<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 June 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 (IRS Employer
of incorporation or organization) Identification No.)
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 June 30, 1998 there were 1,999,774 shares of Common Stock, $.01 par
value, issued and outstanding.
<PAGE> 2
THE TENERE GROUP, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997 3
Consolidated Statements of Operations -
Three Months ended June 30, 1998 and 1997 4
Consolidated Statements of Operations -
Six Months ended June 30, 1998 and 1997 5
Consolidated Statements of Stockholders' Equity
and Comprehensive Income - Periods Ended
December 31, 1997 and 1996 and June 30, 1998 6
Consolidated Statements of Cash Flows
Six Months ended June 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 18
ITEM 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
EXHIBIT INDEX 20
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE TENERE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 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 -
$39,420,763 in 1998; $39,863,330 in 1997) $ 40,674,750 40,930,956
Common stock, at fair value 14,319 7,057
Short-term investments, at cost which approximates fair value 6,222,485 2,788,476
------------ -----------
Total investments 46,911,554 43,726,489
Cash 1,078,597 3,761,457
Premiums receivable 3,598,709 3,124,660
Reinsurance recoverable 8,952,420 10,413,593
Ceded unearned premiums 315,617 369,727
Accrued investment income 657,433 674,843
Deferred policy acquisition costs 198,839 183,253
Deferred income taxes 2,475,846 2,304,087
Income taxes recoverable 300,000 300,000
Other 793,293 867,543
------------ -----------
Total assets $ 65,282,308 65,725,652
============ ===========
Liabilities and Stockholders' Equity
-------------------------------------
Liabilities:
Reserves for losses and loss adjustment expenses $ 30,551,985 31,030,412
Unearned premium reserve 8,247,662 7,717,308
Reinsurance premiums payable 4,343,839 4,435,317
Other 1,463,283 1,563,056
------------ -----------
Total liabilities 44,606,769 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 (2,122,183) ( 1,690,370)
Accumulated other comprehensive income, net of tax 836,896 709,103
------------ -----------
Total stockholders' equity 20,675,539 20,979,559
------------ -----------
Total liabilities and stockholders' equity $ 65,282,308 65,725,652
============ ===========
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
THE TENERE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, 1998 and 1997
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Direct premiums written $3,038,720 2,511,455
Premiums ceded to reinsurers (701,045) (459,420)
---------- ----------
Net premiums written 2,337,675 2,052,035
Increase in unearned premium reserve (419,798) (668,152)
---------- ----------
Net premiums earned 1,917,877 1,383,883
Net investment income 708,424 644,440
---------- ----------
Total revenues 2,626,301 2,028,323
Losses and expenses:
Losses and loss adjustment expenses 2,351,047 950,558
General and administrative expenses 782,224 827,130
---------- ----------
Total losses and expenses 3,133,271 1,777,688
---------- ----------
(Loss) income before income taxes (506,970) 250,635
Income tax benefit (expense) 176,383 (77,378)
---------- ----------
Net (loss) income $ (330,587) 173,257
========== ==========
Basic net (loss) income per share $ (0.17) 0.09
========== ==========
Diluted net (loss) income per share $ (0.17) 0.08
========== ==========
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
THE TENERE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended June 30, 1998 and 1997
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues:
Direct premiums written $ 5,674,199 4,708,923
Premiums ceded to reinsurers (1,386,231) (1,106,244)
------------ -----------
Net premiums written 4,287,968 3,602,679
Increase in unearned premium reserve (584,464) (811,509)
------------ -----------
Net premiums earned 3,703,504 2,791,170
Net investment income 1,416,558 1,285,696
Net realized investment losses (2,204) -
------------ -----------
Total revenues 5,117,858 4,076,866
Losses and expenses:
Losses and loss adjustment expenses 4,236,139 2,546,519
General and administrative expenses 1,551,123 1,778,511
------------ -----------
Total losses and expenses 5,787,262 4,325,030
------------ -----------
Loss before income taxes (669,404) (248,164)
Income tax benefit 237,591 96,059
------------ -----------
Net loss $ (431,813) (152,105)
============ ===========
Basic and diluted net loss per share $ (0.22) (0.08)
============ ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
THE TENERE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
June 30, 1998 and December 31, 1997 and 1996
UNAUDITED
<TABLE>
<CAPTION>
Retained Accumulated
earnings/ other
Common Contributed (accumulated comprehensive Comprehensive
stock capital deficit) income Total income
