<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 MARCH 31, 1998 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 March 31, 1998, there were 21,492,104 shares of the registrant's common
stock outstanding.
Page 1 of 14
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Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Part I - Financial Information
Item l. Condensed Consolidated Financial Statements (Unaudited)
of Medical Assurance, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets.........................................3
Condensed Consolidated Statements of Changes in Capital.......................4
Condensed Consolidated Statements of Income...................................5
Condensed Consolidated Statements of Cash Flows...............................6
Notes to Condensed Consolidated Financial Statements..........................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................10
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>
MARCH 31 December 31
1998 1997
----------------------------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available for sale, at market value $ 624,342 $ 617,914
Equity securities available for sale, at market value 48,540 44,880
Real estate, net 11,807 11,933
Short-term investments 49,762 45,475
---------- -----------
Total investments 734,451 720,202
Cash and cash equivalents 16,262 12,248
Premiums receivable 105,716 92,051
Receivable from reinsurers 165,268 150,598
Prepaid reinsurance premiums 7,240 17,580
Deferred taxes 33,048 33,273
Other assets 32,487 37,221
---------- ----------
$1,094,472 $1,063,173
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Policy liabilities and accruals:
Reserve for losses and loss adjustment expenses $ 628,284 $ 614,729
Unearned premiums 87,227 79,700
Reinsurance premiums payable 57,415 53,752
---------- ----------
Total policy liabilities 772,926 748,181
Income taxes payable 4,716 1,240
Other liabilities 19,024 26,564
---------- ----------
Total liabilities 796,666 775,985
Commitments and contingencies - -
Stockholders' equity:
Common stock, par value $1 per share; 100,000,000
shares authorized, 21,721,253 and 21,721,562
shares issued, respectively 21,722 21,722
Additional paid-in capital 143,083 143,037
Accumulated other comprehensive income, net of
deferred taxes of $8,371 and $7,947, respectively 15,546 14,704
Retained earnings 119,480 109,524
---------- ----------
299,831 288,987
Less treasury stock at cost, 229,149 and 222,201 shares,
respectively (2,025) (1,799)
---------- ----------
Total stockholders' equity 297,806 287,188
---------- ----------
$1,094,472 $1,063,173
========== ==========
</TABLE>
See accompanying notes.
3
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Medical Assurance, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Capital (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Accumulated
Other Other
Comprehensive Retained Capital
Total Income Earnings Accounts
-------------- ------------- -------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $ 287,188 14,704 $ 109,524 $ 162,960
Comprehensive income
Net income 9,956 9,956
Other Comprehensive income, net of tax
Unrealized gains on securities, net of
reclassification adjustment of $433 842 842
---------------
Comprehensive income 10,798
Net purchase of treasury stock (180) (180)
--------------- ------------- --------- ---------
Balance at March 31, 1998 $ 297,806 $ 15,546 $ 119,480 $ 162,780
=============== ============= ========= =========
Other
Comprehensive Retained Capital
Total Income Earnings Accounts
-------------- ------------- --------- ---------
Balance at December 31, 1996 $ 244,565 $ 8,157 $ 103,027 $ 133,381
Comprehensive income
Net income 8,414 8,414
Other Comprehensive income, net of tax
Unrealized gains on securities, net of
reclassification adjustment of $198 (6,282) (6,282)
--------------
Comprehensive income 2,132
Net purchase of treasury stock (676) (676)
-------------- ------------- --------- ---------
Balance at March 31, 1997 $ 246,021 $ 1,875 $ 111,441 $ 132,705
============== ============= ========= =========
</TABLE>
See accompanying notes.
4
<PAGE> 5
Medical Assurance, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------------------
1998 1997
--------------- -----------
<S> <C> <C>
Revenues:
Direct and assumed
premiums written $ 56,361 $ 52,090
=============== ===========
Premiums earned $ 46,915 $ 37,117
Premiums ceded (15,151) (8,715)
--------------- -----------
Net premiums earned 31,764 28,402
Net investment income 9,688 9,458
Other income 887 611
--------------- -----------
Total revenues 42,339 38,471
Expenses:
Losses and loss
adjustment expenses 33,373 30,175
Reinsurance recoveries (12,187) (9,938)
--------------- -----------
Net losses and loss
adjustment expenses 21,186 20,237
Underwriting, acquisition
and insurance expenses 8,127 7,141
--------------- -----------
Total expenses 29,313 27,378
--------------- -----------
Income before income taxes 13,026 11,093
Provision for income taxes:
Current expense 1,925 3,305
Deferred expense (benefit) 1,145 (626)
--------------- -----------
3,070 2,679
--------------- -----------
Net income $ 9,956 $ 8,414
=============== ===========
Earnings per share:
Net income - basic and diluted $ 0.46 $ 0.39
=============== ===========
Weighted average number of common
shares outstanding - basic and diluted 21,494 21,569
=============== ===========
</TABLE>
See accompanying notes.
