<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 SEPTEMBER 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)
<TABLE>
<S> <C>
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)
</TABLE>
(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 September 30, 1996, there were 9,369,908 shares of the registrant's
common stock outstanding.
Page 1 of 14
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Table of Contents
<TABLE>
<S> <C>
Part I - Financial Information
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>
September 30 December 31
1996 1995
-------------------------------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available for sale, at market value $ 496,737,749 $ 483,734,285
Equity securities available for sale, at market value 23,332,900 6,614,805
Real estate, net 11,557,491 11,816,165
Investment in unconsolidated affiliate 3,727,296 3,534,585
Short-term investments 23,389,422 38,298,141
---------------- ----------------
Total investments 558,744,858 543,997,981
Cash and cash equivalents 16,670,620 4,238,067
Premiums receivable 40,180,861 20,416,767
Receivable from reinsurers 103,012,618 80,467,711
Prepaid reinsurance premiums 17,590,591 13,271,997
Deferred taxes 33,930,543 29,339,519
Other assets 29,245,719 28,746,446
---------------- ----------------
$ 799,375,810 $ 720,478,488
================ ================
LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS' EQUITY
Liabilities:
Policy liabilities and accruals:
Reserve for losses and loss adjustment expenses $ 475,558,719 $ 432,945,449
Unearned premiums 62,164,013 47,319,355
Reinsurance premiums payable 22,485,543 18,338,773
---------------- ----------------
Total policy liabilities 560,208,275 498,603,577
Income taxes payable 3,216,249 2,090,222
Other liabilities 15,420,244 11,771,560
---------------- ----------------
Total liabilities 578,844,768 512,465,359
Commitments and contingencies - -
Minority interests - 1,982,870
Stockholders' equity:
Common stock, par value $1 per share;
100,000,000 shares authorized; 9,377,395 shares
and 9,376,956 issued, respectively, including
shares held in treasury 9,377,395 9,376,956
Additional paid-in capital 92,027,490 92,012,826
Net unrealized gains on securities available for sale, net of
deferred taxes of $2,961,988 and $7,195,663, respectively 5,500,834 13,363,374
Retained earnings 113,763,631 91,415,411
---------------- ----------------
220,669,350 206,168,567
Less treasury stock at cost, 7,124 shares (138,308) (138,308)
---------------- ----------------
Total stockholders' equity 220,531,042 206,030,259
---------------- ----------------
$ 799,375,810 $ 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 Nine Months Ended
September 30 September 30
---------------------------------- -------------------------------------
1996 1995 1996 1995
--------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Direct and assumed
premiums written 36,432,428 $ 26,046,599 $ 108,018,450 $ 87,884,783
=============== =============== ================ ================
Revenues:
Premiums earned $ 37,279,547 $ 24,612,882 $ 96,164,845 $ 70,646,617
Premiums ceded (7,765,523) (5,402,856) (24,740,238) (15,159,054)
-------------- --------------- ---------------- ----------------
Net premiums earned 29,514,024 19,210,026 71,424,607 55,487,563
Net investment income 7,868,605 7,379,673 23,787,667 21,987,021
Other income 331,862 1,415,244 1,656,441 3,437,862
-------------- --------------- ---------------- ----------------
Total revenues 37,714,491 28,004,943 96,868,715 80,912,446
Expenses:
Losses and loss
adjustment expenses 29,108,457 19,050,490 76,669,852 58,054,109
Reinsurance recoveries (8,142,959) (6,238,195) (26,362,238) (17,640,783)
-------------- --------------- ---------------- ----------------
Net losses and loss
adjustment expenses 20,965,498 12,812,295 50,307,614 40,413,326
Underwriting, acquisition
and insurance expenses 6,602,964 4,507,611 17,510,230 12,719,665
-------------- --------------- ---------------- ----------------
Total expenses 27,568,462 17,319,906 67,817,844 53,132,991
-------------- --------------- ---------------- ----------------
Income before income taxes
and minority interests 10,146,029 10,685,037 29,050,871 27,779,455
Provision for income taxes:
Current expense 2,752,622 3,681,227 6,973,788 10,534,092
Deferred expense (benefit) (455,798) (1,071,752) (357,350) (4,180,809)
-------------- --------------- ---------------- ----------------
2,296,824 2,609,475 6,616,438 6,353,283
-------------- --------------- ---------------- ----------------
Income before minority
interests 7,849,205 8,075,562 22,434,433 21,426,172
Minority interests (17,918) (5,077) (86,218) (90,581)
-------------- --------------- ---------------- ----------------
Net income $ 7,831,287 $ 8,070,485 $ 22,348,215 $ 21,335,591
============== =============== ================ ================
Earnings per share:
Net Income $ 0.84 $ 0.86 $ 2.39 $ 2.28
============== =============== ================ ================
Weighted average number of
common shares outstanding 9,370,058 9,369,408 9,369,908 9,369,408
============== =============== ================ ================
</TABLE>
See accompanying notes.
