
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).
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. This Contract excludes loss and/or damage and/or costs and/or
expenses arising from seepage and/or pollution and/or contamination,
other than contamination from smoke. Nevertheless, this exclusion
does not preclude payment of the cost of removing debris of property
damaged by a loss otherwise covered hereunder, subject always to a
limit of 25% of the Company's property loss under the applicable
original policy.
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.
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, in
addition to its initial retention for each loss occurrence, 5.0% of the
excess ultimate net loss to which the excess layer applies.
C. No claim shall be made under any excess layer of reinsurance coverage
provided by this Contract in any one loss occurrence unless at least two
risks insured or reinsured by the Company are involved in such loss
occurrence. For purposes of this Article, the Company shall be the sole
judge of what constitutes one risk.
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 equal to the product of the
following:
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 the 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 the 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 - Definitions
A. "Ultimate net loss" as used herein is defined as the sum or sums
(including loss in excess of policy limits, extra contractual
obligations and any loss adjustment expense, as hereinafter defined)
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.
B. "Loss in excess of policy limits" and "extra contractual obligations" as
used herein shall be defined as follows:
1. "Loss in excess of policy limits" shall mean 80% of any amount
paid or payable by the Company in excess of its policy limits, but
otherwise within the terms of its policy, as a result of an action
against it by its insured or its insured's assignee to recover
damages the insured is legally obligated to pay because of the
Company's alleged or actual negligence or bad faith in rejecting a
settlement within policy limits, or in discharging its duty to
defend or prepare the defense in the trial of an action against its
insured, or in discharging its duty to prepare or prosecute an
appeal consequent upon such an action. A loss in excess of policy
limits shall be deemed to have occurred on the same date as the loss
covered or alleged to be covered under the policy. However, for
purposes of this Contract, a loss in excess of policy limits arising
out of any one loss occurrence shall not exceed 25% of the
contractual loss under all policies involved in the loss occurrence.
2. "Extra contractual obligations" shall mean 80% of any punitive,
exemplary, compensatory or consequential damages, other than loss in
excess of policy limits, paid or payable by the Company as a result
of an action against it by its insured or its insured's assignee,
which action alleges negligence or bad faith on the part of the
Company in handling a claim under a policy subject to this Contract.
An extra contractual obligation shall be deemed to have occurred on
the same date as the loss covered or alleged to be covered under the
policy. However, for purposes of this Contract, extra contractual
obligations arising out of any one loss occurrence shall not exceed
25% of the contractual loss under all policies involved in the loss
occurrence.
Notwithstanding anything stated herein, this Contract shall not apply to
any loss in excess of policy limits or any extra contractual obligation
incurred by the Company as a result of any fraudulent and/or criminal
act by any officer or director of the Company acting individually or
collectively or in collusion with any individual or corporation or any
other organization or party involved in the presentation, defense or
settlement of any claim covered hereunder.
C. "Loss adjustment expense" as used herein shall mean expenses assignable
to the investigation, appraisal, adjustment, settlement, litigation,
defense and/or appeal of specific claims, regardless of how such
expenses are classified for statutory reporting purposes. Loss
adjustment expense shall include, but not be limited to, interest on
judgments, expenses of outside adjusters, legal expenses incurred in
connection with coverage questions and legal actions related thereto, a
pro rata share of salaries and expenses of the Company's field employees
according to the time occupied in adjusting a subject loss and expenses
of the Company's officials incurred in connection with the loss, but
shall not include office expenses or salaries of the Company's
officials. For purposes of this Contract, legal expenses incurred in
connection with coverage questions and legal actions related thereto
arising out of any one loss occurrence shall not exceed 25.0% of the
contractual loss under all policies involved in the loss occurrence.
Legal expenses incurred in connection with coverage questions and legal
actions related thereto shall be deemed to have occurred on the same
date as the loss covered or alleged to be covered under the policy.
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 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 IX - Loss Occurrence
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. The
change in date to the year 2000, or any other date change, including
leap year calculations, shall not in and of itself be regarded as an
event. 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 above) 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.
