<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 1997 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
Medical Assurance, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-1137505
- ------------------------------- ---------------------------------
(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 September 30, 1997, there were 20,468,021 shares of the registrant's
common stock outstanding.
Page 1 of 14
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Part I - Financial Information
<S> <C> <C>
Item l. Condensed Consolidated Financial Statements (Unaudited)
of Medical Assurance, 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
Medical Assurance, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31
1997 1996
---------------------------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available for sale, at market value $ 608,280 $ 564,938
Equity securities available for sale, at market value 42,273 33,036
Real estate, net 12,083 12,352
Investment in unconsolidated affiliate 35 30
Short-term investments 40,799 56,403
------------ ---------
Total investments 703,470 666,759
Cash and cash equivalents 15,939 14,033
Premiums receivable 68,619 33,896
Receivable from reinsurers 141,790 108,692
Prepaid reinsurance premiums 12,921 14,152
Deferred taxes 35,713 36,132
Other assets 38,055 31,644
------------ ---------
$ 1,016,507 $ 905,308
============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Policy liabilities and accruals:
Reserve for losses and loss adjustment expenses $ 603,145 $ 548,742
Unearned premiums 68,080 54,920
Reinsurance premiums payable 45,658 31,789
------------ ---------
Total policy liabilities 716,883 635,451
Income taxes payable 2,025 2,852
Other liabilities 23,015 22,440
------------ ---------
Total liabilities 741,923 660,743
Commitments and contingencies -- --
Stockholders' equity:
Common stock, par value $1 per share; 100,000,000
shares authorized, 20,679,641 and 10,339,245
shares issued, respectively 20,680 10,339
Additional paid-in capital 112,903 123,218
Net unrealized gains on securities available for sale, net of
deferred taxes of $6,830 and $4,392, respectively 12,685 8,157
Retained earnings 130,115 103,027
------------ ---------
276,383 244,741
Less treasury stock at cost, 211,620 and 57,214 shares,
respectively (1,799) (176)
------------ ---------
Total stockholders' equity 274,584 244,565
------------ ---------
$ 1,016,507 $ 905,308
============ =========
</TABLE>
See accompanying notes.
3
<PAGE> 4
Medical Assurance, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------------------------------------------------------------
1997 1996 1997 1996
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Direct and assumed
premiums written $ 43,266 $ 36,432 $ 134,802 $ 108,018
============== ================ ================= =================
Premiums earned $ 41,382 $ 37,280 $ 116,287 $ 96,165
Premiums ceded (10,608) (7,766) (27,973) (24,740)
-------------- ---------------- ----------------- -----------------
Net premiums earned 30,774 29,514 88,314 71,425
Net investment income 9,523 7,869 28,407 23,788
Other income 1,283 331 2,023 1,656
-------------- ---------------- ----------------- -----------------
Total revenues 41,580 37,714 118,744 96,869
Expenses:
Losses and loss
adjustment expenses 32,634 29,108 91,503 76,670
Reinsurance recoveries (11,328) (8,143) (30,753) (26,362)
-------------- ---------------- ----------------- -----------------
Net losses and loss
adjustment expenses 21,306 20,965 60,750 50,308
Underwriting, acquisition
and insurance expenses 7,656 6,603 22,850 17,510
-------------- ---------------- ----------------- -----------------
Total expenses 28,962 27,568 83,600 67,818
-------------- ---------------- ----------------- -----------------
Income before income taxes
and minority interests 12,618 10,146 35,144 29,051
Provision for income taxes:
Current expense 3,346 2,753 10,075 6,974
Deferred expense (benefit) (622) (456) (2,019) (357)
-------------- ---------------- ----------------- -----------------
2,724 2,297 8,056 6,617
-------------- ---------------- ----------------- -----------------
Income before minority
interests 9,894 7,849 27,088 22,434
Minority interests - (18) - (86)
-------------- ---------------- ----------------- -----------------
Net income $ 9,894 $ 7,831 $ 27,088 $ 22,348
============== ================ ================= =================
Earnings per share:
Net Income $ 0.48 $ 0.39 $ 1.32 $ 1.13
============== ================ ================= =================
Weighted average number of
common shares outstanding 20,465 19,863 20,496 19,862
============== ================ ================= =================
</TABLE>
See accompanying notes.
