FPIC INSURANCE GROUP INC, S-1/A, 1996-07-26

FPIC INSURANCE GROUP INC
S-1/A, 1996-07-26
LIFE INSURANCE

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 1996

REGISTRATION NO. 333-04585
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------

AMENDMENT NO. 3

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------

FPIC INSURANCE GROUP, INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
FLORIDA 6719 59-3359111
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

1000 RIVERSIDE AVENUE
SUITE 800
JACKSONVILLE, FLORIDA 32204
(904) 354-5910
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
---------------------
WILLIAM R. RUSSELL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
1000 RIVERSIDE AVENUE, SUITE 800
JACKSONVILLE, FLORIDA 32204
(904) 354-5910
(Name, address, including zip code, and telephone
number, including area code, of agent for service)

COPIES TO:

<TABLE>
<S> <C>
JOHN R. BYERS, ESQ. F. SEDGWICK BROWNE, ESQ.
LEBOEUF, LAMB, GREENE & MACRAE, L.L.P. MORGAN, LEWIS & BOCKIUS LLP
50 NORTH LAURA STREET, SUITE 2800 101 PARK AVENUE, 42ND FLOOR
JACKSONVILLE, FLORIDA 32202-3650 NEW YORK, NEW YORK 10178
</TABLE>

---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
promptly as practicable after this Registration Statement becomes effective and
all other conditions to the transactions described herein have been satisfied or
waived.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
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PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock.................... 4,312,500 $12.00 $51,750,000 $17,844.83
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</TABLE>

(1) Includes 450,000 shares which the Underwriters have the option to purchase
solely to cover over-allotments.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).

---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
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<PAGE> 2

CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
INFORMATION REQUIRED IN PROSPECTUS LOCATION IN PROSPECTUS
------------------------------------------------- --------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................... Facing Page; Cross Reference Sheet;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front Cover Page of Prospectus;
Outside Back Cover Page of Prospectus
3. Summary Information, Risk Factors, and Ratio of
Earnings to Fixed Charges and Other
Information...................................... Summary; Risk Factors
4. Use of Proceeds.................................. Summary; Use of Proceeds
5. Determination of Offering Price.................. Outside Front Cover Page of
Prospectus; Underwriting
6. Dilution......................................... Dilution
7. Selling Security Holders......................... Selling Shareholders
8. Plan of Distribution............................. Outside Front Cover Page of
Prospectus; Selling Shareholders;
Underwriting
9. Description of Securities to be Registered....... Description of Capital Stock
10. Interests of Named Experts and Counsel........... Not Applicable
11. Information with Respect to the Registrant....... Summary, Risk Factors, The Company,
Dividend Policy, Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Relationships and Related
Transactions; Principal Shareholders
and Securities Ownership of
Management; Description of Capital
Stock; Shares Eligible for Future Sale
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not Applicable
</TABLE>
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY STATE.

SUBJECT TO COMPLETION, DATED JULY 8, 1996
PROSPECTUS

3,000,000 SHARES

FPIC INSURANCE GROUP, INC.

COMMON STOCK
---------------------

Of the 3,000,000 shares of common stock, par value $.10 per share (the
"Common Stock"), of FPIC Insurance Group, Inc. (the "Company") offered hereby
(the "Offering"), 1,000,000 shares are being sold by the Company and 2,000,000
shares are being sold by the Selling Shareholders. See "Selling Shareholders."
The Company will not receive any of the proceeds from the sale of shares by the
Selling Shareholders.

Prior to the Offering, there has not been a public market for the Common
Stock of the Company. It is currently anticipated that the initial public
offering price will be between $10.00 and $12.00 per share. 150,000 shares of
Common Stock offered by the Company will be reserved for sale to the directors,
officers and employees of the Company at a per share price equal to the public
offering price less a 7% discount. See "Underwriting" for information relating
to the factors to be considered in determining the initial public offering
price.

Application has been made to have the Common Stock listed on the Nasdaq
National Market under the symbol "FPIC".

SEE "RISK FACTORS" ON PAGE 7 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

UNDERWRITING
DISCOUNTS PROCEEDS TO
PRICE TO AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
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<S> <C> <C> <C> <C>
Per Share............................. $ $ $ $
Total(3).............................. $ $ $ $
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</TABLE>

(1) For information regarding indemnification of the Underwriters and discounts
and commissions to be paid to the Underwriters, see "Underwriting."

(2) Before deducting expenses of the Offering estimated at $568,618, payable by
the Company.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 450,000 additional shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts, and Proceeds to Company will be
$ , $ , and $ , respectively.
---------------------

The shares are being offered by the several Underwriters named herein,
subject to prior sale, when, as and if delivered to, and accepted by them and
subject to certain conditions. It is expected that delivery of the certificates
representing the shares will be made against payment on or about ,
1996 at the office of Oppenheimer & Co., Inc., Oppenheimer Tower, World
Financial Center, New York, New York 10281.
---------------------
OPPENHEIMER & CO., INC. THE ROBINSON-HUMPHREY
COMPANY, INC.
The date of this Prospectus is , 1996.
<PAGE> 4

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

FOR NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR THE ADEQUACY OF
THIS DOCUMENT.

THE COMPANY, A FLORIDA CORPORATION, OWNS ALL OF THE SHARES OF CAPITAL STOCK
OF AN INSURANCE COMPANY DOMICILED IN THE STATE OF FLORIDA. IN GENERAL, THE
FLORIDA INSURANCE LAWS REQUIRE PRIOR APPROVAL BY THE FLORIDA DEPARTMENT OF
INSURANCE (THE "DEPARTMENT OF INSURANCE") OF ANY ACQUISITION OF OR CONTROL OF A
DOMESTIC INSURANCE COMPANY OR OF ANY COMPANY WHICH CONTROLS A DOMESTIC INSURANCE
COMPANY. "CONTROL" IS GENERALLY PRESUMED TO EXIST THROUGH THE OWNERSHIP OF, OR
THE HOLDING OF PROXIES WITH RESPECT TO, 5% OR MORE OF THE VOTING SECURITIES OF A
DOMESTIC INSURANCE COMPANY OR OF ANY COMPANY WHICH CONTROLS A DOMESTIC INSURANCE
COMPANY. ANY PURCHASER OF COMMON STOCK HOLDING POWER TO VOTE 5% OR MORE OF THE
OUTSTANDING SHARES OF COMMON STOCK WILL GENERALLY BE PRESUMED TO HAVE ACQUIRED
CONTROL OF THE COMPANY'S INSURANCE SUBSIDIARY UNLESS THE DEPARTMENT OF
INSURANCE, FOLLOWING APPLICATION BY SUCH PURCHASER, DETERMINES OTHERWISE. IN
GENERAL, ANY PURCHASE RESULTING IN SUCH PURCHASER'S HOLDING THE POWER TO VOTE 5%
OR MORE OF THE OUTSTANDING SHARES OF COMMON STOCK WOULD REQUIRE PRIOR APPROVAL
BY THE DEPARTMENT OF INSURANCE. HOWEVER, IN LIEU OF OBTAINING SUCH APPROVAL, A
PURCHASER HOLDING THE POWER TO VOTE LESS THAN 10% OF THE OUTSTANDING SHARES OF
COMMON STOCK MAY FILE A DISCLAIMER OF AFFILIATION AND CONTROL WITH THE
DEPARTMENT OF INSURANCE.

NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY, BY
THE SELLING SHAREHOLDERS', OR BY ANY UNDERWRITER THAT WOULD PERMIT A PUBLIC
OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN
ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE
UNITED STATES AND CANADA. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS COMES
ARE REQUIRED BY THE COMPANY AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT AND
TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING OF THE SHARES AND THE
DISTRIBUTION OF THIS PROSPECTUS.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), a registration statement on Form S-1 (herein, together with all
amendments, exhibits and schedules, referred to as the "Registration
Statement"), of which this Prospectus (the "Prospectus") is a part, with respect
to the Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement. Such additional
information, and other information filed by the Company, may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
maintained at Suite 1300, 7 World Trade Center, New York, New York 10048 and
Northwestern Atrium Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661-2511 at prescribed rates. The Commission maintains a web site
that contains all information filed electronically by the Company. The address
of the Commission's web site is (http://www.sec.gov). Statements contained in
this Prospectus describing the contents of any contract or other document
referred to herein (while complete in all material respects) do not necessarily
describe such documents in their entirety, and in each such instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference.

2
<PAGE> 5

SUMMARY

This summary is qualified by the detailed information and financial data
(including the financial statements and the Notes thereto) appearing elsewhere
in this Prospectus or incorporated by reference herein. Except as otherwise
indicated, (i) all share and per share amounts in this Prospectus have been
adjusted to reflect the 100% stock dividend effective December 31, 1994 and the
5 for 1 stock exchange effective June 11, 1996 in connection with the
Reorganization (as defined herein) of the Company and (ii) all information set
forth in this Prospectus assumes that the Underwriters' over-allotment option
has not been exercised by the Underwriters. See "Underwriting." All financial
information in this Prospectus is presented in accordance with generally
accepted accounting principles ("GAAP") unless otherwise specified. For purposes
of this Prospectus, the "Company" refers, at all times prior to the effective
date of the Reorganization to Florida Physicians Insurance Company, Inc.
("FPIC") and its subsidiaries, collectively, and at all times on or after such
effective date to FPIC Insurance Group, Inc. ("FIG") and its subsidiaries,
collectively. See "Reorganization". See "Glossary" for the definitions of
certain insurance terms used herein. See "Risk Factors" for a discussion of
important factors that should be considered by prospective investors.

THE COMPANY

FPIC Insurance Group, Inc. is the second largest provider of medical
professional liability insurance in Florida, with an approximate 15% market
share of direct premium written for physicians for the year ended December 31,
1994. For more than 20 years, the Company and its predecessors have provided
medical professional liability insurance to Florida's medical community. The
Company has the exclusive endorsement of both the Florida Medical Association
("FMA") and the Florida Dental Association ("FDA"). The Company has increased
its number of insured physicians and dentists from 2,460 at year-end 1986 to
5,055 at year-end 1995 and on June 30, 1996 the Company had outstanding policies
for 5,408 physicians and dentists. For 1995, the Company had direct premium
written of $56.6 million, operating income of $11.5 million and at December 31,
1995 had shareholders' equity of $81.6 million. For the first quarter of 1996,
the Company had direct premium written of $22.6 million, operating income of
$2.1 million and at March 31, 1996 had shareholders' equity of $80.6 million.

The Company has achieved underwriting profitability exceeding industry
averages while consistently expanding its policyholder base. The Company's
statutory combined ratio was 94.9% in 1993, 93.7% in 1994 and 97.6% in 1995,
compared to the Physician Insurers Association of America ("PIAA") industry
average of 121.4%, 101.8% and 98.4%, respectively. The Company's after-tax
operating income increased from $6.3 million in 1993 to $10.4 million in 1994
and to $11.5 million in 1995. The Company's number of insured physicians and
dentists increased from 4,264 on January 1, 1993 to 5,055 on December 31, 1995.

Medical professional liability ("MPL"), or medical malpractice insurance,
insures the physician, dentist, hospital or other healthcare provider against
liabilities arising from the rendering of or failure to render professional
healthcare service. Under the typical MPL insurance policy, the insurer also
pays the legal costs of defending the claim. Based on data compiled by A.M. Best
Company, Inc. ("A.M. Best"), total MPL premium in the U.S. exceeded $5.8 billion
in 1994. Florida is the third largest market for MPL insurance in the U.S.,
based on direct premium written, with more than $370 million of MPL premium
written in 1994.

The Company believes that its underwriting profitability and historical
growth are attributable to several key strengths, which include:

- Targeting Profitable Segments. The Company seeks to maximize
profitability by targeting segments of the MPL industry that are
narrowly-defined by such factors as medical specialty and geographic
location. The Company has identified medical specialties in which it feels
it has substantial knowledge and experience which have enabled it to
generate above-average underwriting profits. The Company selectively
underwrites, markets and prices its MPL insurance to attract insureds in
these segments. As a result of this strategy, approximately 80% of the
increase in the Company's direct premium written during the first five
months of 1996 was received from physicians in targeted medical
specialties.

3
<PAGE> 6

- Targeting "Claims-Free" Business. The Company endeavors to offer MPL
insurance to medical professionals with low levels of previous MPL claims.
In 1995, approximately 86% of the Company's insureds with five years or
more of practice in Florida received a "Claims-free" credit for having low
levels of MPL claims for at least the last five years. In order to attract
such "Claims-free" business, the Company offers insureds credits for five
or more years of low claims experience and pays agents a higher commission
for referring such business.

- Capitalizing on Relationships with Medical Societies. In addition to
being the exclusively endorsed carrier of the FMA and FDA, the Company
also maintains relationships with and receives exclusive endorsements from
a number of state and local specialty societies and medical associations.
Included among these endorsers are the Florida Chapter, American College
of Surgeons, the Florida Obstetric and Gynecologic Society, and the
Florida Society of Thoracic and Cardiovascular Surgeons and nine county
medical associations. Management believes that these relationships provide
the Company knowledge of and insight into its customers and markets and
enables the Company to be more responsive to the changing needs of the
healthcare community.

- Establishing Timely Claims Settlement Procedures. The Company's policy
is to refuse settlement of and to defend aggressively all claims that
appear to have no merit. However, in those instances where claims may have
merit, the Company attempts to settle such claims as expeditiously as
possible in a cost efficient manner. As a result, the average life for
claims settled by the Company in 1995 was 2.5 years as compared to 3.1
years for claims settled in 1987.

The Company's strategy is to pursue future growth and underwriting
profitability by:

- Increasing Florida Medical Professional Liability Market Share. The
Company believes that its primary growth opportunity will be expansion in
the Florida MPL market. The Company is expanding its premium base in
Florida by attracting additional insureds, primarily in its targeted
segments. The Company has been able to achieve this by offering
competitive pricing and signing new agents. New agents accounted for 13.7%
of the increase in direct premium written in 1995. In addition, the
Florida MPL market is highly fragmented, with over 36 insurers currently
writing physician MPL business in the state, 15 of which are physicians'
mutual protective trusts or other similar entities. The Company believes
that this fragmentation provides an opportunity for consolidation.

- Entering the Managed Care Market. The Company has entered the evolving
managed care marketplace which is undergoing change with the recent
emergence of provider-supported organizations, such as independent
physician associations ("IPAs"), physician hospital organizations
("PHOs"), and medical service organizations ("MSOs") by capitalizing on
its knowledge of the medical community and its relationship with its
insureds. The Company is currently marketing managed care liability
insurance to these newly-formed organizations and professional and
comprehensive general liability insurance to healthcare facilities. The
Company believes that by providing insurance to managed care entities and
healthcare facilities, it will have an opportunity to cross-sell its MPL
insurance to physicians affiliated with such entities and facilities.

- Expanding into New States. The Company believes that certain states in
the southern region of the U.S. provide the Company an opportunity to
profitably increase its premium volume while maintaining its underwriting
standards. The Company believes that it could successfully compete with
existing insurers in those states by targeting and competitively pricing
business from certain specialties and geographic territories and by
capitalizing on its ability to develop and maintain strong agent loyalty.
The Company, therefore, has opened an Atlanta office, hired personnel,
begun enrolling agents and commenced marketing in Georgia. In addition,
FPIC has recently obtained a license to do business in Alabama and is
contemplating opportunities in other states, principally in the southern
region of the U.S. This expansion of the Company's business may also
include expansion through the acquisition of, or combination with, MPL
insurers or other entities in other states.

- Pursuing Cross-Selling Opportunities. In order to further its
cross-selling opportunities, on July 1, 1995, the Company, through its
subsidiary, McCreary Corporation ("McCreary"), acquired all of the assets
of a Florida third party administrator for group health, workers'
compensation, general liability,

4
<PAGE> 7

and property insurance. The Company has begun offering McCreary's products
to FPIC's insureds and prospective insureds such as hospitals, healthcare
facilities and provider-supported organizations. The Company is currently
considering the acquisition of an additional Florida third party
administrator that had revenue of approximately $1.9 million in fiscal
year 1995.

FPIC is rated "A- (Excellent)" by A.M. Best, an independent nationally
recognized insurance publishing and rating service. An A.M. Best rating is
intended to provide an independent opinion of an insurer's ability to meet its
obligations to policyholders and should not be considered an investment
recommendation.

THE REORGANIZATION

On June 11, 1996 the shareholders of FPIC approved the formation of a
holding company structure that resulted in FPIC becoming a subsidiary of FIG
(the "Reorganization"). In connection with the Reorganization, FPIC's
shareholders became the shareholders of FIG and received five shares of FIG's
Common Stock for each of their shares of FPIC's common stock. The purposes of
the Reorganization included providing a more flexible operating structure,
increasing financial flexibility and satisfying the liquidity needs of the
Company's shareholders. As of May 21, 1996, the Company had 3,407 shareholders,
the majority of whom were current or former policyholders of the Company.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered(1)
By the Company........................ 1,000,000 shares
By the Selling Shareholders........... 2,000,000 shares
Total......................... 3,000,000 shares
Common Stock to be outstanding after the
Offering(1)(2)(3)..................... 9,519,420 shares
Use of proceeds......................... The principal reasons for the Offering are (i) to
further capitalize FIG which is a newly formed
holding company, and (ii) to assist the Company's
shareholders with selling their shares in an
orderly offering. The Company intends to retain the
net proceeds for general corporate purposes. The
Company may from time to time contribute a portion
of the net proceeds to the capital of FPIC or its
other subsidiaries and use a portion of the net
proceeds for future acquisitions. The Company will
not receive any proceeds from the sale of shares by
the Selling Shareholders.
Dividend policy......................... The Company has no present intention to pay any
dividends in the near future.
Proposed Nasdaq National Market
symbol................................ "FPIC"
</TABLE>

- ---------------

(1) Excludes up to 450,000 shares of Common Stock that may be sold by the
Company upon exercise of the Underwriters' over-allotment option. See
"Underwriting."
(2) Based on the number of shares of Common Stock outstanding as of June 11,
1996. Does not include 390,000 shares of Common Stock issuable upon exercise
of options (options for 60,000 of such shares were granted at the time of
the Reorganization).

