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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 quarterly period ended MARCH 31, 1999 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 0-19439
Medical Assurance, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-1137505
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation of organization)
100 Brookwood Place, Birmingham, AL 35209
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(205) 877-4400
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(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (l) 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 March 31, 1999, there were 23,196,037 shares of the registrant's common
stock outstanding.
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Table of Contents
Part I - Financial Information
Item l. Condensed Consolidated Financial Statements (Unaudited)
of Medical Assurance, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets.............................................................3
Condensed Consolidated Statements of Changes in Capital...........................................4
Condensed Consolidated Statements of Income.......................................................5
Condensed Consolidated Statements of Cash Flows...................................................6
Notes to Condensed Consolidated Financial Statements..............................................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................................................10
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.................................................................16
Signatures....................................................................................................16
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Medical Assurance, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
MARCH 31 December 31
1999 1998
--------------------------------
ASSETS
Investments:
Fixed maturities available for sale, at fair value $ 674,816 $ 657,404
Equity securities available for sale, at fair value 39,058 44,124
Real estate, net 11,546 11,619
Short-term investments 67,420 78,432
----------- -----------
Total investments 792,840 791,579
Cash and cash equivalents 12,649 9,022
Premiums receivable 86,357 59,949
Receivable from reinsurers 180,449 179,890
Prepaid reinsurance premiums 19,383 13,467
Deferred taxes 29,624 26,897
Other assets 49,011 51,435
----------- -----------
$ 1,170,313 $ 1,132,239
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Policy liabilities and accruals:
Reserve for losses and loss adjustment expenses $ 667,113 $ 660,640
Unearned premiums 102,279 76,229
Reinsurance premiums payable 39,432 42,596
----------- -----------
Total policy liabilities 808,824 779,465
Income taxes payable 5,821 2,476
Other liabilities 26,609 26,118
----------- -----------
Total liabilities 841,254 808,059
Commitments and contingencies -- --
Stockholders' equity:
Common stock, par value $1 per share; 100,000,000
shares authorized; 23,900,448 and 23,899,983
shares issued, respectively 23,900 23,900
Additional paid-in capital 206,610 206,562
Accumulated other comprehensive income, net of
deferred taxes of $4,962 and $6,611, respectively 9,214 12,277
Retained earnings 103,074 91,622
----------- -----------
342,798 334,361
Less treasury stock at cost, 704,411 and 587,033 shares,
respectively (13,739) (10,181)
----------- -----------
Total stockholders' equity 329,059 324,180
----------- -----------
$ 1,170,313 $ 1,132,239
=========== ===========
See accompanying notes.
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Medical Assurance, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Capital (Unaudited)
(in thousands)
Accumulated
Other Other
Comprehensive Retained Capital
Total Income Earnings Accounts
--------- ------------- --------- ---------
Balance at December 31, 1998 $ 324,180 $ 12,277 $ 91,622 $ 220,281
Comprehensive income
Net income 11,452 11,452
Other Comprehensive income, net of tax
Unrealized gains on securities, net of
reclassification adjustment of $1,029 (3,063) (3,063)
---------
Comprehensive income 8,389
Common stock issued for compensation 13 13
Net purchases of treasury stock (3,523) (3,523)
--------- --------- --------- ---------
Balance at March 31, 1999 $ 329,059 $ 9,214 $ 103,074 $ 216,771
========= ========= ========= =========
Accumulated
Other Other
Comprehensive Retained Capital
Total Income Earnings Accounts
--------- ------------- --------- ---------
Balance at December 31, 1997 $ 287,188 14,704 $ 109,524 $ 162,960
Comprehensive income
Net income 8,736 8,736
Other Comprehensive income, net of tax
Unrealized gains on securities, net of
reclassification adjustment of $433 842 842
---------
Comprehensive income 9,578
Net purchases of treasury stock (180) (180)
--------- --------- --------- ---------
Balance at March 31, 1998 $ 296,586 $ 15,546 $ 118,260 $ 162,780
========= ========= ========= =========
See accompanying notes.