4
<PAGE> 5
Medical Assurance, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 27,088 $ 22,348
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,042 862
Amortization (1,436) (1,023)
Net realized gain on sale of investments (904) (566)
Deferred income taxes (benefit) (2,019) (357)
Other 26 (130)
Changes in assets and liabilities:
Premiums receivable (34,724) (19,764)
Income taxes receivable/payable (827) 1,126
Receivable from reinsurers (33,098) (22,545)
Prepaid reinsurance premiums 1,231 (4,319)
Other assets (4,057) 1,214
Reserve for losses and loss adjustment expenses 54,403 42,613
Unearned premiums 13,160 14,845
Reinsurance premiums payable 13,869 4,147
Other liabilities 576 3,649
--------- ---------
Net cash provided by operating activities 34,330 42,100
INVESTING ACTIVITIES
Purchases of fixed maturities available for sale (147,253) (104,932)
Purchases of equity securities available for sale (10,900) (18,904)
Proceeds from sale or maturities of fixed
maturities available for sale 107,396 80,041
Proceeds from sale of equity securities available for sale 5,077 2,003
Net decrease in short-term investments 15,607 14,909
Purchase of subsidiaries -- (2,081)
Other (728) (703)
--------- ---------
Net cash used in investing activities (30,801) (29,667)
FINANCING ACTIVITIES
Purchase of treasury stock (1,623) --
--------- ---------
Net cash used by financing activities (1,623) --
--------- ---------
(Decrease) increase in cash and cash equivalents 1,906 12,433
Cash and cash equivalents at beginning of period 14,033 4,238
--------- ---------
Cash and cash equivalents at end of period $ 15,939 $ 16,671
========= =========
</TABLE>
See accompanying notes.
5
<PAGE> 6
Medical Assurance, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of Medical Assurance, Inc. and its 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, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. For further information, refer to the December 31, 1996
audited consolidated financial statements and accompanying notes.
Medical Assurance, Inc. has 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, 1997, the Board of
Directors had not authorized the issuance of any preferred stock nor determined
any provisions for the preferred stock.
2. NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128,"Earnings per share", which is required to be adopted on
December 31, 1997. The Statement requires a change in the method currently used
to compute earnings per share and the restatement of all prior periods
disclosed. The Company does not expect Statement 128 to materially affect the
Company's earnings per share as disclosed in the accompanying financial
statements.
In June 1997, FASB issued Statement 130, "Reporting Comprehensive Income,"
which establishes standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial
statements. The new rules require that enterprises classify items of other
comprehensive income separately from retained earnings and additional
paid-in-capital in the equity section of the balance sheet. This Statement is
effective for fiscal years beginning after December 15, 1997. The impact of
Statement 130, when adopted on January 1, 1998, on the Company's financial
condition or results of operations has not been determined at this time.
FASB Statement 131, "Disclosures About Segments of an Enterprise and Related
Information" was issued in June 1997. This Statement changes the way public
companies report segment information in annual financial statements and
requires public companies to report selected segment information in interim
financial reports to shareholders. Under the Statement's "management approach,"
public companies are to report financial and descriptive information about
their operating segments. Operating segments are revenue-producing components
of an enterprise for which
6
<PAGE> 7
Medical Assurance, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
2. NEW ACCOUNTING STANDARDS (CONTINUED)
separate financial information is produced internally and are subject to
evaluation by the chief operating decision maker in deciding how to allocate
resources to segments. The impact of Statement 131, when adopted on January 1,
1998, on the Company's financial statements has not been determined at this
time.
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, 1997 and 1996 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.
5. INVESTMENTS
Proceeds from sales of investments in fixed maturities and equities available
for sale were $72,955,000 and $61,437,000 for the nine months ended
September 30, 1997 and 1996, respectively. Gross realized gains on such sales
were $1,238,000 and $1,116,000 at September 30, 1997 and 1996; gross realized
losses on such sales were $265,000 and $103,000 at September 30, 1997 and 1996,
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 $631,158,000 and $585,425,000 at September 30, 1997 and December
31, 1996, respectively.
6. EARNINGS PER SHARE
On December 4, 1996 the Board of Directors declared a 6% stock dividend. Cash
was paid to shareholders for fractional shares. Earnings per share data for
1996 has been restated as if the above dividend had been declared on January 1,
1996. Shares issued as part of the Company's December 1996 purchase of MOMED
Holding Company affect only the 1997 earnings computation.
On August 20, 1997, the Board of Directors declared a two-for-one stock split,
which was affected by transferring the par value of the split shares in the
amount of $10,339,713 from additional paid-in capital to common stock. Earnings
per share data for 1996 and 1997 have been restated as if the stock split had
been declared on January 1, 1996.
7
<PAGE> 8
Medical Assurance, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
7. DEFERRED POLICY ACQUISITION COSTS
Costs that vary with and are directly related to the production of new and
renewal premiums (primarily premium taxes, commissions and underwriting
salaries) are deferred to the extent they are recoverable against unearned
premiums and are amortized as related premiums are earned. Amortization of
deferred acquisition costs amounted to approximately $10,099,000 and $6,402,000
for the nine months ended September 30, 1997 and 1996, respectively.