(3) Includes 379,780 shares of Common Stock that will be issued by the Company
effective July 19, 1996. See "Risk Factors -- Prior Offering Issuance."

5
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA(1))

<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total investments.............................. $221,832 $ 221,604 $ 192,867 $ 180,721 $ 179,872 $ 167,473
Total assets................................... 284,593 276,699 244,266 233,120 206,408 196,383
Loss and LAE reserves.......................... 168,822 164,506 152,268 138,745 126,650 118,993
Total liabilities.............................. 203,979 195,143 182,660 169,199 152,954 147,738
Shareholders' equity........................... 80,614 81,556 61,606 63,921 53,454 48,645
Book value per share........................... $ 9.90 $ 10.02 $ 7.94 $ 8.24 $ 6.89 $ 6.28
Common stock outstanding at end of period...... 8,139,640 8,139,640 7,759,860 7,759,860 7,756,850 7,748,600
</TABLE>

- ---------------

(1) Per share data has been calculated after giving effect to the 100% stock
dividend on December 31, 1994 and the 5 for 1 stock exchange effective June
11, 1996 in connection with the Reorganization. Does not give effect to the
sale of Common Stock in the Offering. Excludes 379,780 shares of Common
Stock that will be issued by the Company effective July 19, 1996. See "Risk
Factors -- Prior Offering Issuance."
(2) Net investment income in 1995 includes a $0.5 million write-down on real
estate. See Note 5 of "Notes to the Consolidated Financial Statements."
(3) The $6.7 million loss was principally the result of an increase in interest
rates during the first six months of 1994, coupled with an active trading
strategy by an external manager who was terminated in June 1994.
(4) Includes a $1.6 million, $2.9 million, $10.0 million, $10.5 million, $17.7
million, $16.3 million and $20.2 million decrease in estimated loss and LAE
for claims occurring in prior periods for the three months ended March 31,
1996 and 1995 and the years ended December 31, 1995, 1994, 1993, 1992 and
1991, respectively.
(5) Includes a one-time accrual of $5.0 million for an assessment by the
Florida Insurance Guaranty Association to fund losses by insolvent insurers
incurred as a result of Hurricane Andrew. See Note 10 of "Notes to the
Consolidated Financial Statements."
(6) Operating income represents net income excluding net realized investment
gains or losses, net of federal income taxes and the cumulative effect of
accounting change.
(7) Financial ratios have been calculated using statutory accounting practices
(SAP), which do not require deferral of policy acquisition costs.
(8) Calculated based upon information reported by PIAA. For this calculation,
combined ratio is the total of the loss and LAE ratio and the underwriting
expense ratio. Combined ratio as used herein does not consider any
policyholder dividend information. The Company paid policyholder dividends
of $0.2 million, $2.2 million and $4.0 million in 1994, 1993 and 1991,
respectively. No policyholder dividends were paid in the periods ended
March 31, 1996 or 1995 or in the years ended December 31, 1995 and 1992.

6
<PAGE> 9

RISK FACTORS

The following factors, in addition to the other information in this
Prospectus, should be carefully considered by prospective investors.

INDUSTRY FACTORS

The MPL insurance industry, including the business of marketing and
underwriting MPL insurance, is affected by various factors, many of which are
beyond the Company's control and can adversely affect the Company's results of
operations. Aggressive pricing by competitors can result in downward pressure on
rates. State regulation of rates can limit the Company's discretion with respect
to the pricing of its products. Pricing cycles and overcapacity in the industry
can result in reduced rates. Judicial decisions relating to insurance coverage
issues and the amount of compensation payable with respect to injuries can also
have an adverse impact on the Company's operations. Courts may undermine
insurers' expectations with respect to the level of risk being assumed in a
number of ways, including eliminating exclusions, multiplying limits of coverage
and creating rights for policyholders not set forth in the insurance contract.
These decisions can adversely affect an insurer's profitability. In addition,
the Company's expectations may be undermined by inherent deficiencies in data
available on which it bases its underwriting decisions. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."

CONCENTRATION OF BUSINESS

Although the Company intends to diversify its product lines, approximately
98% of its 1995 direct premium written and 98% of its direct premium written
during the first three months of 1996 were derived from MPL insurance offered to
physicians and dentists. As a result, negative developments in the economic,
competitive or regulatory conditions affecting the MPL insurance industry,
particularly as it might affect MPL insurance for physicians, could have a
material adverse effect on the Company's results of operations.

Although the Company intends to expand its operations into additional
states, substantially all of the Company's direct premium written is generated
in Florida. The revenues and profitability of the Company are therefore subject
to prevailing regulatory, economic and other conditions in Florida. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

There can be no assurance that the Company will be successful in
implementing its strategy of expanding and diversifying its product lines and
geographic market. See " -- Expansion."

LOSS AND LAE RESERVES

Amounts established by the Company for loss and loss adjustment expense
("LAE") reserves are estimates of future costs based on many variables,
including historical and statistical information, inflation, legal developments,
economic conditions and general trends in the frequency and severity of losses.
No assurances can be given that such estimates will accurately reflect actual
losses incurred by the Company. Inflation, changes in medical procedures,
increasing use of managed care, legislative changes and many other factors could
cause increases in the Company's frequency and severity trends, and may
therefore adversely affect future reserve development. The delays between the
collection of premiums and the payment of losses is longer for MPL insurance
than other property and casualty lines. This delay, which is commonly referred
to as a "long tail," is the result of the length of time that elapses between
the incident giving rise to an insurance claim, its reporting to the insurer and
the ultimate resolution of the claim and contributes to the difficulty with
properly estimating loss and LAE reserves. The Company has over twenty years of
claims experience, which it believes enables it to reasonably estimate necessary
reserves. Nevertheless, future upward adjustments to loss and LAE reserves which
are not anticipated by management could have a material adverse impact upon the
Company's financial condition and results of operations. Such adjustments could
also cause the Company's results of operations to fluctuate on a quarterly
basis. See "Business -- Loss and LAE Reserves."

In recent years, the Company has revised estimates of frequency and
severity of losses and determined that certain of its reserves were redundant.
Redundant reserves, which have been released in every year since 1991, have
contributed significantly to reported earnings in 1995, 1994 and 1993. The
Company reduced reserves for prior years by $10.0 million, $10.5 million and
$17.7 million in the years ending December 31,

7
<PAGE> 10

1995, 1994 and 1993, respectively. The Company cannot predict whether
redundancies or deficiencies will be experienced in future years. If such
redundancies do not occur, or if deficiencies are experienced, the Company's net
income could be significantly reduced or a net loss could occur. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Loss and LAE Reserves."

COMPETITION

The MPL insurance industry is highly competitive and the Company competes
with national and regional insurers. Some of the Company's competitors have
greater financial and marketing resources than the Company. Certain of the
Company's competitors may from time to time seek to acquire or increase market
share by pricing their products at levels below those required for
profitability, thereby creating downward pressure on pricing. Downward pressure
on pricing can also result from competitors establishing rates based upon
insufficient or faulty actuarial data. As the Company expands into new product
lines and new geographic markets, it will compete with established companies in
such markets, many of which will have existing relationships with the physicians
and dentists that the Company will seek to insure. The Company believes it can
compete successfully notwithstanding such factors, but such factors may
nevertheless adversely affect the Company and cause fluctuations in the
Company's results of operations. See "Business -- Competition."

CHANGES IN HEALTHCARE

Significant attention has recently been focused on reforming the healthcare
industry at both the Federal and state levels. A broad range of healthcare
reform measures have been suggested, and public discussion of such measures will
likely continue in the future. Proposals have included, among others, spending
limits, price controls, limiting increases in insurance premiums, limiting the
liability of doctors and hospitals for tort claims and restructuring the
healthcare insurance system. The Company cannot predict which, if any, reform
proposals will be adopted, when they may be adopted or what impact they may have
on the Company. While some of these proposals could be beneficial to the
Company, the adoption of others could have a material adverse effect on the
Company's financial condition or results of operations.

In addition to regulatory and legislative efforts, there have been
significant market driven changes in the healthcare environment. In recent
years, a number of factors related to the emergence of managed care have
negatively impacted or threatened to impact the medical practice and economic
independence of medical professionals. Medical professionals have found it more
difficult to conduct a traditional fee for service practice and many have been
driven to join or contractually affiliate with provider-supported organizations.
This consolidation could result in the elimination or significant decrease in
the role of medical professionals from the MPL insurance purchasing decision. In
addition, the consolidation could reduce MPL insurance premiums paid by
healthcare providers, as larger healthcare providers tend to retain more risk by
accepting higher deductibles, self-insuring, or forming captive insurance
companies. This consolidation could also enable provider-supported organizations
to exert greater leverage over MPL insurers with respect to MPL premium rates,
policy features and underwriting decisions.

RELIANCE ON MANAGEMENT

The Company is heavily dependent upon its senior management and the loss of
services of one or more of such executives could adversely affect the Company.
The Company's president and chief executive officer and its executive vice
president and chief operating officer have entered into employment contracts
with the Company. See "Management." The Company has only nominal, if any,
"key-man" insurance for its executive officers.

EXPANSION

The Company's strategy includes expanding and diversifying its product
lines and geographic markets to meet the insurance needs of the changing
healthcare market, while maintaining its traditional personalized service for
physicians and dentists. Such expansion and diversification is contingent on
various factors, including the availability of adequate capital, marketing
success and applicable regulatory requirements. The Company's business expansion
may also occur through the acquisition of, or combination with, other MPL

8
<PAGE> 11

insurers or other entities. There can be no assurance that any such acquisition
or combination will be profitable for the Company. Nor can there be any
assurance that the Company will have adequate resources, receive necessary
regulatory approvals or achieve the marketing results necessary for such
expansion and diversification to be successful. See "Business -- Marketing and
Policyholder Services."

REINSURANCE

The Company's business is partially dependent upon its ability to cede
significant amounts of the risk insured by the Company. The amount, availability
and cost of reinsurance are subject to prevailing market conditions beyond the
control of the Company, and affect the Company's level of business and
profitability. Although the Company anticipates that it will continue to be able
to obtain such reinsurance, which generally is subject to annual renewal, there
can be no assurance that this will be the case. If the Company were unable to
maintain such facilities upon their expiration, either its net exposures would
increase, or, if it were unwilling to bear such increase in net exposures, the
Company would be required to reduce the level of its underwriting commitments.
Further, the Company is subject to credit risk with respect to its reinsurers,
as the ceding of risk to its reinsurers does not relieve the Company of its
liability to its insureds. Although the Company places its reinsurance with
reinsurers it believes to be financially stable, a significant reinsurer's
inability to make payment under the terms of a reinsurance treaty could have a
material adverse effect on the Company. See "Business -- Reinsurance."

ENDORSEMENTS

The Company's MPL insurance has the exclusive endorsement and active
support of the FMA, the FDA, a number of state and local specialty societies and
nine county medical associations. The Company has relied on its relationship
with these organizations in successfully marketing its insurance products. The
Company will endeavor to maintain its endorsements and to continue its close
relationship with physicians and dentists through personalized service. However,
the loss of one or more of these endorsements could have a material adverse
effect on the Company and its ability to attract and retain insureds. See
"Business -- Marketing and Policyholder Services."

RATINGS

Ratings have become an increasingly important factor in establishing the
competitive position of insurance companies. Several of FPIC's competitors have
received A.M. Best ratings that are higher than that of FPIC. FPIC is rated "A-
(Excellent)" by A.M. Best, the third highest rating of 13 ratings assigned to
solvent insurance companies, which currently range from "A++ (Superior)" to "D
(Very Vulnerable)." An A.M. Best rating is intended to provide an independent
opinion of an insurer's ability to meet its obligations to policyholders and
should not be considered an investment recommendation. Although in May, 1996,
A.M. Best reaffirmed this rating and indicated that this rating outlook is
"stable," if FPIC's rating is materially reduced from its current level by A.M.
Best, the Company's results of operations could be adversely affected.

REGULATION OF INSURANCE HOLDING COMPANIES; DIVIDEND RESTRICTIONS

Extensive laws and regulations of the states in which the Company conducts
operations govern many aspects of its business, including, but not limited to,
licensing, payment of dividends, establishment of rates, policy forms, and
change of control. Changes in or the adoption of laws or regulations regarding
rates charged for insurance coverage or other matters could have a material
adverse effect on the operations of the Company. State agencies and officials
responsible for administering such laws and regulations have broad powers, which
they exercise primarily for the protection of policyholders. See
"Business -- Regulation."

The insurance laws of most states, including Florida, FPIC's state of
domicile, regulate the ability of insurers domiciled in such states to pay
dividends or make other distributions to shareholders. Thus, the ability of FIG
to receive dividends from FPIC is subject to significant limitations imposed by
Florida law. See "Dividend Policy" and "Business -- Regulation."

9
<PAGE> 12

GUARANTY FUND ASSESSMENTS

As a Florida insurer, the Company is subject to assessment by the Florida
Insurance Guaranty Association, Inc. ("FIGA") for the provision of funds
necessary for the settlement of covered claims under certain policies of
insolvent property and casualty insurers. To the extent that the Company writes
business in other states it may be subject to similar assessments by those
states' guaranty associations. In 1992, the Company established a reserve of
$5.0 million to cover anticipated assessments resulting from Hurricane Andrew.
There can be no assurances that assessments arising in connection with future
natural disasters or other insurer insolvencies will not have a material adverse
effect on the Company's results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business --
Regulation."

PRIOR OFFERING ISSUANCE

In connection with the initial capitalization of FPIC between October 1984
and December 1988, FPIC's policyholders subscribed for shares of FPIC common
stock pursuant to an "intra-state" offering that was exempt from registration
under the federal securities laws. Certain policyholders who subscribed for
shares failed to submit timely certain required documents. Accordingly, FPIC did
not issue these individuals any shares or treat them as shareholders until such
documents were submitted and accepted by FPIC. Shareholders owning 379,780
shares of the Company's Common Stock (4.6% of the Company's outstanding shares
as of June 30, 1996) submitted the required documentation subsequent to December
31, 1994 and therefore did not receive the 100% stock dividend payable to
shareholders of record on such date. In order to resolve certain questions
recently raised by these shareholders, the Company's Board of Directors has
determined to issue, effective July 19, 1996, up to 379,780 additional shares of
the Company's Common Stock so as to give these shareholders the same number of
shares they would have owned at such date had they received the stock dividend.
In addition, the Company believes there are individuals who subscribed for FPIC
Common Stock who still have not submitted the required documents necessary to be
considered shareholders. Had such individuals properly submitted the required
documentation, they or their successors would have held 210,900 shares of the
Company's Common Stock. The Company believes that should such individuals ever
submit the required documentation it has meritorious defenses against ever
issuing such 210,900 shares. However, it can give no assurances that to the
extent claims are made, the Company will not be compelled to issue some or all
of such shares. This may result in up to an additional 210,900 shares (2.6% of
the Company's outstanding shares as of June 30, 1996) being issued.

DILUTION

Based on an initial public offering price of $11.00 per share, purchasers
of the Common Stock offered hereby will experience immediate and substantial
dilution of $1.38 per share. See "Dilution."

ABSENCE OF PRIOR PUBLIC MARKET

Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active or liquid trading market will
develop or continue after the Offering. The initial public offering price has
been determined by negotiations between the Company and representatives of the
Underwriters and may not be indicative of the market price for the Common Stock
after the Offering. See "Underwriting" for a discussion of the factors
considered in determining the initial public offering price.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock in the open market or the
availability of such shares for sale following the Offering could adversely
affect the market price for the Common Stock and could impair the Company's
future ability to raise capital through offerings of its equity securities.
Following the Offering, the 3,000,000 shares of Common Stock offered hereby will
be eligible for sale in the open market without restriction or registration
under the Securities Act, except for any shares purchased by an affiliate of the
Company. In addition, pursuant to a provision in the Company's articles of
incorporation, 6,139,640 shares of

10
<PAGE> 13

Common Stock will be eligible for sale 120 days after the Offering. Of these
6,139,640 shares of Common Stock, approximately 55,750 will be subject to the
sales volume limitations of Rule 144 promulgated under the Securities Act. See
"Shares Eligible for Future Sale."

RELIANCE ON INDEPENDENT INSURANCE AGENCIES

The Company's insurance products are primarily marketed by independent
agencies. During 1995, approximately 58% of the Company's MPL direct premium
written was produced by independent agencies, four of which accounted for
approximately 34% of such premium. These agencies are not obligated to promote
the Company's products and may sell competitors' insurance products. As a
result, the Company's business depends in part on the marketing effort of these
agencies and on the Company's ability to continue to offer insurance products
and services that meet the requirements of these agencies and their customers.
Failure of these independent insurance agencies to market the Company's products
successfully could have a material adverse effect on the Company's business,
financial condition or results of operations. See "Business -- Marketing and
Policyholder Services."

ANTI-TAKEOVER PROVISIONS

Florida insurance laws and regulations provide that no person may acquire
control of the Company, and thus control of FPIC, without obtaining the prior
approval of the Department of Insurance. Under Florida law, any person acquiring
five percent or more of the voting securities of an insurance holding company is
deemed to have acquired control of that company and, consequently, is generally
required to obtain the approval of the Department of Insurance before
consummating such acquisition. See "Business -- Regulation."