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Medical Assurance, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
Three Months Ended
March 31
----------------------------
1999 1998
-------- --------
Revenues:
Direct and assumed
premiums written $ 78,070 $ 56,361
======== ========
Premiums earned $ 51,752 $ 46,915
Premiums ceded (10,410) (15,151)
-------- --------
Net premiums earned 41,342 31,764
Net investment income 9,611 9,688
Other income 1,395 887
-------- --------
Total revenues 52,348 42,339
Expenses:
Losses and loss
adjustment expenses 35,420 33,373
Reinsurance recoveries (9,045) (12,187)
-------- --------
Net losses and loss
adjustment expenses 26,375 21,186
Underwriting, acquisition
and insurance expenses 10,672 8,276
-------- --------
Total expenses 37,047 29,462
-------- --------
Income before income taxes
and cumulative effect of accounting change 15,301 12,877
Provision for income taxes:
Current expense 4,886 1,873
Deferred expense (benefit) (1,037) 1,145
-------- --------
3,849 3,018
-------- --------
Income before cumulative effect of accounting
change 11,452 9,859
Cumulative effect of accounting change, net of tax -- (1,123)
-------- --------
Net income $ 11,452 $ 8,736
======== ========
Basic and diluted earnings per share:
Income before cumulative effect of accounting
change $ 0.49 $ 0.42
Cumulative effect of accounting change, net of tax -- (0.05)
-------- --------
Net income $ 0.49 $ 0.37
======== ========
Weighted average number
of common shares
outstanding--basic and diluted 23,268 23,642
======== ========
See accompanying notes.
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Medical Assurance, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Three Months Ended
March 31
----------------------------
1999 1998
-------- --------
OPERATING ACTIVITIES
Net cash provided by operating activities $ 12,598 $ 17,098
INVESTING ACTIVITIES
Purchases of fixed maturities available for sale (82,481) (61,987)
Purchases of equity securities available for sale (1,145) (2,031)
Proceeds from sale or maturities of fixed
maturities available for sale 59,294 55,016
Proceeds from sale of equity securities available for sale 7,721 429
Net decrease (increase) in short-term investments 11,012 (4,287)
Other (200) (44)
-------- --------
Net cash used in investing activities (5,799) (12,904)
FINANCING ACTIVITIES
Net purchases of treasury stock (3,172) (180)
-------- --------
Net cash used by financing activities (3,172) (180)
Increase in cash and cash equivalents 3,627 4,014
Cash and cash equivalents at beginning of period 9,022 12,248
-------- --------
Cash and cash equivalents at end of period $ 12,649 $ 16,262
======== ========
See accompanying notes.
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Medical Assurance, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of Medical Assurance, Inc. and its subsidiaries, together referred
to as the Company. The financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with 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
generally accepted accounting principles 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 the three month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. For further information, refer to the December 31, 1998
audited consolidated financial statements and accompanying notes.
Medical Assurance, Inc. has 100 million shares of authorized common stock and 50
million shares of authorized preferred stock. The Board of Directors has the
authorization to determine the provisions for the issuance of shares of the
preferred stock, including the number of shares to be issued and the
designations, powers, preferences and rights, and the qualifications,
limitations or restrictions of such shares. At March 31, 1999, the Board of
Directors had not authorized the issuance of any preferred stock nor determined
any provisions for the preferred stock.
2. SEGMENT INFORMATION
The Company operates in the United States of America and in only one reportable
industry segment, which is providing professional and general liability
insurance for physicians and surgeons, dentists, hospitals, and others engaged
in the delivery of health care.
3. INVESTMENTS
Proceeds from sales of investments in fixed maturities and equities available
for sale were approximately $43.0 million for both three month periods ended
March 31, 1999 and 1998. Gross realized gains on such sales were approximately
$2.0 million and $494,000 at March 31, 1999 and 1998 respectively; gross
realized losses on such sales were approximately $1.0 million and $61,000 at
March 31, 1999 and 1998, respectively. Realized gains and losses are included as
a component of other income. The amortized cost of fixed maturities and equity
securities available for sale was $699.4 million and $649.0 million at March 31,
1999 and March 31, 1998, respectively.
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Medical Assurance, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
4. RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
The reserves for losses and loss adjustment expenses represent management's best
estimate of the ultimate cost of all losses incurred but unpaid. Incurred losses
and loss adjustment expenses for the three month periods ended March 31, 1999
and 1998 were principally based on the application of an expected loss ratio to
premiums earned. These loss ratios take into consideration prior loss
experience, loss trends, the Company's loss retention levels, changes in
frequency and severity of claims and rates charged.
The reserves are evaluated at least annually by independent consulting
actuaries. Actual incurred losses may vary from estimated amounts due to the
inherent difficulty in estimating development of long-tailed lines of business.
The estimated liability is continually reviewed and any adjustments which become
necessary are included in current operations. The Company's management believes
that its actual incurred losses and loss adjustment expenses will not
significantly exceed its reported estimated amounts.