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions arising primarily from claims
made under insurance policies; these legal actions 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.
9. BUSINESS EXPANSION
Effective December 20, 1996 the Company purchased MOMED Holding Company
(MOMED). MOMED is the parent company of Missouri Medical Insurance Company,
which is a provider of medical malpractice insurance. The accompanying 1996
condensed consolidated statements of income do not include any amounts
attributable to MOMED.
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 Medical Assurance, Inc. and its subsidiaries. The
consolidated subsidiaries consist principally of operating insurance companies.
LIQUIDITY AND CAPITAL RESOURCES
The payment of losses, loss adjustment expenses, and operating
expenses in the ordinary course of business is currently 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 1997 to meet the Company's operating 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, 1997 and 1996, 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
goal 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.
The Company's Board of Directors has authorized the purchase of up to
$15 million of its common stock in the open market. At September 30, 1997,
approximately $6.7 million remains available for purposes of purchasing its own
common stock in the open market.
BUSINESS EXPANSION
The Company, through Mutual Assurance, Inc. (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 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.
To further its expansion, the Company is offering certain insurance
and reinsurance products including, without limitation, medical malpractice
reinsurance, excess medical malpractice insurance, managed care liability
insurance, provider stop loss insurance, accident and health insurance, and
workers' compensation insurance. 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. This expansion
effort led to the acquisition of the Missouri Medical Insurance Company
(Momedico), which was effective December 20,1996.
9
<PAGE> 10
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1996
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
----------------------------
1997 1996 (Decrease)
---------------------------- -----------
<S> <C> <C> <C>
Direct and assumed premiums written $ 134,802 $ 108,018 $ 26,784
============ ============ ===========
Premiums earned $ 116,287 $ 96,165 $ 20,122
Premiums ceded (27,973) (24,740) 3,233
------------ ------------ -----------
Net premiums earned $ 88,314 $ 71,425 $ 16,889
============ ============ ===========
</TABLE>
Of the $26,784,000 increase in written premiums, $7,155,000 is
attributable to the inclusion in 1997 of Momedico premiums, and another
$1,142,000 is principally medical malpractice premiums. The remaining increase
is attributable to other related lines of business (see Business Expansion),
which includes (1) a $5,185,000 increase in workers compensation premiums, and
(2) for 1997, $13,210,000 in accident and health premiums.
Investment Income
The Company had consolidated net investment income of $28,407,000 for
the nine months ended September 30 ,1997, as compared to $23,788,000 for the
same period in 1996. The increased investment income is principally a result of
an increase in the amount of invested assets held by the Company, including
$77,909,000 held by Momedico; this increase is somewhat offset by a reduction
in the average rate of return on investments from 6.1% at September 30, 1996 to
5.9% at September 30, 1997.
For the purposes of the above discussion, invested assets are
comprised of fixed maturities and equity securities at amortized cost,
short-term investments and investment in unconsolidated subsidiary; 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 at amortized cost.
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.
Equity securities of $42,273,000 at September 30, 1997 consist of
$23,201,000 in fixed rate preferred stocks and $19,072,000 in common stock.
Equity securities of $33,036,000 at December 31, 1996 are primarily fixed rate
preferred stocks. Disposition of investments prior to maturity may result in a
net gain or loss which would be classified as "Other Income".
10
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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, 1997 September 30, 1996
-------------------- ----------------------
Loss Loss
Losses Ratio Losses Ratio
-------------------- ----------------------
<S> <C> <C> <C> <C>
Losses $ 91,503 79% $ 76,670 80%
== ==
Reinsurance recoveries (30,753) (26,362)
----------- ------------
Net losses $ 60,750 69% $ 50,308 70%
=========== == ============ ==
</TABLE>
The Company's losses for the nine months ended September 30, 1997
reflect a loss ratio of 79% compared to a loss ratio of 80% for the nine months
ended September 30, 1996. 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 increased by $367,000 for the nine months ended September
30, 1997 compared to the nine months ended September 30, 1996. The increase is
principally a result of an increase in capital gains realized from sales or
other dispositions of securities during the first nine months of 1997 compared
to the first nine months of 1996.
Underwriting, Acquisition, and Insurance Expenses
Consolidated expenses increased by $5,340,000 for the nine months
ended September 30, 1997 compared to the nine months ended September 30, 1996.
Expenses incurred by Momedico during the nine months ended September 30, 1997
account for $1,734,000 of this increase. The remainder of 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 and expansion opportunities.