E. Losses arising from the date change to the year 2000, or any other date
change, including leap year calculations, shall not in and of themselves
be regarded as a "loss occurrence" for purposes of this Contract. Such
losses shall include any loss, damage, cost, claim or expense, whether
preventative, remedial or otherwise, directly or indirectly arising out
of or relating to:
1. The calculation, comparison, differentiation, sequencing or
processing of data involving the date change to the year 2000, or
any other date change, including leap year calculations, by any
computer system, hardware, program or software and/or any microchip,
integrated circuit or similar device in computer equipment or non-
computer equipment, whether the property of the insured or not; or
2. Any change, alteration or modification involving the date
change to the year 2000 or any other date change, including leap
year calculations, to any such computer system, hardware, program or
software or any microchip, integrated circuit or similar device in
computer equipment or non-computer equipment, whether the property
of the insured or not.
This paragraph applies regardless of any other cause or event that
contributes concurrently or in any sequence to the loss, damage, cost
claim or expense.
However, this paragraph shall not apply in respect of physical damage
occurring at the insured's premises arising out of the perils covered
under this Contract. None of the circumstances described in
subparagraphs 1 and 2 above shall, in and of themselves, constitute an
event for purposes of this Contract.
Notwithstanding the foregoing, the costs and expenses whether
preventative, remedial or otherwise, arising out of or relating to
change, alteration or modification of any computer system, hardware,
program or software or any microchip, integrated circuit or similar
device in computer or non-computer equipment, whether the property of
the insured or not shall not be included in the definition of loss
occurrence hereunder.
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, unless the term of this
Contract is extended to 15 months in accordance with paragraph C of
Article II, in which event the "15-Month Minimum Premium" for that
excess layer shall apply; 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 1999.
C. Notwithstanding the provisions of paragraph B above, if the term of this
Contract is extended to 15 months in accordance with paragraph C of
Article II, the Company shall pay the Reinsurer a 15-month deposit
premium for each excess layer of the amount, shown as "15-Month Deposit
Premium" for that excess layer in Schedule A attached hereto, in five
equal installments of the 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 1999 and December 1, 2000.
D. 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.
E. "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, Mobile Homeowners and Farmowners business, 70% of the total
basic policy premium as respects Businessowners and Commercial Multiple
Peril business and 100% of the Comprehensive portion of the premium for
Automobile Physical Damage business shall be considered subject premium.
Article XIII - Late Payments
A. The provisions of this Article shall not be implemented unless
specifically invoked, in writing, by one of the parties to this
Contract.
B. In the event any premium, loss or other payment due either party is not
received by the intermediary named in Article XXVI (hereinafter referred
to as the "Intermediary") by the payment due date, the party to whom
payment is due may, by notifying the Intermediary in writing, require
the debtor party to pay, and the debtor party agrees to pay, an interest
penalty on the amount past due calculated for each such payment on the
last business day of each month as follows:
1. The number of full days which have expired since the due date
or the last monthly calculation, whichever the lesser; times
2. 1/365ths of the 12-month United States Treasury Bill Rate, as
quoted in The Wall Street Journal on the first business day of the
month for which the calculation is made; times
3. The amount past due, including accrued interest.
It is agreed that interest shall accumulate until payment of the
original amount due plus interest penalties have been received by the
Intermediary.
C. The establishment of the due date shall, for purposes of this Article,
be determined as follows:
1. As respects the payment of routine deposits and premiums due
the Reinsurer, the due date shall be as provided for in the
applicable section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due
30 days after the date of transmittal by the Intermediary of the
initial billing for each such payment.
2. Any claim or loss payment due the Company hereunder shall be
deemed due 10 business days after the proof of loss or demand for
payment is transmitted to the Reinsurer or received by the
Reinsurer, whichever is soonest. If such loss or claim payment is
not received within the 10 days, interest will accrue on the payment
or amount overdue in accordance with paragraph B above, from the
date the proof of loss or demand for payment, in accordance with the
provisions of Article X, was transmitted to the Reinsurer.
3. As respects any payment, adjustment or return due either party
not otherwise provided for in subparagraphs 1 and 2 of paragraph C
above, the due date shall be as provided for in the applicable
section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due 10
business days following transmittal of written notification that the
provisions of this Article have been invoked.
