<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission file number 0-24800
THE TENERE GROUP, INC.
(Exact name of Registrant as specified in its charter)
Missouri 43-1675969
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1903 E. Battlefield, Springfield, MO 65804
(Address of principal executive offices) (Zip code)
417-889-1010
(Registrant's telephone number, including area code)
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
----- -----
As of September 30, 1998 there were 1,999,774 shares of Common Stock, $.01 par
value, issued and outstanding.
<PAGE> 2
THE TENERE GROUP, INC.
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997 3
Consolidated Statements of Operations -
Three Months ended September 30, 1998 and 1997 4
Consolidated Statements of Operations -
Nine Months ended September 30, 1998 and 1997 5
Consolidated Statements of Stockholders' Equity
and Comprehensive Income - Periods Ended
December 31, 1997 and 1996 and September 30, 1998 6
Consolidated Statements of Cash Flows
Nine Months ended September 30, 1998 and 1997 7
Condensed Notes to Consolidated Financial Statements 8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
PART II. OTHER INFORMATION
ITEM 5. Other Information 20
ITEM 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 20
EXHIBIT INDEX 21
</TABLE>
<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE TENERE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
UNAUDITED
Assets 1998 1997
------ ------ ------
<S> <C> <C>
Investments:
Bonds held available for sale, at fair value (amortized cost -
$37,604,144 in 1998; $39,863,330 in 1997) $ 39,761,871 40,930,956
Common stock, at fair value 13,643 7,057
Short-term investments, at cost which approximates fair value 8,686,500 2,788,476
------------- ------------
Total investments 48,462,014 43,726,489
Cash 713,693 3,761,457
Premiums receivable 3,412,742 3,124,660
Reinsurance recoverable 10,686,262 10,413,593
Ceded unearned premiums 239,423 369,727
Accrued investment income 593,767 674,843
Deferred policy acquisition costs 207,129 183,253
Deferred income taxes 2,826,263 2,304,087
Income taxes recoverable 300,000 300,000
Other 716,859 867,543
------------- ------------
Total assets $ 68,158,152 65,725,652
============= ============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Reserves for losses and loss adjustment expenses $ 34,099,394 31,030,412
Unearned premium reserve 7,876,170 7,717,308
Reinsurance premiums payable 4,949,193 4,435,317
Other 1,321,238 1,563,056
------------- ------------
Total liabilities 48,245,995 44,746,093
Stockholders' equity:
Common stock, $.01 par value; 7,000,000 shares authorized;
1,999,774 shares issued and outstanding 19,998 19,998
Contributed capital 21,940,828 21,940,828
Accumulated deficit (3,481,586) (1,690,370)
Accumulated other comprehensive income, net of tax 1,432,917 709,103
------------- ------------
Total stockholders' equity 19,912,157 20,979,559
------------- ------------
Total liabilities and $ 68,158,152 65,725,652
============= ============
</TABLE>
See condensed notes to consolidated financial statements
3
<PAGE> 4
THE TENERE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 1998 and 1997
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Revenues:
Direct premiums written $ 8,261,356 8,330,362
Premiums ceded to reinsurers (2,988,987) (2,308,816)
------------ ------------
Net premiums written 5,272,369 6,021,546
Increase in unearned premium reserve (289,166) (1,780,186)
------------ ------------
Net premiums earned 4,983,203 4,241,360
Net investment income 2,150,088 1,936,459
Net realized investment gains 61,320 -
------------ ------------
Total revenues 7,194,611 6,177,819
Losses and expenses:
Losses and loss adjustment expenses 7,525,589 2,861,880
General and administrative expenses 2,355,287 2,883,434
------------ ------------
Total losses and expenses 9,880,876 5,745,314
------------ ------------
(Loss) income before income taxes (2,686,265) 432,505
Income tax benefit (expense) 895,049 (204,356)
------------ ------------
Net (loss) income $ (1,791,216) 228,149
============ ============
Basic net (loss) income per share $ (0.90) 0.11
============ ============
Diluted net (loss) income per share $ (0.90) 0.10
============ ============
</TABLE>
See condensed notes to consolidated financial statements
5
<PAGE> 5
THE TENERE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
UNAUDITED
1998 1997
------ ------
<S> <C> <C>
Revenues:
Direct premiums written $ 2,587,157 3,621,439
Premiums ceded to reinsurers (1,602,756) (1,202,572)
------------ ------------
Net premiums written 984,401 2,418,867
Increase in unearned premium reserve 295,298 (968,677)
------------ ------------
Net premiums earned 1,279,699 1,450,190
Net investment income 733,530 650,763
Net realized investment gains 63,524 -
------------ ------------
Total revenues 2,076,753 2,100,953
Losses and expenses:
Losses and loss adjustment expenses 3,289,450 351,361
General and administrative expenses 804,164 1,104,923
------------ ------------
Total losses and expenses 4,093,614 1,420,284
------------ ------------
(Loss) income before income taxes (2,016,861) 680,669
Income tax benefit (expense) 657,458 (300,415)
------------ ------------
Net (loss) income $ (1,359,403) 380,254
============ ============
Basic net (loss) income per share $ (0.68) 0.19
============ ============
Diluted net (loss) income per share $ (0.68) 0.17
============ ============
</TABLE>
<PAGE> 6
THE TENERE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
September 30, 1998 and December 31, 1997 and 1996
UNAUDITED
<TABLE>
<CAPTION>
Retained Accumulated
earnings/ other
Common Contributed (accumulated comprehensive
stock capital deficit) income Total
---------- -------------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 19,998 21,940,828 2,196,890 379,562 24,537,278
Comprehensive loss
Net loss (2,934,486) (2,934,486)
Other comprehensive loss, net of tax
Net unrealized investment loss (213,089) (213,089)
Total comprehensive loss (3,147,575)
---------- ------------ ------------- ----------- ------------
Balance at December 31, 1996 19,998 21,940,828 (737,596) 166,473 21,389,703
Comprehensive loss
Net loss (952,774) (952,774)
Other comprehensive income, net of tax
Net unrealized investment gain 542,630 542,630
Total comprehensive loss
---------- ------------ ------------- ----------- ------------
Balance at December 31, 1997 19,998 21,940,828 (1,690,370) 709,103 20,979,559
Comprehensive loss
Net loss (1,791,216) (1,791,216)
Other comprehensive income, net of tax
Unrealized investment gain, net of
reclassification adjustment 723,814 723,814
Total comprehensive loss
---------- ------------ ------------- ----------- ------------
Balance at September 30, 1998 $ 19,998 21,940,828 (3,481,586) 1,432,917 19,912,157
========== ============ ============= =========== ============
