<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended JUNE 30, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to ______.
Commission file number 0-19439
MAIC Holdings, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Alabama 63-0720042
- --------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation of organization)
100 Brookwood Place, Birmingham, AL 35209
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(205) 877-4400
------------------------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (l) 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, 1996, there were 9,369,832 shares of the registrant's common
stock outstanding.
Page 1 of 14
<PAGE> 2
Table of Contents
Part I - Financial Information
<TABLE>
<S> <C>
Item l. Condensed Consolidated Financial Statements (Unaudited)
of MAIC Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 9
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 3
MAIC Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
-------------- ------------
<S> <C> <C>
Assets
Investments:
Fixed maturities available for sale, at market value $ 484,300,808 $483,734,285
Equity securities available for sale, at market value 8,777,843 6,614,805
Real estate, net 11,660,100 11,816,165
Investment in unconsolidated affiliate 3,585,612 3,534,585
Short-term investments 29,211,671 38,298,141
-------------- ------------
Total investments 537,536,034 543,997,981
Cash and cash equivalents 20,324,857 4,238,067
Premiums receivable 35,335,578 20,416,767
Receivable from reinsurers 96,935,454 80,467,711
Prepaid reinsurance premiums 22,215,474 13,271,997
Deferred taxes 36,346,424 29,339,519
Other assets 27,178,240 28,746,446
-------------- ------------
$ 775,872,061 $720,478,488
============== ============
Liabilities, minority interests and stockholders' equity
Liabilities:
Policy liabilities and accruals:
Reserve for losses and loss adjustment expenses $ 457,237,316 $432,945,449
Unearned premiums 63,308,577 47,319,355
Reinsurance premiums payable 27,589,570 18,338,773
-------------- ------------
Total policy liabilities 548,135,463 498,603,577
Income taxes payable 3,641,277 2,090,222
Other liabilities 14,692,614 11,771,560
-------------- ------------
Total liabilities 566,469,354 512,465,359
Commitments and contingencies - -
Minority interests 2,051,171 1,982,870
Stockholders' equity:
Common stock, par value $1 per share;
100,000,000 shares authorized; 9,376,956 shares
issued including shares held in treasury 9,376,956 9,376,956
Additional paid-in capital 92,012,826 92,012,826
Net unrealized gains on securities available for sale, net of
deferred taxes of $90,310 and $7,195,663, respectively 167,718 13,363,374
Retained earnings 105,932,344 91,415,411
-------------- ------------
207,489,844 206,168,567
Less treasury stock at cost, 7,124 shares (138,308) (138,308)
-------------- ------------
Total stockholders' equity 207,351,536 206,030,259
-------------- ------------
$ 775,872,061 $720,478,488
============== ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
MAIC Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------------- ------------------------------
1996 1995 1996 1995
------------ ----------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Direct and assumed
premiums written $ 28,987,940 $22,762,720 $ 71,586,022 $ 61,838,184
============ =========== ============= ==============
Premiums earned $ 29,866,591 $23,538,717 $ 58,885,298 $ 46,033,735
Premiums ceded (9,033,660) (5,096,266) (16,974,715) (9,756,198)
------------ ----------- ------------- --------------
Net premiums earned 20,832,931 18,442,451 41,910,583 36,277,537
Net investment income 7,196,459 7,609,765 15,919,062 14,607,348
Other income 865,272 1,507,899 1,324,579 2,022,618
------------ ----------- ------------- --------------
Total revenues 28,894,662 27,560,115 59,154,224 52,907,503
Expenses:
Losses and loss
adjustment expenses 22,154,140 19,963,607 47,561,395 39,003,619