For purposes of interest calculations only, amounts due hereunder shall
be deemed paid upon receipt by the Intermediary.
D. Nothing herein shall be construed as limiting or prohibiting a
subscribing reinsurer from contesting the validity of any claim, or from
participating in the defense or control of any claim or suit, or
prohibiting either party from contesting the validity of any payment or
from initiating any arbitration or other proceeding in accordance with
the provisions of this Contract. If the debtor party prevails in an
arbitration or other proceeding, then any interest penalties due
hereunder on the amount in dispute shall be null and void. If the
debtor party loses in such proceeding, then the interest penalty on the
amount determined to be due hereunder shall be calculated in accordance
with the provisions set forth above unless otherwise determined by such
proceedings. If a debtor party advances payment of any amount it is
contesting, and proves to be correct in its contestation, either in
whole or in part, the other party shall reimburse the debtor party for
any such excess payment made plus interest on the excess amount
calculated in accordance with this Article.
E. Interest penalties arising out of the application of this Article that
are $100 or less from any party shall be waived unless there is a
pattern of late payments consisting of three or more items over the
course of any 12-month period.
Article XIV - 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 XV - 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 XVI - 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 XVII - 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 XVIII - 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 XIX - 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 XX - 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 XXI - 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 (including all case reserves plus any
reasonable amount estimated to be unreported from known loss
occurrences) 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
(including all case reserves plus any reasonable amount estimated to be
unreported from known loss occurrences) 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 expense 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 (including all case reserves plus any reasonable amount
estimated to be unreported from known loss occurrences) 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 (including all
case reserves plus any reasonable amount estimated to be unreported
from known loss occurrences), 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 XXII - 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 (1) where this
Contract specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (2) 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 XXIII - Arbitration
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, the two Arbiters shall request the
American Arbitration Association to appoint the Umpire. If the American
Arbitration Association fails to appoint the Umpire within 30 days after
it has been requested to do so, either party may request a justice of a
Court of general jurisdiction of the state in which the arbitration is
to be held to appoint the Umpire.
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 XXIV - 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 a 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 XXV - Agency Agreement
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 XXVI - 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 Insurance Group
Schedule A
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to
Meridian Mutual Insurance 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
Occurrence Limit
(95.0% of) $4,000,000 $8,000,000 $12,000,000 $35,000,000
Reinsurer's Annual
Limit (95.0% of)$8,000,000 $16,000,000 $24,000,000 $70,000,000
Annual Minimum
Premium $638,400 $364,000 $328,000 $599,200
15-Month Minimum
Premium $798,000 $455,000 $410,000 $749,000
Premium Rate 0.7740% 0.4422% 0.3976% 0.7264%
Annual Deposit
Premium $798,000 $455,000 $410,000 $749,000
Quarterly Deposit
Premium $199,500 $113,750 $102,500 $187,250
15-Month Deposit
Premium $997,500 $568,750 $512,500 $936,250
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 Definitions 6
VIII Other Reinsurance 7
IX Loss Occurrence 7
X Loss Notices and Settlements 9
XI Salvage and Subrogation 10
XII Premium 10
XIII Late Payments 11
XIV Offset (BRMA 36C) 12
XV Access to Records (BRMA 1D) 13
XVI Net Retained Lines (BRMA 32E) 13
XVII Errors and Omissions (BRMA 14F) 13
XVIII Currency (BRMA 12A) 13
XIX Taxes (BRMA 50C) 13
XX Federal Excise Tax (BRMA 17A) 14
XXI Unauthorized Reinsurers 14
XXII Insolvency 16
XXIII Arbitration 16
XXIV Service of Suit (BRMA 49C) 17
XXV Agency Agreement 18
XXVI Intermediary (BRMA 23A) 18
Schedule A
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to
Meridian Mutual Insurance Group
Indianapolis, Indiana
Second Excess Catastrophe Reinsurance
Reinsurers Participations
Dorinco Reinsurance Company 10.00%
Erie Insurance Exchange 2.00
Farm Family Casualty Insurance Company 1.50
Gerling Global Reinsurance Corporation of America 1.00
Insurance Corporation of Hannover, An Illinois Corporation 3.50
Nationwide Mutual Insurance Company 2.50
Odyssey Reinsurance Corporation 5.00
Renaissance Reinsurance, Ltd. 10.00
Shelter Reinsurance Company 1.00
Sumitomo Marine Re Management, Ltd.