5. DEFERRED POLICY ACQUISITION COSTS
Costs that vary with and are directly related to the production of new and
renewal premiums (primarily premium taxes, commissions and underwriting
salaries) are deferred to the extent they are recoverable against unearned
premiums and are amortized as related premiums are earned.
Amortization of deferred acquisition costs, net of ceding commissions earned,
amounted to approximately $5.8 million and $3.8 million for the three months
ended March 31, 1999 and 1998, respectively. Underwriting and insurance costs
that are not directly related to the production of new and renewal premiums are
charged to expense as incurred. These costs were $4.9 million and $4.5 million
for the three months ended March 31, 1999 and 1998, respectively.
6. INCOME TAXES
Income tax expense differs from the normal relationship to financial statement
income principally because of tax-exempt interest income.
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Medical Assurance, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
7. EARNINGS PER SHARE
On December 4, 1998 the Board of Directors declared a 10% stock dividend. Cash
was paid to shareholders for fractional shares. Earnings per share data for 1998
has been restated as if this dividend had been declared on January 1, 1998.
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions arising primarily from claims
made under insurance policies; these legal actions have been considered by the
Company in establishing its reserves. While the outcome of all legal actions is
not presently determinable, the Company's management and its legal counsel are
of the opinion that the settlement of these actions will not have a material
adverse effect on the Company's financial position or results of operations.
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ITEM. 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
For purposes of this management discussion and analysis, the term
"Company" refers to Medical Assurance, Inc. and its subsidiaries. The
consolidated subsidiaries consist principally of operating insurance companies.
LIQUIDITY AND CAPITAL RESOURCES
The payment of losses, loss adjustment expenses, and operating expenses
in the ordinary course of business is currently the Company's principal need for
liquid funds. Cash used to pay these items has been provided by operating
activities. Cash provided from these operating activities was sufficient during
the first three months of 1999 to meet the Company's operating needs, and the
Company believes those sources will be sufficient to meet its cash needs for
operating purposes for at least the next twelve months. Prolonged and increasing
levels of inflation could cause increases in the dollar amount of losses and
loss adjustment expenses and may therefore adversely affect future reserve
development. To minimize such risk, the Company (a) maintains what its
management considers to be strong and adequate reinsurance, (b) conducts regular
actuarial reviews to ensure, among other things, that reserves do not become
deficient, and (c) maintains adequate asset liquidity.
The Company did not borrow any funds during the three months ended
March 31, 1999 and 1998, and currently has no requirements indicating a need to
borrow significant funds in the next twelve months. However, the need for
additional capital may arise in order to achieve the Company's ultimate goal of
expansion, as discussed in the following paragraphs. The Company continues to
have available through a lending institution a line of credit in the amount of
$40 million that could be used for these additional capital requirements. The
Company is not charged a fee nor is it required to maintain compensating
balances in connection with this line of credit.
The Company's Board of Directors has authorized the purchase of its common stock
in the open market; the Company purchased 119,900 shares of its stock during the
quarter ended March 31, 1999. On March 8, 1999 the Board increased the
authorization by $10 million; at March 31, 1999 the total remaining purchase
authorization was approximately $14.3 million.
BUSINESS EXPANSION
The Company, through Mutual Assurance, Inc. (Mutual Assurance), has
been developing a marketing strategy to address the insurance needs of hospitals
and vertically integrated health care providers. The Company expects
organizations such as these to represent increasing market opportunities for
professional liability and related insurance products because of the trend
toward the consolidation of health care providers. In certain instances, Mutual
Assurance's size is a competitive factor in this "large account" market because
its principal competitors are larger than those with whom Mutual Assurance has
historically had to compete.
In addition to its expansion into this growing market for "large
accounts," the Company also intends to expand through the acquisition of, or
combination with, medical professional liability insurers that have a
significant presence in states other than Alabama.
Effective January 1, 1999 the Company purchased the ongoing book of
medical professional liability insurance business of Medical Defense Associates
(MDA) and Medical
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Defense Insurance Company (MDIC), subsidiaries of Medical Defense Holding
Company of Springfield, Missouri. The Company has assumed day-to-day management
of existing policies and prior liabilities of MDA and MDIC and provides
aggregate excess of loss reinsurance to protect MDA and MDIC from adverse loss
development in excess of an agreed upon threshold.