4
<PAGE> 5
MAIC Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-----------------------------------------
1996 1995
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 22,348,215 $ 21,335,591
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization (160,926) 1,283,208
Net realized gain on sale of investments (565,856) (2,324,416)
Deferred income taxes (357,350) (4,180,809)
Other (130,130) (79,870)
Changes in assets and liabilities:
Premiums receivable (19,764,094) (12,405,881)
Income taxes receivable/payable 1,126,027 2,846,534
Receivable from reinsurers (22,544,907) (17,112,325)
Prepaid reinsurance premiums (4,318,594) (14,396,963)
Other assets 1,213,847 118,198
Reserve for losses and loss adjustment expenses 42,613,270 32,675,165
Unearned premiums 14,844,658 24,291,264
Reinsurance premiums payable 4,146,770 10,619,625
Other liabilities 3,648,684 (4,706,541)
----------------- -----------------
Net cash provided by operating activities 42,099,614 37,962,780
INVESTING ACTIVITIES
Purchases of fixed maturities available for sale (104,932,127) (168,378,620)
Purchases of equity securities available for sale (18,904,045) (1,057,738)
Proceeds from sale or maturities of fixed
maturities available for sale 80,041,155 117,056,797
Proceeds from sale or maturities of equity
securities available for sale 2,003,150 -
Net decrease in short-term investments 14,908,719 24,783,667
Purchase of subsidiaries (2,080,679) (4,058,851)
Other (703,234) (1,324,624)
----------------- -----------------
Net cash used in investing activities (29,667,061) (32,979,369)
FINANCING ACTIVITIES
Loan payment - (805,822)
----------------- -----------------
Net cash used in financing activities - (805,822)
Increase in cash and cash equivalents 12,432,553 4,177,589
Cash and cash equivalents at beginning of period 4,238,067 5,021,971
----------------- -----------------
Cash and cash equivalents at end of period $ 16,670,620 $ 9,199,560
================= =================
</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.
(Mutual Assurance) to serve as a holding company for Mutual Assurance and other
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.
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 September 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 nine month period
ended September 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 nine month periods ending September
30, 1996 and 1995 were principally based on the application of expected loss
ratios 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 were
$53,268,359 and $61,437,013 for the nine months ended September 30, 1996 and,
1995, respectively.
Gross realized gains on sales of available-for-sale securities totaled
$1,115,747 and $2,426,953 at September 30, 1996 and 1995, respectively. Gross
realized losses on sales of available-for-sale securities totaled $549,891 and
$102,537 at September 30, 1996 and 1995, respectively. Realized gains and
losses are included as a component of other income.
The amortized cost of fixed maturities and equity securities available for sale
was $511,607,838 and $469,789,477 at September 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.
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.