(for The Sumitomo Marine & Fire Insurance Co., Ltd.,
U.S. Branch) 2.00
USF RE Insurance Company 3.00
Through Swire Blanch - Australia
GIO Insurance Ltd. (trading as GIO Reinsurance) 7.50
Reinsurance Australia Corporation Limited 5.00
Through Swire Blanch Europe
Bayerische Ruckversicherung A.G. 6.00
La Mutuelle Du Mans Assurances I.A.R.D. 2.50
Mapfre Re Compania de Reaseguros, S.A. 2.00
R & V Versicherung A.G. 1.00
Walbaum International
for SOREMA North America Reinsurance Company
(as the fronting company for P.R.A.M. subscriptions) 7.00
Through Swire Blanch Ltd.
Lloyd's Underwriters Per Signing Schedule 27.50
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
F&G Re, Inc.
(for St. Paul Fire and Marine Insurance Company) 10.00
Farm Family Casualty Insurance Company 2.50
Farmers Mutual Hail Insurance Company of Iowa 1.50
Gerling Global Reinsurance Corporation of America 4.00
Insurance Corporation of Hannover, An Illinois Corporation 2.50
LaSalle Re Limited 17.50
Nationwide Mutual Insurance Company 4.00
Odyssey Reinsurance Corporation 4.00
Republic Western Insurance Company 1.00
Shelter Reinsurance Company 1.00
USF RE Insurance Company 2.00
Through Swire Blanch - Australia
GIO Insurance Ltd. (trading as GIO Reinsurance) 7.50
Through Swire Blanch Europe
Helvetia Swiss Insurance Company, Ltd. 1.00
La Mutuelle Du Mans Assurances I.A.R.D. 4.00
Mapfre Re Compania de Reaseguros, S.A. 3.00
R & V Versicherung A.G. 2.00
SPS Reassurance 2.50
Walbaum International
for SOREMA North America Reinsurance Company
(as the fronting company for P.R.A.M. subscriptions) 7.00
Through Swire Blanch Ltd.
Lloyd's Underwriters Per Signing Schedule 14.00
Total 100.00%
Fourth Excess Catastrophe Reinsurance
Reinsurers Participations
AXA Reinsurance Company 3.00%
Continental Casualty Company 2.00
Dorinco Reinsurance Company 6.00
Employers Mutual Casualty Company .60
Erie Insurance Exchange 1.50
F&G Re, Inc.
(for St. Paul Fire and Marine Insurance Company) 10.00
Gerling Global Reinsurance Corporation of America 5.00
LaSalle Re Limited 11.00
Nationwide Mutual Insurance Company 3.00
Odyssey Reinsurance Corporation 3.00
Shelter Reinsurance Company 1.00
SOREMA North America Reinsurance Company 16.00
Sumitomo Marine Re Management, Ltd.
(for The Sumitomo Marine & Fire Insurance Co., Ltd.,
U.S. Branch) 1.00
United Fire & Casualty Company .75
Through Swire Blanch - Australia
GIO Insurance Ltd. (trading as GIO Reinsurance) 4.25
Reinsurance Australia Corporation Limited 5.00
Through Swire Blanch Europe
La Mutuelle Du Mans Assurances I.A.R.D. 2.50
Mapfre Re Compania de Reaseguros, S.A. 2.00
R & V Versicherung A.G. .50
SPS Reassurance 1.50
Walbaum International
for SOREMA North America Reinsurance Company
(as the fronting company for P.R.A.M. subscriptions) 5.00
Through Swire Blanch Ltd.