Disclosure of reclassification amount
Unrealized holding gains arising during the period $ 785,134
Less: reclassification adjustment for net realized gains included in net loss (61,320)
-----------
Unrealized gain on securities $ 723,814
===========
Comprehensive
income
-------------
Balance at December 31, 1995
Comprehensive loss
Net loss (2,934,486)
Other comprehensive loss, net of tax
Net unrealized investment loss (213,089)
------------
Total comprehensive loss (3,147,575)
============
Balance at December 31, 1996
Comprehensive loss
Net loss (952,774)
Other comprehensive income, net of tax
Net unrealized investment gain 542,630
------------
Total comprehensive loss (410,144)
============
Balance at December 31, 1997
Comprehensive loss
Net loss (1,791,216)
Other comprehensive income, net of tax
Unrealized investment gain, net of
reclassification adjustment 723,814
------------
Total comprehensive loss (1,067,402)
============
</TABLE>
See condensed notes to consolidated financial statements
6
<PAGE> 7
THE TENERE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1998 and 1997
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
--------------- ----------------
<S> <C> <C>
Cash flows from operating activities
Premiums received from policyholders $ 7,967,870 6,966,187
Premiums paid to reinsurers (2,431,560) (2,524,828)
Recoveries received from reinsurers 2,997,482 415,573
Losses and loss adjustment expenses paid (7,726,539) (7,693,483)
Commissions paid (328,540) (173,011)
Cash paid to suppliers and employees (2,286,042) (2,040,825)
Interest received 2,360,424 2,177,812
Income taxes received - 335,089
------------- -------------
Net cash provided by (used in) operating activities 553,095 (2,537,486)
Cash flows from investing activities:
Maturity of bonds available for sale 10,250,000 1,450,000
Sale of bonds available for sale 4,569,164 -
Redemption on stock rights - 56
Purchase of bonds available for sale (12,495,207) (5,014,094)
Purchase of furniture and equipment (26,792) (43,108)
------------- -------------
Net cash from (used in) investing activities 2,297,165 (3,607,146)
Net increase (decrease) in cash and short-term investments 2,850,260 (6,144,632)
Cash and short-term investments at beginning of period 6,549,933 16,935,122
------------- -------------
Cash and short-term investments at end of period $ 9,400,193 10,790,490
============= =============
Reconciliation of net (loss) income to net cash provided by (used in) operating activities
Net (loss) income $ (1,791,216) 228,149
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Net realized investment gains (61,320) -
Depreciation and amortization expense 96,984 123,248
Net change in deferred acquisition costs (23,876) (80,743)
Deferred income tax benefit (895,049) (160,258)
Net amortization of discount on bonds (3,451) 40,824
Change in operating assets and liabilities
Premiums receivable (288,082) (1,269,633)
Reinsurance balances 371,511 360,143
Accrued investment income 81,076 69,233
Income taxes recoverable - 699,703
Other assets 80,491 60,530
Reserve for losses and loss adjustment expenses 3,068,982 (4,857,225)
Unearned premium reserve 158,862 1,708,679
Other liabilities (241,817) 539,864
------------- -------------
Net cash provided by (used in) operating activities $ 553,095 (2,537,486)
============= =============
</TABLE>
See condensed notes to consolidated financial statements
7
<PAGE> 8
THE TENERE GROUP, INC.
AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements are prepared
in accordance with the rules and regulations of the Securities and
Exchange Commission with regard to interim financial statements. In the
opinion of management, all adjustments necessary for a fair presentation
of such financial statements have been made. Such adjustments consisted
of only normal recurring items. The results of operations for the nine
months ended September 30, 1998 are not necessarily indicative of the
results which may occur for the full year. The accompanying unaudited
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the 1997 Annual
Report.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (Statement
130). Statement 130 requires a company to classify items of other
comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in-capital in the equity section of
the statement of financial position. The change in unrealized investment
gains and losses is the only component of other comprehensive income for
the Company.
(2) INVESTMENTS
The amortized cost and estimated fair values of investments in bonds and
common stock as of September 30, 1998 and December 31, 1997 are presented
below. The estimated fair values presented in this footnote were
determined using quoted market prices, where available, or independent
pricing services.
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
Type of Investment cost basis gains losses value
- ------------------ ---------- ---------- ---------- ---------
September 30, 1998
<S> <C> <C> <C> <C>
Bonds:
United States government,
government agencies and $34,588,337 2,033,110 - 36,621,447
authorities
Corporate 3,015,807 124,617 - 3,140,424
----------- --------- --------- ----------
Total bonds 37,604,144 2,157,727 - 39,761,871
Common stock 284 13,359 - 13,643
Short-term investments 8,686,500 - - 8,686,500
----------- --------- --------- ----------
Total investments $46,290,928 2,171,086 - 48,462,014
=========== ========= ========= ==========
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
Type of Investment cost basis gains losses value
- ------------------ ---------- ---------- ---------- ---------
December 31, 1997
<S> <C> <C> <C> <C>
Bonds:
United State government,
government agencies and $38,003,757 1,012,229 (7,020) 39,008,966
authorities
State municipalities and
political subdivisions 1,859,573 62,417 - 1,921,990
----------- --------- -------- ----------
Total bonds 39,863,330 1,074,646 (7,020) 40,930,956
Common stock 284 6,773 - 7,057
Short-term investments 2,788,476 - - 2,788,476
----------- --------- -------- ----------
Total investments $42,652,090 1,081,419 (7,020) 43,726,489
=========== ========= ======== ==========
</TABLE>
The amortized cost and estimated fair value of investments in bonds at September
30, 1998 by contractual maturity are shown below. Expected maturities may
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized fair
cost basis value
---------- -----
<S> <C> <C>
Due after one year through five years $16,374,478 17,012,549
Due after five years through ten years 21,229,666 22,749,322
----------- ----------
$37,604,144 39,761,871
=========== ==========
</TABLE>
Proceeds from sales of available for sale securities for the nine months ended
September 30, 1998 were $4,569,164. Gross gains and losses on those sales were
$44,789 and $2,204 in 1998, respectively.