Reinsurance recoveries (8,844,071) (6,306,414) (18,219,279) (11,402,588)
------------ ----------- ------------- --------------
Net losses and loss
adjustment expenses 13,310,069 13,657,193 29,342,116 27,601,031
Underwriting, acquisition
and insurance expenses 5,173,050 4,155,405 10,907,266 8,212,054
------------ ----------- ------------- --------------
Total expenses 18,483,119 17,812,598 40,249,382 35,813,085
------------ ----------- ------------- --------------
Income before income taxes
and minority interests 10,411,543 9,747,517 18,904,842 17,094,418
Provision for income taxes:
Current expense 1,550,205 3,546,600 4,221,166 6,852,865
Deferred expense (benefit) 1,164,772 (1,253,413) 98,448 (3,109,057)
------------ ----------- ------------- --------------
2,714,977 2,293,187 4,319,614 3,743,808
------------ ----------- ------------- --------------
Income before minority
interests 7,696,566 7,454,330 14,585,228 13,350,610
Minority interests (35,869) (222,977) (68,300) (85,504)
------------ ----------- ------------- --------------
Net income $ 7,660,697 $ 7,231,353 $ 14,516,928 $ 13,265,106
============ =========== ============= ==============
Earnings per share:
Net Income $ 0.82 $ 0.77 $ 1.55 $ 1.42
============ =========== ============= ==============
Weighted average number of
common shares outstanding 9,369,832 9,369,408 9,369,832 9,369,408
============ =========== ============= ==============
</TABLE>
See accompanying notes.
4
<PAGE> 5
MAIC Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Operating activities
Net Income $ 14,516,928 $ 13,265,106
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization (163,435) 963,315
Net realized gain on sale of Investments (542,256) (1,415,199)
Deferred income taxes 98,448 (3,109,057)
Other (32,712) 60,812
Changes in assets and liabilities:
Premiums receivable (14,918,811) (16,997,063)
Income taxes receivable/payable 1,551,055 2,725,603
Receivable from reinsurers (16,467,743) (7,774,987)
Prepaid reinsurance premiums (8,943,477) (14,739,453)
Other assets 2,726,899 1,444,795
Reserve for losses and loss adjustment expenses 24,291,867 20,732,552
Unearned premiums 15,989,222 25,389,999
Reinsurance premiums payable 9,250,797 4,934,767
Other liabilities 2,921,054 (1,442,426)
------------- -------------
Net cash provided by operating activities 30,277,836 24,038,764
Investing activities
Purchases of fixed maturities available for sale (77,453,992) (74,361,983)
Proceeds from sale or maturities of fixed
maturities available for sale 54,657,103 49,240,521
Net decrease in short-term investments 9,086,677 15,707,576
Purchase of subsidiaries - (4,059,978)
Other (480,834) (1,030,919)
------------- -------------
Net cash used in investing activities (14,191,046) (14,504,783)
Financing activities
Loan payment - (811,098)
------------- -------------
Net cash used in financing activities - (811,098)
Increase in cash and cash equivalents 16,086,790 8,722,883
Cash and cash equivalents at beginning of period 4,238,067 5,021,971
------------- -------------
Cash and cash equivalents at end of period $ 20,324,857 $ 13,744,854
============= =============
</TABLE>
See accompanying notes.
5
<PAGE> 6
MAIC Holdings, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. PLAN OF EXCHANGE AND REORGANIZATION
MAIC Holdings, Inc. is a Delaware corporation formed by Mutual Assurance, Inc.
to serve as a holding company for Mutual Assurance and subsidiaries. On August
31, 1995, Mutual Assurance and MAIC Holdings, Inc. consummated an Agreement
and Plan of Exchange which was accounted for in a manner similar to a pooling
of interests. Under the terms of the agreement, Mutual Assurance shareholders
exchanged the 8,846,429 of issued and outstanding shares, par value $1 per
share, for an equal amount of shares of the common stock of MAIC Holdings,
Inc., par value $1 per share. The common stock of MAIC Holdings, Inc.
succeeded Mutual Assurance common stock for trading on the Nasdaq/NMS under the
trading symbol "MAIC."