Lloyd's Underwriters Per Signing Schedule 15.40
Total 100.00%
Fifth Excess Catastrophe Reinsurance
Reinsurers Participations
AXA Reinsurance Company 3.00%
Continental Casualty Company 4.00
Employers Mutual Casualty Company 1.00
Erie Insurance Exchange 2.00
F&G Re, Inc.
(for St. Paul Fire and Marine Insurance Company) 10.00
Farm Family Casualty Insurance Company 1.00
Farmers Mutual Hail Insurance Company of Iowa .35
Gerling Global Reinsurance Corporation of America 3.00
LaSalle Re Limited 4.50
Lehman Re Ltd. 3.00
Nationwide Mutual Insurance Company 2.50
Odyssey Reinsurance Corporation 3.15
Shelter Reinsurance Company 1.00
SOREMA North America Reinsurance Company 7.50
United Fire & Casualty Company .50
USF RE Insurance Company 1.00
Through Swire Blanch - Australia
Reinsurance Australia Corporation Limited 2.00
Through Swire Blanch Europe
Albingia Versicherungs AG 1.50
Bayerische Ruckversicherung A.G. 2.25
La Mutuelle Du Mans Assurances I.A.R.D. 5.00
Mapfre Re Compania de Reaseguros, S.A. 3.00
R & V Versicherung A.G. 1.00
Sirius International Insurance Corporation .50
Walbaum International
for SOREMA North America Reinsurance Company
(as the fronting company for P.R.A.M. subscriptions) 4.00
Through Swire Blanch Ltd.
Lloyd's Underwriters Per Signing Schedule 33.25
Total 100.00%
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
3.00% of the Fourth Excess Catastrophe Reinsurance
3.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
Continental Casualty Company
Chicago, Illinois
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
2.00% of the Fourth Excess Catastrophe Reinsurance
4.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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:
Chicago, Illinois,this _______ day of ___________________________
199___.
_____________________________________________________
Continental Casualty 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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
2.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
By: Erie Indemnity Company
(Attorney-In-Fact)
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
10.00% of the Third Excess Catastrophe Reinsurance
10.00% of the Fourth Excess Catastrophe Reinsurance
10.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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___.
_____________________________________________________
St. Paul Fire and Marine Insurance Company
By F&G Re, Inc.
Interests and Liabilities Agreement
of
Farm Family Casualty Insurance Company
Glenmont, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
2.50% 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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:
Glenmont, New York,this _______ day of ___________________________________
199___.
_____________________________________________________
Farm Family Casualty Insurance Company
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
Gerling Global Reinsurance
Corporation of America
New York, New York
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
4.00% of the Third Excess Catastrophe Reinsurance
5.00% of the Fourth Excess Catastrophe Reinsurance
3.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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___.
_____________________________________________________
Gerling Global Reinsurance Corporation of America
Interests and Liabilities Agreement
of
Insurance Corporation of Hannover
An Illinois Corporation
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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, An Illinois Corporation
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
17.50% of the Third Excess Catastrophe Reinsurance
11.00% of the Fourth Excess Catastrophe Reinsurance
4.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
Lehman Re Ltd.
Hamilton, Bermuda
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
3.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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___.
_____________________________________________________
Lehman Re Ltd.
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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:
2.50% of the Second Excess Catastrophe Reinsurance
4.00% 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
Odyssey Reinsurance Corporation
Wilmington, Delaware
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
4.00% of the Third Excess Catastrophe Reinsurance
3.00% of the Fourth Excess Catastrophe Reinsurance
3.15% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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___.
_____________________________________________________
Odyssey Reinsurance Corporation
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
0% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
Republic Western Insurance Company
Phoenix, Arizona
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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:
Phoenix, Arizona,this _______ day of ____________________________
199___.
_____________________________________________________
Republic Western Insurance Company
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
1.00% of the Third Excess Catastrophe Reinsurance
1.00% of the Fourth Excess Catastrophe Reinsurance
1.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
16.00% of the Fourth Excess Catastrophe Reinsurance
7.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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:
Warren, 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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
USF RE Insurance Company
Boston, Massachusetts
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
2.00% 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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:
Costa Mesa, California,this _______ day of ______________________
199___.
