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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Period Ended June 30, 2001.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From ________________to____________
Commission file number 0-21230
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Midwest Medical Insurance Holding Company
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(Exact name of registrant as specified in its charter)
Minnesota 41-1625287
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7650 Edinborough Way, Suite 400
Minneapolis, Minnesota 55435-5978
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(Address of principal executive offices) (Zip Code)
952-838-6700
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(Registrant's telephone number, including area code)
Not applicable
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(Former name, former address and former fiscal year, if changed
since last report)
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 periods 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 issuer's classes of common stock as of
June 30, 2001:
Class B Common Stock, $1,000 par value - 1 share
Class C Common Stock, no par value - 8,468 shares
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INDEX
Midwest Medical Insurance Holding Company
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - June 30, 2001 and
December 31, 2000
Condensed consolidated statements of income - Three months ended
June 30, 2001 and 2000; Six months ended June 30, 2001 and 2000
Condensed consolidated statements of cash flows - six months
ended June 30, 2001 and 2000
Notes to condensed consolidated financial statements -
June 30, 2001
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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Part I. Financial Information
Item 1. - Financial Statements
MIDWEST MEDICAL INSURANCE HOLDING COMPANY and SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)
June 30 December 31
2001 2000
----------- -----------
(Unaudited) (Note A)
ASSETS
Fixed maturities at fair value (cost:
2001 $139,544; 2000 $148,832) $ 141,085 $ 146,516
Equity securities at fair value (cost:
2001 $47,485; 2000 $49,739) 67,271 86,418
Short-term investments 19,027 19,587
Other investments 21,616 10,915
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248,999 263,436
Cash 1,215 976
Accrued investment income 1,981 2,286
Premiums receivable - Note C 20,711 6,214
Reinsurance recoverable on paid and unpaid losses 11,653 18,833
Amounts due from reinsurers 4,381 1,390
Other assets 9,598 8,606
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Total assets $ 298,538 $ 301,741
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LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Unpaid losses and loss adjustment expenses $ 110,253 $ 118,478
Unearned premiums - Note C 34,487 12,050
Policyholder dividends - Note D 4,063 8,108
Deferred income taxes 2,491 6,635
Amounts due to reinsurers 7,016 5,248
Other liabilities - Note C 5,594 10,624
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163,904 161,143
SHAREHOLDERS' EQUITY
Class B Common Stock; authorized, issued and
outstanding 1 share; $1,000 par value 1 1
Class C Common Stock; authorized 300,000 shares,
issued and outstanding 8,468 shares in 2001
and 7,961 shares in 2000; no par value -- --
Paid-in capital 12,789 12,789
Retained earnings 106,701 104,524
Accumulated other comprehensive income:
Net unrealized appreciation of investments 15,143 23,284
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134,634 140,598
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Total liabilities and shareholders' equity $ 298,538 $ 301,741
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See notes to condensed consolidated financial statements.
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MIDWEST MEDICAL INSURANCE HOLDING COMPANY and SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands)
(Unaudited)
Three months ended Six months ended
June 30 June 30
------------------------- -------------------------
2001 2000 2001 2000
-------- -------- -------- --------
Revenues:
Net premiums earned $ 9,150 $ 11,072 $ 20,734 $ 21,085
Net investment income 3,254 3,088 6,260 6,041
Net realized capital gains (losses) 3,828 (185) 6,126 6,330
Other 948 2,522 1,690 3,274
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17,180 16,497 34,810 36,730
Losses and expenses:
Losses and loss adjustment expenses 11,581 10,194 23,290 20,643
Underwriting, acquisition and
insurance expenses 1,693 1,613 4,402 4,294
Other operating expenses 1,862 1,598 3,690 3,357
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15,136 13,405 31,382 28,294
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Income before income tax expense (benefit) 2,044 3,092 3,428 8,436
Income tax expense (benefit) -
Note B 751 (1,642) 1,251 208
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Net income $ 1,293 $ 4,734 $ 2,177 $ 8,228
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See notes to condensed consolidated financial statements.
