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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission File Number 33-83382
FIRST MERCURY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 38-3164336
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
29621 Northwestern Highway, P.O. Box 5096 Southfield, Michigan 48086
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (248) 358-4010
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
----- -----
The number of shares outstanding of the registrant's Common Stock, par
value $.01, as of August 14, 1997 was 6,164.07.
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FIRST MERCURY FINANCIAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets;
June 30, 1997 (Unaudited) and
December 31, 1996 2
Condensed Consolidated Statements of
Operations (Unaudited); Three
Months and Six Months Ended June 30,
1997 and 1996 3
Condensed Consolidated Statements of
Stockholders' Equity (Unaudited); Six
Months Ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of
Cash Flows (Unaudited); Six Months
Ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7
Part II. OTHER INFORMATION 12
1
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
FIRST MERCURY FINANCIAL CORPORATION
Condensed Consolidated Balance Sheets
June 30, December 31,
ASSETS 1997 1996
------ ---- ----
(Unaudited)
Investments:
Debt securities available for sale, at market value $ 69,215,296 71,871,818
Preferred stocks, at market 1,344,385 2,691,194
Common stocks, at market 53,108 52,200
Short-term investments 2,688,210 1,810,340
------------- ------------
Total investments 73,300,999 76,425,552
Cash and cash equivalents 3,979,454 3,945,289
Premiums and reinsurance balances receivable 2,301,876 2,584,644
Accrued investment income receivable 1,017,768 1,078,346
Other receivables 300,000 300,000
Reinsurance recoverable on unpaid losses 9,843,066 8,484,364
Prepaid reinsurance premiums 1,020,417 1,799,876
Deferred acquisition costs 701,646 691,319
Deferred federal income taxes 2,252,842 2,288,715
Federal income taxes recoverable 417,964 571,541
Fixed assets, net of accumulated depreciation 1,639,010 1,667,317
Other assets 1,268,383 2,274,410
------------- ------------
Total assets $ 98,043,425 102,111,373
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Loss and loss adjustment expense reserves $ 53,044,881 55,519,174
Unearned premium reserves 4,871,042 5,656,660
Long-term debt 9,159,000 9,225,000
Ceded reinsurance payable 95,783 87,373
Deferred revenue 1,694,315 2,181,975
Accounts payable and accrued expenses 2,105,839 2,922,516
------------- ------------
Total liabilities 70,970,860 75,592,698
Minority interest 2,959 3,278
Stockholders' equity:
Cumulative preferred stock, issued and outstanding
20,850 shares 209 209
Common stock, issued and outstanding 6,164.07 shares 62 62
Gross paid-in and contributed capital 3,437,372 3,437,372
Unrealized gains on marketable securities, net of
federal income taxes 154,415 183,780
Retained earnings 23,477,548 22,893,974
------------- ------------
Total stockholders' equity 27,069,606 26,515,397
------------- ------------
Total liabilities and stockholders' equity $ 98,043,425 102,111,373
------------- ------------
------------- ------------
2
FIRST MERCURY FINANCIAL CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ----------------------
1997 1996 1997 1996
---- ---- ---- ----
Net earned premiums $ 2,235,859 6,581,880 4,541,551 14,477,527
Net investment income 1,261,308 1,314,120 2,414,965 2,709,833
Realized gains (losses) on the sale of investments 124,249 77,567 248,543 230,258
Gain on assignment of non-standard automobile
agency contracts - 1,111,292 - 1,111,292
Miscellaneous income 313,188 316,434 582,907 332,689
------------ --------- --------- ----------
Total revenues and other income 3,934,604 9,401,293 7,787,966 18,861,599
------------ --------- --------- ----------
Losses and loss adjustment expenses, net 1,603,796 4,906,835 3,337,299 12,414,469
Amortization of deferred acquisition expenses 486,944 1,200,096 944,797 3,017,369