The Company's articles of incorporation and bylaws and Florida law contain
provisions that may have the effect of inhibiting a non-negotiated merger or
other business combination. Additionally, the Board of Directors may issue
preferred stock, which could be used as an anti-takeover device, without a
further vote of the shareholders. No shares of preferred stock of the Company
are currently outstanding, and the Company has no present intention to issue any
shares of preferred stock. However, because the rights and preferences of any
series of preferred stock may be set by the Board of Directors in its sole
discretion, the rights and preferences of any such preferred stock may be
superior to those of the Common Stock and thus may adversely affect the rights
of the holders of Common Stock. The voting structure of the Company's Common
Stock and other provisions of the articles of incorporation are intended to
encourage a person interested in acquiring the Company to negotiate with, and to
obtain the approval of, the Board of Directors in connection with a transaction.
However, certain of these provisions may discourage a future acquisition of the
Company, including an acquisition in which shareholders might otherwise receive
a premium for their shares. As a result, shareholders who might desire to
participate in such a transaction may not have the opportunity to do so.
Moreover, the existence of these provisions may have a depressive effect on the
market price of the Common Stock. See "Description of Capital
Stock -- Provisions that Could Delay, Deter or Prevent Changes in Control."

IMPORTANT CONSIDERATIONS RELATED TO FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Discussions concerning
such forward-looking statements may be found in the material set forth under
"Summary", "Risk Factors", "The Company", "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business", as well as the
Prospectus generally. These forward-looking statements include the plans and
objectives of management for future operations, including plans and objectives
relating to the products and future economic performance of the Company. The
forward-looking statements set forth in this Prospectus include or relate to:
(i) the Company's current investment strategy of minimizing realized losses;
(ii) the Company having sufficient liquidity and working capital; (iii) the
Company's strategy to seek consistent profitable growth; (iv) the Company's
ability to and success in increasing its market share of the Florida MPL market;
(v) the Company's ability to and success in diversifying its product lines into
complementary liability products and services for healthcare organizations;

11
<PAGE> 14

(vi) the Company's ability to expand into additional states; (vii) the Company's
avoidance of any material loss on collection of reinsurance recoverables; and
(viii) the continued adequacy of the Company's loss and LAE reserves.

The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements are based on assumptions that the Company will
continue to competitively price and market its insurance products, to
appropriately reserve for losses and LAE, to maintain its successful handling of
claims, that competitive conditions within the MPL insurance business will not
change materially or adversely, that demand for MPL insurance will remain
strong, that the market will accept the Company's new products and services,
that the Company will retain existing agents and key management personnel, that
the Company's reinsurers will remain solvent and that there will be no material
adverse change in the Company's operations or business. Assumptions relating to
the foregoing involve judgements with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in forward-looking information will be realized.
Budgeting, reserving and other management decisions are subjective in many
respects and thus susceptible to interpretations and periodic revisions based on
actual experience and business developments, the impact of which may cause the
Company to alter its marketing, capital expenditures or other budgets, which may
in turn affect the Company's results of operations. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will be
achieved.

12
<PAGE> 15

THE COMPANY

The Company is the second largest provider of MPL insurance in Florida,
with an approximate 15% market share of direct premium written for physicians
for the year ended December 31, 1994. For more than 20 years, the Company and
its predecessors have provided MPL insurance to Florida's medical community. The
Company has the exclusive endorsement of both the FMA and the FDA. The Company
has increased its number of insured physicians and dentists from 2,460 at
year-end 1986 to 5,055 at year-end 1995 and on June 30, 1996 the Company had
policies outstanding for 5,408 physicians and dentists. For 1995, the Company
had direct premium written of $56.6 million, operating income of $11.5 million
and at December 31, 1995 had shareholders' equity of $81.6 million. For the
first quarter of 1996, the Company had direct premium written of $22.6 million,
operating income of $2.1 million and at March 31, 1996, had shareholders' equity
of $80.6 million.

The Company has achieved underwriting profitability exceeding industry
averages while consistently expanding its policyholder base. The Company's
statutory combined ratio was 94.9% in 1993, 93.7% in 1994 and 97.6% in 1995,
compared to the PIAA industry average of 121.4%, 101.8% and 98.4%, respectively.
The Company's operating income increased from $6.3 million in 1993 to $10.4
million in 1994 and to $11.5 million in 1995. The Company's number of insured
physicians and dentists increased from 4,264 on January 1, 1993 to 5,055 on
December 31, 1995.

The Company was formed in 1996 in connection with the Reorganization which
FPIC initiated to form a holding company structure. FPIC was formed in 1985 by
the conversion of Florida Physicians Insurance Reciprocal ("FPIR") into a stock
company. FPIR was organized in 1976 as a Florida insurance reciprocal through
the conversion of the FMA-PLI Trust, which was formed in 1975 to provide MPL
insurance to members of the FMA. Because of financial difficulties, FPIR was
placed in receivership in 1984. The receivership was terminated on January 3,
1985. FPIR was recapitalized by policyholders and merged into FPIC, a stock
insurance company, on January 1, 1986. FPIC and FPIR were managed by Physicians
Management Company ("PMC") from October 1984 to May 1988.

In connection with the capitalization of FPIC between October 1984 and
December 1988, FPIC's policyholders subscribed for shares of FPIC common stock
pursuant to an "intra-state" offering. Certain policyholders who subscribed for
shares failed to submit timely certain required documents. Accordingly, the
Company does not treat these individuals as shareholders until such documents
are submitted and accepted by the Company. See "Risk Factors -- Prior Offering
Issuance."

On May 1, 1988, the contract with PMC was cancelled and the PMC employees
were hired by FPIC. On July 1, 1995, the Company purchased all of the assets of
McCreary Enterprises, Inc. ("MEI"), a Florida third party administrator for
group health, workers' compensation, general liability and property insurance.

On June 11, 1996, the shareholders of FPIC approved the Reorganization. In
connection with the Reorganization, FPIC's shareholders became the shareholders
of FIG and received five shares of FIG's Common Stock for each of their shares
of FPIC's common stock. The purposes of the Reorganization include providing a
more flexible operating structure, increasing financial flexibility and
satisfying the liquidity needs of the Company's shareholders. As of May 21,
1996, the Company had 3,407 shareholders, the majority of which are current or
former policyholders.

In connection with the Reorganization, the Company has also formed FPIC
Insurance Agency, Inc. (the "Agency"). The Company intends for the Agency to
conduct various insurance agency activities, including renewing the insurance
that FPIC directly wrote prior to the Reorganization.

Although the Company's primary activities are conducted through its
subsidiaries, FIG has entered into a management agreement and an investment
management agreement with FPIC pursuant to which FIG

13
<PAGE> 16

provides FPIC with personnel services, legal and accounting support, operations
and marketing advice and services, and investment management services.

The following chart sets forth the Company's organizational structure:

[CHART]

The Company's executive offices are located at 1000 Riverside Avenue, Suite
800, Jacksonville, Florida 32204. Its telephone number at that address is (904)
354-5910.

USE OF PROCEEDS

The principal reasons for the Offering are (i) to further capitalize FIG
which is a newly formed holding company, and (ii) to assist the Company's
shareholders with selling their shares in an orderly offering. The net proceeds
to be received by the Company from the sale of the 1,000,000 shares of Common
Stock offered by the Company hereby are estimated to be approximately $9.7
million (after deducting expenses payable by the Company in connection with the
Offering). The Company intends to retain the net proceeds for general corporate
purposes. The Company may from time to time contribute a portion of the net
proceeds to the capital of FPIC or its other subsidiaries and use a portion of
the net proceeds for future acquisitions.

The Company will not receive any of the net proceeds from the sale of
shares by the Selling Shareholders. See "Selling Shareholders."

DIVIDEND POLICY

Although the Company paid dividends of $0.10 per share on its Common Stock
in 1996, 1995, 1994 and 1992, adjusted to reflect the 100% stock dividend in
1994 and the 5 for 1 stock exchange in 1996, the Company has no plans or
policies regarding future dividends. The Company does not have any present
intention to pay dividends in the near future. The Company's Board of Directors
will review the Company's dividend policy from time to time to determine the
desirability and feasibility of paying dividends after giving consideration to
the Company's and its subsidiaries' regulatory requirements, capital
requirements, operating results and financial condition and such other factors
as the Board of Directors deems relevant. See "Business -- Regulation."

14
<PAGE> 17

DILUTION

At March 31, 1996, the net tangible book value of the Company was $78.2
million, or $9.61 per share of the outstanding Common Stock as adjusted for the
Reorganization. Net tangible book value per share is determined by dividing the
Company's net tangible book value (total tangible assets less total liabilities)
by the total number of shares of Common Stock outstanding. After giving effect,
as of that date, to the sale of the 1,000,000 shares of Common Stock offered by
the Company hereby, at an assumed initial public offering price of $11.00 per
share (the mid-point of the range of the public offering prices set forth on the
cover page of this Prospectus) and after deducting estimated underwriting
discounts and offering expenses, the adjusted net tangible book value would have
been approximately $87.9 million, or $9.62 per share of the Company's Common
Stock. This amount represents an immediate increase in net tangible book value
of $0.01 per share to the existing shareholders and an immediate dilution in net
tangible book value of $1.38 per share to new investors purchasing shares of
Common Stock in the Offering. The following table illustrates this dilution on a
per share basis:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $11.00
------
Net tangible book value per share before the Offering.............. $ 9.61
------
Increase per share attributable to new investors................... $ .01
------
Net tangible book value per share after the Offering................. $ 9.62
------
Dilution in net tangible book value to new investors................. $ 1.38
======
</TABLE>

The following table sets forth as of March 31, 1996, the difference between
the existing shareholders and the new investors with respect to the number of
shares of Common Stock purchased from the Company, the total consideration paid
and the average price per share (at the assumed initial public offering price of
$11.00 per share, before deducting estimated underwriting discounts and offering
expenses). The consideration paid by the existing shareholders and the average
price per share paid by the existing shareholders, shown in the table below, are
based on the valuation assigned to shares of stock of the Company's predecessors
in the Reorganization.

<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders......................... 6,139,640 67.2% $12,279,280 27.1% $ 2.00
New investors................................. 3,000,000 32.8 33,000,000 72.9 11.00
--------- ------- ----------- -------
Total............................... 9,139,640 100.0% $45,279,280 100.0%
</TABLE>

- ---------------

(1) Following the sale of Common Stock by the Selling Shareholders in the
Offering, the number of shares held by the existing shareholders will be
reduced by 2,000,000 shares and, after the Offering, existing shareholders
will hold 6,139,640 shares of Common Stock or 67.2% (64.0% if the
Underwriters' over-allotment option is exercised in full) of the total
shares of Common Stock outstanding after the Offering. New investors will
hold 3,000,000 shares of Common Stock, or 32.8% of the total shares of
Common Stock outstanding after the Offering (36.0% if the Underwriters'
over-allotment option is exercised in full). See "Selling Shareholders."

Each of the foregoing tables assumes that outstanding stock options have
not been exercised. At March 31, 1996, 330,000 shares of Common Stock were
reserved for issuance pursuant to the exercise of outstanding stock options, of
which none are immediately exercisable (options for an additional 60,000 shares
were granted at the time of the Reorganization). To the extent that such stock
options are eventually exercised, there may be further dilution to new
investors. See "Management -- Omnibus Incentive Plan."

Each of the foregoing tables excludes the 379,780 shares of Common Stock
that will be issued by the Company effective July 19, 1996. See "Risk
Factors -- Prior Offering Issuance."

15
<PAGE> 18

CAPITALIZATION

The following table sets forth the capitalization of (i) FPIC at March 31,
1996, (ii) FIG and its consolidated subsidiaries as adjusted to reflect the
Reorganization and (iii) FIG and its consolidated subsidiaries as further
adjusted to reflect the sale of the 1,000,000 shares of Common Stock offered by
the Company hereby (at an assumed initial public offering price of $11.00 per
share) and the application of the net proceeds therefrom, after deducting
estimated underwriting discounts and expenses of the Offering. See "Use of
Proceeds." This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements and the Notes thereto, included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------
AS FURTHER
ACTUAL AS ADJUSTED ADJUSTED
------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt................................................. $ -0- $ -0- $ -0-
------- ----------- ----------
Shareholders' equity:
FIG Preferred Stock, $.10 par value, 50,000,000 shares
authorized; no shares issued and outstanding, as adjusted
and as further adjusted................................... -- -- --
FPIC Common Stock, $1.00 par value, 5,000,000 shares
authorized; 1,627,928 shares issued and outstanding,
actual.................................................... 1,628 -- --
FIG Common Stock, $.10 par value, 25,000,000 shares
authorized; 8,139,640 shares issued and outstanding, as
adjusted and 9,139,640 shares issued and outstanding, as
further adjusted(1)....................................... -- 814 914
Additional paid-in capital................................... 17,641 18,455 28,016
Unrealized loss on investments, net of tax................... (579) (579) (579)
Unearned compensation -- stock options....................... -- -- --
Retained earnings............................................ 61,924 61,924 61,924
------- ----------- ----------
Total shareholders' equity........................... 80,614 80,614 90,275
------- ----------- ----------
Total capitalization................................. $80,614 $80,614 $ 90,275
======= ========= ========
</TABLE>

- ---------------

(1) Excludes 330,000 shares of Common Stock reserved for issuance pursuant to
the exercise of stock options outstanding as of March 31, 1996, (options for
an additional 60,000 shares were granted at the time of the Reorganization).
See "Management -- Directors' Fees." Also excludes 379,780 shares of Common
Stock that will be issued by the Company effective July 19, 1996. See "Risk
Factors -- Prior Offering Issuance."

16
<PAGE> 19

SELECTED CONSOLIDATED FINANCIAL DATA

The following tables should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Company's Consolidated Financial Statements and the Notes thereto, and the other
financial and statistical information included elsewhere in this Prospectus. The
consolidated income statement data for the years ended December 31, and the
consolidated balance sheet data at December 31, have been derived from the
consolidated financial statements of the Company, which have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. The data for
the three months ended March 31, 1995 and 1996 and at March 31, 1995 are derived
from the unaudited consolidated financial statements of the Company, and reflect
all adjustments (which consist of only normally recurring adjustments) necessary
for a fair presentation of interim periods. Operating results for the three
months ended March 31, 1996 are not necessarily indicative of results for the
full fiscal year.

<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31, FOR THE YEARS ENDED DECEMBER 31,
------------------------ --------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA(1))
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Direct premium written..... $ 22,556 $ 20,127 $ 56,641 $ 52,454 $ 51,568 $ 44,845 $ 45,169
Net premium written........ $ 20,663 $ 18,254 $ 54,306 $ 47,509 $ 45,426 $ 40,472 $ 40,194
========== ========== ========== ========== ========== ========== ==========
Net premium earned......... $ 12,922 $ 11,101 $ 52,674 $ 46,836 $ 39,443 $ 40,738 $ 38,123
Net investment income...... 3,149 2,894 11,987(2) 10,369 8,370 8,853 10,342
Net realized investment
gains (losses)........... (11) (557) 238 (6,657)(3) 3,437 (991) 5,553
Other income............... 1,705 428 4,632 1,758 1,435 1,226 1,631
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues..... 17,765 13,866 69,531 52,306 52,685 49,826 55,649
---------- ---------- ---------- ---------- ---------- ---------- ----------
Losses and LAE(4).......... 12,214 10,420 44,839 39,177 34,663 36,740 18,608
Other operating expenses... 2,516 1,227 7,096 4,005 4,394 9,745(5) 6,013
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total expenses..... 14,730 11,647 51,935 43,182 39,057 46,485 24,621
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes
and cumulative effect of
accounting change........ 3,035 2,219 17,596 9,124 13,628 3,341 31,028
Income taxes............... 960 781 5,910 3,098 5,087 1,194 11,383
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before
cumulative effect of
accounting change........ 2,075 1,438 11,686 6,026 8,541 2,147 19,645
---------- ---------- ---------- ---------- ---------- ---------- ----------
Cumulative effect of
accounting change, net... 0 0 0 (149) 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income................. $ 2,075 $ 1,438 $ 11,686 $ 5,877 $ 8,541 $ 2,147 $ 19,645
========== ========== ========== ========== ========== ========== ==========
Net income per share....... $ .25 $ .19 $ 1.47 $ .76 $ 1.10 $ .28 $ 2.54
Operating income(6)........ $ 2,082 $ 1,806 $ 11,529 $ 10,420 $ 6,273 $ 2,801 $ 15,980
Operating income per
share.................... $ .26 $ .23 $ 1.45 $ 1.34 $ .81 $ .36 $ 2.06
Weighted average number of
shares outstanding....... 8,139,640 7,759,860 7,949,750 7,759,860 7,759,640 7,756,180 7,748,600
CERTAIN FINANCIAL
RATIOS:(7)
Loss and LAE ratio(4)...... 88.3% 85.4% 83.9% 81.2% 74.7% 90.2% 44.2%
Underwriting expense
ratio.................... 25.7 26.7 13.7 12.5 20.2 13.3 11.9
---------- ---------- ---------- ---------- ---------- ---------- ----------
Combined ratio............. 114.0% 112.2% 97.6% 93.7% 94.9% 103.5% 56.1%
========== ========== ========== ========== ========== ========== ==========
Industry combined
ratio(8)................. -- -- 98.4% 101.8% 121.4% 134.2% 103.8%
</TABLE>