Net investment income for the nine months ended September 30, 1998 and 1997 is
comprised of the following:
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
----------- -------------
<S> <C> <C>
Investment income:
Interest on short-term investments $ 336,067 639,047
Interest on bonds 1,943,731 1,428,707
----------- -----------
Gross investment income 2,279,798 2,067,754
Investment expenses (129,710) (131,295)
----------- -----------
Net investment income $ 2,150,088 1,936,459
=========== ===========
</TABLE>
9
<PAGE> 10
Bonds with an estimated fair value of $1,944,283 at September 30, 1998
and $1,878,081 at December 31, 1997 were on deposit with the Missouri
Department of Insurance.
The net changes in unrealized investment gains (losses) in the nine
months ended September 30, 1998 and 1997 are as follows:
<TABLE>
September 30, September 30,
1998 1997
------------- ------------
<S> <C> <C>
Net unrealized investment gains $ 1,096,687 311,497
Federal income tax expense at 34% (372,873) (105,908)
------------ -----------
Net unrealized investment gains $ 723,814 205,589
============ ===========
</TABLE>
(3) RESERVE FOR LOSSES AND LOSS
ADJUSTMENT EXPENSES AND REINSURANCE
A summary of the reserves for losses and loss adjustment expenses follows:
10
<PAGE> 11
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Undiscounted reserves for losses and loss
adjustment expenses $ 34,621,635 31,990,412
Less discount (522,241) (960,000)
------------ ------------
Discounted reserves for losses and loss
adjustment expenses $ 34,099,394 31,030,412
============ ============
Following is the activity in the reserves
for losses and loss adjustment expenses:
September 30, September 30,
1998 1997
------------- -------------
Balance at January 1 $31,030,412 32,887,407
Less reinsurance recoverable on reserves for
losses and loss adjustment expenses (9,950,512) (7,099,463)
------------ ------------
21,079,900 25,787,944
------------ ------------
Incurred related to:
Current year 6,177,648 4,566,620
Prior year 1,347,941 (1,704,740)
------------ ------------
Total incurred 7,525,589 2,861,880
------------ ------------
Paid related to:
Current year 293,957 359,378
Prior year 4,823,539 6,751,834
------------ ------------
Total paid 5,117,496 7,111,212
------------ ------------
Net balance at September 30 23,487,993 21,538,612
Plus reinsurance recoverable on reserves for
losses and loss adjustment expenses 10,611,401 6,491,570
------------ ------------
Balance at September 30 $34,099,394 28,030,182
============ ============
</TABLE>
The reserves for losses and loss adjustment expenses are estimated based on
development information available at each reporting date. As a result of the
nature of the risks underwritten, claims development may occur over an extended
period of time. The changes in the incurred amounts disclosed above related to
prior years are the result of utilizing improved claim development information
as that information becomes available.
Reserves were discounted by 2% and 1% in the financial statements for the
periods ended December 31, 1997 and September 30, 1998, respectively. As
directed by the Missouri Department of Insurance, the discount will be
completely eliminated after December 31, 1998.
Premiums and losses related to reinsurance amounts for the nine months ended
September 30, 1998 and 1997 are summarized as follows:
<PAGE> 12
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Ceded premiums written $2,988,987 2,308,816
========== ==========
Ceded premiums earned $2,752,514 2,283,985
========== ==========
Ceded losses and loss
adjustment expenses (benefit) $3,270,151 (25,620)
========== ==========
</TABLE>
(4) FEDERAL INCOME TAXES
The Company files a consolidated federal income tax return. Income tax
expense (benefit) varies from the amount which would be provided by
applying the federal income tax rates to income (loss) before income
taxes. The following reconciles the expected provision for income tax
expense (benefit) using the federal statutory tax rate of 34% to the
provision for income tax expense (benefit) reported herein for the nine
months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Expected tax (benefit) expense
using statutory rates $ (913,330) 147,052
Other, net 18,281 57,304
---------- --------
Income tax (benefit) expense $ (895,049) 204,356
========== ========
</TABLE>
Income taxes consist of the following at September 30:
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Current expense $ - 364,614
Deferred benefit (895,049) (160,258)
---------- --------
Income tax (benefit) expense $ (895,049) 204,356
========== ========
</TABLE>
12
<PAGE> 13
Deferred income taxes arise from temporary differences resulting from
income and expense items reported for financial accounting and tax
purposes in different periods. The sources of these differences and the
tax effect of each are as follows:
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Losses and loss adjustment expenses
incurred for financial reporting
purposes but not deductible for
tax purposes $ (266,446) 61,670
Unearned premiums not deductible
for tax purposes (20,142) (120,817)
Deferred compensation - (102,642)
Deferred retirement benefit (14,583) (100,623)
Net operating loss carryforward (481,944) 105,163
Other, net (111,934) (3,009)
----------- ----------
Deferred tax benefit $ (895,049) (160,258)
=========== ==========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
September 30, 1998 and December 31, 1997 are presented below:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Discounted unpaid loss reserves $ 1,346,494 1,080,048
Discounted unearned premium reserves 519,298 499,158
Deferred compensation 191,042 191,042
Deferred retirement benefit 215,829 201,246
Deferred commissions payable 44,224 47,465
Net operating loss carryforward 1,597,368 1,115,423
----------- ----------
Total gross deferred tax assets 3,914,255 3,134,382
Less valuation allowance (279,400) (390,400)
----------- ----------
Net deferred tax assets 3,634,855 2,743,982
Deferred tax liabilities:
Investments adjusted to market value (738,168) (365,295)
Deferred acquistion costs (70,424) (62,306)
Other - (12,294)
----------- ----------
Total gross deferred tax liabilities (808,592) (439,895)
----------- ----------
Net deferred tax asset $ 2,826,263 2,304,087
=========== ==========
</TABLE>
The valuation allowance for deferred tax assets at September 30, 1998 was
$279,400. Based on the Company's historical earnings, future
expectations of adjusted taxable income, its ability to change its
investment strategy, as well as reversing gross deferred tax liabilities,
management believes it is more likely than not that the Company will
fully realize the gross deferred tax assets less the valuation allowance.