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MIDWEST MEDICAL INSURANCE HOLDING COMPANY and SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Six months ended
June 30
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2001 2000
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OPERATING ACTIVITIES
Net income $ 2,177 $ 8,228
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Increase in premiums receivable (14,497) (11,825)
Decrease in unpaid losses and loss
adjustment expenses (8,225) (5,339)
Decrease in reinsurance recoverable on paid and
unpaid losses 7,180 3,738
Increase in unearned premiums 22,437 18,495
Decrease in policyholder dividends (4,045) (5,073)
Decrease in other liabilities (5,030) (3,406)
Net realized capital gains (6,126) (6,330)
Other changes, net (1,840) 3,871
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(7,969) 2,359
INVESTING ACTIVITIES
Purchases of fixed maturity investments and
equity securities (80,636) (53,150)
Sales of fixed maturity investments and equity
securities 84,924 55,479
Maturities and calls of fixed maturity investments 3,360 3,755
Net sale (purchase) of short-term investments 560 (9,298)
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8,208 (3,214)
FINANCING ACTIVITIES
Redemption of Class A Common Stock -- (313)
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Increase (decrease) in cash 239 (1,168)
Cash at beginning of year 976 1,821
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CASH AT JUNE 30 $ 1,215 $ 653
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See notes to condensed consolidated financial statements.
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MIDWEST MEDICAL INSURANCE HOLDING COMPANY and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 2001
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial statements
of Midwest Medical Insurance Holding Company and its subsidiaries have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and notes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for any interim period are not necessarily indicative of the results
that may occur for the full year. These interim financial statements should be
read in conjunction with the 2000 consolidated financial statements and notes
thereto included in Midwest Holding's Annual Report on Form 10-K as filed with
the Securities and Exchange Commission.
The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements.
Certain amounts applicable to prior periods have been reclassified to conform to
the classifications followed in the current year. All intercompany amounts have
been eliminated.
NOTE B - INCOME TAXES
The Company calculates its income tax provision for interim periods by
estimating its annual effective tax rate and applying this rate to the income of
the interim period. The estimated annual effective tax rate used for the three
and six-month periods ended June 30, 2001 was approximately 36% compared to 35%
for the same periods of 2000. During the second quarter of 2000, Midwest Medical
Insurance Company received $4,418,000 in federal tax refunds and interest that
resulted from the IRS examinations for the 1992 to 1996 tax years. The
$2,715,000 of tax refunds was recorded as an income tax benefit while the
$1,703,000 of interest was recorded to other revenues.
NOTE C - UNEARNED PREMIUMS, PREMIUMS RECEIVABLE and OTHER LIABILITIES
The majority of Midwest Medical's insurance policies expire at December 31 and
renew on January 1 of each year. As a result, the majority of the unearned
premium amount at June 30, 2001 represents six months of unearned premium for
every active policy renewed or newly written on January 1, 2001 with an
expiration date of December 31, 2001. At December 31, 2000, most active 2000
policies expired and therefore had no unearned premium.
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NOTE C - UNEARNED PREMIUMS, PREMIUMS RECEIVABLE and OTHER LIABILITIES
(continued)
Of the total unearned premium balance of $12,050,000 at December 31, 2000,
$6,200,000 is reserved to recognize Midwest Medical's obligation to provide
reporting endorsement coverage without additional premium upon the death,
disability or retirement of policyholders. That same amount is also included in
the unearned premium balance at June 30, 2001 and represents the actuarially
determined present value of future benefits to be provided less the present
value of future revenues to be received.
The increase of $14,497,000 in premiums receivable from December 31, 2000 to
June 30, 2001 is primarily due to the renewal of most active policies on January
1. The full year's premium is recorded as written and collectible at January 1.
Premiums may be paid annually or quarterly and each year's premium is nearly all
collected during the year. The receivable balance remaining at the end of the
year primarily relates to the small number of policies underwritten by Midwest
Medical that have other than December 31 expiration dates.
Of the total other liabilities balance of $10,624,000 at December 31, 2000,
$5,237,000 is for premium payments received from policyholders in advance of
their January 1, 2001 policy renewal. No advance premium payments were recorded
at June 30, 2001.
