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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 14, 1997
PROFESSIONALS INSURANCE COMPANY MANAGEMENT GROUP
(Exact Name of Registrant as Specified in its Charter)
Michigan 0-21223 38-3273911
(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
4295 Okemos Road, Okemos, Michigan 48805
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (517) 349-6500
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On August 14, 1997, Professionals Insurance Company Management Group, a
Michigan business corporation ("Professionals Group"), PICOM Insurance Company,
a Michigan stock insurance company and a wholly-owned subsidiary of
Professionals Group ("PICOM"), and Physicians Protective Trust Fund, a medical
malpractice self-insurance trust fund organized under Florida Statutes Section
627.357 ("PPTF"), entered into an Agreement and Plan of Merger (the
"Agreement") providing for a pooling of interests of Professionals Group and
PPTF. (A conformed copy of the Agreement is being filed with this Current
Report on Form 8-K as Exhibit 2. Capitalized terms not otherwise defined in
this Report shall have the meanings given to them in the Agreement. The
following description and summary of certain provisions of the Agreement is
qualified in its entirety by the Agreement, which is incorporated herein by
this reference.)
Professionals Group is the holding company for PICOM and its affiliates.
At June 30, 1997, Professionals Group had total shareholders' equity of $93.3
million and total assets of $391.2 million. PICOM, which was founded in 1980,
provides professional liability insurance and reinsurance for over 7,500
professionals and institutions in the Midwest (including physicians,
dentists, hospitals and other health care providers, lawyers and law firms).
Professionals Group and its subsidiaries, which (in terms of market share)
constitute the second largest provider of medical malpractice insurance in
Michigan and the fifth largest provider of medical malpractice insurance in
each of Illinois and Indiana, have approximately $62 million of direct written
annual medical malpractice premiums.
Physicians Protective Trust Fund, which was formed in 1975,
is the largest provider of medical malpractice insurance for physicians and
physician corporations in Florida. PPTF currently provides medical malpractice
insurance to over 3,900 physicians and health care providers representing over
25% of the physician professional liability premiums written in Florida.
PPTF has approximately $64 million of direct written annual premiums, and at
June 30, 1997 had a total fund balance (e.g., shareholders' equity) of $105.8
million and total assets of $434.7 million.
The pooling of interests of Professionals Group and PPTF contemplated by
the Agreement will be accomplished through the merger of PPTF with and into a
newly-formed wholly-owned insurance subsidiary of Professionals Group ("INSCO")
followed immediately by the merger of INSCO with and into PICOM, with PICOM
continuing on as the surviving insurance corporation. Upon consummation of
these transactions, PICOM (i) will be renamed to reflect the combined insurance
operations of PPTF and PICOM and (ii) will maintain regional executive offices
in Okemos, Michigan and Coral Gables, Florida and local sales and service
offices in Ft. Lauderdale, Orlando, Tampa and Jacksonville, Florida; Oak Brook,
Illinois; Indianapolis, Indiana; and Columbus, Ohio.
Upon the merger of PPTF with and into INSCO, and except as otherwise
provided in the Agreement, the aggregate rights of Eligible Members of PPTF (the
"Membership Rights") will be converted into an aggregate number of shares (the
"Aggregate Merger Shares") of common stock, no par value per share, of
Professionals Group ("Professionals Group Common Stock") determined by dividing
$116,091,248 (the "Exchange Value") by the average of the daily closing prices
per share of Professionals Group Common Stock as reported by the Nasdaq
National Market for the period of twenty (20) business days ending on the fifth
(5th) business day prior to the Closing Date (the "Average Price"); provided,
however, (i) that in the event the Average Price as determined under the
foregoing provision is $31.00 or higher, then the Average Price will be deemed
to be $31.00 and the Exchange Value will be divided by $31.00 (so that, in such
case, the number of Aggregate Merger Shares issuable would be 3,744,879 shares
of Professionals Group Common Stock), and (ii) that in the event the Average
Price as determined under the foregoing provision is $27.00 or lower, then the
Average Price will be deemed to be $27.00 and the Exchange Value will be
divided by $27.00 (so that, in such case, the number of Aggregate Merger Shares
issuable would be 4,299,676 shares of Professionals Group Common Stock). In
consideration for his or her Membership Right, each Eligible Member of PPTF
will be allocated and will
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be entitled to receive a portion of the Aggregate Merger Shares in accordance
with an allocation formula determined by PPTF and then approved by the
appropriate regulatory authorities of the State of Florida. No fractional
shares of Professionals Group Common Stock will be issued to any Eligible
Member and, in lieu thereof, all of said fractional shares shall be paid the
cash equivalent value thereof based on the applicable Average Price.