Other underwriting expenses 1,050,847 1,152,951 2,037,166 2,112,022
Interest expense 276,470 307,284 554,590 605,891
------------ --------- --------- ----------
Total expenses 3,418,057 7,567,166 6,873,852 18,149,751
------------ --------- --------- ----------
Income before federal income taxes 516,547 1,834,127 914,114 711,848
Federal income taxes 188,962 501,510 330,540 255,785
------------ --------- --------- ----------
Net income $ 327,585 1,332,617 583,574 456,063
------------ --------- --------- ----------
------------ --------- --------- ----------
Per-share earnings $ 53.14 216.19 94.67 73.99
------------ --------- --------- ----------
------------ --------- --------- ----------
3
FIRST MERCURY FINANCIAL CORPORATION
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
NET UNREALIZED
GROSS PAID-IN GAINS (LOSSES),
PREFERRED COMMON AND CONTRIBUTED NET OF FEDERAL RETAINED
STOCK STOCK CAPITAL INCOME TAXES EARNINGS TOTAL
----- ----- ------- ------------ -------- -----
Balance at December 31, 1995 $ 209 62 3,474,872 1,270,614 21,655,479 26,401,236
Net income - - - - 456,063 456,063
Dividends paid to preferred stockholders - - - - (344,025) (344,025)
Change in market values of
marketable investment securities - - - (1,356,758) - (1,356,758)
------ ------ --------- ---------- ---------- ----------
Balance at June 30, 1996 $ 209 62 3,474,872 (86,144) 21,767,517 25,156,516
------ ------ --------- ---------- ---------- ----------
------ ------ --------- ---------- ---------- ----------
Balance at December 31, 1996 $ 209 62 3,437,372 183,780 22,893,974 26,515,397
Net income - - - - 583,574 583,574
Dividends paid to preferred stockholders - - - - - -
Change in market values of - -
marketable investment securities - - - (29,365) - (29,365)
------ ------ --------- ---------- ---------- ----------
Balance at June 30, 1997 $ 209 62 3,437,372 154,415 23,477,548 27,069,606
------ ------ --------- ---------- ---------- ----------
------ ------ --------- ---------- ---------- ----------
4
FIRST MERCURY FINANCIAL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
--------------------------------
1997 1996
-------------- -------------
Net cash used in operating activities $ (2,636,440) (746,700)
Cash flows from investing activities:
Cost of short-term investments acquired (15,307,900) (19,973,655)
Proceeds from disposals of short-term investments 14,430,030 20,373,270
Cost of debt securities acquired (11,521,354) (10,373,212)
Proceeds from maturities of debt securities 7,555,554 4,620,066
Proceeds from debt securities sold 6,656,971 7,122,117
Cost of equity securities acquired (658,930) (575,411)
Proceeds from equity securities sold 2,188,420 1,090,212
Other, net (122,186) (232,398)
------------- -----------
Net cash provided by investing activities 3,220,605 2,050,989
------------- -----------
Cash flows used in financing activities:
Interest payments on senior subordinated notes (550,000) (550,000)
Dividends paid to preferred stockholders - (344,025)
------------- -----------
Net cash used in financing activities (550,000) (894,025)
------------- -----------
Net increase (decrease) in cash and cash equivalents 34,165 410,264
Cash and cash equivalents at beginning of period 3,945,289 2,336,140
------------- -----------
Cash and cash equivalents at end of period $ 3,979,454 2,746,404
------------- -----------
------------- -----------
5
FIRST MERCURY FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited condensed consolidated financial statements of
First Mercury Financial Corporation and subsidiaries (the "Company") have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. In
management's opinion, all adjustments, consisting of normal recurring
adjustments, which are necessary for a fair presentation of financial
position and results of operations, have been made. It is recommended that
these condensed consolidated financial statements be read in conjunction
with the consolidated financial statements and notes related thereto
included in the December 31, 1996 annual report on Form 10-K.