NOTE D - POLICYHOLDER DIVIDENDS
In 1999, Midwest Medical replaced the retrospective premium credit program for
physicians with a policyholder dividend program. To implement the policyholder
dividend program, Midwest Medical issued participating policy endorsements to
all active physician, clinic and hospital accounts during 1999 and 2000.
Participating policies represented approximately 97% and 96% of total premiums
in force and premium income at June 30, 2001 and December 31, 2000,
respectively.
The $8,000,000 of physician and clinic policyholder dividends declared in 2000
is awarded proportionately based on annual premiums for physician and clinic
policyholders that were insured by Midwest Medical in 1996 and remain insured
throughout 2001. The dividend will be paid in four equal installments in
February, May, August and November 2001.
The $108,000 of hospital policyholder dividends declared in 2000 is awarded
based on the number of years insured with Midwest Medical and will be paid
within two months after the hospital policy renews in 2001.
NOTE E - SEGMENT INFORMATION
The Company is organized into five legal entity business segments. The segments
are described under the "Background" section in Item 1 of the 2000 Annual Report
on Form 10-K. The following financial information summarizes the results of
operations and total assets reported by the Company's five business segments for
the three and six-month periods ended June 30, 2001 and 2000 (in thousands).
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NOTE E - SEGMENT INFORMATION (continued)
Three months ended June 30, 2001
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Midwest Midwest
Holding Medical Services Solutions MedPower Eliminations(1) Consolidated
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Revenues:
External customers $ -- $ 9,154 $ 644 $ 223 $ 77 $ -- $ 10,098
Intersegment 3,877 -- -- 20 -- (3,897) --
Net investment income 2 3,242 1 5 4 -- 3,254
Other(2) -- 3,828 -- -- -- -- 3,828
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3,879 16,224 645 248 81 (3,897) 17,180
Total expenses 4,175 13,274 576 829 179 (3,897) 15,136
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(Loss) income before income
taxes (296) 2,950 69 (581) (98) -- 2,044
Income tax (benefit)
expense (85) 1,042 24 (197) (33) -- 751
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Net (loss) income $ (211) $ 1,908 $ 45 $(384) $ (65) $ -- $ 1,293
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Total assets $139,151 $291,740 $3,139 $2,662 $1,079 $(139,233) $298,538
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(1) Intersegment eliminations for revenues and expenses are primarily for
management and administrative services provided by Midwest Holding.
Eliminations for assets consist primarily of investments in wholly-owned
subsidiaries, intersegment receivables and payables for management fees
and reclassifications between assets and liabilities primarily for
taxes.
(2) Other revenues consist primarily of net realized capital gains.
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NOTE E - SEGMENT INFORMATION (continued)
Three months ended June 30, 2000
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Midwest Midwest
Holding Medical Services Solutions MedPower Eliminations(1) Consolidated
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Revenues:
External customers $ -- $ 11,252 $ 529 $ 20 $ 77 $ -- $ 11,878
Intersegment 4,004 -- -- 3 -- (4,007) --
Net investment income (245) 3,041 1 3 3 285 3,088
Other(2) 11 1,520 -- -- -- -- 1,531
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3,770 15,813 530 26 80 (3,722) 16,497
Total expenses 3,875 12,062 463 517 210 (3,722) 13,405
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(Loss) income before income
taxes (105) 3,751 67 (491) (130) -- 3,092
Income tax (benefit)
expense (33) (1,420) 22 (167) (44) -- (1,642)
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Net (loss) income $ (72) $ 5,171 $ 45 $ (324) $ (86) $ -- $ 4,734
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Total assets $165,430 $323,494 $2,258 $2,557 $1,315 $(165,363) $329,691
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(1) Intersegment eliminations for revenues and expenses are primarily for
management, administrative and investment services provided by Midwest
Holding. Eliminations for assets consist primarily of investments in
wholly-owned subsidiaries, intersegment receivables for management fees
and reclassifications between assets and liabilities primarily for
taxes.
(2) Other revenues consist primarily of net realized capital gains and
interest received on federal income tax refunds.