17
<PAGE> 20

<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA(1))
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total investments.............................. $221,832 $ 221,604 $ 192,867 $ 180,721 $ 179,872 $ 167,473
Total assets................................... 284,593 276,699 244,266 233,120 206,408 196,383
Loss and LAE reserves.......................... 168,822 164,506 152,268 138,745 126,650 118,993
Total liabilities.............................. 203,979 195,143 182,660 169,199 152,954 147,738
Shareholders' equity........................... 80,614 81,556 61,606 63,921 53,454 48,645
Book value per share........................... $ 9.90 $ 10.02 $ 7.94 $ 8.24 $ 6.89 $ 6.28
Common stock outstanding at end of period...... 8,139,640 8,139,640 7,759,860 7,759,860 7,756,850 7,748,600
</TABLE>

- ---------------

(1) Per share data has been calculated after giving effect to the 100% stock
dividend on December 31, 1994 and the 5 for 1 stock exchange effective June
11, 1996 in connection with the Reorganization. Does not give effect to the
sale of Common Stock in the Offering. Excludes 379,780 shares of Common
Stock that will be issued by the Company effective July 19, 1996. See "Risk
Factors -- Prior Offering Issuance."
(2) Net investment income in 1995 includes a $0.5 million write-down on real
estate. See Note 5 of "Notes to the Consolidated Financial Statements".
(3) The $6.7 million loss was principally the result of an increase in interest
rates during the first 6 months of 1994, coupled with an active trading
strategy by an external manager who was terminated in June 1994.
(4) Includes a $1.6 million, $2.9 million, $10.0 million, $10.5 million, $17.7
million, $16.3 million and $20.2 million, decrease in estimated loss and
LAE for claims occurring in prior periods for the three months ended March
31, 1996 and 1995 and the years ended December 31, 1995, 1994, 1993, 1992
and 1991, respectively.
(5) Includes a one-time accrual of $5.0 million for an assessment by the FIGA
to fund losses by insolvent insurers incurred as a result of Hurricane
Andrew. See Note 10 of "Notes to the Consolidated Financial Statements."
(6) Operating income represents net income excluding net realized investment
gains or losses, net of federal income taxes and the cumulative effect of
accounting change.
(7) Financial ratios have been calculated using statutory accounting practices
("SAP"), which do not require deferral of policy acquisition costs.
(8) Calculated based upon information reported by PIAA. For this calculation,
combined ratio is the total of the loss and LAE ratio and the underwriting
expense ratio. Combined ratio as used herein does not consider any
policyholder dividend information. The Company paid policyholder dividends
of $0.2 million, $2.2 million and $4.0 million in 1994, 1993 and 1991,
respectively. No policyholder dividends were paid in the periods ended
March 31 or in the years ended December 31, 1995 and 1992.

18
<PAGE> 21

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and the notes thereto appearing
elsewhere herein. The Company's consolidated financial statements include the
results of its wholly owned subsidiary McCreary since July 1, 1995. All amounts
have been rounded to the nearest $100,000.

GENERAL

FIG's primary sources of revenue are dividends from its subsidiaries. The
primary sources of revenues for these dividends are premium earned and
investment income derived from the insurance operations of FPIC, and fee and
commission income from McCreary and the Agency. The Company concentrates on
liability insurance products for the healthcare community, with MPL insurance
for physicians and dentists as its primary product. The Company, through FPIC,
writes MPL insurance on a claims-made basis, which provides protection to the
insured against only those claims that arise out of incidents occurring and of
which notice to the insurer is given while coverage is effective. In contrast to
occurrence MPL policies, which the Company has never written, claims-made
policies allow the Company to accrue reserves in the year that a claim is
reported instead of in the year of incident occurrence. Consequently, the
Company is less dependent on the actuarial determination of claims incurred but
not reported.

The Company's financial position and results of operations are subject to
fluctuations due to a variety of factors. Unexpectedly high frequency or
severity of losses in any period would have a material adverse effect on the
Company. Additionally, reevaluations of the Company's loss and LAE reserves
could result in an increase or decrease in reserves and a corresponding
adjustment to earnings. The Company's historical results of operations are not
necessarily indicative of future results.

RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE
MONTHS ENDED MARCH 31, 1995

Premiums

Direct premium written increased $2.5 million, or 12%, from $20.1 million
in the first quarter of 1995 to $22.6 million in the first quarter of 1996. This
increase was primarily attributable to an increase in the number of insureds and
the average premium per insured (despite the rate reduction discussed below).
This increase was partially offset by an average rate reduction of 2.4% on
physician MPL premiums effective January 1, 1996. Reinsurance premium ceded
remained unchanged from the first quarter of 1995 to the first quarter of 1996
at $1.9 million. Net premium earned increased $1.9 million, or 17%, from $11.1
million in the first quarter of 1995 to $13.0 million in the first quarter of
1996 for the foregoing reasons.

Net Investment Income

Net investment income increased $0.2 million, or 7%, from $2.9 million in
the first quarter of 1995 to $3.1 million in the first quarter of 1996. This
increase was primarily attributable to income earned from a higher level of
invested assets.

Net Realized Investment Gains (Losses)

There were no material net realized investment gains or losses in the first
quarter of 1996. Net realized investment losses were $0.6 million in the first
quarter of 1995.

Other Income

Other income, comprised principally of claims administration and management
fees, commissions and finance charges, increased $1.3 million, or 325%, from
$0.4 million in the first quarter of 1995 to $1.7 million in the first quarter
of 1996. This increase was primarily attributable to claims administration fees
of

19
<PAGE> 22

$1.0 million and commissions of $0.1 million for McCreary's operations, which
the Company acquired on July 1, 1995.

Losses and LAE

Losses and LAE increased $1.8 million, or 17%, from $10.4 million in the
first quarter of 1995 to $12.2 million in the first quarter of 1996. This
increase was primarily attributable to the increase in net premium earned.

Other Operating Expenses

Other operating expenses, comprised principally of selling and
administrative expenses, increased $1.3 million from $1.2 million in the first
quarter of 1995 to $2.5 million in the first quarter of 1996. This increase was
primarily attributable to McCreary's operations.

Income Taxes

Income taxes increased $0.2 million, or 23%, from $0.8 million for the
three months ended March 31, 1995 to $1.0 million for the three months ended
March 31, 1996. This increase was related to the increase in income before
income taxes.

Net Income

For the reasons stated above, net income increased $0.7 million, or 50%,
from $1.4 million in the first quarter of 1995 to $2.1 million in the first
quarter of 1996.

RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED
DECEMBER 31, 1994

Premiums

Direct premium written increased $4.2 million, or 8%, from $52.4 million in
1994 to $56.6 million in 1995. This increase was primarily attributable to (i)
an average rate increase of 3.6% on physician MPL premiums, and (ii) an increase
in the number of insureds and the average premium per insured (excluding the
impact of the rate increase discussed above). Reinsurance premium ceded
decreased $2.6 million, or 53%, from $4.9 million in 1994 to $2.3 million in
1995 due to a return of ceded premium of $3.4 million upon the expiration of a
reinsurance contract. Excluding this transaction, reinsurance premium ceded
would have increased $0.8 million to $5.7 million. Net premium earned increased
$5.9 million, or 13%, from $46.8 million in 1994 to $52.7 million in 1995 due to
the increase in direct premium written and the decrease in ceded premium.

Net Investment Income

Net investment income increased $1.6 million, or 16%, from $10.4 million in
1994 to $12.0 million in 1995. This increase, which was partially offset by a
$0.5 million write-down of the Company's home office building, was primarily
attributable to: (i) a decrease in the portfolio's average cash balance in 1995
from 1994, the difference of which was invested in higher yielding securities;
and (ii) a higher level of invested assets. The change in cash position was
attributed to the Company's decision to change its investment strategy from
active trading to a buy and hold approach. The Company's investment policy is to
acquire investment grade fixed income securities with an average duration of
less than four years. The average duration of the portfolio decreased from 4.6
years in 1994 to 3.6 years in 1995.

Net Realized Investment Gains (Losses)

Net realized investment gains in 1995 were $0.2 million as compared to net
realized investment losses of $6.7 million in 1994. The Company's net realized
investment losses of $6.7 million during 1994 were principally the result of an
increase in interest rates during the first six months of 1994 coupled with an
active trading strategy by an external portfolio manager. The Company terminated
this external manager in June

20
<PAGE> 23

1994. The Company thereafter changed its investment strategy from an active
trading strategy to a buy and hold approach.

Other Income

Other income increased $2.9 million, or 171%, from $1.7 million in 1994 to
$4.6 million in 1995. This increase was primarily attributable to claims
administration fees of $1.9 million and commissions of $0.6 million from
McCreary's operations.

Losses and LAE

Losses and LAE increased $5.6 million, or 14%, from $39.2 million in 1994
to $44.8 million in 1995 reflecting the increase in net premium earned. The SAP
loss ratios of 81.2% in 1994 and 83.9% in 1995 reflect the stability the Company
has experienced in its loss trends in recent years. In connection with the
Company's bi-annual reserving review, which includes a reevaluation of the
adequacy of reserve levels for prior years' claims, the Company reduced its
reserves for claims occurring in prior periods, by $10.5 million in 1994 and
$10.0 million in 1995. These reductions produced corresponding increases in the
Company's pre-tax income. There is no assurance that reserve adequacy
reevaluations will produce similar reserve reductions and pre-tax income
increases in the future.

The Company believes that its favorable loss and LAE reserve development
has primarily resulted from the following factors: (i) the Company's approach to
establishing reserves, see "Business -- Loss and LAE Reserves;" (ii) the
Company's targeting of medical specialties in which it believes it has developed
substantial knowledge and experience; and (iii) the Company's targeting of
"claims-free" business.

The Company believes that a combination of the factors discussed above have
contributed to the recent redundancies in reserves established by the Company
for prior years. The Company cannot predict whether similar redundancies will be
experienced in future years. Factors that could adversely affect the loss and
LAE reserve estimate and future redundancies include, but are not limited to,
inflation, changes in frequency and severity trends or changes in the judicial
or legislative environment.

Other Operating Expenses

Other operating expenses increased $3.1 million, or 78%, from $4.0 million
in 1994 to $7.1 million in 1995. This increase was primarily attributable to an
increase of $2.0 million in administrative expenses of McCreary's operations and
an increase of $0.6 in commission expense due to higher direct premium written
by agents and an increase in the commission rates paid to agents.

Income Tax

Income taxes increased $2.8 million, or 91%, from $3.1 million in 1994 to
$5.9 million in 1995. This increase was primarily attributable to the increase
in income before income taxes.

Net Income

For the reasons stated above, net income increased $5.8 million, or 98%,
from $5.9 million in 1994 to $11.7 million in 1995.

RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED
DECEMBER 31, 1993

Premiums

Direct premium written increased $0.9 million, or 2%, from $51.5 million in
1993 to $52.4 million in 1994. This increase was primarily attributable to an
increase in the number of insureds and the average premium per insured (despite
the rate reduction discussed below). This increase was partially offset by an
average rate reduction of 4.4%. Reinsurance premium ceded decreased $1.2
million, or 20%, from $6.1 million in 1993 to $4.9 million in 1994. This
decrease in the reinsurance premiums ceded was primarily due to a

21
<PAGE> 24

decline in the rates charged by the Company's main reinsurers. Net premium
earned increased $7.4 million, or 19%, from $39.4 million in 1993 to $46.8
million in 1994. This was primarily attributable to a $6.7 million increase in
direct premium written in 1993 over 1992 that were primarily earned in 1994 and
to a $2.2 million policyholder dividend that was subtracted from 1993 net
premium earned.

Net Investment Income

Net investment income increased $2.1 million, or 25%, from $8.3 million in
1993 to $10.4 million in 1994. This increase was primarily attributable to: (i)
a decrease in the portfolio's average cash balance in 1994 from 1993, the
difference of which was invested in higher yielding securities; and (ii) a
higher level of invested assets.

Net Realized Investment Gains (Losses)

Net realized investment losses in 1994 were $6.7 million and were the
result of the reasons discussed above, as compared to net realized investment
gains in 1993 of $3.4 million which were primarily attributable to a favorable
interest rate environment.

Losses and LAE

Losses and LAE increased $4.5 million, or 13%, from $34.7 million in 1993
to $39.2 million in 1994 reflecting the increase in the net premium earned. The
SAP loss ratios of 74.7% in 1993, and 81.2% in 1994 reflect the stability the
Company has experienced in its loss trends in recent years. In connection with
the Company's normal reserving review, which includes a reevaluation of the
adequacy of reserve levels for prior years' claims, the Company reduced its
reserves for claims occurring in prior periods by $10.5 million in 1994 and
$17.7 million in 1993. These reductions produced corresponding increases in the
Company's income before income taxes. There is no assurance that reserve
adequacy reevaluations will produce similar reserve reductions and income before
income tax increases in the future.

Other Operating Expenses

Other operating expenses decreased $0.4 million, or 9%, from $4.4 million
in 1993 to $4.0 million in 1994 primarily due to a decrease in general expenses
and an increase in ceding commissions paid to the Company by reinsurers in 1994.

Income Tax

Income taxes decreased $2.0 million, or 39%, from $5.0 million in 1993 to
$3.0 million in 1994. This decrease was primarily attributable to a decrease in
income before income taxes.

Net Income

For the reasons stated above, net income decreased $2.6 million, or 31%,
from $8.5 million in 1993 to $5.9 million in 1994.

22
<PAGE> 25

LIQUIDITY AND CAPITAL RESOURCES

The payment of losses, LAE, and operating expenses in the ordinary course
of business is the principal need for the Company's liquid funds. Cash used to
pay these items has been provided by operating activities. Cash provided from
these activities was sufficient during 1995 to meet the Company's needs.
Management believes these sources will be sufficient to meet the Company's cash
needs for operating purposes for at least the next twelve months. However, a
number of factors could cause increases in the dollar amount of losses and LAE
paid and may therefore adversely affect future reserve development and cash flow
needs. Management believes these factors include, among others, inflation,
changes in medical procedures, increasing use of managed care and adverse
legislative changes. In order to compensate for such risk, the Company: (i)
maintains what its management considers to be adequate reinsurance; (ii)
conducts regular actuarial reviews of loss reserves every six months; (iii)
maintains adequate asset liquidity (by managing its cash flow from operations
coupled with its fixed income maturities) and (iv) maintains an investment
portfolio invested primarily in investment grade, fixed maturity securities. See
"Risk Factors."

The Company did not borrow any funds during 1995, 1994 or 1993 and has no
current plans to borrow funds during 1996. At March 31, 1996, the Company held
approximately $11.2 million in investments scheduled to mature during the next
twelve months, which, combined with net cash flows from operating activities,
are expected to provide the Company with sufficient liquidity and working
capital. See "Risk Factors." As highlighted in the accompanying consolidated
statements of cash flows, the Company generated positive net cash of $7.5
million in the first quarter of 1996 and $19.9 million, $26.5 million and $0.3
million from operations in 1995, 1994 and 1993, respectively. Net cash provided
in 1993 was reduced by $10.0 million due to premiums ceded to a certain
reinsurance contract that have been recorded as a deposit on the financial
statements.

Shareholder dividends payable by the Company's insurance subsidiary, FPIC,
are subject to certain limitations imposed by Florida law. See
"Business -- Regulation." In 1996, FPIC is permitted, within insurance
regulatory guidelines, to pay dividends of approximately $11.6 million without
prior regulatory approval.

In recent years the NAIC has developed risk based capital ("RBC")
measurements for insurers. The measurements provide state regulators with
varying levels of authority based on the adequacy of an insurer's RBC. At
December 31, 1995, FPIC's statutory annual statements reported a total adjusted
surplus to policyholders of $70.0 million, which is $58.6 million, or 515%, more
than the NAIC's authorized RBC control level of $11.4 million. The authorized
control level permits an insurance regulator to take whatever regulatory actions
are considered necessary to protect the best interests of the policyholders and
creditors of the insurer, which may include placing the insurer under regulatory
control (i.e., rehabilitation or liquidation). The Department of Insurance has
not adopted the NAIC's RBC standards, although the Department of Insurance does
use the standards to identify companies that may need regulatory attention.

CHANGES IN ACCOUNTING PRINCIPLES

Effective December 31, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 113, "Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," which
requires the amounts due from reinsurers and amounts paid to reinsurers relating
to the unexpired portion of reinsured contracts (prepaid reinsurance premiums)
be disclosed separately as assets. This statement also established the risk
transfer criteria necessary for a contract to be accounted for as reinsurance.
For the effect of this change in Accounting Principles, see
"Business -- Reinsurance."

Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" ("SFAS 115"). Under the
provisions of SFAS 115, the Company is required to classify investments in debt
securities (bonds, redeemable preferred stocks and mortgage-backed securities)
into one of three categories: held-to-maturity, available-for-sale, or trading.
As permitted by SFAS 115, no retroactive effect has been included in the 1993
financial statements.

23
<PAGE> 26

Investments in available-for-sale securities are available to be sold in
the future in response to the Company's liquidity needs, changes in market
interest rates, and asset-liability management strategies, among other reasons.
Available-for-sale securities are recorded at fair value, with unrealized gains
and losses excluded from earnings and reported as a separate component of
shareholders' equity, net of deferred taxes. The effect of adopting SFAS 115 was
to report net unrealized depreciation on available-for-sale securities of $0.3
million, and deferred taxes of $0.2 million, as a decrease in shareholders'
equity as of January 1, 1994. Investments were reduced by $0.5 million.