However, there can be no assurances that the Company will generate the
necessary adjusted taxable income in any future period.
13
<PAGE> 14
(5) STATUTORY ACCOUNTING
Intermed and its subsidiary Interlex are domiciled in Missouri and
prepare their statutory-basis financial statements in accordance with
accounting practices prescribed or permitted by the Missouri Department
of Insurance. "Prescribed" statutory accounting practices include state
laws, regulations and general administrative rules, as well as a variety
of publications of the NAIC. "Permitted" statutory accounting practices
encompass all accounting practices that are not prescribed; such
practices may differ from state to state, may differ from company to
company within a state, and may change in the future. Intermed and its
subsidiary Interlex have no significant permitted accounting practices
that vary from prescribed accounting practices, except for discounting of
loss reserves.
Reconciliations of statutory net (loss) income, as determined using
statutory accounting principles, to the amounts included in the
accompanying consolidated financial statements for the nine months ended
September 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Net (loss) income of
insurance subsidiaries $ (2,543,102) 658,544
Increase (decrease):
Deferred policy acquisition costs 23,876 80,743
Deferred income taxes 895,049 160,258
Deferred compensation - (301,887)
Deferred retirement benefit (42,891) (295,951)
Other adjustments, net (124,148) (73,558)
------------ ---------
Net (loss) income as reported herein $ (1,791,216) 228,149
============ =========
</TABLE>
Reconciliations of statutory capital and surplus, as determined using
statutory accounting principles, to stockholders' equity included in the
accompanying consolidated financial statements at September 30, 1998 and
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Statutory capital and surplus of
Intermed Insurance Company $15,262,440 17,830,404
Increase (decrease)
Deferred policy acquisition costs 207,129 183,253
Deferred income taxes 2,826,264 2,304,087
Net unrealized gain (loss)
on investments booked at market 2,157,727 1,067,627
Deferred compensation (561,887) (561,887)
Accrued retirement (634,792) (591,901)
Non-admitted assets and other
adjustments, net 655,276 747,976
----------- ----------
Stockholders' equity as reported herein $19,912,157 20,979,559
=========== ==========
</TABLE>
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis addresses the Company's financial
condition at September 30, 1998 and results of operations for the three and
nine months ended September 30, 1998 and 1997.
RESULTS OF OPERATIONS-THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
- --------------------------------------------------------------------
Direct premiums written in the three months ended September 30, 1998 were $2.6
million, a decrease of approximately $1.0 million or 28.6% from the
corresponding period in 1997. Results by product were:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 CHANGE
-------------------- ------------------ ------
<S> <C> <C> <C>
Medical malpractice $ 2,239,900 3,372,300 -33.6%
Legal malpractice 347,300 249,100 +39.4%
-------------------- ------------------ -----
Total $ 2,587,200 3,621,400 -28.6%
</TABLE>
Legal malpractice premiums written in the three months ended September 30, 1998
were 39.4% ahead of the prior year period while medical malpractice premiums
written were 33.6% below the 1997 period. The decline in medical malpractice
premiums written occurred primarily in the State of Missouri where the Company
continues to encounter fierce rate competition. Medical malpractice production
by state was:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 CHANGE
-------------------- ------------------ ------
<S> <C> <C> <C>
Missouri $ 1,487,700 2,577,200 -42.3%
Kansas 84,000 31,200 +169.2%
Texas 668,200 763,900 -12.5%
-------------------- ------------------ ------
Total $ 2,239,900 3,372,300 -33.6%
==================== ================== ======
</TABLE>
Premiums ceded to reinsurers increased from $1.2 million in the three months
ended September 30, 1997 to $1.6 million in the current quarter. The increase
between periods was due to an increase in losses ceded to reinsurers.
Net premiums written declined from $2.4 million in the three months ended
September 30, 1997 to $984,400 in the 1998 period due to (a) the decrease in
direct premiums written and (b) the increase in premiums ceded to reinsurers
discussed above.
There was a decrease of $295,300 in the unearned premium reserve in the three
months ended September 30, 1998 compared to an increase of $968,700 in the
prior year period. The change
15
<PAGE> 16
between periods was due to the decrease in direct premiums written in the 1998
period as discussed above.
There was a decrease of $170,500 in premiums earned in the three months ended
September 30, 1998 compared to the same period of 1997 due to (a) the decrease
in premiums written and (b) the significant increase in premiums ceded to
reinsurers.
Net investment income in the three months ended September 30, 1998 was $733,500,
an increase of $82,800 or approximately 13.0% over the comparable quarter of
1997. The increase was primarily due to having a larger percentage of the
portfolio invested long-term in the 1998 period than in the prior year period.
Net realized investment gains of $63,500 in the current quarter were from sales
and calls of long-term bonds.
Total revenues were $2.1 million in the three months ended September 30, 1998,
level with the prior year period.
Losses and loss adjustment expenses totaled $3.3 million in the three months
ended September 30, 1998 compared to $315,400 in the comparable prior year
period. The 1997 period included a significant reduction in reserves for prior
accident years recommended by the Company's new consulting actuary. The direct
1998 accident year loss ratio was 104.6%. The net 1998 calendar year loss ratio
was 257.0%. The Company continues to experience high severity and there was a
significant increase in frequency in the 1998 period.
General and administrative expenses were $804,200 in the three months ended
September 30, 1998 compared to $1.1 million in the three months ended September
30, 1997. The 1997 period included accruals of $296,000 for post-retirement
benefits for the Board of Directors, compared to approximately $8,600 in the
third quarter of 1998. The expense ratio for the three months ended September
30, 1998 was 31.1% compared to 30.5% in the 1997 period due to the decline in
premiums written in the 1998 period.
The loss before income taxes in the three months ended September 30, 1998 was
$2.0 million compared to income before income taxes of $680,700 in the
comparable period of 1997. The 1997 period benefited from reserve adjustments
as discussed above.
There was a benefit from income taxes of $657,500 in the 1998 period compared to
an expense of $300,400 in the 1997 period.