The results of operations for the six month period ended June 30, 1997, are
not necessarily indicative of the results to be expected for the full year.
2. Per share earnings are computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Mercury Financial Corporation ("Mercury") is an insurance holding
company incorporated in Delaware in December 1993 and engaged, through its
subsidiaries, in the underwriting of specialty commercial lines and
non-standard automobile insurance for individuals. Mercury's subsidiaries
are First Mercury Insurance Company ("FMIC"), an Illinois property and
casualty insurance company and successor to First Mercury Syndicate, Inc.
(the "Syndicate"), All Nation Insurance Company ("All Nation") and its
wholly owned subsidiary, National Family Insurance Corporation ("National
Family"), both Minnesota property and casualty insurance companies. Mercury
and its subsidiaries are referred to herein as the "Company."
National Family has been in liquidation under the oversight of the Ramsey
County District Court in Minnesota since December 1996. Prior to the
liquidation order, National Family was in rehabilitation for over 30 years.
The Company became affiliated with National Family upon its purchase of All
Nation in 1992. Because All Nation lacks voting control over National Family
and is not liable for National Family's debts, the financial statements of
National Family are not consolidated with the financial statements of the
Company.
Prior to its withdrawal from the Illinois Insurance Exchange ("IIE") in
December 1996, the Syndicate operated as an underwriting member of the IIE.
Under the eligibility of the IIE, the Syndicate wrote general liability
insurance, allied property and auto physical damage coverage in 44 states,
the District of Columbia, and the U.S. Virgin Islands. On June 28, 1996, the
Syndicate formed FMIC as an Illinois property and casualty insurance
subsidiary with an initial capitalization of $5 million and a subsequent $15
million contribution to surplus. The formation of FMIC, a licensed Illinois
insurer, provided the Syndicate with an affiliated company in which to
potentially place coverages offered by the Syndicate and in which to reinsure
certain of the Syndicate's outstanding liabilities. Under a loss portfolio
transfer, on June 28, 1996, the Syndicate transferred approximately $35
million in loss and loss adjustment expense reserves and corresponding assets
to FMIC. In conjunction with the formation of FMIC and the loss portfolio
transfer, on July 8, 1996, the Syndicate notified the IIE of its intention to
withdraw from the IIE. On November 7, 1996, the Syndicate and the IIE
executed a withdrawal agreement. Subsequent to the Syndicate's withdrawal,
the Syndicate was merged into FMIC on December 16, 1996. Due to its
withdrawal from the IIE, the Syndicate lost its ability to write direct
premium under the eligibility of the IIE. As a result, FMIC has aggressively
applied for eligibility to write premiums in many states. As of June 30,
1997, FMIC is eligible to write direct premium in seventeen states. In the
interim, FMIC and Empire Fire and Marine Insurance Company and Empire
Indemnity Company ("Empire") entered into a quota share reinsurance agreement
effective July 18, 1996 whereby Empire writes on a direct basis the coverages
previously offered by the Syndicate and cedes 50 percent of such business to
FMIC.
On May 1, 1996, an agreement was entered into between Mercury, All
Nation, Allstate Insurance Company ("Allstate") and its wholly owned
subsidiary, Deerbrook Insurance Company ("Deerbrook"), for the assignment of
All Nation's independent agent contracts to Deerbrook and the ceding of
associated prospective premium to Allstate on the agency-produced
non-standard automobile business of All Nation. The agreement also included
a three year non-compete clause and various financial guarantees by Mercury.
Under the agreement, All Nation continues to write agency non-standard
automobile coverages and cedes 100 percent of the written business to
Allstate under a quota share reinsurance agreement for a period of up to two
years, as Deerbrook is taking over the direct writing and servicing
responsibility from All Nation on a state-by-state basis over the two-year
period. In addition, All Nation provided underwriting and administrative
services for the
7
ceded business on a percentage of premiums basis until May
1997. The agreements do not include All Nation's agency-produced non-standard
automobile business written prior to May 1, 1996 or its direct response
non-standard automobile business.