During July 1996, MAI Corporation, a wholly-owned subsidiary, purchased 100% of
the minority-owned interest of LifeSouth, Inc. The purchase resulted in
LifeSouth, Inc. becoming the wholly-owned subsidiary of MAI Corporation.
7
<PAGE> 8
MAIC Holdings, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements (continued)
(Unaudited)
8. BUSINESS EXPANSION (CONTINUED)
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 MOMED shareholders'
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, Inc. 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 public trading.
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 consolidated operations or 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 nine 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 nine months ended
September 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. In certain
instances, Mutual Assurance's surplus is a competitive factor in this "large
account" market because its principal competitors are larger than those with
whom Mutual Assurance has historically had to compete.
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 - NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1995
Premiums
The following table presents information related to consolidated
written and earned premiums and reinsurance expense (dollars in thousands):
<TABLE>
<CAPTION>
Nine months ended
September 30
--------------------------- Increase
1996 1995 (Decrease)
--------------------------- ----------
<S> <C> <C> <C>
Direct and assumed premiums written $ 108,018 $ 87,885 $ 20,133
=========== =========== ==========
Premiums earned $ 96,165 $ 70,647 $ 25,518
Premiums ceded (24,740) (15,159) 9,581
----------- ----------- ----------
Net premiums earned $ 71,425 $ 55,488 $ 15,937
=========== =========== ==========
</TABLE>
The increase in premiums written and earned for the nine months ended
September 30, 1996 as compared to the same nine months in 1995 is due primarily
to premiums in Ohio and New Mexico. New Mexico premiums were written during
third quarter 1996 but were retroactive to January 1, 1996. The increase in
premiums ceded is principally a result of additional written premiums in Ohio,
and as respects this new business, increased cessions of risks to reinsurers.
10
<PAGE> 11
Investment Income
The Company had consolidated net investment income of $23,788,000 for
the nine months ended September 30, 1996, as compared to $21,987,000 for the
nine months ended September 30,1995, reflecting an increase of $1,801,000. The
increased income is primarily due to an increase in the amount of invested
assets held by the Company, which increased to $538,709,000 at September 30,
1996 from $497,235,000 at September 30, 1995. The yield on invested assets
decreased to 6.1% for 1996 from 6.2% for 1995. The average composition of
invested assets changed little from 1995 to 1996, with non- taxable investments
comprising an average of 57% for the first nine months of 1996 and 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.
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 losses 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>
Nine months ended
September 30, 1996 September 30, 1995
---------------------------------------------------
Loss Loss
Losses Ratio Losses Ratio
------------------------ -----------------------
<S> <C> <C> <C> <C>
Losses $ 76,670 80% $ 58,054 82%
Reinsurance recoveries (26,362) === (17,641) ===
------------ ------------
Net losses $ 50,308 70% $ 40,413 73%
============ === =========== ===
</TABLE>
The Company's losses for the nine months ended September 30, 1996
reflect a loss ratio of 80% compared to a loss ratio of 82% for the nine months
ended September 30, 1995. Losses for both periods are principally based on the
application of expected loss ratios 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 $1,781,000 for the nine months ended
September 30, 1996 compared to the nine months ended September 30, 1995. The
decrease is principally attributable to a decline in capital gains from the
sale of securities during the first nine months of 1996 compared to the first
nine months of 1995.
11
<PAGE> 12
Underwriting, Acquisition, and Insurance Expenses
Consolidated expenses increased by $4,791,000 (38%) for the nine
months ended September 30, 1996 compared to the nine months ended September 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 of 23% for the nine months ended
September 30, 1996 and 1995 is 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 SEPTEMBER 30, 1996 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 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
September 30
--------------------------- Increase
1996 1995 (Decrease)
--------------------------- ----------
<S> <C> <C> <C>
Direct and assumed premiums written $ 36,432 $ 26,047 $ 10,385
=========== =========== ==========
Premiums earned $ 37,280 $ 24,613 $ 12,667
Premiums ceded (7,766) (5,403) 2,363
----------- ----------- ----------
Net premiums earned $ 29,514 $ 19,210 $ 10,304
=========== =========== ==========
</TABLE>
The increase in the above premiums for the quarter ended September 30,
1996 as compared to the quarter ended September 30, 1995 is due to the same
items discussed in the nine month comparison.
