-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LZKAzaRbVbtXOzv/STPVS0ESamBvI8QUhhug6LGpOyO872xOw9Z/NY/XooUbvvBb /mFhjek7ldu4wqJ8LXBCig== 0000950124-98-007499.txt : 19981218 0000950124-98-007499.hdr.sgml : 19981218 ACCESSION NUMBER: 0000950124-98-007499 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TENERE GROUP INC CENTRAL INDEX KEY: 0000922887 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 431675969 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26062 FILM NUMBER: 98771012 BUSINESS ADDRESS: STREET 1: 1903 E BATTLEFIELD CITY: SPRINGFIELD STATE: MO ZIP: 65804 BUSINESS PHONE: 4178620650 MAIL ADDRESS: STREET 1: 1903 E BATTLEFIELD CITY: SPRINGFIELD STATE: MO ZIP: 65804 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 Commission file number 0-24800 THE TENERE GROUP, INC. (Exact name of Registrant as specified in its charter) Missouri 43-1675969 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1903 E. Battlefield, Springfield, MO 65804 (Address of principal executive offices) (Zip code) 417-889-1010 (Registrant's telephone number, including area code) 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 ----- ----- As of September 30, 1998 there were 1,999,774 shares of Common Stock, $.01 par value, issued and outstanding. 2 THE TENERE GROUP, INC. PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (unaudited) Consolidated Balance Sheets - September 30, 1998 and December 31, 1997 3 Consolidated Statements of Operations - Three Months ended September 30, 1998 and 1997 4 Consolidated Statements of Operations - Nine Months ended September 30, 1998 and 1997 5 Consolidated Statements of Stockholders' Equity and Comprehensive Income - Periods Ended December 31, 1997 and 1996 and September 30, 1998 6 Consolidated Statements of Cash Flows Nine Months ended September 30, 1998 and 1997 7 Condensed Notes to Consolidated Financial Statements 8 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 PART II. OTHER INFORMATION ITEM 5. Other Information 20 ITEM 6. Exhibits and Reports on Form 8-K 20 SIGNATURES 20 EXHIBIT INDEX 21
3 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE TENERE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 1998 and December 31, 1997
UNAUDITED Assets 1998 1997 ------ ------ ------ Investments: Bonds held available for sale, at fair value (amortized cost - $37,604,144 in 1998; $39,863,330 in 1997) $ 39,761,871 40,930,956 Common stock, at fair value 13,643 7,057 Short-term investments, at cost which approximates fair value 8,686,500 2,788,476 ------------- ------------ Total investments 48,462,014 43,726,489 Cash 713,693 3,761,457 Premiums receivable 3,412,742 3,124,660 Reinsurance recoverable 10,686,262 10,413,593 Ceded unearned premiums 239,423 369,727 Accrued investment income 593,767 674,843 Deferred policy acquisition costs 207,129 183,253 Deferred income taxes 2,826,263 2,304,087 Income taxes recoverable 300,000 300,000 Other 716,859 867,543 ------------- ------------ Total assets $ 68,158,152 65,725,652 ============= ============ Liabilities and Stockholders' Equity ------------------------------------ Liabilities: Reserves for losses and loss adjustment expenses $ 34,099,394 31,030,412 Unearned premium reserve 7,876,170 7,717,308 Reinsurance premiums payable 4,949,193 4,435,317 Other 1,321,238 1,563,056 ------------- ------------ Total liabilities 48,245,995 44,746,093 Stockholders' equity: Common stock, $.01 par value; 7,000,000 shares authorized; 1,999,774 shares issued and outstanding 19,998 19,998 Contributed capital 21,940,828 21,940,828 Accumulated deficit (3,481,586) (1,690,370) Accumulated other comprehensive income, net of tax 1,432,917 709,103 ------------- ------------ Total stockholders' equity 19,912,157 20,979,559 ------------- ------------ Total liabilities and $ 68,158,152 65,725,652 ============= ============
See condensed notes to consolidated financial statements 3 4 THE TENERE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Nine Months Ended September 30, 1998 and 1997 UNAUDITED
1998 1997 ------ ------ Revenues: Direct premiums written $ 8,261,356 8,330,362 Premiums ceded to reinsurers (2,988,987) (2,308,816) ------------ ------------ Net premiums written 5,272,369 6,021,546 Increase in unearned premium reserve (289,166) (1,780,186) ------------ ------------ Net premiums earned 4,983,203 4,241,360 Net investment income 2,150,088 1,936,459 Net realized investment gains 61,320 - ------------ ------------ Total revenues 7,194,611 6,177,819 Losses and expenses: Losses and loss adjustment expenses 7,525,589 2,861,880 General and administrative expenses 2,355,287 2,883,434 ------------ ------------ Total losses and expenses 9,880,876 5,745,314 ------------ ------------ (Loss) income before income taxes (2,686,265) 432,505 Income tax benefit (expense) 895,049 (204,356) ------------ ------------ Net (loss) income $ (1,791,216) 228,149 ============ ============ Basic net (loss) income per share $ (0.90) 0.11 ============ ============ Diluted net (loss) income per share $ (0.90) 0.10 ============ ============
See condensed notes to consolidated financial statements 5 5 THE TENERE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended September 30, 1998 and 1997
UNAUDITED 1998 1997 ------ ------ Revenues: Direct premiums written $ 2,587,157 3,621,439 Premiums ceded to reinsurers (1,602,756) (1,202,572) ------------ ------------ Net premiums written 984,401 2,418,867 Increase in unearned premium reserve 295,298 (968,677) ------------ ------------ Net premiums earned 1,279,699 1,450,190 Net investment income 733,530 650,763 Net realized investment gains 63,524 - ------------ ------------ Total revenues 2,076,753 2,100,953 Losses and expenses: Losses and loss adjustment expenses 3,289,450 351,361 General and administrative expenses 804,164 1,104,923 ------------ ------------ Total losses and expenses 4,093,614 1,420,284 ------------ ------------ (Loss) income before income taxes (2,016,861) 680,669 Income tax benefit (expense) 657,458 (300,415) ------------ ------------ Net (loss) income $ (1,359,403) 380,254 ============ ============ Basic net (loss) income per share $ (0.68) 0.19 ============ ============ Diluted net (loss) income per share $ (0.68) 0.17 ============ ============