--------- ----------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 19,998 21,940,828 2,196,890 379,562 24,537,278
Comprehensive income
Net loss (2,934,486) (2,934,486) (2,934,486)
Other comprehensive income, net of tax
Net unrealized investment loss (213,089) (213,089) (213,089)
----------
Total comprehensive income (3,147,575)
==========
-------- ---------- ------------ ----------- ----------
Balance at December 31, 1996 19,998 21,940,828 (737,596) 166,473 21,389,703
Comprehensive income
Net loss (952,774) (952,774) (952,774)
Other comprehensive income, net of tax
Net unrealized investment gain 542,630 542,630 542,630
----------
Total comprehensive income (410,144)
==========
-------- ---------- ------------ ----------- ----------
Balance at December 31, 1997 19,998 21,940,828 (1,690,370) 709,103 20,979,559
Comprehensive income
Net loss (431,813) (431,813) (431,813)
Other comprehensive income, net of tax
Net unrealized investment gain 127,793 127,793 127,793
----------
Total comprehensive income (304,020)
==========
-------- ---------- ------------ ----------- ----------
Balance at June 30, 1998 $19,998 21,940,828 (2,122,183) 836,896 20,675,539
======== ========== ============ =========== ==========
</TABLE>
See notes to consolidated financial statements
6
<PAGE> 7
THE TENERE GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1998 and 1997
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Premiums received from policyholders
$ 5,200,028 4,149,886
Premiums paid to reinsurers (1,446,341) (1,841,411)
Recoveries received from reinsurers 2,094,112 396
Losses and loss adjustment expenses paid (5,347,285) (3,666,005)
Commissions paid (211,663) (101,719)
Cash paid to suppliers and employees (1,472,710) (1,454,320)
Interest received 1,525,912 1,403,659
Income taxes received - 335,089
-------------- ---------------
Net cash provided by (used in) operating activities 342,053 (1,174,425)
Cash flows from investing activities:
Maturity of bonds available for sale 4,250,000 1,450,000
Sale of bonds available for sale 2,671,094 -
Redemption on stock rights - 56
Purchase of bonds available for sale (6,476,850) -
Purchase of furniture and equipment (35,148) (42,388)
-------------- ---------------
Net cash from investing activities 409,096 1,407,668
Net increase in cash and short-term investments 751,149 233,243
Cash and short-term investments at beginning of period 6,549,933 16,935,122
-------------- ---------------
Cash and short-term investments at end of period $ 7,301,082 17,168,365
============== ===============
Reconciliation of net loss to net cash provided by
(used in) operating activities
Net loss $ (431,813) (152,105)
Adjustments to reconcile net loss to net cash
from operating activities:
Net realized investment losses 2,204 -
Depreciation and amortization expense 64,828 130,959
Net change in deferred acquisition costs (15,586) (26,383)
Deferred income tax benefit (237,591) (96,059)
Net amortization of discount on bonds (3,881) 27,451
Change in operating assets and liabilities
Premiums receivable (474,049) (392,144)
Reinsurance balances 1,423,805 (994,483)
Accrued investment income 17,410 4,816
Income taxes recoverable - 335,089
Other assets 44,571 (10,662)
Reserve for losses and loss adjustment expenses (478,427) (843,310)
Unearned premium reserve 530,354 770,075
Other liabilities (99,772) 72,331
-------------- ---------------
Net cash provided by (used in) operating activities $ 342,053 (1,174,425)
============== ===============
</TABLE>
See 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 six
months ended June 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 June 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
- ------------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
June 30, 1998
Bonds:
United States government,
government agencies and $ 37,567,058 1,205,256 (5,268) 38,767,046
authorities
State municipalities and
political subdivisions 1,853,705 53,999 - 1,907,704
------------ ----------- --------- -----------
Total bonds 39,420,763 1,259,255 (5,268) 40,674,750
Common stock 284 14,035 - 14,319
Short-term investments 6,222,485 - - 6,222,485
------------ ----------- --------- -----------
Total investments $ 45,643,532 1,273,290 (5,268) 46,911,554
============ =========== ========= ===========
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
Type of Investment cost basis gains losses value
- ------------------ ------------ ----------- --------- -----------
<S> <C> <C> <C> <C>
December 31, 1997
Bonds:
United States 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 June 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 $ 15,231,099 15,607,957
Due after five years through ten years 24,189,664 25,066,793
------------- ------------
$ 39,420,763 40,674,750
============= ============
</TABLE>
Proceeds from sales of available for sale securities for the six months ended
June 30, 1998 were $2,671,094. Gross losses on those sales were $2,204 in 1998.