At December 31, 1995, MAIC Holdings, Inc. had 100 million shares of authorized
common stock and 50 million shares of authorized preferred stock. The Board of
Directors has the authorization to determine the provisions for the issuance of
shares of the preferred stock, including the number of shares to be issued and
the designations, powers, preferences and rights, and the qualifications,
limitations or restrictions of such shares. At June 30, 1996, the Board of
Directors had not authorized the issuance of any preferred stock nor determined
any provisions for the preferred stock.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of MAIC Holdings, Inc. and its wholly and majority owned
subsidiaries, together referred to as the Company. The financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments,
consisting of normal recurring accruals, considered necessary for a fair
presentation have been included. Operating results for the six month period
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. For further information refer
to the December 31, 1995 audited consolidated financial statements and
accompanying notes.
3. INCOME TAXES
Income tax expense differs from the normal relationship to financial statement
income principally because of tax-exempt interest income.
4. RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
The reserves for losses and loss adjustment expenses represent management's
best estimate of the ultimate cost of all losses incurred but unpaid. Incurred
losses and loss adjustment expenses for the six month periods ending June 30,
1996 and 1995 were principally based on the application of an expected loss
ratio to premiums earned. These loss ratios take into consideration prior loss
experience, loss trends, the Company's loss retention levels, changes in
frequency and severity of claims and rates charged.
6
<PAGE> 7
MAIC Holdings, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
5. INVESTMENTS
Proceeds from sales of investments in fixed maturities available for sale,
excluding prepayments of mortgage-backed securities, were $34,331,914 and
$38,132,064 during the six months ended June 30, 1996 and 1995, respectively.
Gross gains and losses from sales and prepayments of investments in fixed
maturities available for sale are included in other income as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Gross gains excluding prepayments of
mortgage-backed securities $ 947,469 $ 1,475,280
Gross losses excluding prepayments of
mortgage-backed securities (243,443) (18,959)
Gross gains from prepayments of
mortgage-backed securities 32,253 41,281
Gross (losses) from prepayments of
mortgage-backed securities (211,742) (82,402)
---------------- ----------------
Net gain (loss) from sales and prepayments $ 524,537 $ 1,415,199
================ ================
</TABLE>
The amortized cost of fixed maturities and equity securities available for sale
was $492,820,644 and $469,789,477 at June 30, 1996 and December 31, 1995,
respectively.
6. EARNINGS PER SHARE
On December 14, 1995 the Board of Directors declared a 6% stock dividend. Cash
was paid to shareholders for fractional shares. Earnings per share data for
1995 has been restated as if the 1995 dividend had been declared on January 1,
1995.
7. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions arising primarily from claims
made under insurance policies. The legal actions arising from claims made
under insurance policies have been considered by the Company in establishing
its reserves. While the outcome of all legal actions is not presently
determinable, the Company's management and its legal counsel are of the opinion
that the settlement of these actions will not have a material adverse effect on
the Company's financial position or results of operations.
7
<PAGE> 8
MAIC Holdings, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements (continued)
(Unaudited)
8. BUSINESS EXPANSION
Effective January 1, 1995 the Company purchased 51.7% of the outstanding
capital voting stock of PIC-Indiana, an Indiana provider of medical malpractice
insurance. During 1995 the Company acquired additional shares of the
PIC-Indiana stock from various shareholders. The combined purchases resulted
in ownership of approximately 100% of the outstanding capital voting stock of
PIC-Indiana.
Effective July 16, 1995, the Company acquired the recurring medical
professional insurance business of Physicians Insurance Company of Ohio and its
subsidiary. The value of the business acquired is included in other assets.
On June 11, 1996, the Company and MOMED Holding Company (MOMED) executed an
Agreement and Plan of Merger pursuant to which MOMED (OTC: MOMED) will become a
Missouri based subsidiary of the Company. MOMED is the parent company of
Missouri Medical Insurance Company, which is a provider of medical malpractice
insurance. Consummation of the transaction is subject to regulatory and
shareholder approval. The ultimate purchase price is not expected to exceed 10%
of the Company's stockholders' equity, based on historical market prices of the
Company's common stock.