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NOTE E - SEGMENT INFORMATION (continued)
Six months ended June 30, 2001
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Midwest Midwest
Holding Medical Services Solutions MedPower Eliminations(1) Consolidated
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Revenues:
External customers $ -- $ 20,727 $1,149 $ 394 $ 154 $ -- $ 22,424
Intersegment 7,669 -- -- 41 -- (7,710) --
Net investment income 17 6,216 4 12 11 -- 6,260
Other(2) 28 6,098 -- -- -- -- 6,126
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7,714 33,041 1,153 447 165 (7,710) 34,810
Total expenses 8,266 27,693 1,202 1,586 345 (7,710) 31,382
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(Loss) income before income
taxes (552) 5,348 (49) (1,139) (180) -- 3,428
Income tax (benefit)
expense (167) 1,881 (15) (387) (61) -- 1,251
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Net (loss) income $ (385) $ 3,467 $ (34) $ (752) $ (119) $ -- $ 2,177
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Total assets $139,151 $291,740 $3,139 $ 2,662 $1,079 $(139,233) $298,538
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(1) Intersegment eliminations for revenues and expenses are primarily for
management and administrative services provided by Midwest Holding.
Eliminations for assets consist primarily of investments in wholly-owned
subsidiaries, intersegment receivables and payables for management fees
and reclassifications between assets and liabilities primarily for
taxes.
(2) Other revenues consist primarily of net realized capital gains.
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NOTE E - SEGMENT INFORMATION (continued)
Six months ended June 30, 2000
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Midwest Midwest
Holding Medical Services Solutions MedPower Eliminations(1) Consolidated
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Revenues:
External customers $ -- $ 21,569 $ 889 $ 30 $ 156 $ -- $ 22,644
Intersegment 8,378 -- -- 10 -- (8,388) --
Net investment income (458) 5,944 6 5 9 535 6,041
Other(2) 94 7,951 -- -- -- -- 8,045
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8,014 35,464 895 45 165 (7,853) 36,730
Total expenses 8,248 25,478 896 1,089 436 (7,853) 28,294
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(Loss) income before income
taxes (234) 9,986 (1) (1,044) (271) -- 8,436
Income tax (benefit)
expense (72) 727 -- (355) (92) -- 208
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Net (loss) income $ (162) $ 9,259 $ (1) $ (689) $ (179) $ -- $ 8,228
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Total assets $165,430 $323,494 $2,258 $ 2,557 $1,315 $(165,363) $329,691
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(1) Intersegment eliminations for revenues and expenses are primarily for
management, administrative and investment services provided by Midwest
Holding. Eliminations for assets consist primarily of investments in
wholly-owned subsidiaries, intersegment receivables for management fees
and reclassifications between assets and liabilities primarily for
taxes.
(2) Other revenues consist primarily of net realized capital gains and
interest received on federal income tax refunds.
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NOTE F - COMPREHENSIVE INCOME
The components of Midwest Holding's comprehensive income are net income and
changes in net unrealized appreciation of investments. Total comprehensive
income was $(342,000) and $(5,964,000) for the three and six-months ended June
30, 2001 and $969,000 and $5,464,000 for the three and six-months ended June 30,
2000.
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The following analysis of the financial condition and results of operations of
Midwest Holding and its wholly-owned subsidiaries, Midwest Medical, MMIHC
Insurance Services, Inc., Midwest Medical Solutions, Inc., and MedPower
Information Resources, Inc. should be read in conjunction with the condensed
consolidated financial statements and notes thereto included in this report.
Midwest Holding and its subsidiaries are collectively referred to as the Company
unless the reference pertains to a specific entity.
Capital Resources and Liquidity
The majority of the Company's assets, 83% at June 30, 2001 and 87% at December
31, 2000, are invested in investment-grade bonds, equities and short-term
instruments. The Company's investments in debt and equity securities are
classified as available for sale and are therefore carried at fair value. Other
investments consist of equity interests in non-traded real estate investment
trusts (REIT) that are also classified as available for sale and are recorded at
the fair value determined by the most recent independent appraisal. The Company
purchased an additional $10,000,000 of the REIT in the first quarter of 2001
bringing its ownership interest in the REIT to approximately 7% of the total
shares outstanding. The purchase used proceeds from sales of equity securities
and was made to capture the current attractive yield on the REIT, approximately
8.5%, and to reduce the Company's portfolio allocation to equities to a level
more consistent with the rest of the medical malpractice insurance industry. The
Company believes that this will also help to reduce the volatility in the market
value of the total investment portfolio.