Net investment income for the six months ended June 30, 1998 and 1997 is
comprised of the following:
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
--------------- ----------
<S> <C> <C>
Investment income:
Interest on short-term investments $ 226,457 425,295
Interest on bonds 1,285,924 946,097
--------------- ----------
Gross investment income 1,512,381 1,371,392
Investment expenses (95,823) (85,696)
--------------- ----------
Net investment income $ 1,416,558 1,285,696
=============== ==========
</TABLE>
9
<PAGE> 10
Bonds with an estimated fair value of $1,876,502 at June 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) are as follows:
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
--------- ---------
<S> <C> <C>
Net unrealized investment gains (losses) $193,624 (160,390)
Federal income tax (expense) benefit at 34% (65,831) 54,532
--------- ---------
Net unrealized investment gains (losses) $127,793 (105,858)
========= =========
</TABLE>
(3) RESERVE FOR LOSSES AND LOSS
ADJUSTMENT EXPENSES AND REINSURANCE
A summary of the reserves for losses and loss adjustment expenses follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Undiscounted reserves for losses and loss
adjustment expenses $31,266,540 31,990,412
Less discount (714,555) (960,000)
----------- ----------
Discounted reserves for losses and loss
adjustment expenses $30,551,985 31,030,412
=========== ==========
</TABLE>
Following is the activity in the reserves for losses and loss adjustment
expenses:
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
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 3,920,931 2,373,847
Prior Year 315,208 172,672
------------ -------------
Total incurred 4,236,139 2,546,519
------------ -------------
Paid related to:
Current year 117,909 375,041
Prior Year 2,999,641 3,389,402
------------ -------------
Total paid 3,117,550 3,764,443
------------ -------------
Net balance at June 30 22,198,489 24,570,020
Plus reinsurance recoverable on reserves for
losses and loss adjustment expenses 8,353,496 7,474,077
------------ -------------
Balance at June 30 $ 30,551,985 32,044,097
============ =============
</TABLE>
10
<PAGE> 11
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% in the financial statements for the period
ended December 31, 1997. The discount will be 1% in the period ending
December 31, 1998 and this change is reflected ratably over the four
quarters of the year. 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 six months ended
June 30, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
------------ -----------
<S> <C> <C>
Ceded premiums written $ 1,386,231 1,106,244
============ ===========
Ceded premiums earned $ 1,440,341 1,111,678
============ ===========
Ceded losses and loss adjustment expenses $ 632,938 374,614
============ ===========
</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 six months ended June
30, 1998 and 1997:
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
------------ ----------
<S> <C> <C>
Expected tax benefit using statutory rates $(227,597) (84,375)
Other, net (9,994) (11,684)
------------ ----------
Income tax benefit $(237,591) (96,059)
============ ==========
Income taxes consist of the following at June 30:
June 30, June 30,
1998 1997
------------ ----------
<S> <C> <C>
Current expense $ - -
Deferred benefit (237,591) (96,059)
--------- -------
Income tax benefit $(237,591) (96,059)
========= =======
</TABLE>
11
<PAGE> 12
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>
June 30, June 30,
1998 1997
---------- ---------
<S> <C> <C>
Losses and loss adjustment expenses
incurred for financial reporting
purposes but not deductible for
tax purposes $ (245,175) 24,924
Unearned premiums not deductible
for tax purposes (40,222) (55,028)
Deferred compensation - (102,642)
Deferred retirement benefit (11,667) -
Net operating loss carryforward 52,905 31,623
Other, net 6,568 5,064
---------- -------
Deferred tax benefit $ (237,591) (96,059)
========== =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June
30, 1998 and December 31, 1997 are presented below:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Deferred tax assets:
Discounted unpaid loss reserves $1,325,224 1,080,048
Discounted unearned premium reserves 539,379 499,158
Deferred compensation 191,042 191,042
Deferred retirement benefit 212,913 201,246
Deferred commissions payable 46,198 47,465
Net operating loss carryforward 1,062,516 1,115,423
------------ ------------
Total gross deferred tax assets 3,377,272 3,134,382
Less valuation allowance (390,400) (390,400)
------------ ------------
Net deferred tax assets 2,986,872 2,743,982
Deferred tax liabilities:
Investments adjusted to market value (431,127) (365,295)
Deferred acquistion costs (67,605) (62,306)
Other (12,294) (12,294)
------------ ------------
Total gross deferred tax liabilities (511,026) (439,895)
------------ ------------
Net deferred tax asset $2,475,846 2,304,087
============ ============
</TABLE>
The valuation allowance for deferred tax assets at June 30, 1998 was
$390,400. 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.
12
<PAGE> 13
(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 six months ended
June 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
--------- --------
<S> <C> <C>
Net (loss) income of insurance
subsidiaries $(601,638) 76,382
Increase (decrease):
Deferred policy acquisition costs 15,586 26,383
Deferred income taxes 237,591 96,059
Deferred compensation - (301,887)
Deferred retirement benefit (34,313) -
Other adjustments, net (49,039) (49,042)
--------- --------
Net loss as reported herein $(431,813) (152,105)
========= ========
</TABLE>
Reconciliations of statutory capital and surplus, as determined using
statutory accounting principles, to stockholders' equity included in the
accompanying consolidated financial statements at June 30, 1998 and
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- -----------
<C> <C> <C>
Statutory capital and surplus of insurance companies $23,107,346 23,691,554
Stockholder's equity of noninsurance subsidiaries 500 500
----------- ----------
Combined capital and surplus 23,107,846 23,692,054
Increase (decrease)
Deferred policy acquisition costs 198,839 183,253
Deferred income taxes 2,475,846 2,304,087
Net unrealized gain (loss) on investments 1,253,987 1,067,627
booked at market
Deferred compensation (561,887) (561,887)
Accrued retirement (626,214) (591,901)
Non-admitted assets and other adjustments, net 697,128 747,976
Consolidating eliminations and adjustments (5,870,006) (5,861,650)
----------- ----------
Stockholders' equity as reported herein $20,675,539 20,979,559
=========== ==========
</TABLE>
13
<PAGE> 14
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 June 30, 1998 and results of operations for the three and six
months ended June 30, 1998 and 1997.