_____________________________________________________
USF RE Insurance Company
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
Reinsurance Australia Corporation Limited
Sydney, Australia
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
5.00% of the Fourth Excess Catastrophe Reinsurance
2.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
Albingia Versicherungs AG
Hamburg, Germany
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
1.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
Bayerische Ruckversicherung A.G.
Munich, Germany
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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:
6.00% of the Second Excess Catastrophe Reinsurance
0% of the Third Excess Catastrophe Reinsurance
0% of the Fourth Excess Catastrophe Reinsurance
2.25% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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:
2.50% of the Second Excess Catastrophe Reinsurance
4.00% of the Third Excess Catastrophe Reinsurance
2.50% of the Fourth Excess Catastrophe Reinsurance
5.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
3.00% of the Third Excess Catastrophe Reinsurance
2.00% of the Fourth Excess Catastrophe Reinsurance
3.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
R & V Versicherung A.G.
Wiesbaden, Germany
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
2.00% of the Third Excess Catastrophe Reinsurance
0.50% of the Fourth Excess Catastrophe Reinsurance
1.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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:
Wiesbaden, Germany,this _______ day of ___________________________________
199___.
_____________________________________________________
R & V Versicherung AG
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
0.50% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
SPS Reassurance
Paris, France
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
2.50% of the Third Excess Catastrophe Reinsurance
1.50% of the Fourth Excess Catastrophe Reinsurance
0% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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___.
_____________________________________________________
SPS Reassurance
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, 1999
issued to and duly executed by
Meridian Mutual Insurance 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
7.00% of the Third Excess Catastrophe Reinsurance
5.00% of the Fourth Excess Catastrophe Reinsurance
4.00% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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
Certain Underwriting Members of Lloyd's
shown in the Signing Schedule attached hereto
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1999
issued to and duly executed by
Meridian Mutual Insurance 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:
27.50% of the Second Excess Catastrophe Reinsurance
14.00% of the Third Excess Catastrophe Reinsurance
15.40% of the Fourth Excess Catastrophe Reinsurance
33.25% of the Fifth Excess Catastrophe Reinsurance
This Agreement shall become effective on January 1, 1999, and shall
continue in force until December 31, 1999, both days inclusive, unless this
Agreement is extended to March 31, 2000, upon notice from the Company, in
accordance with the provisions of the attached Contract.
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 & Mount, 750 Seventh Avenue, New York, New York 10019.
Signed for and on behalf of the Subscribing Reinsurer in the Signing
Schedule attached hereto.
EXHIBIT 10-65
MERIDIAN CITIZENS MUTUAL
MERIDIAN CITIZENS SECURITY
AGENCY PROFIT-SHARING AGREEMENT
The Company provides this Profit Sharing Plan on the net profits of the
business written and produced through the Agency as shown by the Home
Office records of the Company for each period and during the time this plan
is in force; the first such period beginning January 1, and ending on
December 31, and each calendar year thereafter.
Profit Sharing payments shall not be payable to the Agency for the current
Profit Sharing Year unless the Agency's annually written premiums are a
minimum of:
$75,000 as of the end of the current calendar year
otherwise this plan will be inoperative if this minimum is not met based on
Company production statements.
The provisions of this plan do not pertain to premium production written
through Meridian Mutual Insurance Company and/or Meridian Security
Insurance Company.
No Profit Sharing will be paid if an Agency has been delinquent more than
once in payment of account as provided in the Company's Agency Agreement.
Payments are based on the twelve (12) monthly statements which make up the
Profit Sharing.
For the purpose of this agreement, the profit on the business produced by
the Agency during the year under consideration will be determined by the
following formula:
I. FORMULA
At the end of each Profit Sharing Year (the accounting period
beginning January 1 and ending December 31 of the same calendar year),
the Net Profit or Loss shall be calculated as follows:
A. Earned premiums $
B. Incurred Losses (not less than zero) $
C. Incurred Losses Percentage (B/A * 100) %
D. Gross Profit Percentage (50% - C) %
E. Gross Profit (D * A) $
F. Base Profit Share Due Agency (___% E)$
G. Profit Share Due Agency $
II. FORMULA DEFINITIONS
A. "Annual Written Premiums" are defined as gross premiums less
credits for premiums on cancellations and returns written by Agency
and recorded by Company during the Profit Sharing Year.