RESULTS OF OPERATIONS
The following table reflects revenues of the Company for the three month
and six month periods ended June 30, 1997 and 1996:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ ------- ------ -------
(DOLLARS IN THOUSANDS)
NET PREMIUMS EARNED:
Specialty commercial lines:
Security, fire and alarm . . . . $1,492 66.7% 2,091 31.8% $3,109 68.5% 4.189 28.9%
Police . . . . . . . . . . . . . 0 0.0 216 3.3 19 0.4 508 3.5
Public officials . . . . . . . . 71 3.2 170 2.6 164 3.6 356 2.5
Other. . . . . . . . . . . . . . 361 16.2 206 3.1 730 16.1 513 3.5
Non-standard automobile lines:
Agency auto liability. . . . . . 1 0.0 2,815 42.8 1 0.0 6,382 44.1
Direct auto liability. . . . . . 189 8.5 183 2.8 323 7.1 395 2.7
Agency auto physical damage. . . 10 0.4 769 11.6 10 0.2 1,852 12.8
Direct auto physical damage. . . 112 5.0 132 2.0 186 4.1 283 2.0
------ ----- ------ ----- ------ ----- ------- -----
Total net premiums earned. . . . . $2,236 100.0% $6,582 100.0% $4,542 100.0% $14,478 100.0%
------ ----- ------ ----- ------ ----- ------- -----
------ ----- ------ ----- ------ ----- ------- -----
NET PREMIUMS EARNED
Net premiums earned for the three months and six months ended June 30,
1997 declined 66.0% and 68.6%, respectively, in comparison to the year
earlier periods. The Company's specialty commercial lines, security, fire,
alarm, police, public official and miscellaneous commercial coverages,
decreased 28.3% and 27.7%, respectively, for the three months and six months
ended June 30, 1997 versus the three months and six months ended June 30,
1996. This decrease occurred principally due to the quota share reinsurance
arrangement entered into with Empire and the Company's decision to non-renew
a substantial amount of the police business beginning in the first quarter of
1996. Although net premiums earned for the Company's specialty commercial
lines have been declining, the Company has experienced average rate increases
in excess of 10% on this book of business in the first half of 1997.
Effective July 1, 1997, the Company has entered into a 100 percent quota
share reinsurance arrangement with Reliance Insurance Company of Illinois
("Reliance") to offer liability coverage to non-profit entities and day care
facilities. In addition, the Company has been actively pursuing a workers'
compensation program as a complementary product to the security, fire and
alarm coverages currently provided.
Due to the sale of All Nation's independent agent contracts to Deerbrook
effective May 1, 1996, net premiums earned for private passenger non-standard
automobile coverages decreased 92.0% and 94.2% in the three and six months
ended June 30, 1997, respectively. Net premiums earned for direct response
non-standard automobile coverages have declined for the first six months of
1997 versus the first six months of 1996 due to a moratorium on advertising,
however, the Company has implemented rating changes for the direct response
business effective July 1, 1997 and has begun actively marketing this program
late in the second quarter.
NET INVESTMENT INCOME AND REALIZED INVESTMENT GAINS (LOSSES)
Net investment income decreased approximately $53,000 for the three
months ended June 30,
8
1997 as compared to the three months ended June 30, 1996. For the six months
ended June 30, 1997, net investment income decreased $295,000 or 10.8% in
comparison to the same period of the preceding year. The decrease resulted
from a decline in the Company's average invested assets due to the reduction
in premium revenues at both All Nation and FMIC under the quota share
reinsurance agreements with Allstate and Empire, respectively.
For the three months ended June 30, 1997, the Company realized a net gain
on the sale of investments of $124,000 versus a net gain of $78,000 for the
same period in the prior year. The Company recognized a net gain on the sale
of investments of $249,000 for the six months ended June 30, 1997 as compared
to a $230,000 net gain for the six months ended June 30, 1996.