RESULTS OF OPERATIONS-THREE MONTHS ENDED JUNE 30, 1998 AND 1997
Direct premiums written in the three months ended June 30, 1998 were $3.0
million, an increase of $527,300 or 21% over the prior year period. Results by
line of business were:
THREE MONTHS ENDED JUNE 30
--------------------------
<TABLE>
<CAPTION>
1998 1997 CHANGE
---------- --------- ------
<S> <C> <C> <C>
Medical $2,746,200 2,280,000 +20.4%
Legal 292,500 231,500 +26.3%
---------- --------- ------
Total $3,038,700 2,511,500 +21.0%
</TABLE>
Salaried marketing representatives produced approximately 56% of medical
malpractice premiums written and approximately 91% of legal malpractice premiums
written in the 1998 period. The remainder was written by brokers. Medical
malpractice premiums written in the State of Texas through affiliated purchasing
groups during the three months ended June 30, 1998 totaled $1,016,800 compared
to $582,500 in the same period of 1997. Such premiums represented 37% of all
medical premiums written in the 1998 period compared to 26% in the prior year
period.
Premiums ceded to reinsurers in the three months ended June 30, 1998 were
$701,000 compared to $459,000 in the prior year period. The increase was
primarily due to an increase in losses ceded under the Company's primary excess
of loss treaty for medical malpractice insurance which resulted in a
corresponding increase in the cost of reinsurance.
Net premiums written in the three months ended June 30, 1998 were $2.3 million,
an increase of $285,600 or approximately 14% over the prior year period.
There was an increase of $419,800 in the unearned premium reserve (UPR) during
the current period compared to $668,200 in the three months ended June 30,
1997. The change was primarily due to an increase of $358,400 in the death,
disability and retirement component (DD&R) of the UPR in the three months ended
June 30, 1997 compared to an increase of $45,540 in the same period of 1998.
Net premiums earned in the 1998 period were $1.9 million, an increase of
$534,000 or 38.6% over the prior year primarily due to (a) the increase in
premiums written and (b) the smaller increase in the UPR.
14
<PAGE> 15
Net investment income in the three month period ended June 30, 1998 was $708,400
compared to $644,400 in the prior year period. The increase was attributable to
the Company's portfolio being more fully-invested in higher-yielding long-term
bonds during the 1998 period.
Losses and loss adjustment expenses totaled $2.4 million in the three months
ended June 30, 1998, an increase of $1.4 million or approximately 147.3% over
the prior year period. The calendar year loss ratio for the 1998 period was
123% compared to approximately 69% in the prior year period. An increase in the
severity of losses experienced in the 1998 period was the primary reason for the
unfavorable results. Expected direct loss ratios of 90% for medical and 82.5%
for legal were utilized for the 1998 accident year.
General and administrative expenses were $782,200 in the three months ended June
30, 1998, a decrease of $44,900 or 5.4% over the prior year period. The expense
ratio in the 1998 period was 25.7% compared to approximately 33% in the three
months ended June 30, 1997. The improvement was primarily due to the 21%
increase in premiums written in the 1998 period.
There was a loss before income taxes of $507,000 in the three months ended June
30, 1998 compared to income before income taxes of $250,600 in the prior year
period. Unfavorable loss experience in the 1998 period was the primary reason
for the change.
As a result of the foregoing, the Company reported a net loss of $330,600 in the
1998 period compared to net income of $173,300 in the comparable period of 1997.
There was an income tax benefit of $176,400 in the 1998 period compared to an
income tax expense of $77,400 in the prior year period.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Premiums written in the six months ended June 30, 1998 were $5.7 million, an
increase of $965,300 or 20.5% over the prior year period. Results by line of
business were:
SIX MONTHS ENDED JUNE 30
------------------------
<TABLE>
<CAPTION>
1998 1997 CHANGE
---- ---- ------
<S> <C> <C> <C>
Medical $5,005,800 4,154,500 +20.5%
Legal 668,400 554,400 +20.6%
---------- --------- ------
Total $5,674,200 4,708,900 +20.5%
</TABLE>
Salaried marketing representatives produced approximately 55% of medical
malpractice and 90% of legal malpractice premiums written in the 1998 period.
The remainder was written by brokers.
The State of Texas represents an important new market for Intermed Insurance
Co., the Company's medical malpractice subsidiary. Premiums written in Texas
through affiliated purchasing groups, were 32% of medical premiums written in
the six months ended June 30, 1998 compared
15
<PAGE> 16
to 26% in the prior year period. Approximately 92% of legal premiums are
written in the State of Missouri and 8% in Kansas.
Premiums ceded to reinsurers totaled $1.4 million in the six months ended June
30, 1998, an increase of $280,000 or approximately 25.3%. The increase was due
to an increase in losses ceded under the Company's primary excess of loss treaty
covering medical malpractice insurance which resulted in a corresponding
increase in the cost of reinsurance.