The transactions contemplated by the Agreement, which are expected to be
completed early in the first quarter of 1998, are subject to certain regulatory
approvals (including the approvals of the Insurance Commissioners of Florida
and Michigan), and to the approval of the Eligible Members of PPTF and of the
shareholders of Professionals Group.
After consummation of the transactions contemplated by the Agreement:
W. Peter McCabe, M.D. will continue as the Chairman of the Board of Directors
of Professionals Group, Eliot H. Berg, M.D. (currently the Chairman of the
Board of Trustees of PPTF) will become the Vice-Chairman of the Board of
Directors of Professionals Group, Mr. Victor T. Adamo will continue as the
President and Chief Executive Officer of Professionals Group, and Mr. Steven L.
Salman (currently the President and Chief Executive Officer of PPTF) will
become the Chief Operating Officer of Professionals Group. The Board of
Directors of Professionals Group will consist of sixteen (16) persons;
including all ten (10) of the persons who are directors of Professionals Group
(including Dr. McCabe and Mr. Adamo) immediately prior to the consummation of
such transactions (the "Professionals Group Representatives"), R. Kevin
Clinton, FCAS, MAAA, who is the President of Michigan Educational Employees
Mutual Insurance Company, and Dr. Berg, Mr. Salman and three (3) other persons
named as directors of Professionals Group by the Board of Trustees of PPTF (the
"PPTF Representatives"). The PPTF Representatives will be divided as equally
as practicable among the three classes of directors of Professionals Group.
The headquarters and principal executive offices of Professionals Group shall
be located in Okemos, Michigan.
After consummation of the transactions contemplated by the Agreement:
Dr. Berg will be the Chairman of the Board of Directors of PICOM, Dr. McCabe
will be the Vice-Chairman of the Board of Directors of PICOM, and Mr.
Salman will be the President and Chief Executive Officer of PICOM. The Board
of Directors of PICOM will consist of ten (10) persons; including Dr. McCabe,
Mr. Adamo, and three (3) other persons named as directors of PICOM by the Board
of Directors of Professionals Group (the "PG PICOM Directors"), and Dr. Berg
and Mr. Salman, and three (3) other persons named as directors of PICOM by the
Board of Trustees of PPTF (the "PPTF PICOM Directors"). The PG PICOM Directors
and the PPTF PICOM Directors will be divided as equally as practicable among
the three classes of directors of PICOM in proportion to the aggregate
representation set forth in the preceding sentence.
The transactions contemplated by the Agreement are an extension of the
business strategies of Professionals Group and PPTF, each of which is seeking
growth through consolidation and through product diversification and
geographical diversification. The combined entity, which will be one of the
leading medical malpractice companies in the United States, will be licensed in
Florida, Michigan, Ohio, Indiana, Iowa, Illinois, Kentucky and Pennsylvania and
will pursue additional licenses in the Eastern half of the United States. It
is anticipated that the merger of PPTF's insurance operations with those of
PICOM will result in a stronger capital position that should (i) enable the
combined entity to bid more effectively for larger health care accounts and to
compete more effectively in its current insurance markets, and (ii) facilitate
further product diversification and geographical diversification. It is also
anticipated that recent changes in PPTF's underwriting practices and rate
structure, when combined with PICOM's marketing experience, will enable the
combined entity, over time, to attain a loss ratio comparable to that of PICOM
and industry averages. It is expected that the combining of such insurance
operations will produce cost savings and revenue enhancements.