Investment Income
The Company had consolidated net investment income of $7,869,000 for
the three months ended September 30, 1996, as compared to $7,380,000 for the
three months ended September 30,1995. The amount of invested assets held by the
Company increased to $538,709,000 at September 30, 1996 from $497,235,000 at
September 30, 1995, which resulted in an increase to net investment income.
This increase is offset by a decrease in the weighted average yield on invested
assets from 5.9% for the three months ended September 30, 1996 as compared to
6.1% for the three months ended September 30, 1995.
Other Income
Other income decreased by $1,083,000 for the quarter ended September
30, 1996 as compared to the quarter ended September 30, 1995. The decrease is
principally attributable to a decline in capital gains from the sale of
securities during the third quarter of 1996 compared to the third quarter of
1995.
12
<PAGE> 13
Losses
Consolidated losses 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
September 30, 1996 September 30, 1995
---------------------------------------------------
Loss Loss
Losses Ratio Losses Ratio
------------------------ -----------------------
<S> <C> <C> <C> <C>
Losses $ 29,108 78% $ 19,050 77%
Reinsurance recoveries (8,143) === (6,238) ===
------------ -----------
Net losses $ 20,965 71% $ 12,812 67%
============ === =========== ===
</TABLE>
The Company's losses in the three months ended September 30, 1996
reflect a loss ratio of 78% as compared to a loss ratio of 77% for the three
months ended September 30, 1995. Developed redundancies released are
$6,375,000 and $5,650,000 for the three months ended September 30, 1996 and
1995, respectively.
Underwriting, Acquisition, and Insurance Expenses
Consolidated expenses increased by $2,095,000 (46%) for the quarter
ended September 30, 1996 compared to the quarter ended September 30, 1995. The
increase is due to the same items described in the nine month comparison.
13
<PAGE> 14
PART II - OTHER INFORMATION
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.
November 11, 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 SEPTEMBER 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<DEBT-HELD-FOR-SALE> 496,737,749
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 23,332,900
<MORTGAGE> 0
<REAL-ESTATE> 11,557,491
<TOTAL-INVEST> 558,744,858
<CASH> 16,670,620
<RECOVER-REINSURE> 103,012,618
<DEFERRED-ACQUISITION> 0<F1>
<TOTAL-ASSETS> 799,375,810
<POLICY-LOSSES> 475,558,719
<UNEARNED-PREMIUMS> 62,164,013
<POLICY-OTHER> 22,485,543
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 9,377,395
<OTHER-SE> 211,153,647
<TOTAL-LIABILITY-AND-EQUITY> 799,375,810
71,424,607
<INVESTMENT-INCOME> 23,787,667
<INVESTMENT-GAINS> 553,109
<OTHER-INCOME> 1,103,332
<BENEFITS> 50,307,614
<UNDERWRITING-AMORTIZATION> 17,510,230
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 29,050,871
<INCOME-TAX> 6,616,438
<INCOME-CONTINUING> 22,434,433
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,348,215
<EPS-PRIMARY> 2.39
<EPS-DILUTED> 0
<RESERVE-OPEN> 432,945,449
<PROVISION-CURRENT> 95,794,852
<PROVISION-PRIOR> (19,125,000)
<PAYMENTS-CURRENT> (1,729,000)
<PAYMENTS-PRIOR> (32,327,582)
<RESERVE-CLOSE> 475,558,719
<CUMULATIVE-DEFICIENCY> (19,125,000)
<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 EXPENSE.
</FN>
</TABLE>