IMPACT OF YEAR 2000
The Company's comprehensive Year 2000 initiatives are designed to
ensure that there is no adverse effect on the Company's core business operations
and that transactions with customers, suppliers, and financial institutions are
fully supported. The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
the Company's computer programs that have time-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company is reliant on various third party business partners. The
Company's own readiness for the year 2000 will be impacted by the readiness of
these third parties. The Company has identified the third party relationships
that it believes to be significant and has obtained information from the parties
regarding their efforts and expectations related to Year 2000 compliance. To
date, the Company is not aware of any third party issue that would materially
impact the Company's results of operations, liquidity or capital resources.
The Company has also evaluated the risk of claims against its
policyholders for medical incidents resulting in bodily injury to patients as a
consequence of Year 2000 computer or medical device failure. The Company has
required that hospitals and other large health care facilities complete
questionnaires as to their Year 2000 preparedness in underwriting their
professional liability insurance policies. If the questionnaire of a health care
facility is not returned or provides inadequate or unsatisfactory information
regarding this issue, the policy issued to such facility will exclude coverage
for medical incidents caused by Year 2000 problems. The Company has not surveyed
insureds who are physicians and surgeons as to their Year 2000 compliance and
intends to offer coverage for claims from such medical incidents because the
Company does not believe that physicians and surgeons will have significantly
greater risk of liability if they are not Year 2000 compliant.
In 1996, the Company committed to replace substantially all of the
software and hardware used in its core computer information system. The
component systems that perform the critical functions of the new information
system have been implemented. The new information system, including software and
hardware, will function properly with respect to dates in the year 2000 and
thereafter. The Company believes that with the new information system and the
planned modifications to the Company's existing software in connection
therewith, the Year 2000 issue will not pose significant problems for its core
computer operations. Because Year 2000 compliance is incidental to the
implementation of the new information system, costs specifically related to Year
2000 compliance will be minimal. Year 2000 compliance for the Company's core
computer operations are scheduled to be completed in mid-year 1999.
While the Company believes its efforts are adequate to address its Year
2000 concerns, there can be no guarantee that full compliance will be achieved
or that the systems of other companies on which the Company's systems and
operations rely will be converted on a timely basis and therefore will not have
a material effect on the Company. The Company's expectations about the
completion of its Year 2000 efforts, the related costs, and its assessment of
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the anticipated business, operational and financial risks to the Company are
subject to a number of uncertainties and assumptions regarding future events
including, among others, representations of third parties and the continued
availability of trained personnel. This disclosure as well as the information
previously filed by the Company regarding its Year 2000 readiness during the
period January 1, 1996 to October 19, 1998 are designated as a Year 2000
readiness disclosure related to the Year 2000 Information and Readiness
Disclosure Act.
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RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1998
Premiums
The following table presents information related to consolidated
written and earned premiums and reinsurance expense (in thousands):
Three months ended
March 31
------------------------ Increase
1999 1998 (Decrease)
------------------------ ----------
Direct and assumed premiums written $ 78,070 $ 56,361 $ 21,709
======== ======== ========
Direct and assumed premiums earned $ 51,752 $ 46,915 $ 4,837
Premiums ceded (10,410) (15,151) 4,741
-------- -------- --------
Net premiums earned $ 41,342 $ 31,764 $ 9,578
======== ======== ========
The change in direct and assumed premiums written was due to an
increase in direct medical malpractice premiums of $8.3 million, an increase in
assumed medical malpractice premiums of $7.2 million, an increase in assumed
accident and health premiums of $4.1 million and a $1.1 million increase in
direct accident and health premiums. The increase in assumed medical malpractice
premiums included $4.2 million from the existing policies of the book of
business acquired from MDA and MDIC, as discussed under Business Expansion in
Item II.
The change in direct and assumed premiums earned is due to an increase
in assumed reinsurance of $7.2 million, including amounts from MDA and MDIC of
$1.9 million, an increase in direct medical malpractice of $1.1 million offset
by decreases in direct accident and health premiums of $3.9 million.
The Company cedes reinsurance to provide for greater diversification of
business, allow management to control exposure to potential losses arising from
large risks, and provide capacity for additional growth. Premiums ceded are
estimated based on the terms of the respective reinsurance agreements. The
estimated expense is continually reviewed and any adjustments which become
necessary are included in current operations. Amounts recoverable from
reinsurers are estimated in a manner consistent with the loss liability
associated with the reinsured policies. The decrease in premiums ceded for the
three months ended March 31, 1999 as compared to the three months ended March
31, 1998 is principally due to the decrease in earned accident and health
premiums, which are heavily ceded. The remaining decrease is due to a greater
proportion of earned premiums in states where cession levels are lower. The
Company continually reviews the levels of coverages ceded and the related costs.