Cochran, Caronia & Co. and McDonald & Company are serving as financial
advisors to Professionals Group with respect to the transactions contemplated
by the Agreement and each of them has rendered a fairness opinion to the Board
of Directors of Professionals Group to the effect that the consideration to be
paid by Professionals Group to the Eligible Members of PPTF in respect of
their Membership Rights is fair, from a financial point of view, to the
shareholders of Professionals Group. Donaldson, Lufkin & Jenrette Securities
Corporation is serving as financial advisor to PPTF with respect to the
transactions contemplated by the Agreement and it has rendered a separate
fairness opinion to the Board of Trustees of PPTF to the effect that the
Aggregate Merger Shares to be received by the Eligible Members of PPTF is fair
to those Eligible Members, as a group, from a financial point of view.
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The following table sets forth certain additional information regarding
Professionals Group and PPTF.
Physicians Protective
Professionals Group Trust Fund
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Mailing Address: 4295 Okemos Road 2121 Ponce de Leon Blvd.
P.O. Box 2510 P.O. Box 149001
Okemos, MI 48805-9510 Coral Gables, FL 33114-9001
Telephone Numbers: (800) 292-1036 (800) 222-5115
(517) 349-6500 (305) 442-8119
Facsimile Number: (517) 349-8977 (305) 448-8236
Number of Employees: 96 96
Current States of Licensure: Michigan, Illinois, Ohio Florida
Indiana, Iowa, Kentucky,
Pennsylvania
Number of Policyholders: 7,500 3,900
Active Subsidiaries and
Affiliates: PICOM Insurance Company Physicians Protective Plan, Inc.
PICOM Insurance Company of Illinois
American Insurance Management Corp.
(attorney-in-fact for American
Medical Insurance Exchange)
PICOM Claims Services Corporation
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PROFESSIONALS INSURANCE COMPANY MANAGEMENT GROUP
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
At, and for the year ending, December 31, 1996
Professionals
Group PPTF Pro Forma
--------------- ------------ ---------
Total investments $ 300,132,000 $ 342,127,000 $ 642,259,000
Total assets 357,382,000 422,241,000 779,623,000
Loss and loss adjustment expense reserves 219,919,000 281,593,000 501,512,000
Total liabilities 269,424,000 320,041,000 589,465,000
Total shareholders' equity 87,958,000 102,200,000 190,158,000
Book value per common share 25.09 -- --
Premiums earned, net 56,687,000 68,028,000 124,715,000
Net income 9,585,000 9,376,000 18,961,000
GAAP Ratios:
Loss ratio 86.6% 112.3% 100.6%
Expense ratio 19.6% 10.9% 14.9%
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Combined ratio 106.2% 123.2% 115.5%
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Statutory Ratios:
Loss ratio 85.4% 112.3% 99.6%
Expense ratio 15.9% 9.5% 12.5%
----------- ----------- -----------
Combined ratio 101.3% 121.8% 112.1%
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Except as otherwise indicated above, the foregoing unaudited pro forma
financial information has been prepared in accordance with generally accepted
accounting principles and gives effect to the transactions contemplated by the
Agreement as a "pooling of interests" and as if those transactions had been
effective on December 31, 1996. The pro forma combined financial data do not
give effect to any anticipated cost savings or revenue enhancements in
connection with those transactions and are not necessarily indicative of either
the results that actually would have occurred had those transactions been
consummated on or before December 31, 1996 or the results that may be obtained
in the future. All financial information contained herein with respect to PPTF
was supplied by PPTF.