B. "Earned Premiums" are defined as the Written Premiums on business
produced during the Profit Sharing Year minus the Unearned Premiums
as of the end of the same year plus the Unearned Premium as of the
end of the prior year.
C. "Incurred Losses" are defined as net losses paid during the Profit
Sharing Year plus reserve for unpaid losses as of the end of the
same year and minus reserve for unpaid losses as of the beginning
of the same year. If a negative total results, a zero total will be used.
The maximum amount charged for any one loss shall be the net amount
paid or reserved subject to Section V, Paragraph D. Incurred Loss
Percentage is calculated by dividing the Incurred Losses by the
Earned Premiums times 100. If such Percentage is greater than 50
percent, no further calculation will be made.
D. Gross Profit Percentage is calculated by subtracting the Incurred
Loss Percentage from 50 percent.
E. Gross Profit is calculated by multiplying Earned Premiums by the
Gross Profit Percentage.
F. Base Profit Share Due Agent shall be calculated by multiplying the Net
Profit by the applicable Profit Share Percentage set forth in the
following table:
(a) (b)
Annual Base Profit Share
Written Premiums Percentage
0 - 74,999 0%
75,000 - 125,000 10.0%
125,001 - 250,000 15.0%
250,001 - 500,000 20.0%
500,001 - Over 25.0%
Determination of base Profit Share Percentage: The Percentage figure
which is opposite the written premiums for the Profit Sharing Year
is the base Profit Share Percentage (enter in Section I. F).
G. Profit Share Due Agency shall be the base profit share plus or minus
any Bonus Plan percentages as set forth in Section III. and Section IV.,
Bonus Plan.
III. BONUS PLAN--Agencies with annual written premiums of $75,000 to
$250,000
A. Growth Bonus
1. The Company agrees to pay 1.25 times the dollar amount shown in
Section I. F when the policy count as of December 31 is in excess
of 1.149 percent of the policy count as of January 1 of the current
year as shown in the Company's Agency Statement.
2. The Company agrees to pay .75 times the dollar amount shown in
Section I. F when the policy count as of December 31 is less than
.949 percent of the policy count as of January 1 of the current year
as shown in the Company's Agency Statement.
Profit Sharing calculation ends here for agencies
BELOW $250,000 annual written premiums.
IV. BONUS PLAN--Agencies with annual written premiums of $250,001 to
$1,000,000
A. Growth Bonus
1. The Company agrees to include the following Growth Bonus percentage
points to the current year's base Profit Share percentage (Section II.
F(b)) when the policy count as of December 31 to the policy count
of January 1 of the current year as shown in the Company's Agency
Statement is:
% of Policy Count Growth Bonus
.949% and less -1.0%
+1.050% to +1.15% +1.0%
+1.151% and above +2.0%
B. Retention Bonus
1. The Company agrees to include the following Retention Bonus
percentage points to the base Profit Share percentage
(Section II. F(b)) when policies in force as of December 31 divided
by the same policies in force as of January 1 of the current year are:
Retention
Current Retention Bonus Points
Percentage
80.0% - 90.99% +2%
91.0% - 100.00% +3%
C. Loss Ratio Bonus
1. The Company agrees to include the following Loss Ratio Bonus
percentage points to the current year's base Profit Share
percentage (Section II. F(b)) when the current year plus the
preceding two years' total incurred losses to earned premiums loss
ratio is:
Loss Ratio
3-Year Loss Ratios Bonus
Points
0 - 25.99% +4%
26.0% - 39.99% +3%
40.0% - 49.99% +2%
50.0% - 59.99% 0%
60.0% - 69.99% -2%
70.0% - 79.99% -3%
80.0% - Over -4%
V. OTHER PROVISIONS
A. The Company agrees to submit to the Agency a Profit Sharing Statement
within a reasonable time after the close of the Profit Sharing period,
and if a net profit is shown, the Company will promptly remit the
resultant Profit Sharing payment to the Agency, if all premiums and
other current indebtedness for the period have been paid. The
Profit Sharing allowed the Agency, if any, is not payable unless
the Agency has complied with all terms of this Plan and the Company's
Agency Agreement. No charge or deduction for Profit Sharing payment
shall be made or claimed by the Agency in its accounts and is
payable only by the Company's check.