Investments in debt securities that were held with the objective of trading
to maximize investment returns or were expected to be sold before maturity were
recorded at fair market value. The effect of adopting SFAS 115 was to report a
net unrealized loss of $0.1 million related to the trading portfolio as a
cumulative effect adjustment in the 1994 consolidated statement of income, and
deferred taxes of $0.1 million. Investments were reduced by $0.2 million.
Effective July 1, 1994, the Company classified all of its investments in debt
securities as available-for-sale.

GUARANTY FUND ASSESSMENTS

The standard FIGA assessments that may be levied annually by FIGA on an "as
needed" basis, are expensed as paid. In 1995, no assessment was levied. In 1994
and 1993, FPIC was assessed $0.4 million and $0.8 million, respectively.

In addition to the standard FIGA assessments, in 1992 the Florida
Legislature passed a special assessment to retire bonds issued to pay property
losses arising from Hurricane Andrew. FPIC is assessed 2 percent of the greater
of either net direct premium written during the current year or 1991, the base
year. The bonds were initially scheduled for defeasance in the year 2003 but may
be paid off prior to that time. However, changes in the premium levels of
insurers in this pool could revise the payoff date. At December 31, 1992, FPIC
established a reserve of $5.0 million to cover the anticipated payments which
was accounted for as other operating expense in 1992. At March 31, 1996, the
balance of this reserve was $2.8 million.

24
<PAGE> 27

BUSINESS

OVERVIEW

The Company is the second largest provider of MPL insurance in Florida,
with an approximate 15% market share of direct premium written for the year
ended December 31, 1994. Based on data compiled by A.M. Best, total MPL premiums
in the U.S. exceeded $5.8 billion in 1994. Florida is the third largest market
for MPL insurance in the U.S. based on direct premium written with more than
$370 million of MPL premium written in 1994. For more than 20 years, the Company
and its predecessors have provided MPL insurance to Florida's medical community.
The Company has the exclusive endorsement of both the FMA and the FDA. The
Company has increased its number of insured physicians and dentists from 2,460
at year-end 1986 to 5,055 at year-end 1995 and on June 30, 1996 the Company had
policies outstanding for 5,408 physicians and dentists. For 1995, the Company
had direct premium written of $56.6 million, operating income of $11.5 million,
and at December 31, 1995 had shareholders' equity of $81.6 million. For the
first quarter of 1996, the Company had direct premium written of $22.6 million,
operating income of $2.1 million, and at March 31, 1996, had shareholders'
equity of $80.6 million.

The Company has achieved underwriting profitability exceeding industry
averages while consistently expanding its policyholder base. The Company's
statutory combined ratio was 94.9% in 1993, 93.7% in 1994 and 97.6% in 1995,
compared to the PIAA industry average of 121.4%, 101.8% and 98.4%, respectively.
The Company's after-tax operating income increased from $6.3 million in 1993 to
$10.4 million in 1994 and to $11.5 million in 1995. The Company increased its
number of insured physicians and dentists from 4,264 on January 1, 1993 to 5,055
on December 31, 1995.

OPERATING STRATEGY

The Company believes that its underwriting profitability and historical
growth are attributable to several key strengths, which include:

25
<PAGE> 28

GROWTH STRATEGY

The Company's strategy is to pursue future growth and underwriting
profitability by:

- Increasing Florida Medical Malpractice Market Share. The Company
believes that its primary growth opportunity will be expansion in the
Florida MPL market. The Company is expanding its premium base in Florida
by attracting additional insureds, primarily in its targeted segments. The
Company has been able to do so by offering competitive pricing and signing
new agents. New agents accounted for 13.7% of new direct written premiums
in 1995. In addition, the Florida MPL market is highly fragmented, with
over 36 insurers currently writing business in the state, 15 of which are
physicians' mutual protective trusts or other similar entities. The
Company believes that this fragmentation provides an opportunity for
consolidation.

- Entering the Managed Care Market. The Company has entered the evolving
managed care marketplace which is undergoing change with the recent
emergence of provider-supported organizations, such as IPAs, PHOs, and
MSOs by capitalizing on its knowledge of the medical community and its
relationship with its insureds. The Company is currently marketing managed
care liability insurance to these newly-formed organizations and
professional and comprehensive general liability insurance to healthcare
facilities. The Company believes that by providing insurance to managed
care entities and healthcare facilities, it will have an opportunity to
cross-sell its MPL insurance to physicians affiliated with such entities
and facilities.

- Expanding into New States. The Company believes that states in the
southern region of the U.S. provide the Company an opportunity to
profitably increase its premium volume while maintaining its underwriting
standards. The Company believes that it can successfully compete with
existing insurers in those states by targeting and competitively pricing
business from certain specialties and geographic territories and by
capitalizing on its ability to develop and maintain strong agent loyalty.
The Company therefore, has hired personnel, has begun enrolling agents,
and has commenced marketing in Georgia. In addition, FPIC has recently
obtained a license to do business in Alabama and is contemplating
opportunities in other states, principally in the southern region of the
U.S. This expansion of the Company's business may also include expansion
through acquisition of, or combination with, MPL insurers and other
entities in other states.

- Pursuing Cross-Selling Opportunities. In order to further its
cross-selling opportunities, on July 1, 1995, the Company, through its
subsidiary, McCreary, acquired all of the assets of a Florida third party
administrator for group health, workers' compensation, general liability,
and property insurance. The Company has begun offering McCreary's products
to FPIC's insureds and prospective insureds such as hospitals, healthcare
facilities, and other provider-supported organizations. The Company is
currently considering the acquisition of an additional Florida third party
administrator that had revenues of approximately $1.9 million in fiscal
year 1995.

INSURANCE PRODUCTS

The Company has developed a variety of insurance products for participants
in the healthcare industry. These products include: MPL insurance for medical
professionals, managed care liability insurance, professional and comprehensive
general liability insurance for healthcare facilities, AHCA/OSHA insurance
coverage, provider stop loss insurance and third party administration. The
following table summarizes, by product, the direct premium written by the
Company for the periods indicated.

<TABLE>
<CAPTION>
FOR THE THREE FOR THE YEAR ENDED DECEMBER
MONTHS ENDED 31,
MARCH 31, -----------------------------
1996 1995 1994 1993
------------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Medical professional liability for physicians.............. $21,505 $52,134 $48,546 $48,123
Medical professional liability for dentists................ 703 3,190 2,817 2,618
Managed care............................................... 23 215 -- --
Professional and comprehensive general liability........... 42 317 153 --
AHCA/OSHA.................................................. 283 785 938 827
------------- ------- ------- -------
Total............................................. $22,556 $56,641 $52,454 $51,568
============ ======== ======== ========
</TABLE>

26
<PAGE> 29

Medical Professional Liability. The principal product offered by the
Company is MPL insurance for physicians and dentists. The Company's MPL
insurance is offered to physicians and dentists in all types of settings
including solo practices, group practices and hospitals. MPL insurance provides
coverage against the legal liability of an insured for such things as injury
caused by or as a result of treatment of a patient, failure to treat a patient
and failure to diagnose a patient.

MPL policies are issued on a "claims-made" basis. Coverage is provided for
claims reported to the Company during the policy period arising from incidents
that occurred at any time the insured was covered by the policy. The Company
also offers "tail coverage" for claims reported after the expiration of the
policy for occurrences during the coverage period. The price of the tail
coverage is based on the length of time the insured has been covered under the
Company's claims-made form. The Company provides free tail coverage for insured
physicians who die or become disabled during the coverage period of the policy
and those who have been insured by the Company for at least five consecutive
years and retire completely from the practice of medicine. MPL insurance
policies offered by the Company are issued on a claims-made basis with liability
limits up to $3.0 million per incident and $5.0 million in annual aggregate for
physicians and $1.0 million per incident and $3.0 million in annual aggregate
for dentists. At June 30, 1996, the Company had 3,803 physician insureds and
1,605 dentist insureds. For the year ended December 31, 1995, the Company had
$55.3 million in direct premium written from MPL insurance, representing 97.7%
of the Company's total direct premium written.

The following tables summarize the Company's physician and dentist MPL
insurance direct premium written for the year ended December 31, 1995:

PHYSICIAN GROUP SIZE
-------------------------------------------------------------- DIRECT
PREMIUM PERCENT
WRITTEN OF TOTAL
-------------- ----------
(IN THOUSANDS)
<S> <C> <C>
Sole practitioner physicians.................................. $ 27,532 52.8%
Group with less than 5 physicians............................. 14,868 28.5
Group with 5-8 physicians..................................... 5,738 11.0
Group with 9 or more physicians............................... 3,997 7.7
-------------- ----------
Total............................................... $ 52,135 100.0%
=========== ========
</TABLE>

DENTIST GROUP SIZE
-------------------------------------------------------------- DIRECT
PREMIUM PERCENT
WRITTEN OF TOTAL
-------------- ----------
(IN THOUSANDS)
<S> <C> <C>
Sole practitioner dentists.................................... $ 2,748 86.1%
Group with less than 5 dentists............................... 425 13.3
Group with 5-8 dentists....................................... 17 0.6
-------------- ----------
Total............................................... $ 3,190 100.0%
=========== ========
</TABLE>

Managed Care. Managed care liability insurance provides coverage for
liability arising from the errors and omissions of a managed care organization,
the vicarious liability of a managed care organization for acts or omissions by
contracted and employed providers ("E&O") and the liability of directors and
officers of a managed care organization ("D&O"). These policies are issued on a
claims-made basis. The typical limits of coverage offered by the Company for E&O
policies is $1.0 million per incident and $1.0 million in annual aggregate and
for D&O policies is $3.0 million per incident and $3.0 million in annual
aggregate. As of December 31, 1995, the Company had 11 managed care liability
policies issued. For the year ended December 31, 1995, the Company had $0.2
million in direct premium written from managed care liability insurance,
representing 0.4% of the Company's total direct premium written.

Professional and Comprehensive General Liability. The Company also offers
professional and comprehensive general liability insurance to healthcare
facilities, such as ambulatory surgery centers and walk-in medical care clinics.
The policy issued to healthcare facilities provides protection for professional
liability related to the operation of a healthcare facility and its various
staff committees, together with comprehensive

27
<PAGE> 30

general liability. Professional liability insurance is offered by the Company to
healthcare facilities on a claims-made basis. Commercial general liability is
available on a claims-made or occurrence basis, although all policies issued as
of March 31, 1996 were on a claims-made basis. The limits of coverage for these
policies available to non-hospital healthcare facilities is $1.0 million per
incident and $3.0 million in annual aggregate and to hospitals is $10.0 million
per incident and $10.0 million in annual aggregate. Higher liability limits are
placed through facultative reinsurance arrangements. As of March 31, 1996, the
Company had 12 facility insureds. For the year ended December 31, 1995, the
Company had $0.3 million in direct premium written from professional and
comprehensive general liability insurance for healthcare facilities,
representing 0.5% of the Company's total direct premium written.

AHCA/OSHA. The Company also offers defense coverage to physicians and
dentists for costs associated with investigations initiated by Florida's Agency
for Healthcare Administration ("AHCA") as well as the Occupational Safety and
Health Administration ("OSHA"). This coverage is offered to the Company's
insureds for investigations that are not related to an MPL claim; investigations
related to an MPL claim are provided to the Company's insureds as part of their
policy coverage. AHCA/OSHA coverage is also offered to physicians and dentists
not otherwise insured by the Company. Policy limits for this coverage are
$25,000 per incident and $75,000 in annual aggregate. For the year ended
December 31, 1995, the Company had $0.8 million in direct premium written for
AHCA/OSHA insurance, representing 1.4% of the Company's total direct premium
written.

Provider Stop Loss. As part of its efforts to develop insurance products
designed to meet the needs of customers in the healthcare industry, the Company
has developed provider stop loss insurance. Provider stop loss insurance is
designed to limit the risk of a healthcare provider (whether a hospital,
physician group or managed care organization) with respect to contracts under
which the insured provider has agreed to provide healthcare services at a fixed
rate ("capitation"). The Company has not yet sold any provider stop loss
insurance.

Third Party Services. Through McCreary, the Company offers third party
administrative services. McCreary specializes in the administration of self
insurance plans for large employers. The lines of insurance that McCreary
primarily administers are group health, workers' compensation, general liability
and property. The Company intends to offer these services to its existing and
future customer base of healthcare facilities and managed care organizations on
both a self insured basis and a fully insured basis. For the six-month period
ended December 31, 1995, McCreary contributed $2.7 million to the Company's
total revenue. See "Risk Factors."

RATES

The Company establishes, through its own actuarial staff and independent
actuaries, rates and rating classifications for its physician and dentist
insureds based on the loss and LAE experience it has developed over the past 20
years and upon rates charged by its competitors. The Company uses certain
relative risk factors based on geographic location, medical specialty and policy
limits. The Company has established its premium rates and rating classifications
for healthcare facilities and managed care organizations utilizing data publicly
filed by other insurers and guidelines provided by its reinsurers. All rates for
liability insurance are subject to review by the relevant insurance regulatory
authority.

Premium rates contemplate a certain level of risk. Consequently, there is
significant variance in premium rates based upon factors that are unique to a
particular insured. The Company establishes premium rates by applying relative
risk factors to an established base rate. A base rate is currently defined as
the premium charged a family practitioner, practicing outside of Dade, Broward
and Palm Beach Counties with a $500,000 per occurrence policy limit. As of
January 1, 1996 the Company's base rate premium was approximately $8,000 per
annum. Upon application of the various risk factors a neurosurgeon practicing in
one of those three counties with a policy limit of $500,000 per occurrence could
be charged a premium rate of approximately $140,000 per annum.

As part of its pricing strategy, the Company targets medical professionals
with low levels of previous MPL claims. The Company offers such medical
professionals a "Claims-free" credit if they have had five or

28
<PAGE> 31

more years of experience with no claim in excess of either $25,000 for medical
professionals practicing outside Dade, Broward and Palm Beach counties or
$50,000 for medical professionals practicing in one of those three counties.
This credit can range from 10% to 25% of premium for physicians.

MARKETING AND POLICYHOLDER SERVICES

The Company's insurance products are primarily marketed by independent
agencies. In addition insurance products are sold by the Company directly. As of
December 31, 1995, the Company's products were sold through 77 independent
agencies. During 1995, approximately 58% of the Company's MPL direct premium
written was produced by independent agents, four of which accounted for
approximately 34% of such premiums. The Company added 16 new independent
agencies in 1995. The insurance products that are sold by the Company directly
are a result of direct requests from physicians.

An integral part of the Company's marketing strategy is targeting segments
of the MPL industry that it believes generate above average underwriting
profits. The Company has identified certain medical specialties and
"Claims-free" physicians as segments in which it wishes to increase its market
share. This marketing strategy includes sending targeted physicians personal
mail solicitation packages, encouraging agents to refer targeted physicians and
providing an expedited application process for those physicians. In addition,
agents who refer "Claims-free" physicians are paid a higher commission. As a
result of this strategy approximately 80% of the increase in direct premium
written in the first five months of 1996 was received from physicians in the
targeted specialties and approximately 70% of the Company's total direct premium
written in 1995 was from physicians who received the "Claims-free" credit.

The Company has also entered into endorsement and marketing agreements with
local medical associations and other provider-supported organizations that
provide rate credits and certain services for insureds of the programs. These
endorsement and marketing agreements gain the Company access to meetings of
these groups in order to make presentations and have access to their respective
publications for advertisements. In addition, several local associations have
agreed to assist the Company in developing loss prevention programs, monitoring
proposed legislation and administrative regulations and providing information on
healthcare matters relating primarily to professional liability.

The Company's MPL insurance has the exclusive endorsement of the FMA (since
1976), the FDA (since 1989), the Florida Chapter, American College of Surgeons,
the Florida Obstetric and Gynecologic Society, the Florida Society of Thoracic
and Cardiovascular Surgeons, the Jacksonville Chapter, American College of
Surgeons, the South Florida Chapter of the American College of Surgeons and nine
county medical associations. These relationships provide the Company knowledge
of and insight into its customers and markets and enables the Company to be more
responsive to the changing needs of the healthcare community.

The Company provides comprehensive risk management services designed to
heighten its insureds' awareness of situations giving rise to potential loss
exposures, to educate its insureds on ways to improve their medical practice
procedures and to assist its insureds in implementing risk modification
measures. In addition, the Company conducts surveys for hospitals and large
medical groups both to review their practice procedures generally and to focus
on specific areas in which there may be some concern. Complete reports that
specify areas of the insured's medical practice that may need attention are
provided to the policyholder. The Company presents and participates in periodic
seminars with medical societies and other groups at which pertinent subjects are
presented. These educational offerings are designed to increase risk awareness
and the effectiveness of various medical professionals.

UNDERWRITING

The underwriting of the Company's MPL insurance is performed internally by
four underwriters with approximately 35 years of combined experience
underwriting MPL insurance for the Company. The Company has given its internal
underwriting department complete authority for all initial underwriting
decisions. The Company's agents have no binding authority. The Company's Board
of Directors is involved in underwriting decisions only to the extent that a
standing committee of the Board of Directors reviews appeals by insureds who
have been cancelled.

29
<PAGE> 32

Each applicant is required to complete a detailed application that provides
a personal and professional history, the type and nature of the applicant's
professional practice, certain information relating to specific practice
procedures, hospital and professional affiliations, a complete history of any
prior claims and incidents and three personal references.

As part of the underwriting process, the Company utilizes the State of
Florida's database, which consolidates a record of all MPL claims-paid
information that insurers are required to report to the State. When applications
are received from physicians for MPL insurance, the first step is to review this
database to verify the physician's claims-paid record. Based upon this record,
the underwriting department will begin a more thorough review of the
application. If a physician has an excessive claims-paid history, the
application is denied. All other applicants are reviewed on the basis of the
physician's educational background, residency experience, practice history and
the comments received from personal references. In addition, the Company
maintains data from 10 years of clipping services and industry periodicals
against which applications are reviewed. Annually, the Company's underwriting
department also reexamines each insured before their coverage is renewed,
including verifying that each insured's licensing is current and that any
reported claims for the insured were within acceptable limits.