6 THE TENERE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME September 30, 1998 and December 31, 1997 and 1996 UNAUDITED
Retained Accumulated earnings/ other Common Contributed (accumulated comprehensive stock capital deficit) income Total ---------- -------------- -------------- --------------- ----------- Balance at December 31, 1995 $ 19,998 21,940,828 2,196,890 379,562 24,537,278 Comprehensive loss Net loss (2,934,486) (2,934,486) Other comprehensive loss, net of tax Net unrealized investment loss (213,089) (213,089) Total comprehensive loss (3,147,575) ---------- ------------ ------------- ----------- ------------ Balance at December 31, 1996 19,998 21,940,828 (737,596) 166,473 21,389,703 Comprehensive loss Net loss (952,774) (952,774) Other comprehensive income, net of tax Net unrealized investment gain 542,630 542,630 Total comprehensive loss ---------- ------------ ------------- ----------- ------------ Balance at December 31, 1997 19,998 21,940,828 (1,690,370) 709,103 20,979,559 Comprehensive loss Net loss (1,791,216) (1,791,216) Other comprehensive income, net of tax Unrealized investment gain, net of reclassification adjustment 723,814 723,814 Total comprehensive loss ---------- ------------ ------------- ----------- ------------ Balance at September 30, 1998 $ 19,998 21,940,828 (3,481,586) 1,432,917 19,912,157 ========== ============ ============= =========== ============ Disclosure of reclassification amount Unrealized holding gains arising during the period $ 785,134 Less: reclassification adjustment for net realized gains included in net loss (61,320) ----------- Unrealized gain on securities $ 723,814 =========== Comprehensive income ------------- Balance at December 31, 1995 Comprehensive loss Net loss (2,934,486) Other comprehensive loss, net of tax Net unrealized investment loss (213,089) ------------ Total comprehensive loss (3,147,575) ============ Balance at December 31, 1996 Comprehensive loss Net loss (952,774) Other comprehensive income, net of tax Net unrealized investment gain 542,630 ------------ Total comprehensive loss (410,144) ============ Balance at December 31, 1997 Comprehensive loss Net loss (1,791,216) Other comprehensive income, net of tax Unrealized investment gain, net of reclassification adjustment 723,814 ------------ Total comprehensive loss (1,067,402) ============
See condensed notes to consolidated financial statements 6 7 THE TENERE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 1998 and 1997 UNAUDITED
1998 1997 --------------- ---------------- Cash flows from operating activities Premiums received from policyholders $ 7,967,870 6,966,187 Premiums paid to reinsurers (2,431,560) (2,524,828) Recoveries received from reinsurers 2,997,482 415,573 Losses and loss adjustment expenses paid (7,726,539) (7,693,483) Commissions paid (328,540) (173,011) Cash paid to suppliers and employees (2,286,042) (2,040,825) Interest received 2,360,424 2,177,812 Income taxes received - 335,089 ------------- ------------- Net cash provided by (used in) operating activities 553,095 (2,537,486) Cash flows from investing activities: Maturity of bonds available for sale 10,250,000 1,450,000 Sale of bonds available for sale 4,569,164 - Redemption on stock rights - 56 Purchase of bonds available for sale (12,495,207) (5,014,094) Purchase of furniture and equipment (26,792) (43,108) ------------- ------------- Net cash from (used in) investing activities 2,297,165 (3,607,146) Net increase (decrease) in cash and short-term investments 2,850,260 (6,144,632) Cash and short-term investments at beginning of period 6,549,933 16,935,122 ------------- ------------- Cash and short-term investments at end of period $ 9,400,193 10,790,490 ============= ============= Reconciliation of net (loss) income to net cash provided by (used in) operating activities Net (loss) income $ (1,791,216) 228,149 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Net realized investment gains (61,320) - Depreciation and amortization expense 96,984 123,248 Net change in deferred acquisition costs (23,876) (80,743) Deferred income tax benefit (895,049) (160,258) Net amortization of discount on bonds (3,451) 40,824 Change in operating assets and liabilities Premiums receivable (288,082) (1,269,633) Reinsurance balances 371,511 360,143 Accrued investment income 81,076 69,233 Income taxes recoverable - 699,703 Other assets 80,491 60,530 Reserve for losses and loss adjustment expenses 3,068,982 (4,857,225) Unearned premium reserve 158,862 1,708,679 Other liabilities (241,817) 539,864 ------------- ------------- Net cash provided by (used in) operating activities $ 553,095 (2,537,486) ============= =============
See condensed notes to consolidated financial statements 7 8 THE TENERE GROUP, INC. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements are prepared in accordance with the rules and regulations of the Securities and Exchange Commission with regard to interim financial statements. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been made. Such adjustments consisted of only normal recurring items. The results of operations for the nine months ended September 30, 1998 are not necessarily indicative of the results which may occur for the full year. The accompanying unaudited financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the 1997 Annual Report. Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (Statement 130). Statement 130 requires a company to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in-capital in the equity section of the statement of financial position. The change in unrealized investment gains and losses is the only component of other comprehensive income for the Company. (2) INVESTMENTS The amortized cost and estimated fair values of investments in bonds and common stock as of September 30, 1998 and December 31, 1997 are presented below. The estimated fair values presented in this footnote were determined using quoted market prices, where available, or independent pricing services.