Income Taxes
The Company's effective tax rate of 23% for the each of the nine month
periods ended September 30, 1997 and 1996, 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.
11
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RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1996
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
1997 1996 (Decrease)
---------------------------- -----------
<S> <C> <C> <C>
Direct and assumed premiums written $ 43,266 $ 36,432 $ 6,834
============ ============ ===========
Premiums earned $ 41,382 $ 37,280 $ 4,102
Premiums ceded (10,608) (7,766) 2,842
------------ ------------ -----------
Net premiums earned $ 30,774 $ 29,514 $ 1,260
============ ============ ===========
</TABLE>
The increase in premiums written and earned for the quarter ended
September 30, 1997 as compared to the quarter ended September 30, 1996 is due
primarily to the inclusion in 1997 of the Momedico premiums and the increase in
accident and health premiums.
Investment Income
The Company had consolidated net investment income of $9,523,000 for
the three months ended September 30, 1997, as compared to $7,869,000 for the
three months ended September 30, 1996, reflecting an increase of $1,654,000.
The increased investment income is principally a result of an increase in the
amount of investments held by the Company. The average rates of return on
investments for the third quarters of 1997 and 1996 were 5.8% and 5.9%,
respectively.
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, 1997 September 30, 1996
------------------------ ------------------------
Loss Loss
Losses Ratio Losses Ratio
------------------------ ------------------------
<S> <C> <C> <C> <C>
Losses $ 32,634 79% $ 29,108 78%
=== ===
Reinsurance recoveries (11,328) (8,143)
----------- ------------
Net losses $ 21,306 69% $ 20,965 71%
=========== === ============ ===
</TABLE>
The Company's losses in the three months ended September 30, 1997
reflect a loss ratio of 79% as compared to a loss ratio of 78% for the three
months ended September 30, 1996. 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.
12
<PAGE> 13
Other Income
Other income increased by $952,000 for the quarter ended September 30,
1997 as compared to the quarter ended September 30, 1996. The increase is
principally attributable to increased capital gains realized upon the sale or
other disposition of securities during the third quarter of 1997 compared to
the third quarter of 1996.
Underwriting, Acquisition, and Insurance Expenses
Consolidated expenses increased by $1,053,000 for the quarter ended
September 30, 1997 compared to the quarter ended September 30, 1996. Expenses
incurred by Momedico during the three months ended September 30, 1997 account
for $520,000 of this increase. The remainder of 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.
Medical Assurance, Inc.
November 10, 1997 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 (UNAUDITED) OF MEDICAL ASSURANCE,
INC. AND SUBSIDIARIES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 608,280
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 42,273
<MORTGAGE> 0<F1>
<REAL-ESTATE> 12,083
<TOTAL-INVEST> 703,470
<CASH> 15,939
<RECOVER-REINSURE> 141,790
<DEFERRED-ACQUISITION> 0<F1>
<TOTAL-ASSETS> 1,016,507
<POLICY-LOSSES> 603,145
<UNEARNED-PREMIUMS> 68,080
<POLICY-OTHER> 45,658
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0<F1>
0
0
<COMMON> 20,680
<OTHER-SE> 253,904
<TOTAL-LIABILITY-AND-EQUITY> 1,016,507
88,314
<INVESTMENT-INCOME> 28,407
<INVESTMENT-GAINS> 904
<OTHER-INCOME> 1,119
<BENEFITS> 60,750
<UNDERWRITING-AMORTIZATION> 10,099
<UNDERWRITING-OTHER> 12,751
<INCOME-PRETAX> 35,144
<INCOME-TAX> 8,056
<INCOME-CONTINUING> 27,088
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,088
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 0
<RESERVE-OPEN> 548,742
<PROVISION-CURRENT> 117,273
<PROVISION-PRIOR> (25,770)
<PAYMENTS-CURRENT> (3,776)
<PAYMENTS-PRIOR> (33,324)
<RESERVE-CLOSE> 603,145
<CUMULATIVE-DEFICIENCY> (25,770)
<FN>
<F1>DEFERRED POLICY ACQUISITION COSTS AND MORTGAGE NOTES PAYABLE ARE NOT SEPARATELY
DISCLOSED IN FORM 10-Q BECAUSE ITEMS ARE IMMATERIAL FOR INDIVIDUAL DISCLOSURE.
DEFERRED POLICY ACQUISITION COSTS ARE INCLUDED AS A COMPONENT OF OTHER ASSETS,
AND MORTGAGE NOTES PAYABLE ARE INCLUDED AS A COMPONENT OF OTHER LIABILITIES.
</FN>
</TABLE>