The net loss in the three months ended September 30, 1998 was $1,359,400 or $.68
per share compared to net income of $380,300 or $.19 per share in the prior year
period ($.17 per diluted share).
16
<PAGE> 17
RESULTS OF OPERATIONS-NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Direct premiums written were $8.3 million in the nine months ended September 30,
1998, a decrease of $69,000 or less than 1% from the comparable prior year
period. Results by product were:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 CHANGE
-------------------- ------------------ ------
<S> <C> <C> <C>
Medical malpractice $ 7,245,700 7,526,900 -3.7%
Legal malpractice 1,015,700 803,500 +26.4%
-------------------- ------------------ -----
Total $ 8,261,400 8,330,400 -0.8%
</TABLE>
Legal malpractice premiums written in the nine months ended September 30, 1998
were 26.4% above the prior year period while medical malpractice premiums
written showed a decline of 3.7%. The decline in medical malpractice premiums
written occurred in the State of Missouri where the Company continues to
encounter fierce rate competition. Medical malpractice production by state
was:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 CHANGE
-------------------- ------------------ ------
<S> <C> <C> <C>
Missouri $ 4,836,000 5,636,300 -14.2%
Kansas 147,000 66,900 +119.7%
Texas 2,262,700 1,823,700 +24.1%
-------------------- ------------------ ------
Total $ 7,245,700 7,526,900 -3.7%
</TABLE>
Premiums ceded to reinsurers in the nine months ended September 30, 1998 were
$3.0 million, $680,200 higher than the prior year period. The increase was
primarily attributable to an increase in losses ceded to reinsurers in the
current period.
There was a $289,200 increase in the unearned premium reserve (UPR) in the nine
months ended September 30, 1998 compared to an increase of $1.8 million in the
nine months ended September 30, 1997.
Due primarily to a smaller increase in the unearned premium reserve, net
premiums earned in the 1998 period were $741,800 higher than in the comparable
period of 1997.
Net investment income in the nine months ended September 30, 1998 was $2.2
million, an increase of $213,600 or 11.0% compared to the prior year period. The
primary reason for the increase was due to having a larger percentage of the
portfolio invested long-term in the 1998 period.
17
<PAGE> 18
The net realized investment gain of $61,300 in the 1998 period was from sales
and calls of several long-term bonds.
Due to the increases in net premiums earned and investment income and to the net
realized investment gain discussed above, total revenues in the nine months
ended September 30, 1998 were $7.2 million, an increase of $1.0 million or 16.5%
higher than in the comparable period of 1997.
Losses and loss adjustment expenses totaled $7.5 million in the nine months
ended September 30, 1998, $4.7 million higher than in the same period of 1997.
The direct 1998 accident year loss ratio was 104.6%. The period ended September
30, 1997 reflected favorable adjustments to prior accident year loss reserves
and there were no corresponding adjustments in the 1998 period. The net 1998
calendar loss ratio was 151.0%. The Company continues to experience high
severity and there was a significant increase in frequency in the 1998 period.
General and administrative expenses totaled $2.4 million in the nine months
ended September 30, 1998, a decrease of $528,100 or 18.3% from the prior year
period. The 1997 period included an accrual of $597,800 for the post-retirement
benefits of the Board of Directors and the Chief Executive Officer compared to
$42,900 in 1998. The expense ratio for the nine months ended September 30, 1998
was 28.5% compared to 34.6% in the 1997 period.
Due primarily to the significant increase in losses and loss adjustment expenses
in the 1998 period, there was a loss before income taxes of approximately $2.7
million compared to income before income taxes of $432,500 in the same period of
1997.
The 1998 period had an income tax benefit of $895,000 which resulted in a net
loss of $1.8 million or $.90 per share. In the comparable period of 1997, there
was an income tax expense of $204,400 which resulted in net income of $228,100
or $.11 per share ($.10 per diluted share).
FINANCIAL CONDITION
ASSETS:
Total assets at September 30, 1998 were $68.2 million, an increase of $2.4
million over the prior year end. Significant changes in asset categories are
discussed below:
- - The investment portfolio increased from $43.7 million at December 31, 1997
to $48.5 million at September 30, 1998, an increase of $4.7 million or
10.8%. The increase was due to (a) the transfer of approximately $3.0
million from the cash account and (b) a $1.1 million increase in the
market value of bonds during the first nine months of 1998. There was an
unrealized gain of $2.2 million in the bond portfolio at September 30,
1998 compared to $1.1 million at December 31, 1997. Short-term investments
totaled $8.7 million at September 30, 1998 compared to $2.8 million at the
prior year end, an increase of $5.9 million. The increase was due to the
call in August of two bonds with par values of $3.0 million. $3.0 mil-
18
<PAGE> 19
lion was reinvested long-term in September but the remaining $3.0 million
remains invested in short-term securities until long-term rates improve
above current levels. The current target for short-term investments is 10%
of the investment portfolio or $5 million.
- - There was a $3.0 million decrease in cash from December 31, 1997 to
September 30, 1998 due to the transfer to the investment account discussed
above. The cash balance of $3.8 million at December 31, 1997 was
unusually high due to several year-end transactions. The excess cash was
subsequently transferred to the investment account. Cash balances are
invested overnight.
- - The increase in premiums receivable at September 30, 1998 over the prior
year end was due to the significant percentage of annual renewals that
take place during the third quarter of each year, many of which involve
monthly and quarterly premium plans.
- - Reinsurance recoverable from reinsurers increased from $10.4 million at
December 31, 1997 to $10.7 million at September 30, 1998 due to an
increase in ceded losses during the nine months ended September 30, 1998.
- - Deferred income taxes increased from $2.3 million at the prior year end to
approximately $2.8 million at September 30, 1998 due primarily to an
increase of $477,200 in the net operating loss carryforward.
LIABILITIES:
Total liabilities increased from $44.7 million at December 31, 1997 to $48.2
million at September 30, 1998, an increase of $3.5 million or approximately
8.0%. Significant variances in liability accounts are discussed below:
- - Reserves for losses and loss adjustment expenses increased $3.1 million
or approximately 10.0% in the nine months ended September 30, 1998, from
$31.0 million at December 31, 1997 to $34.1 million. Changes in total
reserves are summarized below:
<TABLE>
<S> <C>
$31,030,400 Discounted loss and loss adjustment expense reserves at
December 31, 1997.