Gross Gross Estimated Amortized unrealized unrealized fair Type of Investment cost basis gains losses value - ------------------ ---------- ---------- ---------- --------- September 30, 1998 Bonds: United States government, government agencies and $34,588,337 2,033,110 - 36,621,447 authorities Corporate 3,015,807 124,617 - 3,140,424 ----------- --------- --------- ---------- Total bonds 37,604,144 2,157,727 - 39,761,871 Common stock 284 13,359 - 13,643 Short-term investments 8,686,500 - - 8,686,500 ----------- --------- --------- ---------- Total investments $46,290,928 2,171,086 - 48,462,014 =========== ========= ========= ==========
8 9
Gross Gross Estimated Amortized unrealized unrealized fair Type of Investment cost basis gains losses value - ------------------ ---------- ---------- ---------- --------- December 31, 1997 Bonds: United State government, government agencies and $38,003,757 1,012,229 (7,020) 39,008,966 authorities State municipalities and political subdivisions 1,859,573 62,417 - 1,921,990 ----------- --------- -------- ---------- Total bonds 39,863,330 1,074,646 (7,020) 40,930,956 Common stock 284 6,773 - 7,057 Short-term investments 2,788,476 - - 2,788,476 ----------- --------- -------- ---------- Total investments $42,652,090 1,081,419 (7,020) 43,726,489 =========== ========= ======== ==========
The amortized cost and estimated fair value of investments in bonds at September 30, 1998 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Estimated Amortized fair cost basis value ---------- ----- Due after one year through five years $16,374,478 17,012,549 Due after five years through ten years 21,229,666 22,749,322 ----------- ---------- $37,604,144 39,761,871 =========== ==========
Proceeds from sales of available for sale securities for the nine months ended September 30, 1998 were $4,569,164. Gross gains and losses on those sales were $44,789 and $2,204 in 1998, respectively. Net investment income for the nine months ended September 30, 1998 and 1997 is comprised of the following:
September 30, September 30, 1998 1997 ----------- ------------- Investment income: Interest on short-term investments $ 336,067 639,047 Interest on bonds 1,943,731 1,428,707 ----------- ----------- Gross investment income 2,279,798 2,067,754 Investment expenses (129,710) (131,295) ----------- ----------- Net investment income $ 2,150,088 1,936,459 =========== ===========
9 10 Bonds with an estimated fair value of $1,944,283 at September 30, 1998 and $1,878,081 at December 31, 1997 were on deposit with the Missouri Department of Insurance. The net changes in unrealized investment gains (losses) in the nine months ended September 30, 1998 and 1997 are as follows: September 30, September 30, 1998 1997 ------------- ------------ Net unrealized investment gains $ 1,096,687 311,497 Federal income tax expense at 34% (372,873) (105,908) ------------ ----------- Net unrealized investment gains $ 723,814 205,589 ============ ===========
(3) RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES AND REINSURANCE A summary of the reserves for losses and loss adjustment expenses follows: 10 11
September 30, December 31, 1998 1997 ------------- ------------ Undiscounted reserves for losses and loss adjustment expenses $ 34,621,635 31,990,412 Less discount (522,241) (960,000) ------------ ------------ Discounted reserves for losses and loss adjustment expenses $ 34,099,394 31,030,412 ============ ============ Following is the activity in the reserves for losses and loss adjustment expenses: September 30, September 30, 1998 1997 ------------- ------------- Balance at January 1 $31,030,412 32,887,407 Less reinsurance recoverable on reserves for losses and loss adjustment expenses (9,950,512) (7,099,463) ------------ ------------ 21,079,900 25,787,944 ------------ ------------ Incurred related to: Current year 6,177,648 4,566,620 Prior year 1,347,941 (1,704,740) ------------ ------------ Total incurred 7,525,589 2,861,880 ------------ ------------ Paid related to: Current year 293,957 359,378 Prior year 4,823,539 6,751,834 ------------ ------------ Total paid 5,117,496 7,111,212 ------------ ------------ Net balance at September 30 23,487,993 21,538,612 Plus reinsurance recoverable on reserves for losses and loss adjustment expenses 10,611,401 6,491,570 ------------ ------------ Balance at September 30 $34,099,394 28,030,182 ============ ============
The reserves for losses and loss adjustment expenses are estimated based on development information available at each reporting date. As a result of the nature of the risks underwritten, claims development may occur over an extended period of time. The changes in the incurred amounts disclosed above related to prior years are the result of utilizing improved claim development information as that information becomes available. Reserves were discounted by 2% and 1% in the financial statements for the periods ended December 31, 1997 and September 30, 1998, respectively. As directed by the Missouri Department of Insurance, the discount will be completely eliminated after December 31, 1998. Premiums and losses related to reinsurance amounts for the nine months ended September 30, 1998 and 1997 are summarized as follows: 12
September 30, September 30, 1998 1997 ---- ---- Ceded premiums written $2,988,987 2,308,816 ========== ========== Ceded premiums earned $2,752,514 2,283,985 ========== ========== Ceded losses and loss adjustment expenses (benefit) $3,270,151 (25,620) ========== ==========
(4) FEDERAL INCOME TAXES The Company files a consolidated federal income tax return. Income tax expense (benefit) varies from the amount which would be provided by applying the federal income tax rates to income (loss) before income taxes. The following reconciles the expected provision for income tax expense (benefit) using the federal statutory tax rate of 34% to the provision for income tax expense (benefit) reported herein for the nine months ended September 30, 1998 and 1997:
September 30, September 30, 1998 1997 ---- ---- Expected tax (benefit) expense using statutory rates $ (913,330) 147,052 Other, net 18,281 57,304 ---------- -------- Income tax (benefit) expense $ (895,049) 204,356 ========== ========