8
<PAGE> 9
ITEM. 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For purposes of this management discussion and analysis, the term
"Company" refers to MAIC Holdings, Inc. and its wholly and majority owned
subsidiaries, the accounts of which are included in the accompanying financial
statements.
MAIC Holdings, Inc. is a Delaware corporation formed by Mutual
Assurance to serve as a holding corporation for Mutual Assurance and other
subsidiaries. On August 31, 1995, Mutual Assurance and MAIC Holdings, Inc.
consummated an Agreement and Plan of Exchange which generally provided that
each share of common stock of Mutual Assurance, par value $1 per share, would
be exchanged for one share of common stock of MAIC Holdings, Inc., par value $1
per share. MAIC Holdings, Inc. common stock succeeded Mutual Assurance common
stock for trading on the Nasdaq/NMS under the trading symbol "MAIC."
The variances discussed below include amounts attributable to the
operations of all the companies. Although balances attributable to the
subsidiaries other than Mutual Assurance may be significant to specific
variances, they are not material to the total operations or the financial
condition of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The payment of losses, loss adjustment expenses, and operating
expenses in the ordinary course of business remains the Company's principal
need for liquid funds. Cash used to pay these items has been provided by
operating activities. Cash provided from these activities was sufficient
during the first six months of 1996 to meet the Company's needs, and the
Company believes those sources will be sufficient to meet its cash needs for
operating purposes for at least the next twelve months. Prolonged and
increasing levels of inflation could cause increases in the dollar amount of
losses and loss adjustment expenses and may therefore adversely affect future
reserve development. To minimize such risk, the Company (i) maintains what its
management considers to be strong and adequate reinsurance, (ii) conducts
regular actuarial reviews to ensure, among other things, that reserves do not
become deficient, and (iii) maintains adequate asset liquidity.
The Company did not borrow any funds during the six months ended June
30, 1996 and 1995, and currently has no requirements indicating a need to
borrow significant funds in the next twelve months. However, the need for
additional capital may arise in order to achieve the Company's ultimate goals
of expansion, as discussed in subsequent paragraphs. The Company continues to
have available through a lending institution a line of credit in the amount of
$40 million that could be used for these additional capital requirements. The
Company is not charged a fee nor is it required to maintain compensating
balances in connection with this line of credit.
9
<PAGE> 10
BUSINESS EXPANSION
The Company, through Mutual Assurance, has been developing a marketing
strategy to address the insurance needs of hospitals and vertically integrated
health care providers. The Company expects organizations such as these to
represent increasing market opportunities for professional liability and
related insurance products because of the trend toward the consolidation of
health care providers. In 1995, Mutual Assurance engaged a managing agent,
Medical Reinsurance Corporation (MRC), to market medical malpractice
reinsurance, excess medical malpractice insurance, managed care liability
insurance and provider stop loss insurance to these large accounts.
Mutual Assurance's principal competitors for this "large account"
business are insurers that are larger than those with whom Mutual Assurance has
historically had to compete. The Company believes that Mutual Assurance's
surplus will be a significant competitive factor in this market because of
criteria used by large health care providers in the selection of professional
liability insurers.