+ 901,700 Impact of change in discount rate.
- 7,745,700 Indemnity and expense payments during nine months ended
September 30, 1998.
+ 2,081,600 Increase in loss and loss adjustment expense reserve for
prior accident years.
+ 7,831,400 Reserves established for accident year 1998.
-----------
$34,099,400 Discounted loss and loss adjustment expense reserves at
September 30, 1998.
</TABLE>
19
<PAGE> 20
The discount rate has been reduced from 2% to 1% during the nine months ended
September 30, 1998.
- - The unearned premium reserve (UPR) increased $158,900 or 2.1% from $7.7
million at December 31, 1997 to $7.9 million at September 30, 1998.
EQUITY:
Total stockholders' equity decreased from approximately $21.0 million at
December 31, 1997 to $19.9 million at September 30, 1998. The $1.1 million
decline was due to the following factors:
<TABLE>
<S> <C>
$(1,791,200) net loss from operations
723,800 increase in unrealized investment gains, net of
income taxes.
-----------
$(1,067,400) decrease in stockholders' equity.
</TABLE>
Book value of the Company's common stock at September 30, 1998 was $9.96 per
share, $9.13 per diluted share.
There were no changes in the capital structure of the Company in the nine months
ended September 30, 1998. The accumulated deficit increased from $1.7 million
at December 31, 1997 to approximately $3.5 million at September 30, 1998 due to
the net loss of $1.8 million during the nine month period then ended.
Accumulated other comprehensive income increased from $709,100 to $1.4 million
over the same period due to the increase in unrealized gains in the investment
portfolio, net of income taxes.
LIQUIDITY AND CAPITAL RESOURCES
There was a positive cash flow from operations of $553,100 in the nine months
ended September 30, 1998 compared to a negative cash flow of $2.5 million in the
comparable period of 1997. The $3.1 million improvement was attributable to the
following factors:
<TABLE>
<S> <C>
+$1,001,700 increase in premium receipts
+ 2,581,900 increase in recoveries from reinsurers
+ 93,300 decrease in payments to reinsurers
+ 182,600 increase in investment income received
- 33,100 increase in loss and LAE payments
- 400,700 increase in commissions and other general and
administrative expenses
- 335,100 no FIT recoveries in 1998 period
-----------
+$3,090,600 improvement in cash flow from operations
</TABLE>
The cash position of $713,700 and short-term investments of $8.7 million at
September 30, 1998 provide reasonable assurance regarding the adequacy of the
Company's current and foreseeable liquidity.
20
<PAGE> 21
YEAR 2000
The Company has completed the assessment phase of is Year 2000 information
systems initiative and has completed 85% of the remediation phase. All
remediation and testing should be completed by year end. The cost of the
assessment, remediation and testing of the information systems has been
immaterial and no future material expenditures are anticipated. Expenses have
been charged to current operations as incurred.
The Company has commenced a program of communication with all policyholders. A
newsletter advising physicians and dentists of the Year 2000 problem and steps
necessary to reduce the possibility of lawsuits was issued in October, 1998. A
similar letter will be issued to lawyers prior to the end of the year.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On October 2, 1998 the Company signed a definitive agreement with
Florida Physicians Insurance Company (FPIC) under which FPIC will
acquire The Tenere Group, Inc. The closing is anticipated to take
place in January, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: See Exhibit Index
(b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements 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.
THE TENERE GROUP, INC.
(Registrant)
December 15, 1998 /s/ J D Williams
- ----------------- -------------------------------
Date Joseph D. Williams, CPA
Vice President - Finance
Chief Financial Officer and
21
<PAGE> 22
Principal Accounting Officer
22
<PAGE> 23
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --- -----------
<S> <C>
3.1 Articles of Incorporation of the Registrant, filed as Exhibit 3.1
to the Registrant's Registration Statement on Forms S-1 (Reg. No.
33-78702) is incorporated herein by this reference.
3.2 Bylaws of the Registrant, filed as Exhibit 3.2 to the Registrant's
Registration Statement on Form S-1 (Reg. No. 33-78702) is
incorporated herein by this reference.
4.1 Form of common stock certificate, filed as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-1 (Reg. No. 33-78702)
is incorporated herein by this reference.
10.1 Management Contract, dated July 8, 1994, by and between RCA Mutual
Insurance Company, Interlex Insurance Co. and Insurance Services,
Inc., filed as Exhibit 10.1 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995, is incorporated
herein by reference.
10.2 Lease Agreement, dated December 7, 1994, by and between Georgetown
Square II, Ltd. and Insurance Services, Inc., filed as Exhibit 10.2
to the Registrant's Quarterly Report on Form 10-Q for the nine
months ended September 30, 1995, is incorporated herein by
reference.
10.3 Medical Practitioners' Liability Primary Excess of Loss Reinsurance
Contract, dated October 1, 1993, by and between RCA Mutual
Insurance Company and Certain Reinsurers of Lloyd's of London,
filed as Exhibit 10.3 to the Registrant's Quarterly Report on Form
10-Q for the nine months ended September 30, 1995, is incorporated
herein by reference.
10.4 Addendum No. 1 to Medical Practitioners' Liability Primary Excess
of Loss Reinsurance Contract, dated February 1, 1995, by and
between RCA Mutual Insurance Company and Certain Reinsurers of
Lloyd's of London, filed as Exhibit 10.4 to the Registrant's
Quarterly Report on Form 10-Q for the nine months ended September
30, 1995, is incorporated herein by reference.
10.5 Addendum No. 2 to Medical Practitioners' Liability Primary Excess
of Loss Reinsurance Contract, effective April 27, 1995, by and
between RCA Mutual Insurance Company and Certain Reinsurers of
Lloyd's of London, filed as Exhibit 10.5 to the Registrant's
Quarterly Report on Form 10-Q for the nine months ended September
30, 1995, is incorporated herein by reference.