At June 30, 1997, the unrealized gain on investments available for sale,
net of deferred taxes, was $154,000 in comparison to a $184,000 unrealized
gain as of December 31, 1996. The decline in interest rates in the second
quarter of 1997 resulted in a recovery of the Company's portfolio from the
unrealized losses experienced in the first quarter.
GAIN ON ASSIGNMENT OF AGENCY CONTRACTS
The gain on the assignment of the All Nation agency contracts of $1.1
million was recognized in the second quarter of 1996. The gain recognized
represents the net present value of the related payments from Deerbrook
reduced by All Nation's estimated liability for losses under the quota share
reinsurance contract and costs attendant with the sale.
LOSS AND LOSS ADJUSTMENT EXPENSES
Loss and loss adjustment expenses incurred decreased 67.3% to $1.6
million for the three months ended June 30, 1997 from $4.9 million for the
three months ended June 30, 1996. For the six months ended June 30, 1997,
loss and loss adjustment expenses incurred decreased 73.1% versus the
comparable period in the preceding year, principally due to the decline in
premiums written under the quota share reinsurance agreements with Allstate
and Empire. The loss and loss adjustment expense ratio for private passenger
automobile coverages increased marginally to 91.6% for the six months ended
June 30, 1997 as compared to 90.3% for the six months ended June 30, 1996.
Within the specialty commercial lines, the loss and loss adjustment expense
ratio decreased to 71.1% for the six months ended June 30, 1997 versus 75.8%
for the comparable period in the preceding year. The 1997 loss ratio
reflects a release of reserve redundancies approximating $350,000. There
were no reserve redundancy releases in the first six months of 1996.
AMORTIZATION OF DEFERRED ACQUISITION COSTS, OTHER UNDERWRITING EXPENSES AND
INTEREST EXPENSE
Amortization of deferred acquisition costs and other underwriting
expenses represent the Company's costs to generate premium volume. For the
second quarter of 1997, acquisition costs and other underwriting expenses
declined approximately 34.6% to $ 1.5 million for the three months ended June
30, 1997 as compared to $2.4 million for the same period in the preceding
year. The Company's underwriting expense ratio increased to 52.9% for the
six months ended June 30, 1997 in comparison to 38.9% for the two quarters
ended June 30, 1996. The increase in the expense ratio principally occurred
due to the decline in net premiums written in the first six months of 1997 in
comparison to the Company's fixed costs of its insurance operations. In
addition, the Company incurred approximately $200,000 of expenses during the
second quarter of 1997 for the implementation of new rate filings for its
direct response private passenger auto program.
9
The Company realized $583,000 of miscellaneous income in the first six
months of 1997 as compared to $333,000 in the first two quarters of 1996
primarily due to the recognition of approximately $381,000 of revenue under
the non-compete agreement with Allstate. No revenue was recognized under this
agreement in the six months ended June 30, 1996.
The Company incurred $555,000 and $606,000 of interest expense related to
the $10 million senior subordinated notes during the six months ended June
30, 1997 and 1996, respectively. The decrease in interest expense resulted
from the Company's repurchase of $841,000 of its own senior subordinated
notes during 1996 and 1997.
FEDERAL INCOME TAXES
The effective tax rate for the six months ended June 30, 1997 of 36.2%
has increased slightly from the effective tax rate for the first two quarters
of 1996 of 35.9%. The Company has eliminated all tax-exempt interest since
the first quarter of 1997.
NET INCOME
Pre-tax net income for the three months ended June 30, 1997 was $517,000
compared to $1.8 million for the same period in the preceding year, primarily
due to the recognition of the gain on the assignment of the non-standard
automobile agency contracts to Deerbrook of $1.1 million in 1996. For the
first six months of 1997, pre-tax net income was $914,000 versus $712,000 for
the six months ended June 30, 1996. Net income for the first two quarters of
1997 includes $350,000 related to the release of reserve redundancies,
$381,000 in revenue under the non-compete clause and $200,000 in rate filing
costs, while the results for the six months ended June 30, 1996 includes the
gain on the assignment of $1.1 million.