Income taxes consist of the following at September 30:
September 30, September 30, 1998 1997 ---- ---- Current expense $ - 364,614 Deferred benefit (895,049) (160,258) ---------- -------- Income tax (benefit) expense $ (895,049) 204,356 ========== ========
12 13 Deferred income taxes arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. The sources of these differences and the tax effect of each are as follows:
September 30, September 30, 1998 1997 ---- ---- Losses and loss adjustment expenses incurred for financial reporting purposes but not deductible for tax purposes $ (266,446) 61,670 Unearned premiums not deductible for tax purposes (20,142) (120,817) Deferred compensation - (102,642) Deferred retirement benefit (14,583) (100,623) Net operating loss carryforward (481,944) 105,163 Other, net (111,934) (3,009) ----------- ---------- Deferred tax benefit $ (895,049) (160,258) =========== ==========
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at September 30, 1998 and December 31, 1997 are presented below:
September 30, December 31, 1998 1997 ---- ---- Deferred tax assets: Discounted unpaid loss reserves $ 1,346,494 1,080,048 Discounted unearned premium reserves 519,298 499,158 Deferred compensation 191,042 191,042 Deferred retirement benefit 215,829 201,246 Deferred commissions payable 44,224 47,465 Net operating loss carryforward 1,597,368 1,115,423 ----------- ---------- Total gross deferred tax assets 3,914,255 3,134,382 Less valuation allowance (279,400) (390,400) ----------- ---------- Net deferred tax assets 3,634,855 2,743,982 Deferred tax liabilities: Investments adjusted to market value (738,168) (365,295) Deferred acquistion costs (70,424) (62,306) Other - (12,294) ----------- ---------- Total gross deferred tax liabilities (808,592) (439,895) ----------- ---------- Net deferred tax asset $ 2,826,263 2,304,087 =========== ==========
The valuation allowance for deferred tax assets at September 30, 1998 was $279,400. Based on the Company's historical earnings, future expectations of adjusted taxable income, its ability to change its investment strategy, as well as reversing gross deferred tax liabilities, management believes it is more likely than not that the Company will fully realize the gross deferred tax assets less the valuation allowance. However, there can be no assurances that the Company will generate the necessary adjusted taxable income in any future period. 13 14 (5) STATUTORY ACCOUNTING Intermed and its subsidiary Interlex are domiciled in Missouri and prepare their statutory-basis financial statements in accordance with accounting practices prescribed or permitted by the Missouri Department of Insurance. "Prescribed" statutory accounting practices include state laws, regulations and general administrative rules, as well as a variety of publications of the NAIC. "Permitted" statutory accounting practices encompass all accounting practices that are not prescribed; such practices may differ from state to state, may differ from company to company within a state, and may change in the future. Intermed and its subsidiary Interlex have no significant permitted accounting practices that vary from prescribed accounting practices, except for discounting of loss reserves. Reconciliations of statutory net (loss) income, as determined using statutory accounting principles, to the amounts included in the accompanying consolidated financial statements for the nine months ended September 30, 1998 and 1997 are as follows:
September 30, September 30, 1998 1997 ---- ---- Net (loss) income of insurance subsidiaries $ (2,543,102) 658,544 Increase (decrease): Deferred policy acquisition costs 23,876 80,743 Deferred income taxes 895,049 160,258 Deferred compensation - (301,887) Deferred retirement benefit (42,891) (295,951) Other adjustments, net (124,148) (73,558) ------------ --------- Net (loss) income as reported herein $ (1,791,216) 228,149 ============ =========
Reconciliations of statutory capital and surplus, as determined using statutory accounting principles, to stockholders' equity included in the accompanying consolidated financial statements at September 30, 1998 and December 31, 1997 are as follows:
September 30, December 31, 1998 1997 ---- ---- Statutory capital and surplus of Intermed Insurance Company $15,262,440 17,830,404 Increase (decrease) Deferred policy acquisition costs 207,129 183,253 Deferred income taxes 2,826,264 2,304,087 Net unrealized gain (loss) on investments booked at market 2,157,727 1,067,627 Deferred compensation (561,887) (561,887) Accrued retirement (634,792) (591,901) Non-admitted assets and other adjustments, net 655,276 747,976 ----------- ---------- Stockholders' equity as reported herein $19,912,157 20,979,559 =========== ==========
14 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis addresses the Company's financial condition at September 30, 1998 and results of operations for the three and nine months ended September 30, 1998 and 1997. RESULTS OF OPERATIONS-THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 - -------------------------------------------------------------------- Direct premiums written in the three months ended September 30, 1998 were $2.6 million, a decrease of approximately $1.0 million or 28.6% from the corresponding period in 1997. Results by product were:
THREE MONTHS ENDED SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 CHANGE -------------------- ------------------ ------ Medical malpractice $ 2,239,900 3,372,300 -33.6% Legal malpractice 347,300 249,100 +39.4% -------------------- ------------------ ----- Total $ 2,587,200 3,621,400 -28.6%
Legal malpractice premiums written in the three months ended September 30, 1998 were 39.4% ahead of the prior year period while medical malpractice premiums written were 33.6% below the 1997 period. The decline in medical malpractice premiums written occurred primarily in the State of Missouri where the Company continues to encounter fierce rate competition. Medical malpractice production by state was:
THREE MONTHS ENDED SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 CHANGE -------------------- ------------------ ------ Missouri $ 1,487,700 2,577,200 -42.3% Kansas 84,000 31,200 +169.2% Texas 668,200 763,900 -12.5% -------------------- ------------------ ------ Total $ 2,239,900 3,372,300 -33.6% ==================== ================== ======
Premiums ceded to reinsurers increased from $1.2 million in the three months ended September 30, 1997 to $1.6 million in the current quarter. The increase between periods was due to an increase in losses ceded to reinsurers. Net premiums written declined from $2.4 million in the three months ended September 30, 1997 to $984,400 in the 1998 period due to (a) the decrease in direct premiums written and (b) the increase in premiums ceded to reinsurers discussed above. There was a decrease of $295,300 in the unearned premium reserve in the three months ended September 30, 1998 compared to an increase of $968,700 in the prior year period. The change 15 16 between periods was due to the decrease in direct premiums written in the 1998 period as discussed above. There was a decrease of $170,500 in premiums earned in the three months ended September 30, 1998 compared to the same period of 1997 due to (a) the decrease in premiums written and (b) the significant increase in premiums ceded to reinsurers. Net investment income in the three months ended September 30, 1998 was $733,500, an increase of $82,800 or approximately 13.0% over the comparable quarter of 1997. The increase was primarily due to having a larger percentage of the portfolio invested long-term in the 1998 period than in the prior year period. Net realized investment gains of $63,500 in the current quarter were from sales and calls of long-term bonds. Total revenues were $2.1 million in the three months ended September 30, 1998, level with the prior year period. Losses and loss adjustment expenses totaled $3.3 million in the three months ended September 30, 1998 compared to $315,400 in the comparable prior year period. The 1997 period included a significant reduction in reserves for prior accident years recommended by the Company's new consulting actuary. The direct 1998 accident year loss ratio was 104.6%. The net 1998 calendar year loss ratio was 257.0%. The Company continues to experience high severity and there was a significant increase in frequency in the 1998 period. General and administrative expenses were $804,200 in the three months ended September 30, 1998 compared to $1.1 million in the three months ended September 30, 1997. The 1997 period included accruals of $296,000 for post-retirement benefits for the Board of Directors, compared to approximately $8,600 in the third quarter of 1998. The expense ratio for the three months ended September 30, 1998 was 31.1% compared to 30.5% in the 1997 period due to the decline in premiums written in the 1998 period. The loss before income taxes in the three months ended September 30, 1998 was $2.0 million compared to income before income taxes of $680,700 in the comparable period of 1997. The 1997 period benefited from reserve adjustments as discussed above. There was a benefit from income taxes of $657,500 in the 1998 period compared to an expense of $300,400 in the 1997 period. The net loss in the three months ended September 30, 1998 was $1,359,400 or $.68 per share compared to net income of $380,300 or $.19 per share in the prior year period ($.17 per diluted share). 16 17 RESULTS OF OPERATIONS-NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 Direct premiums written were $8.3 million in the nine months ended September 30, 1998, a decrease of $69,000 or less than 1% from the comparable prior year period. Results by product were:
NINE MONTHS ENDED SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 CHANGE -------------------- ------------------ ------ Medical malpractice $ 7,245,700 7,526,900 -3.7% Legal malpractice 1,015,700 803,500 +26.4% -------------------- ------------------ ----- Total $ 8,261,400 8,330,400 -0.8%
Legal malpractice premiums written in the nine months ended September 30, 1998 were 26.4% above the prior year period while medical malpractice premiums written showed a decline of 3.7%. The decline in medical malpractice premiums written occurred in the State of Missouri where the Company continues to encounter fierce rate competition. Medical malpractice production by state was:
NINE MONTHS ENDED SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 CHANGE -------------------- ------------------ ------ Missouri $ 4,836,000 5,636,300 -14.2% Kansas 147,000 66,900 +119.7% Texas 2,262,700 1,823,700 +24.1% -------------------- ------------------ ------ Total $ 7,245,700 7,526,900 -3.7%
Premiums ceded to reinsurers in the nine months ended September 30, 1998 were $3.0 million, $680,200 higher than the prior year period. The increase was primarily attributable to an increase in losses ceded to reinsurers in the current period. There was a $289,200 increase in the unearned premium reserve (UPR) in the nine months ended September 30, 1998 compared to an increase of $1.8 million in the nine months ended September 30, 1997. Due primarily to a smaller increase in the unearned premium reserve, net premiums earned in the 1998 period were $741,800 higher than in the comparable period of 1997. Net investment income in the nine months ended September 30, 1998 was $2.2 million, an increase of $213,600 or 11.0% compared to the prior year period. The primary reason for the increase was due to having a larger percentage of the portfolio invested long-term in the 1998 period. 