Net premiums written in the 1998 period were $4.3 million, an increase of
$685,300 or 19% over the six months ended June 30, 1997.
There was an increase of $584,500 in the UPR in the six months ended June 30,
1998 compared to an increase of $811,500 in the comparable period of 1997. This
change was primarily due to an increase of $358,400 in the DD&R component of the
UPR in the six months ended June 30, 1997 compared to an increase of $185,600 in
the comparable period of 1998.
Net premiums earned in the six months of 1998 were $3.7 million, an increase of
$912,300 or 32.7% over the prior year period.
Net investment income of $1.4 million in the first half of 1998 was $130,900 or
approximately 10% higher than in the 1997 period. The improvement was
attributable to the fact that the Company's portfolio was more fully-invested
long-term in the 1998 period.
Losses and loss adjustment expenses totaled approximately $4.2 million in the
six months ended June 30, 1998, an increase of approximately $1.7 million over
the same period in 1997. The calendar year loss ratio in the 1998 period was
114% compared to 91% in the six months ended June 30, 1997. An increase in the
severity of lossess experienced was the primary reason for the unfavorable
experience in 1998. Expected loss ratios of 90% for medical and 82.5% for legal
were utilized for the 1998 accident year.
General and administrative expenses were $1.6 million in the six months ended
June 30, 1998 compared to $1.8 million in the comparable period in 1997. The
expense ratio in the 1998 period was 27.3% compared to 37.8% in the six months
ended June 30, 1997. The improvement was primarily due to the significant
increase in premiums written in the 1998 period.
As a result of the foregoing, the Company reported a loss before income taxes of
$669,400 in the first half of 1998 compared to a loss before income taxes of
$248,200 in the prior year period. The net loss in the six months ended June
30, 1998 was $431,800 compared to a net loss of $152,100 in the six months ended
June 30, 1997. There were income tax benefits of $237,600 in the 1998 period
and $96,100 in the prior year period.
16
<PAGE> 17
FINANCIAL CONDITION
ASSETS:
Total assets declined from $65.7 million at December 31, 1997 to $65.3 million
at June 30, 1998, a decrease of $443,300 or less than 1%. Invested assets
increased from $43.7 million to $46.9 million in the same period. Two agency
bonds with par values of $2.5 million and $3.0 million were purchased in May
with yields-to-maturity of 6.48% and 6.32%. There was an unrealized gain of
$1.3 million in the portfolio at June 30, 1998 compared to $1.1 million at the
prior year end. Yield-to-maturity of the investment portfolio at June 30, 1998
was 6.71%.
Cash balances decreased from $3.8 million at December 31, 1997 to $1.1 million
at June 30, 1998 primarily due to the purchase of long-term bonds with a
combined par value of $5.5 million. Cash balances are invested overnight at
current yields ranging from 4.48% to 5.24%.
The reinsurance recoverable account decreased from $10.4 million at December 31,
1997 to $8.9 million at June 30, 1998 due to recoveries from reinsurers of $2.1
million in the six month period.
LIABILITIES:
Total liabilities were $44.7 million at the end of 1997 and $44.6 million at the
end of the current reporting period. Reserves for losses and loss adjustment
expenses decreased from $31.0 million at December 31, 1997 to $30.6 million at
June 30, 1998. Changes in reserves are discussed more fully under RESULTS OF
OPERATIONS.
The unearned premium reserve increased from $7.7 million at December 31, 1997 to
$8.2 million at June 30, 1998. Reasons for the increase are discussed more
fully under RESULTS OF OPERATIONS.
EQUITY:
There were no changes in the capital structure of the Company in the six months
ended June 30, 1998. The accumulated deficit increased from $1.7 million at
December 31, 1997 to $2.1 million at the end of the current reporting period due
to the net loss of $431,800 during the six months ended June 30, 1998.
Accumulated other comprehensive income increased from $709,100 at the prior year
end to $836,900 at June 30, 1998 due to an increase in the market value of
investments in the current period.
Stockholders' equity at June 30, 1998 was $20.7 million, a decrease of $304,000
during the six month period. Equity per share was $10.34 ($9.48 fully diluted).
17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $342,100 in the six months ended June
30, 1998 compared to cash of $1.2 million used in operations in the same period
of 1997. The $1.5 million improvement in cash flow was attributable to the
following factors:
<TABLE>
<S> <C>
$1,050,100 increase in premiums received
395,100 reduction in payments to reinsurer
2,093,700 increase in recoveries from reinsurers
122,300 increase in interest received
(128,400) increase in general and administrative expenses paid
(1,681,300) increase in loss and loss adjustment expenses paid
(335,100) no FIT recovery in 1998 period
-----------
$1,516,400 improvement in cash flow from operations
</TABLE>
As a result of cash position of $1.1 million at June 30, 1998 and short-term
investments of $6.2 million, the Company anticipates that no bonds will have to
be liquidated in the final six months of the year in order to meet unexpected
cash calls.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: See Exhibit Index
(b) Reports on Form 8-K: None
18
<PAGE> 19
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)
August 12, 1998 /s/ J D Williams
- --------------- -------------------------------
Date Joseph D. Williams, CPA
Vice President - Finance
Chief Financial Officer and
Principal Accounting Officer
19
<PAGE> 20
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- --------------------
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
20
<PAGE> 21
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. Registrant's Quarterly Report on
Form 10-Q for the three months March 31, 1996, 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
Registrant's 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.