The underwriting of the Company's other insurance products is conducted in
conjunction with external underwriters. With respect to these products, the
Company receives applications from prospective insureds. After a review of the
information contained in such applications, the Company forwards them to an
external underwriter. The external underwriter performs its review procedures
for each application and consults with the Company on the amount of premium to
charge each insured. The Company has entered into an agreement with CNA
Reinsurance of London, Limited to reinsure and to underwrite 90% of each of the
Company's managed care liability insurance policies.

CLAIMS

The Company's claims department is responsible for the supervision of
claims investigation, the establishment of case reserves, case management,
development of the defense strategy and the coordination and control of
attorneys engaged by the Company. The Company's claims department has 19
employees, including 4 supervisors and 5 field investigators who are located in
Orlando, Tampa, Miami and Jacksonville in order to provide localized and timely
attention to claims. Employees in the claims department with settlement
authority have an average of 14 years of experience with the Company. As
evidence of the Company's attention to claims settlement, the average life for
claims settled by the Company in 1995 was 2.5 years compared to 3.1 years for
claims settled in 1987.

The Company has developed an innovative computerized claims system for
administering claims and tracking case reserves. The system (i) automates the
initial review of the claim, ensuring that the occurrence is one which would
potentially be covered by the policy, (ii) generates routine correspondence and
(iii) provides a database for the management of individual case reserves and the
development of trend and industry reports.

An integral part of this claim system is the Litigation Management System
("LMS") program. The LMS program provides the Company with an on-line connection
with its network of 40 defense attorneys allowing the Company to standardize its
billing format and efficiently track and monitor law firm billings. The LMS
system also features a library of standardized document templates, pertinent
cases and expert information thus reducing the duplication of effort and
associated costs. Utilizing LMS, the Company has implemented a legal
cost-containment program which requires attorneys to submit a detailed legal
budget against which their daily billing is compared.

When the Company receives notice of a loss or potential loss, a claims
handler is assigned to the claim and a claim file is created. In assessing a
claim, the claims handler considers specified information about the claim,
including such characteristics as claim type, suit status, allegations and
injuries. The claims evaluation process is designed to ensure objectivity, and
consequently consistency, of claims evaluation. A severity classification is
assigned to each claim in order to determine the manner in which the claim is
administered.

30
<PAGE> 33

All significant claims are reviewed at least quarterly. Claims assigned a higher
severity rating are monitored more frequently.

The Company's claims department has complete settlement authority for most
claims filed against the Company's insureds. The Company's policy is and has
been to refuse settlement of and to defend aggressively all claims that appear
to have no merit. In those instances where claims may have merit, the claims
department attempts to settle cases as expeditiously as possible. The Company
believes that it has developed relationships with attorneys in Florida who have
significant experience in the defense of MPL claims and who are able to defend
in an aggressive, cost-efficient manner claims against the Company's insureds.

REINSURANCE

The Company follows customary industry practice by reinsuring a portion of
its risks. The Company cedes to reinsurers a portion of its risks and pays a fee
based upon premiums received on all policies subject to such reinsurance.
Insurance is ceded principally to reduce net liability on individual risks and
to provide protection against large losses. Although reinsurance does not
legally discharge the ceding insurer from its primary liability for the full
amount of the policies reinsured, it does make the reinsurer liable to the
insurer to the extent of risk ceded.

For MPL insurance and professional and comprehensive general liability
insurance, the Company has established a policy of reinsuring risks in excess of
$500,000 per loss. The Company reinsures risks associated with these policies
under treaties pursuant to which the reinsurers agree to assume those risks
insured by the Company in excess of its individual risk retention level and up
to its maximum individual policy limit offered. For managed care liability
insurance the Company has entered into a separate quota share reinsurance
treaty. Under this treaty, the reinsurers bear 90% of all losses and LAE
incurred under these policies. See "-- Underwriting."

The following table demonstrates the allocation of risk between the Company
and its reinsurers applicable to claims reported to the Company on all MPL
insurance policies for physicians and dentists and professional and
comprehensive general liability insurance.

<TABLE>
<CAPTION>
MAXIMUM AMOUNT TO BE
PAID BY(1):
--------------------
TOTAL AMOUNT OF INDIVIDUAL LOSS(2) COMPANY REINSURERS
- -------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
$0-$500,000............................................................... 100% 0%
$500,000 To Policy Limit.................................................. 0 100%
</TABLE>

- ---------------

(1) The Company is responsible to the policyholder for the "Total Amount of
Individual Loss." The "Maximum Amount to be Paid By" reinsurers represents
the percentage of the claim for which the Company has recourse against
reinsurers pursuant to its reinsurance treaties and agreements.
(2) Assuming no self insured retention or deductible is applicable.

Reinsurance is placed under reinsurance treaties and agreements with a
number of individual companies and syndicates to mitigate concentrations of
credit risk. In 1996, General Reinsurance Corporation became the Company's
largest reinsurer of MPL insurance, with 25% of the ceded risks and for
professional and comprehensive general liability insurance with 50% of the ceded
risks. The Company relies on reinsurance brokers and intermediaries to assist in
the analysis of the credit quality of its reinsurers. The Company also requires
reinsurers that are not authorized to do business in Florida to post an
evergreen letter of credit to secure their reinsurance recoverables.

Reinsurance ceded is recorded on a gross basis. Ceding commissions, which
are 25 percent of gross ceded premiums, are deducted from other operating
expenses. Ceding commissions were $1.2 million, $1.2 million and $1.4 million in
1995, 1994 and 1993, respectively.

In the event the Company has the opportunity to settle a claim within
policy limits but fails to do so, and a judgement is rendered against a
policyholder for an amount exceeding the policy limit, the Company may be
charged with bad faith in failing to settle. The Company may be held responsible
for the amount exceeding the policy limit or extra contractual damages. In the
past five years, the Company has not paid a claim, including

31
<PAGE> 34

bad faith claims, in excess of $3.0 million. On July 1, 1993, the Company
entered into a contingent excess of loss reinsurance contract with Cologne
Reinsurance Company (Dublin) Ltd. (the "Cologne Contract") to cover the Company
against the following risks: the "free tail coverage" offered on MPL policies;
extra contractual obligations and/or excess of policy limits claims and stop
loss coverage insuring the Company in the event its loss ratio on a net paid
basis exceeds 120 percent for any report year during the term of the contract.
As of March 31, 1996, the balance on deposit pursuant to the Cologne Contract
was $15.6 million. These funds are available to the Company to cover losses
arising from risks covered by the treaty subject to certain deductibles and
aggregates. The Cologne Contract expires on December 31, 1997. Under the
provisions of SFAS 113, "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts", amounts deposited under the Cologne
Contract have been accounted for as a deposit.

The following table reflects reinsurance recoverables on paid and unpaid
losses at December 31, 1995, by reinsurer:

<TABLE>
<CAPTION>
REINSURANCE LETTERS OF
REINSURER RECOVERABLES CREDIT
- ------------------------------------------------------------------------ ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Underwriters at Lloyd's................................................. $ 2,196 $ --
TIG Reinsurance Company................................................. 2,170 --
CNA Reinsurance of London Limited....................................... 1,515 1,674
Unionamerica Insurance.................................................. 1,413 1,606
Terra Nova Insurance Company............................................ 1,181 1,301
Zurich Reinsurance (UK) Limited......................................... 658 808
6 other reinsurers...................................................... 1,156 1,171
------------ ----------
Total......................................................... $ 10,289 $6,560
========= =======
</TABLE>

The Company has never incurred a significant loss on reinsurance
recoverables. There can be no assurance that the Company will not suffer losses
on its reinsurance recoverables in the future.

LOSS AND LAE RESERVES

The determination of loss reserves is a projection of ultimate losses
through an actuarial analysis of the claims history of the Company and other MPL
insurers, subject to adjustments deemed appropriate to the Company due to
changing circumstances. Included in its claims history are losses and LAE paid
by the Company in prior periods and case reserves for anticipated losses and LAE
developed by the Company's claims department as claims are reported and
investigated. The Company relies primarily on such historical loss experience in
determining reserve levels on the assumption that historical loss experience
provides a good indication of future loss experience despite the uncertainties
in loss cost trends and the delays in reporting and settling claims. As
additional information becomes available, the estimates reflected in earlier
loss and LAE reserves may be revised. Any increase in the amount of reserves,
including reserves for insured events of prior years, could have an adverse
effect on the Company's results for the period in which the adjustments are
made.

The uncertainties inherent in estimating ultimate losses on the basis of
past experience have grown significantly in recent years principally as a result
of judicial expansion of liability standards and expansive interpretations of
insurance contracts. These uncertainties may be further affected by, among other
factors, changes in the rate of inflation and changes in the propensities of
individuals to file claims. The inherent uncertainty of establishing reserves is
relatively greater for companies writing long-tail casualty insurance, including
MPL insurance, due primarily to the long-term nature of the resolution of
claims. The Company utilizes both its staff and independent actuaries in
establishing its reserves. The Company's independent actuaries review the
Company's loss and LAE reserves bi-annually and prepare a report that includes a
recommended level of reserves. The Company considers this recommendation as well
as other factors, such as known, anticipated or estimated changes in frequency
and severity of losses, loss retention levels and premium rates, in establishing
the amount of its loss and LAE reserves. The Company continually refines reserve

32
<PAGE> 35

estimates as experience develops and further claims are reported and settled.
The Company reflects adjustments to reserves in the results of the periods in
which such adjustments are made. Since MPL insurance is a long-tail line of
business for which the initial loss and LAE estimates may be adversely impacted
by events occurring long after the reporting of the claim, such as sudden severe
inflation or adverse judicial or legislative decisions, the Company has
attempted to establish its loss and LAE reserves at the upper end of a
reasonable range of reserve estimates.

The following table sets forth an analysis of the Company's reserves for
losses and LAE and provides a reconciliation of beginning and ending loss and
LAE reserves net of reinsurance, balances for the periods presented.

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ------------------------------
1996 1995 1994 1993
------------------ -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Reserve liability, at beginning of period..... $155,318 $143,415 $132,190 $126,650
------------------ -------- -------- --------
Provisions for losses and LAE occurring in the
current period.............................. 13,855 54,868 49,702 52,369
Increase (decrease) in estimated losses and
LAE for claims occurring in prior periods... (1,641) (10,029) (10,524) (17,706)
------------------ -------- -------- --------
Total incurred during current period.......... 12,214 44,839 39,178 34,663
------------------ -------- -------- --------
Losses and LAE payments for claims, occurring
during:
The current period.......................... 8 4,320 3,035 2,960
Prior periods............................... 7,890 28,616 24,918 26,163
------------------ -------- -------- --------
Total paid during current period.............. 7,898 32,936 27,953 29,123
------------------ -------- -------- --------
Reserve liability, at end of period........... $159,634 $155,318 $143,415 $132,190
=============== ======== ======== ========
Gross liability at end of period.............. $168,822 $164,506 $152,268 $138,745
Reinsurance recoverable at end of period...... 9,188 9,188 8,853 6,555
------------------ -------- -------- --------
Net liability at end of period................ $159,634 $155,318 $143,415 $132,190
=============== ======== ======== ========
</TABLE>

As shown above, as a result of the Company's bi-annual reserving review,
which includes a reevaluation of the adequacy of reserve levels for prior years'
claims, the Company reduced its reserves for claims occurring in prior periods
by $1.6 million, $10.0 million, $10.5 million and $17.7 million for the three
months ended March 31, 1996, and the years ended December 31, 1995, 1994 and
1993, respectively. There can be no assurance concerning future adjustments of
reserves, positive or negative, for prior years' claims. The procedures used in
determining appropriate reserves at March 31, 1996 were consistent with prior
period reserving methodologies.

33
<PAGE> 36

The following table sets forth the development of loss and LAE reserves of
the Company for the 10-year period ended December 31, 1995:

ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------- ------- ------- ------- ------- ------- ------- ------ ------- ------- -------
(IN $ THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Reserves(2)..... 164,506 152,268 138,745 126,651 118,995 119,031 97,302 79,893 63,088 51,205 50,155
Re-estimated Liability As
Of(2):
End of Year................. 164,506 152,268 138,745 126,651 118,995 119,031 97,302 79,893 63,088 51,205 50,155
One year later.............. 137,746 128,333 98,706 101,844 103,523 104,996 92,801 80,637 70,426 58,596
Two years later............. 111,028 89,182 80,716 86,133 89,427 96,179 97,259 89,646 76,676
Three years later........... 75,848 71,318 64,124 72,164 80,686 97,121 94,183 94,533
Four years later............ 66,276 56,127 56,695 77,714 90,617 89,173 98,801
Five years later............ 54,728 53,007 68,034 88,584 86,739 98,318
Six years later............. 52,714 66,199 83,195 86,321 96,993
Seven years later........... 65,894 83,144 82,619 96,231
Eight years later........... 82,768 82,581 94,890
Nine years later............ 82,131 94,860
Ten years later............. 94,329
Cumulative Paid, As Of(2):
End of Year................. 0 0 0 0 0 0 0 0 0 0 0
One year later.............. 28,701 24,794 25,924 26,482 17,500 22,656 28,900 31,930 30,611 26,888
Two years later............. 44,882 42,401 44,542 37,283 34,656 47,038 64,280 58,695 52,696
Three years later........... 55,278 52,340 47,357 43,754 55,172 72,868 74,975 74,499
Four years later............ 56,633 49,655 49,298 61,111 76,213 75,284 86,476
Five years later............ 51,869 49,224 64,669 79,289 77,220 89,887
Six years later............. 50,407 63,810 81,434 79,079 91,417
Seven years later........... 64,830 81,646 81,045 92,517
Eight years later........... 82,043 81,192 93,316
Nine years later............ 81,504 93,471
Ten years later............. 93,702
Redundancy(1)................. 14,522 27,717 50,803 52,719 64,303 44,588 13,999 (19,680) (30,926) (44,174)
(Deficiency)
% Redundancy.................. 9.7% 20.2% 40.1% 44.3% 54.0% 45.8% 17.5% (31.2)% (60.4)% (88.1)%
(Deficiency)
</TABLE>

- ---------------

(1) There may be a difference of 1(,000) in the redundancies due to rounding.
(2) Due to the adoption of SFAS No. 113 in 1993, amounts in the years 1993
through 1995 are presented on a gross basis. Amounts in the years 1985
through 1992 are presented net of reinsurance recoverables. Prior to the
issuance of SFAS No. 113, the Company maintained its reinsurance records on
a net basis. As detailed records on a gross basis are not available for
years prior to 1993, the Company considers it impracticable to restate these
years on a gross basis.

The first line of the preceding table sets forth the estimated liability
for unpaid losses and LAE recorded at the balance sheet date for each of the
indicated years. This liability represents the estimated amount of losses and
LAE for claims arising in that year and all prior years that are unpaid as of
the balance sheet date, including losses incurred but not yet reported to the
Company. The preceding table also shows the re-estimated amount of the
previously recorded liability based on experience as of the end of each
succeeding year, including cumulative payments made. The lower portion of the
table shows the cumulative amounts paid as of successive years for such claims.
The estimates change as more information becomes known for each year. A
redundancy (deficiency) exists when the liability estimate is greater (less)
than the re-estimated liability at each December 31. The cumulative redundancy
(deficiency) depicted in the table, for any particular calendar year, shows the
aggregate change in estimates over the period of years subsequent to the
calendar year reflected at the top of the respective columns. For example, the
redundancy of $14.5 million at December 31, 1994, as related to reserves of
$152.2 million at December 31, 1994, represents the cumulative amount by which
reserves for 1994 and prior years have developed during 1995. Reserves are
necessarily based on estimates and there can be no assurance that the ultimate
liability will not exceed such estimates. Future adjustments to reserves that
are unanticipated by the Company's management could have an adverse impact upon
the Company's financial condition and results of operations.

34
<PAGE> 37

The Company's management believes that the Company's reserves at March 31,
1996 are adequate. However, conditions and trends that have historically
affected the Company's claims may not necessarily occur in the future.
Accordingly, it would not be appropriate to extrapolate future deficiencies or
redundancies based on the results set forth above.

INVESTMENT PORTFOLIO

Investments. The Company's investment strategy is to maintain a
diversified investment grade fixed income portfolio, provide liquidity, and
maximize after-tax yield. Approximately 80% of the fixed income portfolio as of
December 31, 1995 was managed internally and the remainder, which consists
solely of municipal bonds of primarily Florida issuers, was managed by Brown
Brothers Harriman & Co. As of March 31, 1996, the Company had $219.0 million of
fixed income securities. All of the Company's fixed income securities are
classified as available for sale.

In mid-1994, the Company changed its investment strategy from active
investing predominantly by external managers to emphasizing a buy-and-hold
approach, which is primarily managed internally. The Company believes that this
focus on income generation rather than capital appreciation has reduced the
portfolio's overall volatility. In addition, the Company has invested a greater
portion of its portfolio in municipal bonds, which the Company believes generate
a greater after-tax return than investments in taxable fixed income securities
of comparable risk, duration, and other investment characteristics.