B. The Company's records shall be considered binding and conclusive
as to all information pertaining to this Agreement.
C. A deficit is incurred anytime Agency's Loss Percentage is in excess
of 50 percent. There is no deficit carry-over, except as it may apply
to the Loss Ratio Bonus, Section IV. C(1).
D. The maximum loss charged to Section I. B--"Incurred Losses"--for a
Profit Sharing Year will be $100,000 on any one occurrence. Section IV.
C(1) shall include total losses incurred for the Bonus Period calculation
E. In the event of a change in Agency ownership during the Profit
Sharing period, any Profit Sharing earned during that period shall
be payable by the Company to the Agency owner shown on the Company's
records at the close of that Profit Sharing period. It is also agreed,
for the purpose of computing Profit Sharing, that the purchaser
receive credit for all the earned premiums and is charged with all
the incurred losses of the purchased Agency subject to the terms
of this Agreement. Except as provided in this Section E, neither this
plan nor any rights hereunder shall be assignable.
F. This Plan supersedes all additional commission, bonus commission,
growth opportunity bonus, contingent or profit sharing agreements
of any kind, and any such previous agreements are terminated.
G. The failure of the Company to enforce, or apply at any time, any
of the provisions of this Agreement shall in no way be construed
to be a waiver of such provisions, nor in any way to affect
the right of the Company thereafter to enforce or apply each
and every such provision.
H. This Agreement may be terminated by either party following ninety
(90) days' prior written notice, or shall terminate automatically
concurrent with the effective date of termination of the Agency
Agreement or Agency's contract with the Company. Upon termination,
only Profit Sharing commission accrued and unpaid at the end of the
year prior to the year of termination shall be payable to Agency.
In witness whereof, Agency and Company have executed this Agreement on
_____________________, 19______, to be effective _____________________,
19_____, and thereafter until terminated as provided herein.
herein referred to as "Agent,"
By_______________________
Title____________________
_____Meridian Citizens Mutual Insurance Company
_____Meridian Citizens Security Insurance Company
Meridian Citizens Mutual Insurance Company and
Meridian Citizens Security Insurance Company
_____Jointly
Herein referred to as "Company."
By_______________________
Title____________________
EXHIBIT 21-01
MERIDIAN INSURANCE GROUP, INC.
Listing of Subsidiaries
As of December 31, 1998
State of Incorporation
Name of Subsidiary or Organization
Meridian Security Insurance Company Indiana
Meridian Citizens Security Insurance Company Minnesota
Insurance Company of Ohio Ohio
Meridian Service Corporation Indiana
EXHIBIT 23-01
CONSENT OF INDEPENDENT ACCOUNTANTS
March 26, 1999
We consent to the incorporation by reference in Registration No. 33-69313
on Form S-8 effective December 18, 1998; in Registration No. 33-10943 on
Form S-8 effective August 28, 1996; in Registration Statement No. 33-31003
on Form S-8 as amended by Post-Effective Amendment No. 1 effective July 31,
1997; in Registration Statement No. 33-42771 on Form S-8 effective December
18, 1997; 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 24, 1999, on
our audits of the consolidated financial statements and financial statement
schedules of Meridian Insurance Group, Inc. as of December 31, 1998 and
1997 and for each of the three years in the period ended December 31, 1998,
which report is included in the Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<DEBT-HELD-FOR-SALE> 241,994
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189,188
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<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-END> DEC-31-1997
<DEBT-HELD-FOR-SALE> 248,404
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<TOTAL-ASSETS> 413,586
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0
0
<COMMON> 41,802
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194,587
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<TOTAL-ASSETS> 397,798
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<NOTES-PAYABLE> 11,875
0
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167,304
<INVESTMENT-INCOME> 14,908
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