10.6 Reinsurance Cover Note: 95/1146/RM to Medical Practitioners'
Liability Primary Excess of Loss Reinsurance Contract, dated
October 16, 1995, by and between RCA Mutual Insurance Company and
Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.6 to
the Registrant's Quarterly Report on Form 10-Q for the nine months
ended September 30, 1995, is incorporated herein by reference.
10.7 Reinsurance Cover Note: 95/1212/RM(A) to Catastrophe "Awards Made"
Excess of Loss Reinsurance Contract, dated October 16, 1995, by and
between RCA Mutual Insurance Company and Certain Reinsurers of
Lloyd's of London, filed as Exhibit 10.7 to the Registrant's
Quarterly Report on Form 10-Q
</TABLE>
23
<PAGE> 24
<TABLE>
<S> <C>
for the nine months ended September 30, 1995, is incorporated
herein by reference.
10.8 Catastrophe "Awards Made" Excess of Loss Reinsurance Contract,
commencing February 1, 1995, by and between RCA Mutual Insurance
Company and Certain Reinsurers of Lloyd's of London including
Amendment No. 1, effective April 27, 1995, filed as Exhibit 10.8 to
the Registrant's Quarterly Report on Form 10-Q for the nine months
ended September 30, 1995, is incorporated herein by reference.
10.9 Reinsurance Cover Note: 95/1249/IP to Lawyers' Professional
Liability Primary Excess of Loss Reinsurance Treaty, dated October
16, 1995, by and between Interlex Insurance Company and Certain
Reinsurers of Lloyd's of London, filed as Exhibit 10.9 to the
Registrant's Quarterly Report on Form 10-Q for the nine months
ended September 30, 1995, is incorporated herein by reference.
10.10 Lawyers' Professional Liability Primary Excess of Loss Reinsurance
Contract, commencing July 1, 1995, by and between Interlex
Insurance Company and Certain Reinsurers of Lloyd's of London,
filed as Exhibit 10.10 to the Registrant's Quarterly Report on Form
10-Q for the nine months ended September 30, 1995, is incorporated
herein by reference.
10.11 Reinsurance Cover Note: 95/1250/IP to Prior Agreement Excess of
Loss Reinsurance Contract, dated October 16, 1996, by and between
Interlex Insurance Company and Certain Reinsurers of Lloyd's of
London, filed as Exhibit 10.11 to the Registrant's Quarterly Report
on Form 10-Q for the nine months ended September 30, 1995, is
incorporated herein by reference.
10.12 Prior Agreement Excess of Loss Reinsurance Contract, commencing
July 1, 1996, by and between Interlex Insurance Company and Certain
Reinsurers of Lloyd's of London, filed as Exhibit 10.12 to the
Registrant's Quarterly Report on Form 10-Q for the nine months
ended September 30, 1995, is incorporated herein by reference.
10.13 Draft Reinsurance Slip by and between Intermed Insurance Company
and American Re-Insurance Company filed as Exhibit 10.13 to the
Registran'ts Quarterly Report on Form 10-Q for the three months
March 31, 1996, is incorporated herein by reference.
10.14 Employment Agreement dated May 6, 1996 between The Tenere Group,
Inc. and Raymond A. Christy, M.D., President and Chief Executive
Officer, filed as Exhibit 10.14 to the Registrant's Quarterly
Report on Form 10-Q for the nine months ended September 30, 1996,
is incorporated herein by reference.
10.15 Employment Agreement dated May 6, 1996 between The Tenere Group,
Inc. and Andrew K. Bennett, Vice President-Claims and General
Counsel, filed as Exhibit 10.15 to the Registrant's Quarterly
Report on Form 10-Q for the nine months ended September 30, 1996,
is incorporated herein by reference.
10.16 Employment Agreement dated May 6, 1996 between The Tenere Group,
Inc. and Andrew C. Fischer, Vice President-Underwriting and Policy
Services, filed as Exhibit 10.16 to the Registrant's Quarterly
Report on Form 10-Q for the nine months ended September 30, 1996,
is incorporated herein by reference.
</TABLE>
24
<PAGE> 25
<TABLE>
<S> <C>
10.17 Employment Agreement dated May 6, 1996 between The Tenere Group,
Inc. and Clifton R. Stepp, Vice President-Marketing, filed as
Exhibit 10.17 to the Registrant's Quarterly Report on Form 10-Q for
the nine months ended September 30, 1996, is incorporated herein by
reference.
10.18 Employment Agreement dated May 6, 1996 between The Tenere Group,
Inc. and Joseph D. Williams, Vice President-Finance, Chief
Financial Officer and Assistant Treasurer filed, as Exhibit 10.18
to the Registrant's Quarterly Report on Form 10-Q for the nine
months ended September 30, 1996, is incorporated herein by
reference.
10.19 The Tenere Group, Inc. Retirement Plan for Directors effective May
17, 1996, filed as Exhibit 10.19 to the Registrant's Quarterly
Report on Form 10-Q for the nine months ended September 30, 1996,
is incorporated herein by reference.
10.20 The Tenere Group, Inc. 1996 Long Term Incentive Plan effective
April 17, 1996, filed as Annex A to the Registrant's definitive
proxy statements for the 1996 Annual Meeting of Shareholders, is
incorporated herein by reference.
10.21 Amendment No. 1 to Employment Agreement, dated February 28, 1997,
between The Tenere Group, Inc. and Raymond A. Christy, M.D.,
President and Chief Executive Officer, filed as Exhibit 10.21 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, is incorporated herein by reference.
10.22 Amendment No. 1 to Employment Agreement, dated February 28, 1997,
between The Tenere Group, Inc. and Andrew K. Bennett, Vice
President-Claims and General Counsel, filed as Exhibit 10.22 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1996, is incorporated herein by reference.
10.23 Amendment No. 1 to Employment Agreement, dated February 28, 1997,
between The Tenere Group, Inc. and Andrew C. Fischer, Vice
President - Underwriting and Policy Services, filed as Exhibit
10.23 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, is incorporated herein by reference.
10.24 Amendment No. 1 to Employment Agreement dated February 28, 1997,
between The Tenere Group, Inc. and Clifton R. Stepp, Vice
President-Marketing, filed as Exhibit 10.24 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1996, is
incorporated herein by reference.