LIQUIDITY AND CAPITAL RESOURCES
Mercury is a holding company whose principal assets are its investment in
the capital stock of FMIC and All Nation. Generally, Mercury is dependent
upon the receipt of dividends from FMIC and All Nation to fund any necessary
cash requirements, including debt service requirements. FMIC and All Nation
are restricted by regulation as to the amount of dividends they may pay
without regulatory approval. No dividends were paid by FMIC or All Nation to
Mercury in the first six months of 1997. Mercury anticipates cash payments
from Deerbrook of $1.2 million in 1997 for the non-compete agreement. In
addition, Mercury receives annual payments from its subsidiaries when
appropriate pursuant to a tax allocation agreement between Mercury and its
subsidiaries. The Company believes these amounts are sufficient to meet
Mercury's current cash flow requirements.
The Company's subsidiaries' primary sources of cash are from premiums
collected and amounts earned from the investment of this cash flow. The
principal uses of funds are the payment of claims and related expenses, other
operating expenses and interest expense. The Company's insurance operations
utilized cash in operations of $2,636,000 during the six months ended June
30, 1997 as compared to $747,000 in the first two quarters of 1996. The
decreased cash flow resulted primarily from a decline in premium revenues at
both All Nation and FMIC under the quota share reinsurance agreements with
Allstate and Empire.
At June 30, 1997, the insurance subsidiaries maintained cash and cash
equivalents and short-term investments of $2.7 million to meet short-term
payment obligations. In addition, the Company's investment portfolio is
heavily weighted toward short-term fixed maturities and a portion of the
10
portfolio could be liquidated without material adverse financial impact
should further liquidity be necessary.
As part of its investment strategy, and as required by debt covenants,
the Company establishes a level of cash and highly liquid short- and
intermediate-term securities which, combined with expected cash flow, is
believed adequate to meet foreseeable payment obligations. As part of this
strategy, the Company attempts to maintain an appropriate relationship
between the average duration of the investment portfolio and the approximate
duration of its liabilities. The weighted average maturity of the Company's
fixed income portfolio as of June 30, 1997 was approximately three years.
Under IIE regulations, the Syndicate maintained a $1,000,000 deposit in a
Guaranty Fund Trust Account prior to its withdrawal from the IIE which
required at least 50 percent of the deposit to be in cash and/or marketable
securities. Under the terms of the Syndicate's withdrawal agreement with the
IIE, a $1,000,000 deposit must be maintained in the Guaranty Fund Trust
Account of the IIE for a period of three years from November 7, 1996.
The Syndicate's withdrawal agreement also required FMIC to establish a
trust fund for the payment of claims under insurance policies issued and
reinsurance agreements entered into by the Syndicate. Investments held in
trust for payment of Syndicate claims approximated $31.9 million at June 30,
1997.
11
FIRST MERCURY FINANCIAL CORPORATION
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company's subsidiaries are subject to routine legal proceedings in
connection with their property and casualty insurance business. Neither
Mercury nor any of its subsidiaries are involved in any pending or threatened
legal proceedings which reasonably could be expected to have a material
adverse impact on the Company's financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the second
quarter of 1997.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
10.24 Reinsurance Agreement effective July 18, 1996 between Empire and
FMIC.
27 Financial Data Schedule.
b. REPORTS ON FORM 8-K
No report on Form 8-K was filed by the Registrant during the quarter
ended June 30, 1997.
12
SIGNATURE
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.
FIRST MERCURY FINANCIAL CORPORATION
Date: August 14, 1997 By: /S/ WILLIAM S. WEAVER
---------------------------------
William S. Weaver
Chief Financial Officer
(Principal Financial Officer
and duly authorized to sign on
behalf of the Registrant)
13