In addition to its expansion into this growing market for "large
accounts", the Company also intends to expand through the acquisition of, or
combination with, medical professional liability insurers that have a
significant presence in states other than Alabama. The Company purchased for
cash the stock of Medical Assurance of West Virginia, Inc. (formerly West
Virginia Hospital Insurance Company) in 1994, the stock of Physicians Insurance
Company of Indiana in 1995, and the prospective book of business of Physicians
Insurance Company of Ohio in 1995. The Company recently announced that it will
combine with MOMED Holding Company in a merger that will result in Missouri
Medical Insurance Company becoming a subsidiary of the Company. The merger
agreement provides for the stock of MOMED Holding Company to be converted into
the Company's common stock and cash.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS
ENDED JUNE 30, 1995
Premiums
The following table presents information related to consolidated
written and earned premiums and reinsurance expense (dollars in thousands):
<TABLE>
<CAPTION>
Six months ended
June 30
--------------------------- Increase
1996 1995 (Decrease)
--------------------------- ----------
<S> <C> <C> <C>
Direct and assumed premiums written $ 71,586 $ 61,838 $ 9,748
=========== =========== ==========
Premiums earned $ 58,885 $ 46,034 $ 12,851
Premiums ceded (16,975) (9,756) 7,219
----------- ----------- ----------
Net premiums earned $ 41,911 $ 36,278 $ 5,633
=========== =========== ==========
</TABLE>
The increase in premiums written and earned for the six months ended
June 30, 1996 as compared to the same six months in 1995 is due principally to
premiums in the state of Ohio. The increase in premiums ceded is directly
related to the increases in earned premiums, and, as respects the new Ohio
business, increased cessions of risks to reinsurers.
10
<PAGE> 11
Investment Income
The Company had consolidated net investment income of $15,919,000 for
the six months ended June 30, 1996, as compared to $14,607,000 for the six
months ended June 30, 1995, reflecting an increase of $1,312,000. The increased
income is primarily due to an increase in the amount of invested assets held by
the Company. The yield on invested assets remained constant at 6.2%. The
average composition of invested assets changed little from 1995 to 1996, with
non- taxable investments comprising an average of 56% for the first six months
of 1995 as compared to 58% for the first six months of 1996.
For the purposes of the above discussion, invested assets are comprised
of fixed maturities at amortized cost, short-term investments, equities at cost
and investment in unconsolidated affiliate, and the earnings on such invested
assets constitute the related net investment income. The Company calculates
the yield on invested assets by dividing the related investment income
(annualized for interim periods) by the monthly average of invested assets.
The principal investment objective of the Company is to achieve a high
level of after-tax income while minimizing risk. Although fixed maturity
securities are purchased with the initial intent to hold such securities until
their maturity, disposals of securities prior to their respective maturities
may occur if management believes such disposals are consistent with the
Company's overall investment objectives, including maximizing after-tax yields.
Disposition of investments prior to maturity may result in a net gain or loss
which would be classified as "Other Income".
Losses
Consolidated loss and loss adjustment expenses (Losses) and the related
loss ratios are summarized in the following table (dollars in thousands). The
ratio for losses below is based on premiums earned; the ratio for net losses is
based on net premiums earned.
<TABLE>
<CAPTION>
Six months ended
June 30, 1996 June 30, 1995
------------------------ -----------------------
Loss Loss
Losses Ratio Losses Ratio
------------------------ -----------------------
<S> <C> <C> <C> <C>
Losses $ 47,561 81% $ 39,004 85%
== ===
Reinsurance recoveries (18,219) (11,403)
------------ ------------
Net losses $ 29,342 70% $ 27,601 76%
============ == =========== ===
</TABLE>
The Company's losses for the six months ended June 30, 1996 reflect a
loss ratio of 81% compared to a loss ratio of 85% for the six months ended June
30, 1995. Losses for both periods are principally based on the application of
an expected loss ratio to premiums earned. These loss ratios take into
consideration prior loss experience, loss trends, the Company's loss retention
levels, changes in frequency and severity of claims and rates charged.
The increase in reinsurance recoveries primarily results from the
increase in losses and loss adjustment expenses and the increased cessions to
reinsurers.
Other Income
Other income decreased by $698,000 for the six months ended June 30,
1996 compared to the six months ended June 30, 1995. The decrease is
principally attributable to fewer capital gains realized upon the sale of
securities during the first six months of 1996 compared to the first six months
of 1995.