The table set forth below reflects the average market value of the fixed
income portfolio and short-term investments, income earned and the average yield
thereon for the three months ended March 31, 1996 and the years ended December
31, 1995, 1994 and 1993, respectively:

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED DECEMBER 31,
MARCH 31, ----------------------------------
1996 1995 1994 1993
------------------ -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Average fixed income
investments................... $218,919 $204,323 $183,239 $176,438
Net investment income(1)........ $ 3,035 $ 12,318 $ 10,140 $ 8,067
Average yield(2)(3)............. 5.55% 6.03% 5.53% 4.57%
Average tax equivalent
yield(2)(3)................... 6.30% 6.59% 5.90% 4.94%
</TABLE>

- ---------------

(1) Assumes all investment expenses apply to fixed income investments.
(2) Excluding realized and unrealized capital gains and losses.
(3) Annualized.

The Company's net realized investment losses of $6.7 million during 1994
were principally the result of an increase in interest rates during the first
six months of 1994 coupled with an active trading strategy by an external
manager. The Company terminated this external manager in June 1994.

The following table summarizes, by type, the Company's investments as of
March 31, 1996:

<TABLE>
<CAPTION>
COST OR FAIR PERCENT OF
AMORTIZED COST VALUE FAIR VALUE
-------------- -------------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Treasury securities and obligations of U.S.
Govt. corporations and agencies............ $ 52,332 $ 52,341 24%
Debt securities issued by states and
political subdivisions..................... 60,095 59,730 27
Corporate securities......................... 36,473 36,337 16
Mortgage-backed securities................... 71,013 70,627 32
Common stocks................................ 140 140 *
Real estate investments...................... 2,657 2,657 1
------------ ------------ ---------
$222,710 $221,832 100%
------------ ------------ ---------
------------ ------------ ---------
</TABLE>

- ---------------

* Less than one percent.

35
<PAGE> 38

The table set forth below indicates the scheduled maturity distribution of
the Company's fixed income securities and short-term investments as of March 31,
1996:

<TABLE>
<CAPTION>
COST OR PERCENT OF FAIR
AMORTIZED COST FAIR VALUE VALUE
-------------- ---------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
One year or less................................ $ 11,214 $ 11,225 5%
One year to five years.......................... 58,698 58,994 27
Five years to ten years......................... 46,460 45,983 21
Due after ten years............................. 103,530 102,833 47
-------------- ---------- ---
Total fixed income securities and
short-term
investments......................... $219,912 $ 219,035 100%
=========== ======== ============
</TABLE>

The table set forth below reflects the ratings assigned to the Company's
fixed income securities and short-term investments as of December 31, 1995:

<TABLE>
<CAPTION>
PERCENT OF FAIR
RATING(1) VALUE
---------------------------------------------------------- FAIR VALUE ----------------
--------------
(IN THOUSANDS)
<S> <C> <C>
AAA/Aaa................................................... $185,200 85%
AA/Aa..................................................... 15,247 7
A/A....................................................... 5,527 2
BBB/Baa................................................... 12,829 6
-------------- ---
Total fixed income securities and short-term
investments................................... $218,803 100%
=========== ============
</TABLE>

- ---------------

(1) Ratings are assigned by either Standard & Poor's Corporation or by Moody's
Investor Service, Inc.

The NAIC has a fixed income securities rating system that assigns to
investment securities certain ratings, called "NAIC designations," that are used
by insurers when preparing their annual financial statements. The NAIC assigns
designations to publicly traded and privately placed securities. Designations
assigned by the NAIC range from 1 to 6, with 1 representing securities of the
highest quality. Of the $218.8 million held in the Company's investment
portfolio, at December 31, 1995 $204.9 million (or 93.6%) were rated NAIC 1, and
$13.9 million (or 6.4%) were rated NAIC 2. No security held was rated below NAIC
2.

The Company does not, and is not contemplating, investing in any
off-balance sheet derivative financial instruments including futures, options,
forwards, interest rate swaps, floors or caps. All of the fixed maturity
securities held in the investment portfolio are publicly traded securities.

COMPETITION

The MPL insurance market in Florida is highly competitive. While there are
a number of companies active in this market, the Company competes principally
with CNA Insurance Company and Physicians Protective Trust Fund. Several
companies in the state offer products at lower premium rates than the Company
and more companies may enter the Florida market in the future. In addition, the
Company believes that the number of healthcare entities that insure their
affiliated physicians through self-insurance may begin to increase. Many of the
MPL insurers are substantially larger and have considerably greater resources
than the Company. Additionally, several of these insurers have received A.M.
Best ratings that are higher than FPIC's rating of "A- (Excellent)." In
addition, because a substantial portion of the Company's products are marketed
through independent insurance agencies, all of which represent more than one
company, the Company faces competition within each agency in its own agency
system. However, the Company's name recognition, medical society endorsements,
physician board of directors, agency force and program development have all
contributed to helping the Company increase its number of insureds every year
since 1985. The Company has been successful at target marketing groups and
specialties that exhibit above average

36
<PAGE> 39

profitability. The Company believes that its marketing success has allowed it to
improve the quality and profitability of its overall business.

The Company plans to expand into other states in a number of ways. These
ways include the use of agencies, writing insurance with multi-state healthcare
providers having a prior relationship with the Company and possible business
combinations with MPL insurers and other entities having name recognition and
significant support in the medical community in the states in which they conduct
business. See "Risk Factors"

The Company believes that the principal competitive factors in its business
are service, name recognition and price, and that it is competitive in Florida
in all of these areas. The Company enjoys strong name recognition in Florida by
virtue of having been organized by, and operated for the principal benefit of,
Florida physicians. The services offered insureds of the Company as well as the
healthcare community in general are intended to promote name recognition and to
maintain and improve loyalty among the insureds of the Company. MPL insurance
offered by the Company has the exclusive endorsement of both the FMA and the
FDA. The Company's MPL insurance is also endorsed by various county medical
societies and various state medical specialty societies.

INSURANCE RATINGS

FPIC currently has a financial condition rating from A.M. Best of "A-
(Excellent)". In May 1996, A.M. Best indicated that this rating outlook is
"stable". An A.M. Best rating is intended to provide an independent opinion of
an insurer's ability to meet its obligations to policyholders and should not be
considered an investment recommendation. A.M. Best's ratings are based upon a
comprehensive review of a company's financial performance that is supplemented
by certain data, including responses to A.M. Best's questionnaires, quarterly
NAIC filings, state insurance department examination reports, loss reserve
reports, annual reports and reports filed with the Commission. A.M. Best
undertakes a quantitative evaluation based upon profitability, leverage and
liquidity and a qualitative evaluation based upon the composition of an
insurer's book of business or spread of risk, the amount, appropriateness and
soundness of reinsurance, the quality, diversification and estimated market
value of its assets, the adequacy of its loss reserves and policyholders'
surplus and the experience and competency of its management.

REGULATION

FPIC and the Company are subject to extensive state regulatory oversight in
Florida and in the other jurisdictions in which it or they conduct business.

Florida insurance law regulates insurance holding company structures,
including the Company and its subsidiaries, FPIC, the Agency and McCreary. Each
insurance company in a holding company structure is required to register with
the Department of Insurance and furnish information concerning the operations of
companies within the holding company structure that may materially affect the
operations, management or financial condition of the insurers within the
structure. Pursuant to these laws, the Department of Insurance may examine the
Company, and/or FPIC at any time and require disclosure of and/or approval of
material transactions involving any insurance subsidiary of the Company, such as
extraordinary dividends from FPIC. All transactions within the holding company
structure affecting FPIC must be fair and reasonable.

Florida insurance law provides that no person may acquire direct or
indirect control of an insurance company unless such person has obtained the
prior written approval of the Department of Insurance for such acquisition. Any
purchaser of 5% or more of the Company's or FPIC's outstanding common stock will
generally be presumed to have acquired control of FPIC unless the Department of
Insurance, following application by such purchaser, determines otherwise. In
lieu of obtaining such prior approval, a purchaser owning less than 10% of the
outstanding shares of the Company or FPIC may file a disclaimer of affiliation
and control with the Department of Insurance.

Since FPIC is domiciled in Florida, the Department of Insurance is its
principal supervisor and regulator. However, FPIC is also subject to supervision
and regulation in the states in which it transacts business in relation to
numerous aspects of FPIC's business and financial condition. The primary purpose
of such

37
<PAGE> 40

supervision and regulation is to insure the financial stability of FPIC for the
protection of policyholders. The laws of the various states establish insurance
departments with broad regulatory powers relative to granting and revoking
licenses to transact business, regulating trade practices, required statutory
financial statements and prescribing the types and amount of investments
permitted. Although premium rate regulations vary among states and lines of
insurance, such regulations generally require approval by each state regulator
of the rates and policies to be used in its state.

Insurance companies are required to file detailed annual reports with the
supervisory agencies in each state in which they do business, and their business
and accounts are subject to examination by such agencies at any time.

The NAIC annually calculates 12 financial ratios to assist state insurance
departments in monitoring the financial condition of insurance companies.
Results are compared against a "usual range" of results for each ratio,
established by the NAIC. For the years 1995, 1994 and 1993, FPIC's results were
within the usual range for each of the 12 ratios.

As a Florida insurer, FPIC is subject to assessment by FIGA for the
provision of funds necessary for the settlement of covered claims under certain
policies of insolvent insurers. Under the Florida Insurance Guaranty Association
Act, FIGA can assess member insurers on the basis of net direct written premiums
in the State of Florida at a level established by the Florida Legislature.

In 1992, the Florida Legislature passed a special assessment to retire
bonds issued to pay property losses arising from Hurricane Andrew. FPIC is
assessed 2 percent of the greater of either net direct written premiums during
the current year or 1991, the base year. The bonds were initially scheduled for
defeasance in the year 2003 but may be paid off prior to that time. However,
changes in the premium levels of insurers in this pool could revise the payoff
date. In addition, damages caused by future hurricanes or other events could
subject FPIC to additional FIGA assessments. FPIC is also subject to assessments
by the guaranty associations in other states in which it conducts or may in the
future conduct business. Such assessments by other states generally are based on
a percentage of premiums written by FPIC in those states.

Florida insurance law allows FPIC to pay dividends in cash or property out
of available and accumulated surplus funds that are derived from realized net
operating profits and net realized capital gains. FPIC may make dividend
payments without the prior written approval of the Department of Insurance if
the dividend payment does not exceed the larger of: (i) the lesser of 10% of
surplus or net income, not including realized capital gains, plus a 2-year carry
forward; (ii) 10% of surplus with dividends payable constrained to unassigned
funds minus 25% of unrealized capital gains; and (iii) the lesser of 10% of
surplus or net investment income plus a 3-year carry forward with dividends
payable constrained to unassigned funds minus 25% of unrealized capital gains.
FPIC may also pay a dividend without the prior written approval of the
Department of Insurance when: (a) the dividend is equal to or less than the
greater of: (i) 10% of its surplus as to policyholders derived from realized net
operating profits on its business and net realized capital gains; or (ii) its
entire net operating profits and realized net capital gains during the
immediately preceding calendar year; (b) it will have surplus as to
policyholders equal to or exceeding 115% of the minimum required statutory
surplus as to policyholders after the dividend is made and (c) it has filed a
specific notice with the Department of Insurance prior to the dividend payment.
In 1996, FPIC is permitted, within insurance regulatory guidelines, to pay
dividends of approximately $11.6 million without prior regulatory approval.

The insurance industry is under continuous review by Congress, state
legislatures and state and federal regulatory agencies. From time to time
various regulatory and legislative changes have been proposed for the insurance
industry, some of which could have an effect on insurers or reinsurers. Among
the proposals that have in the past been, or are at present being, considered
are the possible introduction of state and federal limits on certain damages for
MPL as well as federal regulation in addition to, or in lieu of, the current
system of state regulation of insurers. The Company is unable to predict whether
any of these proposals will be adopted, the form in which any such proposals
would be adopted, or the impact, if any, such adoption would have on the
Company, although such impact could be material.

38
<PAGE> 41

EMPLOYEES

At December 31, 1995, the Company employed 126 persons. None of these
employees are covered by a collective bargaining agreement. Management considers
its relationships with the Company's employees to be good.

PROPERTIES

The Company owns an 8 story, 70,000 sq. ft. office building in
Jacksonville, Florida, where its offices are located in 17,500 sq. ft. of space.
The Company's subsidiary, McCreary, leases a 13,300 sq. ft. office building in
Stuart, Florida where its offices are located. See "Certain Relationships and
Related Transactions -- McCreary." Management believes these facilities are
adequate for the Company's current needs.

LEGAL PROCEEDINGS

There are no material pending legal proceedings against the Company or its
subsidiaries other than litigation arising in connection with the settlement of
insurance claims.

39
<PAGE> 42

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

FIG's executive officers and directors and certain officers of FIG's
subsidiaries as of June 30, 1996 are as listed below. The directors and
executive officers of FIG will also serve in similar capacities with FPIC.

<TABLE>
<CAPTION>
NAME AGE CAPACITY
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
William R. Russell......................... 49 President, Chief Executive Officer and
Director
Steven R. Smith............................ 46 Executive Vice President and Chief
Operating Officer
Steven M. Rosenbloom....................... 45 Senior Vice President, Chief Investment
Officer and Assistant Secretary
Robert B. Finch............................ 36 Vice President and Chief Financial Officer
R. Jeannie Whitter......................... 46 Vice President
Charles W. Emanuel......................... 46 Vice President and Assistant Secretary
Ray A. Carey............................... 58 Vice President
Kurt F. Driscoll........................... 46 Vice President
Paul T. Luckman............................ 39 Vice President
Donald J. Sabia............................ 37 Controller
William T. McCreary........................ 53 President and Chief Executive Officer of
McCreary
Gaston J. Acosta-Rua, M.D.................. 58 Chairman of the Board of Directors
James G. White, M.D........................ 63 Vice Chairman of the Board of Directors
Curtis E. Gause, D.D.S..................... 71 Director
Guy T. Selander, M.D....................... 60 Director
David M. Shapiro, M.D...................... 43 Director
Richard J. Bagby, M.D...................... 55 Director
Robert O. Baratta, M.D..................... 55 Director
Louis C. Murray, M.D....................... 71 Director
James W. Bridges, M.D...................... 61 Director
J. Stewart Hagen, M.D...................... 64 Director
D. L. Van Eldik, M.D....................... 67 Director
Henry M. Yonge, M.D........................ 75 Director
</TABLE>

WILLIAM R. RUSSELL has served as President, Chief Executive Officer and as
a director of the Company since 1990. From 1988 until 1990, Mr. Russell was the
Company's Executive Vice President and Chief Operating Officer. From 1982 until
1988, Mr. Russell was Executive Vice President, Chief Operating Officer and a
director of Co-ordinated Management Systems, a third party administrator, in
Petaluma, California.

STEVEN R. SMITH has served as Executive Vice President and Chief Operating
Officer of the Company since 1995. From 1990 to 1995, Mr. Smith was the
Company's Executive Vice President and Treasurer. From 1987 to 1990, Mr. Smith
served as Vice President and Treasurer of the Company. From 1986 to 1987, Mr.
Smith served as Treasurer and Controller of the Company. From 1983 to 1986, Mr.
Smith served as Controller of the Company. Mr. Smith is a Certified Public
Accountant.

STEVEN M. ROSENBLOOM has served as Senior Vice President, Chief Investment
Officer and Assistant Secretary of the Company since 1994. From 1980 to 1994,
Mr. Rosenbloom was First Vice President and a registered broker and investment
consultant with Merrill Lynch, Pierce, Fenner & Smith Incorporated.

40
<PAGE> 43

ROBERT B. FINCH has served as Vice President and Chief Financial Officer of
the Company since 1995. From 1990 to 1995, he served as Vice President and
Controller of the Company. From 1987 to 1990, he served as Controller of the
Company. Mr. Finch was a senior auditor for Coopers & Lybrand from 1984 to 1987.
Mr. Finch is a Certified Public Accountant.

R. JEANNIE WHITTER has served as Vice President of the Company since 1988.
She has been involved in the Company's underwriting since 1976.

CHARLES W. EMANUEL has served as Vice President and Assistant Secretary of
the Company since 1988. Since 1982, Mr. Emanuel has been responsible for the
Company's management information systems.

RAY A. CAREY has served as Vice President of the Company since 1992. Since
1978, Mr. Carey has been responsible for the Company's claims administration.

KURT F. DRISCOLL has served as Vice President of the Company since 1992 and
has been responsible for the Company's risk management since 1988. Mr. Driscoll
served as President of Professionals Insurance Company from 1986 to 1988. Mr.
Driscoll served as Executive Vice President of Physicians Insurance Company of
Indiana from 1982 to 1986.

PAUL T. LUCKMAN has served as Vice President of the Company since March
1996 and is responsible for the Company's marketing. Mr. Luckman served as
director of Hospitals and Managed Care programs for MAG Mutual Insurance Company
from 1993 to 1996. He served as Director of Insurance and Risk Management for
Crozar-Keystone Health System from 1992 to 1993. Mr. Luckman served as Associate
Director of Risk Management for Franciscan Health System from 1991 to 1992.

DONALD J. SABIA has served as Controller of the Company since 1995 and has
been employed by the Company since 1993. From 1986 to 1993, Mr. Sabia was an
audit supervisor for Coopers & Lybrand. Mr. Sabia is a Certified Public
Accountant.

WILLIAM T. MCCREARY has served as President and Chief Executive Officer of
the Company's subsidiary, McCreary, since July, 1995. Mr. McCreary founded a
third party administrator, McCreary Corporation, now known as McCreary
Enterprises, Inc., in 1985. Prior to founding McCreary Corporation, Mr. McCreary
was Vice President of Arthur J. Gallagher & Company from 1977 to 1985.