Operations generated $(7,969,000) of negative cash flow during the first six
months of 2001 compared to $2,359,000 of positive cash flow for the same period
of 2000. During the first six months of 2001, dividend payments of $4,045,000
were made to policyholders and payments of $1,877,000 were made to reinsurers.
Unfavorable experience adjustments on the 1992-1994 and 1995-1997 reinsurance
contracts triggered the payments to the reinsurers. An increase in claim
payments also contributed to the negative cash flow in the first six months of
2001. The positive cash flow in the first six months of 2000 was primarily due
to payments of $5,208,000 received from reinsurers for favorable experience
adjustments on the 1992-1994 and 1995-1997 reinsurance contracts. Federal tax
refunds including interest of $4,418,000 also contributed to the positive
operating cash flow. This was partially offset by $5,073,000 of policyholder
dividend payments. The Company believes that its cash, internally generated
funds and investments will be sufficient to meet normal operating requirements.
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Capital Resources and Liquidity (continued)
Shareholders' equity decreased by $(5,964,000) during the first six months of
2001. Net income of $2,177,000 was offset by net unrealized losses in the fair
value of investments, net of deferred taxes, of $(8,141,000).
Results of Operations
Net premiums earned decreased $351,000 for the first six months of 2001 compared
to the same period of 2000. An unfavorable experience adjustment of $2,329,000
was recorded in the second quarter on the 1995-1997 reinsurance contract due
primarily to a large claim paid on the 1996 report year. This was partially
offset by new business resulting in approximately $1,868,000 of additional
premiums earned, a 5% premium rate increase for Iowa policyholders and fewer
premium discounts. Fewer premium discounts were awarded as competitive pressures
are easing in most of Midwest Medical's markets. Competitors are generally
raising rates aggressively or exiting certain medical malpractice market
segments altogether. These insurance marketplace conditions, rising rates and
more limited availability, are often referred to as a "hard market".
Net capital gains of $6,126,000 were realized during the first six months of
2001, a decrease of $204,000 over the same period in 2000. Equities selected by
the outside, domestic equity manager were sold in the first half of 2001 to fund
the additional REIT purchase of $10,000,000 as well as policyholder dividend
payments. Appreciated technology common stocks were sold in the first quarter of
2000 to maintain appropriate equity portfolio diversification. Future levels of
realized capital gains or losses are difficult to predict as investment managers
purchase and sell securities in response to changing market conditions and
investment policy guidelines.
Other revenues were $1,690,000 for the first six months of 2001, a decrease of
$1,584,000 from the same period of 2000. Most of this decrease is due to the
$1,703,000 of interest on federal tax refunds recorded in the second quarter of
2000. Also contributing to the decrease is the elimination of finance charges on
2001 premium billings to Midwest Medical policyholders. Finance charges of
$484,000 were included in other revenues for the first half of 2000. Offsetting
these decreases were a $402,000 increase in Solutions' revenues primarily from
the information technology consulting division and a $258,000 increase in
Services' revenues primarily from commission income earned on new accounts.
Losses and loss adjustment expenses increased $2,647,000 for the first six
months of 2001 versus 2000. The increase in 2001 was primarily due to the growth
in Midwest Medical business and the corresponding exposure. The increase in
Midwest Medical's retention on a single claim from $750,000 to $1,000,000
beginning 2001 also contributed to the increase in incurred losses. Since the
effects of interim claim frequency and severity statistics are not actuarially
analyzed, incurred losses are estimated during the interim using historical
company data, known trends and management's judgment. The increase in incurred
losses for the first six months of 2001 was, for the most part, anticipated by
management due to Midwest Medical's increased exposure and the recent growth in
claims severity. Due to these same reasons, management expects a continuation in
the upward trend in losses for the remainder of the year.