17 18 The net realized investment gain of $61,300 in the 1998 period was from sales and calls of several long-term bonds. Due to the increases in net premiums earned and investment income and to the net realized investment gain discussed above, total revenues in the nine months ended September 30, 1998 were $7.2 million, an increase of $1.0 million or 16.5% higher than in the comparable period of 1997. Losses and loss adjustment expenses totaled $7.5 million in the nine months ended September 30, 1998, $4.7 million higher than in the same period of 1997. The direct 1998 accident year loss ratio was 104.6%. The period ended September 30, 1997 reflected favorable adjustments to prior accident year loss reserves and there were no corresponding adjustments in the 1998 period. The net 1998 calendar loss ratio was 151.0%. The Company continues to experience high severity and there was a significant increase in frequency in the 1998 period. General and administrative expenses totaled $2.4 million in the nine months ended September 30, 1998, a decrease of $528,100 or 18.3% from the prior year period. The 1997 period included an accrual of $597,800 for the post-retirement benefits of the Board of Directors and the Chief Executive Officer compared to $42,900 in 1998. The expense ratio for the nine months ended September 30, 1998 was 28.5% compared to 34.6% in the 1997 period. Due primarily to the significant increase in losses and loss adjustment expenses in the 1998 period, there was a loss before income taxes of approximately $2.7 million compared to income before income taxes of $432,500 in the same period of 1997. The 1998 period had an income tax benefit of $895,000 which resulted in a net loss of $1.8 million or $.90 per share. In the comparable period of 1997, there was an income tax expense of $204,400 which resulted in net income of $228,100 or $.11 per share ($.10 per diluted share). FINANCIAL CONDITION ASSETS: Total assets at September 30, 1998 were $68.2 million, an increase of $2.4 million over the prior year end. Significant changes in asset categories are discussed below: - - The investment portfolio increased from $43.7 million at December 31, 1997 to $48.5 million at September 30, 1998, an increase of $4.7 million or 10.8%. The increase was due to (a) the transfer of approximately $3.0 million from the cash account and (b) a $1.1 million increase in the market value of bonds during the first nine months of 1998. There was an unrealized gain of $2.2 million in the bond portfolio at September 30, 1998 compared to $1.1 million at December 31, 1997. Short-term investments totaled $8.7 million at September 30, 1998 compared to $2.8 million at the prior year end, an increase of $5.9 million. The increase was due to the call in August of two bonds with par values of $3.0 million. $3.0 mil- 18 19 lion was reinvested long-term in September but the remaining $3.0 million remains invested in short-term securities until long-term rates improve above current levels. The current target for short-term investments is 10% of the investment portfolio or $5 million. - - There was a $3.0 million decrease in cash from December 31, 1997 to September 30, 1998 due to the transfer to the investment account discussed above. The cash balance of $3.8 million at December 31, 1997 was unusually high due to several year-end transactions. The excess cash was subsequently transferred to the investment account. Cash balances are invested overnight. - - The increase in premiums receivable at September 30, 1998 over the prior year end was due to the significant percentage of annual renewals that take place during the third quarter of each year, many of which involve monthly and quarterly premium plans. - - Reinsurance recoverable from reinsurers increased from $10.4 million at December 31, 1997 to $10.7 million at September 30, 1998 due to an increase in ceded losses during the nine months ended September 30, 1998. - - Deferred income taxes increased from $2.3 million at the prior year end to approximately $2.8 million at September 30, 1998 due primarily to an increase of $477,200 in the net operating loss carryforward. LIABILITIES: Total liabilities increased from $44.7 million at December 31, 1997 to $48.2 million at September 30, 1998, an increase of $3.5 million or approximately 8.0%. Significant variances in liability accounts are discussed below: - - Reserves for losses and loss adjustment expenses increased $3.1 million or approximately 10.0% in the nine months ended September 30, 1998, from $31.0 million at December 31, 1997 to $34.1 million. Changes in total reserves are summarized below: $31,030,400 Discounted loss and loss adjustment expense reserves at December 31, 1997. + 901,700 Impact of change in discount rate. - 7,745,700 Indemnity and expense payments during nine months ended September 30, 1998. + 2,081,600 Increase in loss and loss adjustment expense reserve for prior accident years. + 7,831,400 Reserves established for accident year 1998. ----------- $34,099,400 Discounted loss and loss adjustment expense reserves at September 30, 1998.
19 20 The discount rate has been reduced from 2% to 1% during the nine months ended September 30, 1998. - - The unearned premium reserve (UPR) increased $158,900 or 2.1% from $7.7 million at December 31, 1997 to $7.9 million at September 30, 1998. EQUITY: Total stockholders' equity decreased from approximately $21.0 million at December 31, 1997 to $19.9 million at September 30, 1998. The $1.1 million decline was due to the following factors: $(1,791,200) net loss from operations 723,800 increase in unrealized investment gains, net of income taxes. ----------- $(1,067,400) decrease in stockholders' equity.
Book value of the Company's common stock at September 30, 1998 was $9.96 per share, $9.13 per diluted share. There were no changes in the capital structure of the Company in the nine months ended September 30, 1998. The accumulated deficit increased from $1.7 million at December 31, 1997 to approximately $3.5 million at September 30, 1998 due to the net loss of $1.8 million during the nine month period then ended. Accumulated other comprehensive income increased from $709,100 to $1.4 million over the same period due to the increase in unrealized gains in the investment portfolio, net of income taxes. LIQUIDITY AND CAPITAL RESOURCES There was a positive cash flow from operations of $553,100 in the nine months ended September 30, 1998 compared to a negative cash flow of $2.5 million in the comparable period of 1997. The $3.1 million improvement was attributable to the following factors: +$1,001,700 increase in premium receipts + 2,581,900 increase in recoveries from reinsurers + 93,300 decrease in payments to reinsurers + 182,600 increase in investment income received - 33,100 increase in loss and LAE payments - 400,700 increase in commissions and other general and administrative expenses - 335,100 no FIT recoveries in 1998 period ----------- +$3,090,600 improvement in cash flow from operations