Investment Income
The Company had consolidated net investment income of $9.6 million for the three
months ended March 31, 1999, as compared to $9.7 million for the three months
ended March 31, 1998. The decrease was due primarily to a lower yield offset by
increased investing. The annualized average pre-tax investment yield for the
quarter ended March 31, 1999 was 5.1% as compared to 5.7% for the quarter ended
March 31,1998. The reduction in the investment yield was due to a shortening of
the Company's investment portfolio in the latter half of 1998 and a slight
increase in the proportion of the portfolio invested in non-taxable securities.
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Losses
Consolidated losses and loss adjustment expenses (losses) and the
related loss ratios are summarized in the following table (dollars in
thousands). The ratio for losses below is based on premiums earned; the ratio
for net losses is based on net premiums earned.
Three months ended
March 31, 1999 March 31, 1998
--------------------- ---------------------
Loss Loss
Losses Ratio Losses Ratio
--------------------- ---------------------
Losses $ 35,420 68% $ 33,373 71%
===== =====
Reinsurance recoveries (9,045) (12,187)
-------- --------
Net losses $ 26,375 64% $ 21,186 67%
======== ===== ======== =====
Losses for both periods are principally based on the application of
expected loss ratios to premiums earned. These loss ratios take into
consideration prior loss experience, loss trends, the Company's loss retention
levels, changes in frequency and severity of claims, and rates charged.
The above loss ratios reflect improvement of loss development in prior
years coverage of $13.2 million in 1999 and $9.0 million in 1998. However, as
the Company continues its expansion efforts, the improvement of loss development
for prior years could have a smaller or less favorable impact on the loss ratios
of future years.
Other Income
Other income increased by $500,000 for the quarter ended March 31, 1999
as compared to the quarter ended March 31, 1998. The increase is principally
attributable to increased capital gains realized upon the sale of securities
during the first quarter of 1999 compared to the first quarter of 1998.
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Underwriting, Acquisition, and Insurance Expenses
Underwriting, acquisition and insurance expenses are summarized in the following
table (in thousands):
Three months ended
March 31
------------------------ Increase
1999 1998 (Decrease)
------------------------ ----------
Underwriting, acquisition and insurance expenses
before reduction by ceding commissions earned $ 13,138 $ 9,698 $ 3,440
Ceding commissions earned (2,466) (1,422) (1,044)
-------- -------- --------
$ 10,672 $ 8,276 $ 2,396
======== ======== ========
The increase in underwriting, acquisition and insurance expense is primarily due
to amortization of increased policy acquisition costs associated with new
business and increased costs from state guaranty assessments offset by
additional ceding commissions earned. During 1999, as compared to 1998, a
greater portion of the Company's earned premiums were subject to reinsurance
treaties providing for ceding commissions, thereby increasing ceding commissions
earned.
Income Taxes
The Company's effective tax rate was 25% for the three months ended March 31,
1999 and 22% for the three months ended March 31, 1998. These rates are lower
than the statutory rate of 35% principally due to the effect of tax exempt
investment income. The effective rate for 1999 was higher than the rate for 1998
because tax exempt income represented a smaller portion of total income.
FORWARD LOOKING STATEMENTS
This discussion contains historical information, as well as
forward-looking statements that are based upon Medical Assurance's estimates and
anticipation of future events that are subject to certain risks and
uncertainties that could cause actual results to vary materially from the
expected results described in the forward-looking statements. The Company's
expectations regarding losses, the retention of current business, expansion of
product lines, development of business in new geographical areas, Year 2000
compliance, and market risks depend on a variety of factors, including economic,
competitive and market conditions which may be beyond the Company's control and
are thus difficult or impossible to predict. In view of the many uncertainties
inherent in the forward-looking statements made in this document, the inclusion
of such information should not be taken as representation by the Company or any
other person that Medical Assurance's objectives or plans will be realized.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit (27) required of Item 601 of Regulation SK-Financial Data
Schedule (for SEC use only).
(b) Reports on 8-K. No reports on Form 8-K have been filed during the
quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Medical Assurance, Inc.
May 12, 1999 By: /s/ James J. Morello
----------------------------
James J. Morello, Treasurer
(duly authorized officer and
principal financial officer)
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