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Results of Operations (continued)
Underwriting, acquisition and insurance expenses increased $108,000 for the
first six months of 2001 compared to the same period in 2000. An increase in
gross premium written drove additional commission expense in the first six
months of 2001.
Other operating expenses increased $333,000 for the first six months of 2001
compared to the same period in 2000. Additional staff for Solutions and Services
and greater commissions paid to Services' producers accounted for most of the
increase. These increases were partially offset by lower development costs in
Solutions and lower consulting expenses in MedPower.
Income tax expense increased to $1,251,000 for the six months ending June 30,
2001 from $208,000 for the same period in 2000. The increase was primarily due
to the $2,715,000 income tax benefit recorded in the second quarter of 2000 for
federal tax refunds received on the 1992 to 1996 tax years.
As a result of the factors discussed above, the Company recorded net income of
$2,177,000 for the six months ended June 30, 2001 compared to net income of
$8,228,000 for the same period of 2000.
Cautionary Note Regarding Forward-Looking Statements
Statements other than historical information contained in this report are
considered to be "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Act
of 1934, as amended.
All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, in addition to the factors discussed in this report,
there are or will be other significant factors that could cause actual results
to differ materially from those indicated. These factors include but are not
limited to:
1. the impact of changing market conditions on the Company's business
strategy;
2. the effects of increased competition on pricing, coverage terms, retention
of customers and ability to attract new customers;
3. greater severity or frequency of the types of losses that the Company
insures;
4. faster or more adverse loss development experience than what the Company
had based its underwriting, reserving, and investment practices;
5. developments in global financial markets which could adversely affect the
performance of the Company's investment portfolio;
6. litigation, regulatory or tax developments which could adversely affect the
Company's business;
7. risks associated with the introduction of new products and services;
8. dependence on key personnel; and
9. the impact of mergers and acquisitions.
The above factors should be considered when reviewing any forward-looking
statement contained in this report. The significant factors that could affect
forward-looking statements are subject to change, and the Company does not
intend to update any forward-looking statement or the above list of significant
factors.
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Cautionary Note Regarding Forward-Looking Statements (continued)
By this cautionary note, the Company intends to rely upon the safe harbor from
liability with respect to forward-looking statements provided by Section 27A and
Section 21E referred to previously.
Item 3. - Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss that may occur when fluctuations in interest and
foreign currency exchange rates and equity and commodity prices change the value
of a financial instrument. Both derivative and nonderivative financial
instruments have market risk. The Company is primarily exposed to interest rate
risk on its investment in fixed maturities, equity price risk on its investment
in equity securities, and foreign currency exchange rate risk on its investment
in international equity securities.
Based on the effective duration of the fixed maturity investment portfolio, an
abrupt 100 basis point increase in interest rates along the entire interest rate
yield curve would adversely affect the fair value of fixed maturity investments
by approximately $6,200,000 at June 30, 2001 compared to $6,500,000 at December
31, 2000.
Based primarily on past annual performance relative to the Standard & Poors 500
Market Index (S&P 500), an abrupt ten percent decrease in the S&P 500 would
adversely affect the fair value of equity securities by approximately $8,100,000
at June 30, 2001 compared to $10,400,000 at December 31, 2000.
No material change occurred in the foreign currency exchange rate risk on the
investment in international equity securities at June 30, 2001 compared to
December 31, 2000.
The Company believes that there would be no material effect on its net income
and cash flows in any of the above scenarios. This effect on net income and cash
flows does not consider the possible effects a change in economic activity could
have in such an environment. Investors, customers, regulators and legislators
could respond to these fluctuations in ways the Company cannot foresee. Because
the Company cannot be certain what specific actions would be taken and their
effects, the above sensitivity analyses assume no significant changes in the
Company's financial structure.
Part II. Other Information
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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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 thereunto duly authorized.
Midwest Medical Insurance Holding Company
-----------------------------------------
(Registrant)
Date August 6, 2001 /s/ David P. Bounk
- ------------------- -----------------------------------------
David P. Bounk
President and Chief Executive Officer
Date August 6, 2001 /s/ Niles Cole
- ------------------- -----------------------------------------
Niles Cole
Vice President and
Principal Financial Officer and
Principal Accounting Officer
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