A registration statement relating to the shares of Professionals Group
Common Stock to be exchanged in the transactions contemplated by the Agreement
will be filed with the Securities and Exchange Commission. Such shares of
Professionals Group Common Stock may not be exchanged, nor may offers to
exchange be accepted, prior to the time the registration statement becomes
effective. The above information, together with the other portions of this
Current Report on Form 8-K, shall not constitute an offer to exchange or the
solicitation of an offer to exchange nor shall there be any exchange of shares
of Professionals Group Common Stock in any state in which such offer,
solicitation or exchange would be unlawful prior to registration or
qualification under the securities laws of any such state. The shares of
Professionals Group Common Stock to be exchanged in the transactions
contemplated by the Agreement will be offered only by means of a prospectus
filed with the Securities and Exchange Commission.
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PROFESSIONALS INSURANCE COMPANY MANAGEMENT GROUP
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
At, and for the six-month period ending, June 30, 1997
Professionals
Group PPTF Pro Forma
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Total investments $ 324,099,000 $ 317,685,000 $ 641,784,000
Total assets 391,236,000 434,666,000 825,902,000
Loss and loss adjustment expense reserves 226,728,000 270,055,000 496,783,000
Total liabilities 297,927,000 328,845,000 626,772,000
Total shareholders' equity 93,309,000 105,821,000 199,130,000
Book value per common share 26.62 -- --
Premiums earned, net 25,480,000 30,926,000 56,406,000
Net income 5,298,000 4,154,000 9,452,000
GAAP Ratios:
Loss ratio 85.7% 118.6% 103.7%
Expense ratio 20.7% 4.8% 12.0%
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Combined ratio 106.4% 123.4% 115.7%
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Statutory Ratios:
Loss ratio 85.7% 118.6% 103.7%
Expense ratio 17.8% 3.4% 9.8%
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Combined ratio 103.5% 122.0% 113.5%
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Except as otherwise indicated above, the foregoing unaudited pro forma
financial information has been prepared in accordance with generally accepted
accounting principles and gives effect to the transactions contemplated by the
Agreement as a "pooling of interests" and as if those transactions had been
effective on June 30, 1997. The pro forma combined financial data do not give
effect to any anticipated cost savings or revenue enhancements in connection
with those transactions and are not necessarily indicative of either the
results that actually would have occurred had those transactions been
consummated on or before June 30, 1997 or the results that may be obtained in
the future. All financial information contained herein with respect to PPTF was
supplied by PPTF.
A registration statement relating to the shares of Professionals Group
Common Stock to be exchanged in the transactions contemplated by the Agreement
will be filed with the Securities and Exchange Commission. Such shares of
Professionals Group Common Stock may not be exchanged, nor may offers to
exchange be accepted, prior to the time the registration statement becomes
effective. The above information, together with the other portions of this
Current Report on Form 8-K, shall not constitute an offer to exchange or the
solicitation of an offer to exchange nor shall there be any exchange of shares
of Professionals Group Common Stock in any state in which such offer,
solicitation or exchange would be unlawful prior to registration or
qualification under the securities laws of any such state. The shares of
Professionals Group Common Stock to be exchanged in the transactions
contemplated by the Agreement will be offered only by means of a prospectus
filed with the Securities and Exchange Commission.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired. Not applicable.
(b) Pro Forma Financial Information. Not applicable.
(c) Exhibits.
Item 601
Regulation S-K
Exhibit Reference
Number Exhibit Description
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(2) Agreement and Plan of Merger dated as of August 14, 1997, by and among
Professionals Insurance Company Management Group, PICOM Insurance Company and
Physicians Protective Trust Fund.
(99) Joint Press Release of Professionals Insurance Company Management Group,
PICOM Insurance Company and Physicians Protective Trust Fund issued August
15, 1997.
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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 hereunto duly authorized.
PROFESSIONALS INSURANCE COMPANY
MANAGEMENT GROUP
Date: August 25, 1997 By: /s/ Victor T. Adamo
---------------------------------
Victor T. Adamo
President and
Chief Executive Officer
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