21
<PAGE> 22
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
22
<PAGE> 23
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-
23
<PAGE> 24
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.
10.40 Employment Agreement dated May 7, 1998 between The Tenere Group,
Inc. and Andrew K. Bennett, Vice President-Claims and General
Counsel.
10.41 Employment Agreement dated May 7, 1998 between The Tenere Group,
Inc. and Andrew C. Fischer, Vice President-Underwriting and Policy
Services.
10.42 Employment Agreement dated May 7, 1998 between The Tenere Group,
Inc. and Clifton R. Stepp, Vice President-Marketing.
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.
27 Financial Data Schedules
24
<PAGE> 1
EXHIBIT 10.39
THE TENERE GROUP, INC.
AMENDMENT NO. 2
TO
EMPLOYMENT AGREEMENT
This Amendment No. 2 to Employment Agreement ("Amendment") has been entered
into as of this 7th day of May, 1998, by and between The Tenere Group, Inc., a
Missouri corporation ("Company"), and Raymond A. Christy, M.D., an individual
("Executive").
RECITALS
WHEREAS, the Company and the Executive are parties to that certain
Employment Agreement, dated as of May 6, 1996 (the "Agreement"); and
WHEREAS, the Company and the Executive wish to amend the terms of the
Agreement, and any Amendments thereto, to extend the initial Employment Period
under the Agreement from May 6, 2000 to May 6, 2001:
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT OF SECTION 1.1(g). Section 1.1(g) of the Agreement is hereby
deleted in its entirety and replaced with the following:
1.1(g) "EMPLOYMENT PERIOD" means the period beginning on the Effective Date
and ending on the later of (i) May 6, 2001, or (ii) May 6 of any
succeeding fiscal year during which notice is given by either party
(as described in Section 1.1(j)) of such party's intent not to renew
this Agreement.
2. AMENDMENT OF SECTION 1.1 (j). Section 1.1(j) of the Agreement is hereby
deleted in its entirety and replaced with the following:
1.1(j) "TERM" means the period that begins on the Effective Date and ends on
the earlier of: (i) the Date of Termination as defined in Section 3.6,
or (ii) the close of business on the later of May 6, 2001 or May 6 of
any renewed term as set forth in Section 2.1 of this Agreement.
3. EFFECTIVENESS; LIMITED EFFECT. The amendments contained in Sections 1
and 2 hereof shall be effective as of the date of the execution of this
Amendment by the Company and the Executive. Except as amended hereby, terms and
conditions of the
<PAGE> 2
Agreement shall continue in full force and effect and shall be interpreted in
light of the amendments contained herein.
IN WITNESS WHEREOF, the Executive and the Company, pursuant to the
authorization from its Board of Directors, have caused this Amendment to be
executed in its name and on its behalf, all as of the day and year first above
written.
EXECUTIVE
/s/ Raymond A. Christy
---------------------------
Raymond A. Christy, M.D.
THE TENERE GROUP, INC.
By: /s/ Andrew K. Bennett
-----------------------
Name: Andrew K. Bennett
----------------------
Title: General Counsel
---------------------
ATTEST: /s/ Michael D. Hoeman, M.D.
---------------------------
Michael D. Hoeman, M.D.
Secretary
<PAGE> 1
EXHIBIT 10.40
THE TENERE GROUP, INC.
AMENDMENT NO. 2
TO
EMPLOYMENT AGREEMENT
This Amendment No. 2 to Employment Agreement ("Amendment") has been entered
into as of this 7th day of May, 1998, by and between The Tenere Group, Inc., a
Missouri corporation ("Company"), and Andrew K. Bennett, an individual
("Executive").
RECITALS
WHEREAS, the Company and the Executive are parties to that certain
Employment Agreement, dated as of May 6, 1996 (the "Agreement"); and
WHEREAS, the Company and the Executive wish to amend the terms of the
Agreement, and any Amendments thereto, to extend the initial Employment Period
under the Agreement from May 6, 2000 to May 6, 2001:
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT OF SECTION 1.1(g). Section 1.1(g) of the Agreement is hereby
deleted in its entirety and replaced with the following:
1.1(g) "EMPLOYMENT PERIOD" means the period beginning on the Effective Date
and ending on the later of (i) May 6, 2001, or (ii) May 6 of any
succeeding fiscal year during which notice is given by either party
(as described in Section 1.1(j)) of such party's intent not to renew
this Agreement.