11
<PAGE> 12
Underwriting, Acquisition, and Insurance Expenses
Consolidated expenses increased by $2,695,212 (33%) for the six months
ended June 30, 1996 compared to the six months ended June 30, 1995. The
increase results primarily from policy acquisition costs associated with new
business, along with the other costs associated with the Company's current
business strategy. This strategy calls for the Company to continue
investigating potential acquisition opportunities and the possibility of
expansion into additional markets.
Income Taxes
The Company's effective tax rate for the six months ended June 30,
1996 was 23%, compared to 22% for the six months ended June 30, 1995: these
rates were both lower than the statutory rate of 35%. The principal reason for
the Company's lower effective tax rate is the effect of tax exempt investment
income.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE
MONTHS ENDED JUNE 30, 1995
Premiums
The following table presents information related to consolidated
written and earned premiums and reinsurance expense (dollars in thousands):
<TABLE>
<CAPTION>
Three months ended
June 30 Increase
---------------------------
1996 1995 (Decrease)
--------------------------- ----------
<S> <C> <C> <C>
Direct and assumed premiums written $ 28,988 $ 22,763 $ 6,225
=========== =========== ==========
Premiums earned $ 29,867 $ 23,539 $ 6,328
Premiums ceded (9,034) (5,096) 3,938
----------- ----------- ----------
Net premiums earned $ 20,833 $ 18,443 $ 2,390
=========== =========== =========
</TABLE>
The increase in premiums written, premiums earned and premiums ceded
for the quarter ended June 30, 1996 as compared to the quarter ended June 30,
1995 is due principally to premiums written in the state of Ohio. This new
business includes premiums earned attributable to the acquisition of the
recurring medical professional insurance business of Physicians Insurance
Company of Ohio.
Investment Income
The Company had consolidated net investment income of $7,196,000 for
the three months ended June 30, 1996, as compared to $7,610,000 for the three
months ended June 30, 1995. The amount of invested assets held by the Company
increased from $478,143,000 at June 30, 1995, to $525,618,000 at June 30, 1996
which resulted in an increase to net investment income. This increase is
offset by (i) a $747,000 reduction attributable to an overstatement of accrued
investment income at March 31, 1996, and (ii) a decrease in the weighted
average yield on invested assets from 6.1% (computed excluding the effects of
the overstatement) for the three months ended June 30, 1996 as compared to 6.5%
for the three months ended June 30, 1995.
For the purposes of the above discussion, invested assets are
comprised of fixed maturities at amortized cost, short-term investments,
equities at cost and investment in unconsolidated affiliate, and the earnings
on such invested assets constitute the related net investment income. The
Company calculates the yield on invested assets by dividing the related
investment income (annualized for interim periods) by the monthly average of
invested assets.
12
<PAGE> 13
Other Income
Other income decreased by $643,000 for the quarter ended June 30, 1996
as compared to the quarter ended June 30, 1995. The decrease is principally
attributable to fewer capital gains realized upon the sale of securities during
the second quarter of 1996 compared to the second quarter of 1995.
Losses
Consolidated loss and loss adjustment expenses (Losses) and the
related loss ratios are summarized in the following table (dollars in
thousands). The ratio for losses below is based on premiums earned; the ratio
for net losses is based on net premiums earned.
<TABLE>
<CAPTION>
Three months ended
June 30, 1996 June 30, 1995
------------------------ -----------------------
Loss Loss
Losses Ratio Losses Ratio
------------------------ -----------------------
<S> <C> <C> <C> <C>
Losses $ 22,154 74% $ 19,964 85%
== ==
Reinsurance recoveries (8,844) (6,306 )
------------ -----------
Net losses $ 13,310 64% $ 13,658 74%
============ == =========== ==
</TABLE>
The Company's losses in the three months ended June 30, 1996 reflect a
loss ratio of 74% compared to a loss ratio of 85% for the three months ended
June 30, 1995. Losses for both periods are principally based on the
application of an expected loss ratio to premiums earned. These loss ratios
take into consideration prior loss experience, loss trends, the Company's loss
retention levels, changes in frequency and severity of claims and rates
charged. Developed redundancies released are $8,250,000 and $4,125,000 for the
three months ended June 30, 1996 and 1995, respectively.