The cash position of $713,700 and short-term investments of $8.7 million at September 30, 1998 provide reasonable assurance regarding the adequacy of the Company's current and foreseeable liquidity. 20 21 YEAR 2000 The Company has completed the assessment phase of is Year 2000 information systems initiative and has completed 85% of the remediation phase. All remediation and testing should be completed by year end. The cost of the assessment, remediation and testing of the information systems has been immaterial and no future material expenditures are anticipated. Expenses have been charged to current operations as incurred. The Company has commenced a program of communication with all policyholders. A newsletter advising physicians and dentists of the Year 2000 problem and steps necessary to reduce the possibility of lawsuits was issued in October, 1998. A similar letter will be issued to lawyers prior to the end of the year. PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION On October 2, 1998 the Company signed a definitive agreement with Florida Physicians Insurance Company (FPIC) under which FPIC will acquire The Tenere Group, Inc. The closing is anticipated to take place in January, 1999. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: See Exhibit Index (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE TENERE GROUP, INC. (Registrant) December 15, 1998 /s/ J D Williams - ----------------- ------------------------------- Date Joseph D. Williams, CPA Vice President - Finance Chief Financial Officer and 21 22 Principal Accounting Officer 22 23 EXHIBIT INDEX -------------
EXHIBIT NO. DESCRIPTION - --- ----------- 3.1 Articles of Incorporation of the Registrant, filed as Exhibit 3.1 to the Registrant's Registration Statement on Forms S-1 (Reg. No. 33-78702) is incorporated herein by this reference. 3.2 Bylaws of the Registrant, filed as Exhibit 3.2 to the Registrant's Registration Statement on Form S-1 (Reg. No. 33-78702) is incorporated herein by this reference. 4.1 Form of common stock certificate, filed as Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 (Reg. No. 33-78702) is incorporated herein by this reference. 10.1 Management Contract, dated July 8, 1994, by and between RCA Mutual Insurance Company, Interlex Insurance Co. and Insurance Services, Inc., filed as Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995, is incorporated herein by reference. 10.2 Lease Agreement, dated December 7, 1994, by and between Georgetown Square II, Ltd. and Insurance Services, Inc., filed as Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.3 Medical Practitioners' Liability Primary Excess of Loss Reinsurance Contract, dated October 1, 1993, by and between RCA Mutual Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.4 Addendum No. 1 to Medical Practitioners' Liability Primary Excess of Loss Reinsurance Contract, dated February 1, 1995, by and between RCA Mutual Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.5 Addendum No. 2 to Medical Practitioners' Liability Primary Excess of Loss Reinsurance Contract, effective April 27, 1995, by and between RCA Mutual Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.6 Reinsurance Cover Note: 95/1146/RM to Medical Practitioners' Liability Primary Excess of Loss Reinsurance Contract, dated October 16, 1995, by and between RCA Mutual Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.6 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.7 Reinsurance Cover Note: 95/1212/RM(A) to Catastrophe "Awards Made" Excess of Loss Reinsurance Contract, dated October 16, 1995, by and between RCA Mutual Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.7 to the Registrant's Quarterly Report on Form 10-Q
23 24 for the nine months ended September 30, 1995, is incorporated herein by reference. 10.8 Catastrophe "Awards Made" Excess of Loss Reinsurance Contract, commencing February 1, 1995, by and between RCA Mutual Insurance Company and Certain Reinsurers of Lloyd's of London including Amendment No. 1, effective April 27, 1995, filed as Exhibit 10.8 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.9 Reinsurance Cover Note: 95/1249/IP to Lawyers' Professional Liability Primary Excess of Loss Reinsurance Treaty, dated October 16, 1995, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.9 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.10 Lawyers' Professional Liability Primary Excess of Loss Reinsurance Contract, commencing July 1, 1995, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.10 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.11 Reinsurance Cover Note: 95/1250/IP to Prior Agreement Excess of Loss Reinsurance Contract, dated October 16, 1996, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.11 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.12 Prior Agreement Excess of Loss Reinsurance Contract, commencing July 1, 1996, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.12 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1995, is incorporated herein by reference. 10.13 Draft Reinsurance Slip by and between Intermed Insurance Company and American Re-Insurance Company filed as Exhibit 10.13 to the Registran'ts Quarterly Report on Form 10-Q for the three months March 31, 1996, is incorporated herein by reference. 10.14 Employment Agreement dated May 6, 1996 between The Tenere Group, Inc. and Raymond A. Christy, M.D., President and Chief Executive Officer, filed as Exhibit 10.14 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996, is incorporated herein by reference. 10.15 Employment Agreement dated May 6, 1996 between The Tenere Group, Inc. and Andrew K. Bennett, Vice President-Claims and General Counsel, filed as Exhibit 10.15 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996, is incorporated herein by reference. 10.16 Employment Agreement dated May 6, 1996 between The Tenere Group, Inc. and Andrew C. Fischer, Vice President-Underwriting and Policy Services, filed as Exhibit 10.16 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996, is incorporated herein by reference.