2. AMENDMENT OF SECTION 1.1 (j). Section 1.1(j) of the Agreement is hereby
deleted in its entirety and replaced with the following:
1.1(j) "TERM" means the period that begins on the Effective Date and ends
on the earlier of: (i) the Date of Termination as defined in Section
3.6, or (ii) the close of business on the later of May 6, 2001 or May
6 of any renewed term as set forth in Section 2.1 of this Agreement.
3. EFFECTIVENESS; LIMITED EFFECT. The amendments contained in Sections 1
and 2 hereof shall be effective as of the date of the execution of this
Amendment by the Company and the Executive. Except as amended hereby, terms and
conditions of the
<PAGE> 2
Agreement shall continue in full force and effect and shall be interpreted in
light of the amendments contained herein.
IN WITNESS WHEREOF, the Executive and the Company, pursuant to the
authorization from its Board of Directors, have caused this Amendment to be
executed in its name and on its behalf, all as of the day and year first above
written.
EXECUTIVE
/s/ Andrew K. Bennett
-----------------------------
Andrew K. Bennett
THE TENERE GROUP, INC.
By: /s/ Raymond A. Christy
-------------------------
Name: Raymond A. Christy
-----------------------
Title: President/CEO
----------------------
ATTEST: /s/ Michael D. Hoeman, M.D.
---------------------------
Michael D. Hoeman, M.D.
Secretary
<PAGE> 1
EXHIBIT 10.41
THE TENERE GROUP, INC.
AMENDMENT NO. 2
TO
EMPLOYMENT AGREEMENT
This Amendment No. 2 to Employment Agreement ("Amendment") has been entered
into as of this 7th day of May, 1998, by and between The Tenere Group, Inc., a
Missouri corporation ("Company"), and Andrew C. Fischer, an individual
("Executive").
RECITALS
WHEREAS, the Company and the Executive are parties to that certain
Employment Agreement, dated as of May 6, 1996 (the "Agreement"); and
WHEREAS, the Company and the Executive wish to amend the terms of the
Agreement, and any Amendments thereto, to extend the initial Employment Period
under the Agreement from May 6, 2000 to May 6, 2001:
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT OF SECTION 1.1(g). Section 1.1(g) of the Agreement is hereby
deleted in its entirety and replaced with the following:
1.1(g) "EMPLOYMENT PERIOD" means the period beginning on the Effective Date
and ending on the later of (i) May 6, 2001, or (ii) May 6 of any
succeeding fiscal year during which notice is given by either party
(as described in Section 1.1(j)) of such party's intent not to renew
this Agreement.
2. AMENDMENT OF SECTION 1.1 (j). Section 1.1(j) of the Agreement is hereby
deleted in its entirety and replaced with the following:
1.1(j) "TERM" means the period that begins on the Effective Date and ends
on the earlier of: (i) the Date of Termination as defined in Section
3.6, or (ii) the close of business on the later of May 6, 2001 or May
6 of any renewed term as set forth in Section 2.1 of this Agreement.
3. EFFECTIVENESS; LIMITED EFFECT. The amendments contained in Sections 1
and 2 hereof shall be effective as of the date of the execution of this
Amendment by the Company and the Executive. Except as amended hereby, terms and
conditions of the
<PAGE> 2
Agreement shall continue in full force and effect and shall be interpreted in
light of the amendments contained herein.
IN WITNESS WHEREOF, the Executive and the Company, pursuant to the
authorization from its Board of Directors, have caused this Amendment to be
executed in its name and on its behalf, all as of the day and year first above
written.
EXECUTIVE
/s/ Andrew C. Fischer
-------------------------
Andrew C. Fischer
THE TENERE GROUP, INC.
By: /s/ Raymond A. Christy
-------------------------
Name: Raymond A. Christy
-----------------------
Title: President/CEO
----------------------
ATTEST: /s/ Michael D. Hoeman, M.D.
---------------------------
Michael D. Hoeman, M.D.
Secretary
<PAGE> 1
EXHIBIT 10.42
THE TENERE GROUP, INC.
AMENDMENT NO. 2
TO
EMPLOYMENT AGREEMENT
This Amendment No. 2 to Employment Agreement ("Amendment") has been entered
into as of this 7th day of May, 1998, by and between The Tenere Group, Inc., a
Missouri corporation ("Company"), and Clifton R. Stepp, an individual
("Executive").
RECITALS
WHEREAS, the Company and the Executive are parties to that certain
Employment Agreement, dated as of May 6, 1996 (the "Agreement"); and
WHEREAS, the Company and the Executive wish to amend the terms of the
Agreement, and any Amendments thereto, to extend the initial Employment Period
under the Agreement from May 6, 2000 to May 6, 2001:
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT OF SECTION 1.1(g). Section 1.1(g) of the Agreement is hereby
deleted in its entirety and replaced with the following:
1.1(g) "EMPLOYMENT PERIOD" means the period beginning on the Effective Date
and ending on the later of (i) May 6, 2001, or (ii) May 6 of any
succeeding fiscal year during which notice is given by either party
(as described in Section 1.1(j)) of such party's intent not to renew
this Agreement.
