<PAGE> 1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K/A
(AMENDMENT NO. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-14094
MEADOWBROOK INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2626206
(State of Incorporation) (IRS Employer Identification No.)
26600 TELEGRAPH ROAD, SOUTHFIELD, MI 48034
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (248) 358-1100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, $.01 par value per share New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock (common stock, $.01 par
value) held by non-affiliates of the registrant was $24,866,277 on March 17,
1999, based on the closing sales price of the Common Stock on such date.
The aggregate number of shares of the Registrant's Common Stock, $.01 par
value, outstanding on March 17, 1999 was 8,511,655.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's proxy statement for the annual meeting
scheduled for May 15, 2000 are incorporated by reference into Part III of this
report and certain portions of the 1999 Annual Report to Shareholders are
incorporated herein by reference into Part II of this report.
================================================================================
<PAGE> 2
THIS AMENDMENT NO. 1 ON FORM 10-K / A IS BEING FILED IN ORDER TO AMEND THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAREND DECEMBER 31, 1999,
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 2000, BY
AMENDING AND RESTATING ITEM 7A IN ITS ENTIRETY.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk is the risk of loss arising from adverse changes in market rates and
prices, such as interest rates as well as other relevant market rate or price
changes. The volatility and liquidity in the markets in which the underlying
assets are traded directly influence market risk. The following is a discussion
of the Company's primary risk exposures and how those exposures are currently
managed as of December 31, 1999. The Company's market risk sensitive instruments
are limited to debt securities and equity securities which are available for
sale and not held for trading purposes.
Interest rate risk is managed within the context of asset and liability
management where the target duration of investment portfolio is managed to
approximate that of the liabilities as determined by actuarial analysis.
The fair value of Company's investment portfolio was $201.8 million, 91.6% of
which is invested in debt securities. The Company's market risk to the
investment portfolio is interest rate risk associated with debt securities. The
Company's exposure to equity price risk is not significant. The Company's
investment philosophy is one of maximizing after-tax earnings and has
historically included significant investments in tax-exempt bonds. For the
Company's investment portfolio, there were no significant changes in the
Company's primary market risk exposures or in how those exposures are managed
compared to the year ended December 31, 1998. The Company does not anticipate
significant changes in the Company's primary market risk exposures or in how
those exposures are managed in future reporting periods based upon what is known
or expected to be in effect in future reporting periods.
A sensitivity analysis is defined as the measurement of potential loss in future
earnings, fair values or cash flows of market sensitive instruments resulting
from one or more selected hypothetical changes in interest rates and other
market rates or prices over a selected period. In the Company's sensitivity
analysis model, a hypothetical change in market rates is selected that is
expected to reflect reasonable possible near-term changes in those rates. The
term near term means a period of time going forward up to one year from the date
of the consolidated financial statements. In its sensitivity model, the Company
uses fair values to measure its potential loss of debt securities assuming an
upward parallel shift 100 basis point change in interest rates to measure the
hypothetical change in fair values. Based upon this sensitivity model, a 100
basis point change in interest rates produces a loss in fair value of market
sensitive instruments of approximately $8.1 million. This loss in fair value
only reflects the impact of interest rate increases on the fair value of the
Company's debt securities, which constitute 33.6% of total assets. The other
financial instruments, which include cash and cash equivalents, equity
securities, premium receivables, reinsurance recoverables, line of credit and
other assets and liabilities, when included in the sensitivity model do not
produce a material loss in fair values.
<PAGE> 3
MEADOWBROOK INSURANCE GROUP, INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized, in Southfield, Michigan.
MEADOWBROOK INSURANCE GROUP, INC.
By: /s/ WILLIAM J. LOHMEYER
-----------------------------
Senior Vice President
Chief Financial Officer
Dated: June 1, 2000