Underwriting, Acquisition, and Insurance Expenses
Consolidated expenses increased by $1,018,000 (24%) for the quarter
ended June 30, 1996 compared to the quarter ended June 30, 1995. The increase
is due to the same items described in the six month comparison.
13
<PAGE> 14
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 1996 Annual Meeting of Stockholders on May 14,
1996. At the meeting, the stockholders of the Company were asked to vote on
the two matters, each of which was described in the Proxy Statement
accompanying the Notice of the Meeting and filed with the Securities and
Exchange Commission in accordance with Rule 14a-6. The matters voted on at the
meeting and the results of the voting are described below.
1. Election of one director to serve on the Board of Directors for a
three year term.
FOR WITHHOLD AUTHORITY
--- ------------------
7,007,767 32,315
2. Approval of the Company's assumption and amendment of the
"Mutual Assurance, Inc. 1995 Stock Award Plan" and the change of
its name to the "MAIC Holdings, Inc. Incentive Compensation Stock
Plan."
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
4,939,876 241,014 212,788 1,646,409
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit (27) required of Item 601 of Regulation SK-Financial Data
schedule (for SEC use only).
(b) Reports on 8-K. No reports on Form 8-K have been filed during the
quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAIC Holdings, Inc.
August 13, 1996 By: /s/ James J. Morello
---------------------------
James J. Morello, Treasurer
(duly authorized officer and
principal financial officer)
14
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF MAIC HOLDINGS, INC. AND
SUBSIDIARIES FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 484,300,808
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 8,777,843
<MORTGAGE> 0
<REAL-ESTATE> 11,660,100
<TOTAL-INVEST> 537,536,034
<CASH> 20,324,857
<RECOVER-REINSURE> 96,935,454
<DEFERRED-ACQUISITION> 0<F1>
<TOTAL-ASSETS> 775,872,061
<POLICY-LOSSES> 457,237,316
<UNEARNED-PREMIUMS> 63,308,577
<POLICY-OTHER> 27,589,570
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 9,376,956
<OTHER-SE> 197,974,580
<TOTAL-LIABILITY-AND-EQUITY> 775,872,061
41,910,583
<INVESTMENT-INCOME> 15,919,062
<INVESTMENT-GAINS> 542,256
<OTHER-INCOME> 782,323
<BENEFITS> 29,342,116
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 10,907,266
<INCOME-PRETAX> 18,904,842
<INCOME-TAX> 4,319,614
<INCOME-CONTINUING> 14,516,928
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,516,928
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 0
<RESERVE-OPEN> 432,945,449
<PROVISION-CURRENT> 60,311,395
<PROVISION-PRIOR> (12,750,000)
<PAYMENTS-CURRENT> (832,000)
<PAYMENTS-PRIOR> (22,437,528)
<RESERVE-CLOSE> 457,237,316
<CUMULATIVE-DEFICIENCY> (12,750,000)
<FN>
<F1>DEFERRED POLICY ACQUISITION COSTS AND AMORTIZATION OF DEFERRED POLICY
ACQUISITION COSTS ARE NOT SEPARATELY DISCLOSED WITHIN FORM 10-Q BECAUSE ITEMS
ARE IMMATERIAL FOR INDIVIDUAL DISCLOSURE. DEFERRED POLICY ACQUISITION COSTS ARE
INCLUDED AS A COMPONENT OF OTHER ASSETS, AND AMORTIZATION OF DEFERRED POLICY
ACQUISITION COSTS ARE INCLUDED WITH OTHER UNDERWRITING, ACQUISITION AND
INSURANCE EXPENSES.
</FN>
</TABLE>