5
<PAGE> 6
Medical Assurance, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------------------------------
1998 1997
----------------- ---------------
<S> <C> <C>
Operating Activities
Net Income $ 9,956 $ 8,414
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 170 349
Amortization 4,304 2,070
Policy acquisition costs, deferred (4,866) (2,803)
Net realized gain on sale of investments (433) (198)
Deferred income taxes (benefit) 1,145 (626)
Changes in assets and liabilities:
Premiums receivable (13,665) (28,888)
Income taxes receivable/payable 3,476 2,393
Receivable from reinsurers (14,670) (12,279)
Prepaid reinsurance premiums 10,340 (1,852)
Other assets 4,136 2,066
Reserve for losses and loss adjustment expenses 13,555 22,755
Unearned premiums 7,527 13,670
Reinsurance premiums payable 3,663 12,257
Other liabilities (7,540) (3,160)
----------------- --------------
Net cash provided by operating activities 17,098 14,168
Investing Activities
Purchases of fixed maturities available for sale (61,987) (39,167)
Purchases of equity securities available for sale (2,031) (2,827)
Proceeds from sale or maturities of fixed
maturities available for sale 55,016 23,818
Proceeds from sale of equity securities available for sale 429 3,656
Net (increase) decrease in short-term investments (4,287) 9,100
Other (44) (467)
----------------- --------------
Net cash used in investing activities (12,904) (5,887)
Financing Activities
Net purchase of treasury stock (180) (676)
----------------- --------------
Net cash used by financing activities (180) (676)
----------------- --------------
Increase in cash and cash equivalents 4,014 7,605
Cash and cash equivalents at beginning of period 12,248 14,033
----------------- --------------
Cash and cash equivalents at end of period $ 16,262 $ 21,638
================= ==============
</TABLE>
See accompanying notes.
6
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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 three month period ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. For further information, refer to the December 31, 1997
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 March 31, 1998, 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 June 1997, the Financial Accounting Standards Board (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. Items
of other comprehensive income are displayed in a separate condensed consolidated
statement of changes in capital, and amounts for 1997 are provided for
comparative purposes.
FASB Statement 131, "Disclosures About Segments of an Enterprise and Related
Information" was issued in June 1997 and is effective for years beginning after
December 15, 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
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. Since the statement is not required to be applied to
interim financial statements in the initial year of application, the Company
will evaluate and implement this statement by year end.
7
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Medical Assurance, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
3. INVESTMENTS
Proceeds from sales of investments in fixed maturities and equities available
for sale were $43.0 million and $10.8 million for the three months ended March
31, 1998 and 1997, respectively. Gross realized gains on such sales were
$494,000 and $198,000 at March 31, 1998 and 1997 respectively; gross realized
losses on such sales were $61,000 and $0 at March 31, 1998 and 1997,
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 $649.0 million and $640.1 million at March 31, 1998 and December
31, 1997, respectively.
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 three month periods ending March 31, 1998
and 1997 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.
The reserves are evaluated at least annually by independent consulting
actuaries. Actual incurred losses may vary from estimated amounts due to the
inherent difficulty in estimating development of long-tailed lines of business.
The estimated liability is continually reviewed and any adjustments which become
necessary are included in current operations. The Company's management believes
that its actual incurred losses and loss adjustment expenses will not
significantly exceed its reported estimated amounts.
5. 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 $4.4 million and $3.1
million for the three months ended March 31, 1998 and 1997, respectively.
As is common practice within the industry, ceding commissions are deducted from
underwriting, acquisition, and insurance expenses and amounted to $1.4 million
and $0 for the three months ended March 31, 1998 and 1997, respectively.
6. INCOME TAXES
Income tax expense differs from the normal relationship to financial statement
income principally because of tax-exempt interest income.
8
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Medical Assurance, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
7. EARNINGS PER SHARE
On December 3, 1997 the Board of Directors declared a 5% stock dividend. Cash
was paid to shareholders for fractional shares. Earnings per share data for 1997
has been restated as if the above dividend had been declared on January 1, 1997.
On August 20, 1997, the Board of Directors declared a two-for-one stock split,
which was effected by transferring the par value of the split shares in the
amount of $10.3 million from additional paid-in capital to common stock.
Earnings per share data for 1997 has been restated as if the stock split had
been declared on January 1, 1997.
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
<PAGE> 10
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
three months of 1998 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 three months ended
March 31, 1998 and 1997, 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 March 31, 1998,
approximately $6.3 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.
10
<PAGE> 11
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.
11
<PAGE> 12
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1997
Premiums
The following table presents information related to consolidated
written and earned premiums and reinsurance expense (in thousands):
<TABLE>
<CAPTION>
Three months ended
March 31
---------------------------- Increase
1998 1997 (Decrease)
---------------------------- -----------
<S> <C> <C> <C>
Direct and assumed premiums written $ 56,361 $ 52,090 $ 4,271
============ ============ ===========
Premiums earned $ 46,915 $ 37,117 $ 9,798
Premiums ceded (15,151) (8,715) (6,436)
------------ ------------ -----------
Net premiums earned $ 31,764 $ 28,402 $ 3,362
============ ============ ===========
</TABLE>
The increase in premiums written and earned for the quarter ended March
31, 1998 as compared to the quarter ended March 31, 1997 is due primarily to an
increase in accident and health premiums.
