The headquarters building of the Company and Meridian Mutual is owned by Meridian Mutual and is located near downtown Indianapolis, Indiana. The building is a multi-level structure containing approximately 205,000 square feet of office space. During 1995, construction was completed on a 75,000-square-foot addition to the home office facility. This expansion allowed the Company and Meridian Mutual to enhance and enlarge its operational work areas and create a brighter, more open environment. The expansion also allowed Meridian to consolidate the two Indianapolis satellite offices, which were being leased, into the home office facility.
Approximately 86 percent of the Company's investment assets are held in fixed maturities, substantially all of which are believed to be readily marketable. Within the fixed maturity portfolio, the Company holds approximately 26 percent in mortgage-backed pass-through securities and collateralized mortgage obligations. The Company has attempted to reduce the prepayment risks associated with mortgage- backed securities by investing a majority of the collateralized mortgage obligations in planned amortization and very accurately defined tranches. These investments are designed to alleviate the risk of prepayment by providing predictable principal prepayment schedules within a designated range of prepayments. The Company has no exposure to high risk derivatives in its portfolio.
Shareholders' equity: Common shares, no par value, Authorized-20,000,000 Issued-6,803,185 and 6,769,343, Outstanding- 6,776,805 and 6,742,763 at December 31, 1995 and 1994, respectively 44,076,685 43,930,722 Contributed capital 15,058,327 15,058,327 Unrealized appreciation (depreciation) of investments, net of deferred income taxes 6,842,245 (7,281,724) Retained earnings 52,265,410 42,545,114 Total shareholders' equity 118,242,667 94,252,439 Total liabilities and shareholders' equity $322,588,216 $291,406,031
The consolidated financial statements include the accounts of Meridian Insurance Group, Inc., and its wholly-owned subsidiaries. All intercompany transactions have been eliminated.
1995 1994 1993 Realized gains (losses): Fixed maturities $ 87,370 $ (118,358) $ 896,166 Equity securities 1,458,589 404,059 (6,114) Other invested assets (7,678) -- -- Total realized investment gains $ 1,538,281 $ 285,701 $ 890,052
Net change in unrealized appreciation (depreciation): Fixed maturities, available for sale $16,373,654 $(16,819,514) $ -- Equity securities 5,104,315 (1,696,054) 740,305 Cumulative effect of accounting change for certain investments -- 6,743,818 -- Deferred income tax from cumulative effect of accounting change for certain investments -- (2,326,617) -- Deferred income tax benefit (expense) (7,354,000) 6,325,616 (252,000) Net change in unrealized appreciation (depreciation) $14,123,969 $ (7,772,751) $ 488,305
7.Deferred Policy Acquisition Costs Changes in deferred policy acquisition costs are summarized as follows:
1995 1994 1993 Deferred tax assets: Unearned premium reserves $ 4,336,000 $ 3,936,000 $ 3,854,000 Loss and loss expense reserves and salvage and subrogation 4,980,000 5,346,000 5,391,000 Unrealized depreciation on investment securities -- 3,747,000 -- Other post-employment benefits 454,000 380,000 345,000 Other -- 10,000 24,000 Total deferred tax assets 9,770,000 13,419,000 9,614,000
12.Subsequent Events On February 8, 1996, the Company and Citizens Security Group, Inc. ("Citizens") jointly announced that they have entered into a letter of intent providing for Meridian Security's acquisition of Citizens for approximately $29 million in cash. The transaction is subject to the execution of a definitive acquisition agreement which is expected by mid-March 1996. The acquisition is conditioned upon approval by the companies' Boards of Directors, Citizens' common and preferred shareholders and insurance regulators in Indiana, Minnesota and Ohio, where the insurance companies are domiciled. It is anticipated that the acquisition will be completed by mid- year 1996.