10.25 Amendment No. 1 to Employment Agreement dated February 28, 1997,
between The Tenere Group, Inc. and Joseph D. Williams, Vice
President-Finance, Chief Financial Officer and Assistant Treasurer,
filed as Exhibit 10.25 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1996, is incorporated herein
by reference.
10.26 Reinsurance Cover Note: 96/1212/RM to Catastrophe "Awards Made"
Excess of Loss Reinsurance Contract, effective October 1, 1996, by
and between Intermed Insurance Company and/or Interlex Insurance
Company and certain Reinsurers of Lloyd's of London, filed as
Exhibit 10.26 to the Registrant's
</TABLE>
25
<PAGE> 26
<TABLE>
<C> <C>
Annual Report on Form 10-K for the year ended December 31, 1997, is
incorporated herein by reference.
10.27 Addendum No. 2 to Catastrophe "Awards Made" Excess of Loss
Reinsurance Contract, effective October 1, 1996, by and between
Intermed Insurance Company and/or Interlex Insurance Company and
certain Reinsurers of Lloyd's of London, filed as Exhibit 10.27 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997, is incorporated herein by reference.
10.28 Reinsurance Cover Note: 97/1212/RM to Catastrophe "Awards Made"
Excess of Loss Reinsurance Contract, effective October 1, 1997, by
and between Intermed Insurance Company and/or Interlex Insurance
Company and certain Reinsurers of Lloyd's of London, filed as
Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1997, is incorporated herein by
reference.
10.29 Addendum No. 3 to Catastrophe "Awards Made" Excess of Loss
Reinsurance Contract, effective October 1, 1997, by and between
Intermed Insurance Company and/or Interlex Insurance Company and
certain Reinsurers of Lloyd's of London, filed as Exhibit 10.29 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997, is incorporated herein by reference.
10.30 Reinsurance Cover Note: 94/1146/RM to Medical Practitioners'
Liability Primary Excess of Loss Reinsurance Contract, effective
October 1, 1994, by and between Intermed Insurance Company and
Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.30 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997, is incorporated herein by reference.
10.31 Medical Practitioners' Liability Primary Excess of Loss Reinsurance
Contract, effective October 1, 1996, by and between Intermed
Insurance Company and Certain Reinsurers of Lloyd's of London,
filed as Exhibit 10.31 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997, is incorporated herein
by reference.
10.32 Addendum No. 1 to Medical Practitioners' Liability Combined
Reinsurance Contract (formerly the Primary Excess of Loss
Reinsurance Contract), effective October 1, 1996, by and between
Intermed Insurance Company and Certain Reinsurers of Lloyd's of
London, filed as Exhibit 10.32 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997, is incorporated
herein by reference.
10.33 Addendum No. 2 to Medical Practitioners' Liability Combined
Reinsurance Contract (formerly the Primary Excess of Loss
Reinsurance Contract), effective October 1, 1997, by and between
Intermed Insurance Company and Certain Reinsurers of Lloyd's of
London, filed as Exhibit 10.33 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997, is incorporated
herein by reference.
10.34 Reinsurance Cover Note: 97/1146/RM to Medical Practitioners'
Liability Combined Reinsurance Contract (formerly the Primary
Excess of Loss Reinsurance Contract), effective October 1, 1997, by
and between Intermed Insurance Company and Certain Reinsurers of
Lloyd's of London, filed as Exhibit 10.34 to the Registrant's
Annual Report on Form 10-K for the year ended De-
</TABLE>
26
<PAGE> 27
<TABLE>
<S> <C>
cember 31, 1997, is incorporated herein by reference.
10.35 Lawyers' Professional Liability Primary Excess of Loss Reinsurance
Contract, effective October 1, 1996, by and between Interlex
Insurance Company and Certain Reinsurers of Lloyd's of London,
filed as Exhibit 10.35 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997, is incorporated herein
by reference.
10.36 Lawyers' Professional Liability Primary Excess of Loss Reinsurance
Contract, effective October 1, 1997, by and between Interlex
Insurance Company and Certain Reinsurers of Lloyd's of London,
filed as Exhibit 10.36 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997, is incorporated herein
by reference.
10.37 Lawyers' Professional Liability Prior Agreement Excess Reinsurance
Contract, effective October 1, 1996, by and between Interlex
Insurance Company and Certain Reinsurers of Lloyd's of London,
filed as Exhibit 10.37 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997, is incorporated herein
by reference.
10.38 Lawyers' Professional Liability Prior Agreement Excess Reinsurance
Contract, effective October 1, 1997, by and between Interlex
Insurance Company and Certain Reinsurers of Lloyd's of London,
filed as Exhibit 10.38 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997, is incorporated herein
by reference.
10.39 Employment Agreement dated May 7, 1998 between The Tenere Group,
Inc. and Raymond A. Christy, M.D., President and Chief Executive
Officer, filed as Exhibit 10.39 to the Registrant's Quarterly
Report on Form 10-Q for the six months ended June 30, 1998, is
incorporated herein by reference.
10.40 Employment Agreement dated May 7, 1998 between The Tenere Group,
Inc. and Andrew K. Bennett, Vice President-Claims and General
Counsel, filed as Exhibit 10.40 to the Registrant's Quarterly
Report on Form 10-Q for the six months ended June 30, 1998, is
incorporated herein by reference.
10.41 Employment Agreement dated May 7, 1998 between The Tenere Group,
Inc. and Andrew C. Fischer, Vice President-Underwriting and Policy
Services, filed as Exhibit 10.41 to the Registrant's Quarterly
Report on Form 10-Q for the six months ended June 30, 1998, is
incorporated herein by reference.
10.42 Employment Agreement dated May 7, 1998 between The Tenere Group,
Inc. and Clifton R. Stepp, Vice President-Marketing, filed as
Exhibit 10.42 to the Registrant's Quarterly Report on Form 10-Q for
the six months ended June 30, 1998, is incorporated herein by
reference.
10.43 Employment Agreement dated May 7, 1998 between The Tenere Group,
Inc. and Joseph D. Williams, Vice President-Finance, Chief
Financial Officer and Assistant Treasurer, filed as Exhibit 10.43
to the Registrant's Quarterly Report on Form 10-Q for the six
months ended June 30, 1998, is incorporated herein by reference.
27 Financial Data Schedules
</TABLE>
27
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
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