24 25 10.17 Employment Agreement dated May 6, 1996 between The Tenere Group, Inc. and Clifton R. Stepp, Vice President-Marketing, filed as Exhibit 10.17 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996, is incorporated herein by reference. 10.18 Employment Agreement dated May 6, 1996 between The Tenere Group, Inc. and Joseph D. Williams, Vice President-Finance, Chief Financial Officer and Assistant Treasurer filed, as Exhibit 10.18 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996, is incorporated herein by reference. 10.19 The Tenere Group, Inc. Retirement Plan for Directors effective May 17, 1996, filed as Exhibit 10.19 to the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996, is incorporated herein by reference. 10.20 The Tenere Group, Inc. 1996 Long Term Incentive Plan effective April 17, 1996, filed as Annex A to the Registrant's definitive proxy statements for the 1996 Annual Meeting of Shareholders, is incorporated herein by reference. 10.21 Amendment No. 1 to Employment Agreement, dated February 28, 1997, between The Tenere Group, Inc. and Raymond A. Christy, M.D., President and Chief Executive Officer, filed as Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.22 Amendment No. 1 to Employment Agreement, dated February 28, 1997, between The Tenere Group, Inc. and Andrew K. Bennett, Vice President-Claims and General Counsel, filed as Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.23 Amendment No. 1 to Employment Agreement, dated February 28, 1997, between The Tenere Group, Inc. and Andrew C. Fischer, Vice President - Underwriting and Policy Services, filed as Exhibit 10.23 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.24 Amendment No. 1 to Employment Agreement dated February 28, 1997, between The Tenere Group, Inc. and Clifton R. Stepp, Vice President-Marketing, filed as Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.25 Amendment No. 1 to Employment Agreement dated February 28, 1997, between The Tenere Group, Inc. and Joseph D. Williams, Vice President-Finance, Chief Financial Officer and Assistant Treasurer, filed as Exhibit 10.25 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.26 Reinsurance Cover Note: 96/1212/RM to Catastrophe "Awards Made" Excess of Loss Reinsurance Contract, effective October 1, 1996, by and between Intermed Insurance Company and/or Interlex Insurance Company and certain Reinsurers of Lloyd's of London, filed as Exhibit 10.26 to the Registrant's
25 26 Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.27 Addendum No. 2 to Catastrophe "Awards Made" Excess of Loss Reinsurance Contract, effective October 1, 1996, by and between Intermed Insurance Company and/or Interlex Insurance Company and certain Reinsurers of Lloyd's of London, filed as Exhibit 10.27 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.28 Reinsurance Cover Note: 97/1212/RM to Catastrophe "Awards Made" Excess of Loss Reinsurance Contract, effective October 1, 1997, by and between Intermed Insurance Company and/or Interlex Insurance Company and certain Reinsurers of Lloyd's of London, filed as Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.29 Addendum No. 3 to Catastrophe "Awards Made" Excess of Loss Reinsurance Contract, effective October 1, 1997, by and between Intermed Insurance Company and/or Interlex Insurance Company and certain Reinsurers of Lloyd's of London, filed as Exhibit 10.29 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.30 Reinsurance Cover Note: 94/1146/RM to Medical Practitioners' Liability Primary Excess of Loss Reinsurance Contract, effective October 1, 1994, by and between Intermed Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.30 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.31 Medical Practitioners' Liability Primary Excess of Loss Reinsurance Contract, effective October 1, 1996, by and between Intermed Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.31 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.32 Addendum No. 1 to Medical Practitioners' Liability Combined Reinsurance Contract (formerly the Primary Excess of Loss Reinsurance Contract), effective October 1, 1996, by and between Intermed Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.32 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.33 Addendum No. 2 to Medical Practitioners' Liability Combined Reinsurance Contract (formerly the Primary Excess of Loss Reinsurance Contract), effective October 1, 1997, by and between Intermed Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.33 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.34 Reinsurance Cover Note: 97/1146/RM to Medical Practitioners' Liability Combined Reinsurance Contract (formerly the Primary Excess of Loss Reinsurance Contract), effective October 1, 1997, by and between Intermed Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.34 to the Registrant's Annual Report on Form 10-K for the year ended De-
26 27 cember 31, 1997, is incorporated herein by reference. 10.35 Lawyers' Professional Liability Primary Excess of Loss Reinsurance Contract, effective October 1, 1996, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.35 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.36 Lawyers' Professional Liability Primary Excess of Loss Reinsurance Contract, effective October 1, 1997, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.36 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.37 Lawyers' Professional Liability Prior Agreement Excess Reinsurance Contract, effective October 1, 1996, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.37 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.38 Lawyers' Professional Liability Prior Agreement Excess Reinsurance Contract, effective October 1, 1997, by and between Interlex Insurance Company and Certain Reinsurers of Lloyd's of London, filed as Exhibit 10.38 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997, is incorporated herein by reference. 10.39 Employment Agreement dated May 7, 1998 between The Tenere Group, Inc. and Raymond A. Christy, M.D., President and Chief Executive Officer, filed as Exhibit 10.39 to the Registrant's Quarterly Report on Form 10-Q for the six months ended June 30, 1998, is incorporated herein by reference. 10.40 Employment Agreement dated May 7, 1998 between The Tenere Group, Inc. and Andrew K. Bennett, Vice President-Claims and General Counsel, filed as Exhibit 10.40 to the Registrant's Quarterly Report on Form 10-Q for the six months ended June 30, 1998, is incorporated herein by reference. 10.41 Employment Agreement dated May 7, 1998 between The Tenere Group, Inc. and Andrew C. Fischer, Vice President-Underwriting and Policy Services, filed as Exhibit 10.41 to the Registrant's Quarterly Report on Form 10-Q for the six months ended June 30, 1998, is incorporated herein by reference. 10.42 Employment Agreement dated May 7, 1998 between The Tenere Group, Inc. and Clifton R. Stepp, Vice President-Marketing, filed as Exhibit 10.42 to the Registrant's Quarterly Report on Form 10-Q for the six months ended June 30, 1998, is incorporated herein by reference. 10.43 Employment Agreement dated May 7, 1998 between The Tenere Group, Inc. and Joseph D. Williams, Vice President-Finance, Chief Financial Officer and Assistant Treasurer, filed as Exhibit 10.43 to the Registrant's Quarterly Report on Form 10-Q for the six months ended June 30, 1998, is incorporated herein by reference. 27 Financial Data Schedules
27 EX-27 2 FINANCIAL DATA SCHEDULE
7 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 39,761,871 0 0 13,643 0 0 48,462,014 713,693 74,861 207,129 68,158,152 34,099,394 7,876,170 0 0 0 0 0 19,998 19,892,159 68,158,152 4,983,203 2,150,088 61,320 0 7,525,589 0 2,355,287 (2,686,265) (895,049) (1,791,216) 0 0 0 (1,791,216) (.90) (.90) 21,079,900 6,177,648 1,347,941 293,957 4,823,539 23,487,993 0
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