2. AMENDMENT OF SECTION 1.1 (j). Section 1.1(j) of the Agreement is
hereby deleted in its entirety and replaced with the following:
1.1(j) "TERM" means the period that begins on the Effective Date and ends
on the earlier of: (i) the Date of Termination as defined in Section
3.6, or (ii) the close of business on the later of May 6, 2001 or May
6 of any renewed term as set forth in Section 2.1 of this Agreement.
3. EFFECTIVENESS; LIMITED EFFECT. The amendments contained in Sections 1
and 2 hereof shall be effective as of the date of the execution of this
Amendment by the Company and the Executive. Except as amended hereby, terms and
conditions of the
<PAGE> 2
Agreement shall continue in full force and effect and shall be interpreted in
light of the amendments contained herein.
IN WITNESS WHEREOF, the Executive and the Company, pursuant to the
authorization from its Board of Directors, have caused this Amendment to be
executed in its name and on its behalf, all as of the day and year first above
written.
EXECUTIVE
/s/ Clifton R. Stepp
-------------------------
Clifton R. Stepp
THE TENERE GROUP, INC.
By: /s/ Raymond A. Christy
-------------------------
Name: Raymond A. Christy
-----------------------
Title: President/CEO
----------------------
ATTEST: /s/ Michael D. Hoeman, M.D.
---------------------------
Michael D. Hoeman, M.D.
Secretary
<PAGE> 1
EXHIBIT 10.43
THE TENERE GROUP, INC.
AMENDMENT NO. 2
TO
EMPLOYMENT AGREEMENT
This Amendment No. 2 to Employment Agreement ("Amendment") has been entered
into as of this 7th day of May, 1998, by and between The Tenere Group, Inc., a
Missouri corporation ("Company"), and Joseph D. Williams, an individual
("Executive").
RECITALS
WHEREAS, the Company and the Executive are parties to that certain
Employment Agreement, dated as of May 6, 1996 (the "Agreement"); and
WHEREAS, the Company and the Executive wish to amend the terms of the
Agreement, and any Amendments thereto, to extend the initial Employment Period
under the Agreement from May 6, 2000 to May 6, 2001:
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT OF SECTION 1.1(g). Section 1.1(g) of the Agreement is hereby
deleted in its entirety and replaced with the following:
1.1(g) "EMPLOYMENT PERIOD" means the period beginning on the Effective Date
and ending on the later of (i) May 6, 2001, or (ii) May 6 of any
succeeding fiscal year during which notice is given by either party
(as described in Section 1.1(j)) of such party's intent not to renew
this Agreement.
2. AMENDMENT OF SECTION 1.1 (j). Section 1.1(j) of the Agreement is hereby
deleted in its entirety and replaced with the following:
1.1(j) "TERM" means the period that begins on the Effective Date and ends
on the earlier of: (i) the Date of Termination as defined in Section
3.6, or (ii) the close of business on the later of May 6, 2001 or May
6 of any renewed term as set forth in Section 2.1 of this Agreement.
3. EFFECTIVENESS; LIMITED EFFECT. The amendments contained in Sections 1
and 2 hereof shall be effective as of the date of the execution of this
Amendment by the Company and the Executive. Except as amended hereby, terms
and conditions of the
<PAGE> 2
Agreement shall continue in full force and effect and shall be interpreted in
light of the amendments contained herein.
IN WITNESS WHEREOF, the Executive and the Company, pursuant to the
authorization from its Board of Directors, have caused this Amendment to be
executed in its name and on its behalf, all as of the day and year first above
written.
EXECUTIVE
/s/ Joseph D. Williams
-----------------------------
Joseph D. Williams
THE TENERE GROUP, INC.
By: /s/ Raymond A. Christy
-------------------------
Name: Raymond A. Christy
-----------------------
Title: President/CEO
----------------------
ATTEST: /s/ Michael D. Hoeman, M.D.
---------------------------
Michael D. Hoeman, M.D.
Secretary
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<DEBT-HELD-FOR-SALE> 40,674,750
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 14,319
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 6,222,485
<CASH> 1,078,597
<RECOVER-REINSURE> 598,924
<DEFERRED-ACQUISITION> 198,839
<TOTAL-ASSETS> 65,282,308
<POLICY-LOSSES> 30,551,985
<UNEARNED-PREMIUMS> 8,247,662
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 19,998
<OTHER-SE> 20,655,541
<TOTAL-LIABILITY-AND-EQUITY> 65,282,308
3,703,504
<INVESTMENT-INCOME> 1,416,558
<INVESTMENT-GAINS> (2,204)
<OTHER-INCOME> 0
<BENEFITS> 4,236,139
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 1,551,123
<INCOME-PRETAX> (669,404)
<INCOME-TAX> (237,591)
<INCOME-CONTINUING> (431,813)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (431,813)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
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<CUMULATIVE-DEFICIENCY> 0
</TABLE>