The Company cedes reinsurance to provide for greater diversification of
business, allow management to control exposure to potential losses arising from
large risks, and provide capacity for additional growth. Premiums ceded are
estimated based on the terms of the respective reinsurance agreements. The
estimated expense is continually reviewed and any adjustments which become
necessary are included in current operations. Amounts recoverable from
reinsurers are estimated in a manner consistent with the loss liability
associated with the reinsured policies. The $6.4 million increase in premiums
ceded for the three months ended March 31, 1998 as compared to the three months
ended March 31, 1997 is principally due to additional written premium and
assumed premiums, and as respects this new business, increased cessions of risks
to reinsurers. The Company continually reviews the levels of coverages ceded and
the related costs.
Investment Income
The Company had consolidated net investment income of $9.7 million for
the three months ended March 31, 1998, as compared to $9.5 million for the three
months ended March 31, 1997, reflecting an increase of $230,000. The increased
investment income is principally a result of an increase in the amount of
investments held by the Company. Offsetting this increase was a decrease in the
average rates of return; the rate of return for the first quarter of 1998 was
5.7% compared to 5.9% for the comparable period in 1997.
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
March 31, 1998 March 31, 1997
-------------------- ------------------
Loss Loss
Losses Ratio Losses Ratio
-------------------- -------------------
<S> <C> <C> <C> <C>
Losses $ 33,373 71% $ 30,175 81%
=== ---
Reinsurance recoveries (12,187) (9,938)
----------- ---------
Net losses $ 21,186 67% $ 20,237 71%
=========== === ========= ===
</TABLE>
The Company's losses in the three months ended March 31, 1998 reflect a
loss ratio of 71% as compared to a loss ratio of 81% for the three months ended
March 31, 1997. 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 above loss ratios reflect improvement of loss development in prior years
coverage of $9.0 million in 1998 and $7.4 million in 1997. However, as the
Company continues its expansion efforts, the improvement of loss development for
prior years could have a smaller or less favorable impact on the loss ratios of
future years.
Other Income
Other income increased by $276,000 for the quarter ended March 31, 1998
as compared to the quarter ended March 31, 1997. The increase is principally
attributable to increased capital gains realized upon the sale or other
disposition of securities during the first quarter of 1998 compared to the first
quarter of 1997.
Underwriting, Acquisition, and Insurance Expenses
Consolidated expenses increased by $986,000 (which are net of ceding
commissions earned, see note 5 of the accompanying Notes to Condensed
Consolidated Financial Statements for more information) for the quarter ended
March 31, 1998 compared to the quarter ended March 31, 1997. Amortization of
deferred policy acquisition costs increased $443,000 for the three months ended
March 31, 1998 over the comparable period in 1997 and such increase is
principally attributable to new business. The remainder of the increase results
primarily from salary and benefit increases and other miscellaneous expenses
relating to the daily operation of the company.
Income Taxes
The Company's effective tax rates of 24% for each of the three months ended
March 31, 1998 and 1997 are lower than the statutory rate of 35% principally due
to the effect of tax exempt investment income.
13
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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.
May 12, 1998 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
FINANCIAL STATEMENTS OF MEDICAL ASSURANCE INC. FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 624,342
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 48,540
<MORTGAGE> 0
<REAL-ESTATE> 11,807
<TOTAL-INVEST> 734,451
<CASH> 16,262
<RECOVER-REINSURE> 165,268
<DEFERRED-ACQUISITION> 0<F1>
<TOTAL-ASSETS> 1,094,472
<POLICY-LOSSES> 628,284
<UNEARNED-PREMIUMS> 87,227
<POLICY-OTHER> 57,415
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 21,722
<OTHER-SE> 276,084
<TOTAL-LIABILITY-AND-EQUITY> 1,094,472
31,764
<INVESTMENT-INCOME> 9,688
<INVESTMENT-GAINS> 433
<OTHER-INCOME> 454
<BENEFITS> 21,186
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 13,026
<INCOME-TAX> 3,070
<INCOME-CONTINUING> 9,956
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,956
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
<RESERVE-OPEN> 464,131
<PROVISION-CURRENT> 30,700
<PROVISION-PRIOR> (9,515)
<PAYMENTS-CURRENT> (929)
<PAYMENTS-PRIOR> (17,043)
<RESERVE-CLOSE> 467,344
<CUMULATIVE-DEFICIENCY> (9,515)
<FN>
<F1>
Deferred policy acquisition costs and amortization of deferred policy
acquisition costs are not separately disclosed in the financial statements
included in Form 10K because these items are immaterial for individual
disclosure. Deferred policy acquisition costs are included as a component of
other assets; amortization of deferred policy acquisition costs is included as
a component of other underwriting expenses.
</FN>
</TABLE>