GASTON J. ACOSTA-RUA, M.D. is a neurosurgeon engaged in private practice in
Jacksonville, Florida. He has practiced medicine since 1971. Dr. Acosta-Rua is
Chairman of the Board of Directors and has served as a director of FPIC since
1986.

CURTIS E. GAUSE, D.D.S. is engaged in the private practice of general
dentistry in St. Petersburg, Florida. He has practiced dentistry since 1954. Dr.
Gause, a past president of the FDA, has served as a director of FPIC since 1993.

GUY T. SELANDER, M.D. is a family physician engaged in the private practice
of medicine in Jacksonville, Florida. He has practiced medicine since 1964. Dr.
Selander is a past president of the FMA and has served as a director of FPIC
since 1989.

DAVID M. SHAPIRO, M.D. is engaged in the private practice of anesthesiology
in Ft. Myers, Florida. He has practiced medicine since 1986 and has served as a
director of FPIC since 1996.

JAMES G. WHITE, M.D. is engaged in the private practice of pediatric
medicine in Ormond Beach, Florida. He has practiced medicine since 1966. Dr.
White is a past president of the FMA and has served as a director of FPIC since
1986. Dr. White is currently Vice Chairman of the Board of Directors.

RICHARD J. BAGBY, M.D. is engaged in the private practice of diagnostic
radiology in Orlando, Florida. Dr. Bagby has practiced medicine since 1966. Dr.
Bagby is the President of the FMA and has served as a director of FPIC since
1993.

ROBERT O. BARATTA, M.D. is engaged in the private practice of ophthalmology
in Stuart, Florida. Dr. Baratta has practiced medicine since 1973. He has served
as a director of FPIC since 1993.

41
<PAGE> 44

LOUIS C. MURRAY, M.D. is a family physician engaged in the private practice
of medicine in Orlando, Florida. Dr. Murray has practiced medicine since 1954.
Dr. Murray is a past president of the FMA and has served as a director of FPIC
since 1988.

JAMES W. BRIDGES, M.D. is engaged in the private practice of obstetrics and
gynecology in Miami, Florida. He has practiced medicine since 1967. Dr. Bridges
has served as a director of FPIC since 1985.

J. STEWART HAGEN, M.D. is a general surgeon engaged in the private practice
of medicine in Ft. Myers, Florida. He has practiced medicine since 1965. Dr.
Hagen has served as a director of FPIC since 1988.

D. L. VAN ELDIK, M.D. is a family physician engaged in the private practice
of medicine in Lake Worth, Florida. He has practiced medicine since 1957. Dr.
Van Eldik is a past President of the FMA and has served as a director of FPIC
since 1988.

HENRY M. YONGE, M.D. is engaged in the private practice of medicine
specializing in internal medicine in Pensacola, Florida. He has practiced
medicine since 1952. Dr. Yonge has served as a director of FPIC since 1985.

FIG's articles of incorporation provide that the Board of Directors will
initially consist of 13 persons and that the number of directors may be
determined from time to time by resolution adopted by the affirmative vote of at
least 75% of the entire Board of Directors. This number and its determination is
exclusive of directors to be elected by the holders of any one or more series of
Preferred Stock voting separately as a class or classes. No such Preferred Stock
is outstanding. FIG's bylaws provide that FIG's President will always be
nominated by the Board of Directors for election to the Board of Directors.

FIG has a staggered Board of Directors with three classes of directors that
serve for terms of three years. Class I directors consist of Drs. Bagby, Baratta
and Murray and Mr. Russell and their term of office will expire at the annual
meeting of shareholders in 1997. Class II directors consist of Drs. Bridges,
Hagen, Van Eldik and Yonge and their term of office will expire at the annual
meeting of shareholders in 1998. Class III directors consist of Drs. Acosta-Rua,
Gause, Selander, Shapiro and White and their term of office will expire at the
annual meeting of shareholders in 1999.

DIRECTORS' FEES

Members of the Board of Directors receive annual compensation in two
components -- a quarterly fee and a fee for each meeting attended. The Chairman
receives a quarterly fee of $7,500, the Vice Chairman a quarterly fee of $6,000,
and the other voting members receive a quarterly fee of $4,500. Board members
also receive a fee of $800 per day that they attend committee and board
meetings. Mr. Russell, an employee of the Company, receives no fees. In addition
to the above fees, each director is reimbursed for his or her reasonable
expenses incurred for attendance at meetings.

The Company has a Director Stock Option Plan that provides each member of
the Board of Directors who is not an employee of the Company with an option to
purchase 5,000 shares of the Company's Common Stock. Such option is granted on
the date the person first becomes a director of the Company and has an exercise
price equal to the fair market value of such shares on the date of grant.
Directors who were serving on the Board of Directors at the time the Director
Stock Option Plan was adopted were given an option for 5,000 shares with an
exercise price equal to the book value of such shares on the effective date of
such plan and the right to receive an option for an additional 5,000 shares on
the date of this Offering, with an exercise price for such shares equal to their
fair market value. Options vest at a rate of one-third of the amount of the
grant at the end of each anniversary of the date of the grant or fully upon the
death of the recipient director.

The Company also offers directors a nonqualified deferred compensation
plan. In this plan, directors may defer into the plan all or a portion of their
directors' fees. Deferred fees generally will be paid, as adjusted for
investment gains or losses, following termination of service as a director.

42
<PAGE> 45

SUMMARY COMPENSATION TABLE

The following table sets forth information concerning the compensation of
the Company's Principal Executive Officer and each executive officer whose
salary and bonus in 1995 exceeded $100,000.

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS
-------------------------------- -----------------------
OTHER RESTRICTED LONG-TERM ALL OTHER
ANNUAL STOCK INCENTIVE COMPENSA-
NAME AND FISCAL SALARY(1) COMPENSA- AWARD PLAN TION
PRINCIPAL POSITION YEAR ($) BONUS($) TION($) ($) OPTIONS(#) PAYOUTS($) ($)
- --------------------- ------ ------- -------- --------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William R. Russell... 1995 218,171 35,000 -- 0 0 0 24,125(2)
President and Chief 1994 198,337 25,000 -- 0 0 0 24,417(2)
Executive Officer 1993 183,645 25,000 -- 0 0 0 26,081(2)
Steven R. Smith...... 1995 170,894 25,000 -- 0 0 0 24,486(3)
Executive Vice 1994 155,358 15,500 -- 0 0 0 21,357(3)
President and Chief 1993 143,850 15,500 -- 0 0 0 19,919(3)
Operating Officer
Steven M. 1995 152,250 75,000(7) -- 0 0 0 16,903(4)
Rosenbloom(6)...... 1994 -- -- -- 0 0 0 --
Senior Vice 1993 -- -- -- 0 0 0 --
President and Chief
Investment Officer
Robert B. Finch...... 1995 99,317 8,276 -- 0 0 0 13,449(5)
Vice President and 1994 90,288 7,524 -- 0 0 0 12,227(5)
Chief Financial 1993 82,080 6,840 -- 0 0 0 11,115(5)
Officer
</TABLE>

- ---------------

(1) Includes compensation amounts earned during the fiscal year but deferred
under the Company's 401(k) plan and benefits set aside pursuant to the
Company's non-qualified deferred compensation plan (Mr. Russell $2,125 and
$1,833 in 1995, and 1994, respectively, and Mr. Smith $1,147 and $521 in
1995 and 1994, respectively.)
(2) Includes the Company's contributions to the profit sharing plan of $15,000,
$15,000 and $20,865, the Company's matching contributions for the 401(k)
plan of $3,750, $3,750 and $5,216 and contributions from the Company
pursuant to the Company's nonqualified deferred compensation plan of $5,375,
$5,667 and $0 for the years 1995, 1994 and 1993, respectively.
(3) Includes the Company's contributions to the profit sharing plan of $15,000,
$15,000 and $15,935, the Company's matching contributions for the 401(k)
plan of $3,750, $3,750 and $3,984 and contributions from the Company
pursuant to the Company's nonqualified deferred compensation plan of $5,736;
$2,607 and $0 for the years 1995, 1994 and 1993, respectively.
(4) Includes the Company's contribution of $15,000 to the profit sharing plan
and the Company's matching contributions for the 401(k) plan of $1,903.
(5) Includes the Company's contributions to the profit sharing plan of $10,759,
$9,781 and $8,892 and the Company's matching contributions for the 401(k)
plan of $2,690, $2,445 and $2,223 for the years 1995, 1994 and 1993,
respectively.
(6) Mr. Rosenbloom began employment with FPIC on December 31, 1994.
(7) Represents a one-time signing bonus.

OMNIBUS INCENTIVE PLAN

The Company has adopted, and its shareholders have approved, the Omnibus
Incentive Plan (the "Incentive Plan"). A maximum of 915,000 shares of Common
Stock will be available for options or grants during the term of the Incentive
Plan. The maximum number of shares is subject to adjustment in the event of a
stock split, stock dividend, recapitalization, merger, consolidation,
combination or such similar events.

The Incentive Plan is administered by the Omnibus Incentive Plan Committee
(the "OIP Committee") which is currently a Committee of the Board of Directors.
The OIP Committee determines, from time to time, the individuals to whom awards
will be made, the type of awards, and the amount, size and terms of each

43
<PAGE> 46

award. The maximum number of shares that may be issued pursuant to options
granted to any one individual during the life of the Incentive Plan is 300,000
shares of the Company's Common Stock.

Awards under the Incentive Plan may be in the form of options (both
nonqualified stock options and incentive stock options), contingent stock,
restricted stock, and stock appreciation rights, or such other forms as the OIP
Committee in its discretion may deem appropriate.

Stock Options. The OIP Committee may grant both an incentive stock option
and a nonqualified stock option to the same individual. When both an incentive
stock option and a nonqualified stock option are awarded at one time, such
options are deemed to have been awarded in separate grants, and in no event will
the exercise of one such option affect the right to exercise the other such
option except to the extent the OIP Committee determines in writing otherwise.

The option price of an incentive stock option may not be less than 100% of
the fair market value of such share on the day the option is granted, as
determined by the OIP Committee. The option price of a nonqualified stock option
issued prior to this Offering is at the book value of such share on the day the
option is granted, as determined by the OIP Committee. The option price of a
nonqualified stock option issued on or after this Offering shall not be less
than 50% of the fair market value of such share on the day the option is
granted, as determined by the OIP Committee.

Each option may be exercised by a participant, in whole or in part,
provided such exercise may not occur earlier than six months after the grant of
the option and not later than ten years after the grant of the option.

Any option designated by the OIP Committee as an incentive stock option
will be subject to the general provisions applicable to all options granted
under the Incentive Plan and will be subject to the following specific
provisions:

(a) At the time the incentive stock option is granted, if a recipient
employee owns, directly or indirectly, stock representing more than 10% of
the total combined voting power of all classes of the Company's stock then:
(i) the option price must equal at least 110% of the fair market value on
the effective date of grant of the shares subject to the option; and (ii)
the term of the option shall not be greater than five years from the date
such option is granted.

(b) The aggregate fair market value of shares (determined at the date
of grant) with respect to which incentive stock options granted by the
Company, that can be exercised by a participant employee for the first time
in any one calendar year shall not exceed $100,000.

If any option is not granted, exercised, or held pursuant to the provisions
applicable to an incentive stock option, it will be considered to be a
nonqualified stock option to the extent that any or all of the grant is in
conflict with these restrictions.

In general, options granted pursuant to the Incentive Plan terminate upon
the earlier of: (i) the full exercise of the option; (ii) the expiration of the
option by its terms; or (iii) no more than three years (three months for
incentive stock options) following termination of the option holder's employment
with the Company.

In January, 1996, the OIP Committee granted options for 270,000 shares to
ten employees under the Incentive Plan. Messrs. Russell, Smith, Rosenbloom and
Finch received options for 60,000, 50,000, 40,000 and 30,000 shares,
respectively. Messrs. Carey, Emanuel, Driscoll and Sabia and Ms. Whitter
received options for 15,000 shares each. All of the options granted in January
1996 vest at a rate of one-third of the amount of the grant at the end of each
anniversary of the date of the grant.

Stock Appreciation Rights. A stock appreciation right ("SAR") may be
granted in connection with an option and entitles the grantee, subject to the
terms and conditions determined by the OIP Committee to receive, upon surrender
of the option, all or a portion of the excess of (i) the fair market value of a
specified number of shares at the time of the surrender, as determined by the
OIP Committee, over (ii) 100% of the fair market value of such shares at the
time the option was granted plus any dividends paid while the option was
outstanding but unexercised.

44
<PAGE> 47

SARs may be granted for a period of not less than six months nor more than
ten years, and shall be exercisable in whole or in part, at such time or times
and subject to such other terms and conditions as shall be prescribed by the OIP
Committee at the time of the grant.

SARs will be exercisable only during a grantee's employment by the Company,
except that in the discretion of the OIP Committee an SAR may be made
exercisable for up to three months after a grantee's employment is terminated
for any reason other than death, retirement or disability.

In the event that a grantee's employment is terminated as a result of
death, retirement or disability without having fully exercised such grantee's
SARs, the grantee, or grantee's beneficiary following the grantee's death, may
have the right to exercise the SARs during their term within a period of 24
months after the date of such termination to the extent that the right was
exercisable at the date of such termination, or during such other period and
subject to such terms as may be determined by the OIP Committee.

Contingent Stock Awards. The OIP Committee will determine the amount of a
contingent stock award to be granted to an employee based on the expected impact
the employee can have on the financial well-being of the Company and other
factors determined by the OIP Committee to be appropriate. Contingent stock
awards under the Incentive Plan shall be subject to such terms, conditions, and
restrictions, if any, including without limitation, substantial risks of
forfeiture and/or attainment of performance objectives, and for such period or
periods (in excess of six months) as will be determined by the OIP Committee at
the time of grant. The OIP Committee in its discretion may permit an
acceleration of the expiration of the applicable restriction period, so long as
the minimum six-month period is retained, with respect to any part or all of the
award to any participant.

In the event of a participant's termination of employment for any reason
prior to lapse of restrictions applicable to a contingent stock award paid to
such participant and unless otherwise provided for by the Omnibus Incentive Plan
or as provided in a contingent stock agreement, all rights to shares as to which
there still remain unlapsed restrictions will be forfeited by such participant
to the Company without payment of any consideration by the Company.

Restricted Stock Award. The OIP Committee will determine the amount of a
restricted stock award to be granted to an employee based on the past or
expected impact the employee has had or can have on the financial well-being of
the Company and other factors deemed by the OIP Committee to be appropriate.
Restricted stock awards made pursuant to the Incentive Plan shall be subject to
such terms, conditions, and restrictions, including attainment of performance
objectives, and for such period or periods (in excess of six months) as will be
determined by the OIP Committee at the time of grant. The OIP Committee in its
discretion may permit an acceleration of the expiration of the applicable
restriction period, so long as the minimum six-month period is retained, with
respect to any part or all of the award to any participant.

In the event of a participant's termination of employment for any reason
prior to the lapse of restrictions applicable to a restricted stock award made
to such participant and unless otherwise provided for by the Incentive Plan or
as provided in a restricted stock agreement, all rights to shares as to which
there still remain unlapsed restrictions will be forfeited by such participant
to the Company without payment of any consideration by the Company.

Change in Control. Upon a change in control, all options, contingent stock
awards, restricted stock awards and stock appreciation rights will automatically
vest as of that date of the change in control and all restrictions or
contingencies will be deemed to have been satisfied.

The Company intends to file a registration statement on Form S-8 for the
Incentive Plan as soon as practicable.

EMPLOYEE STOCK PURCHASE PLAN

The Company has adopted, and its shareholders have approved, the Employee
Stock Purchase Plan (the "Stock Purchase Plan"). A maximum of 120,000 shares of
Common Stock will be available to be issued pursuant to the Stock Purchase Plan.
The maximum number of shares that may be sold pursuant to the Stock

45
<PAGE> 48

Purchase Plan, as well as the number of shares that may be purchased pursuant to
the exercise of any option outstanding thereunder, is subject to adjustment in
the event of a stock split, stock dividend, recapitalization, merger,
consolidation, combination or such similar events.

The Stock Purchase Plan is administered by the Employee Stock Purchase Plan
Committee (the "ESPP Committee") which consists of two or more members of the
Board of Directors who are not employees of the Company. The ESPP Committee will
determine from time to time, in its sole and final discretion, whether or not to
grant options to eligible employees as well as the price, rights and privileges
of such options.

No eligible employee may receive an option if: (i) after receiving such
option such employee owns 5% or more of the outstanding Common Stock, or (ii)
such employee would be permitted to purchase shares pursuant to the Stock
Purchase Plan and any other Company plan at a rate which would exceed an
aggregate of $25,000 of fair market value of such shares in any calendar year.

The ESPP Committee may determine the exercise price for the options granted
pursuant to the Stock Purchase Plan, but such exercise price may not be less
than the lesser of (i) 85% of the fair market value of the Common Stock at the
time such options are granted, or (ii) 85% of the fair market value of the
Common Stock at the time such options are exercised.

Any Company employee who has been employed not less than two years and
whose customary employment is more than 20 hours per week is eligible to
participate in the Stock Purchase Plan. At February 1, 1996, the Company and its
subsidiaries had approximately 126 employees of whom 86 were eligible employees
under the Stock Purchase Plan.

Options granted pursuant to the Stock Purchase Plan may not be exercised
after the expiration of 27 months from the date such options are granted.
Options granted pursuant to the Stock Purchase Plan may not be transferred
except by will or the laws of descent and distribution.

The Company intends to file a registration statement on Form S-8 for the
Stock Purchase Plan as soon as practicable.

RETIREMENT PLANS

The following table illustrates the maximum annual benefits payable in the
form of a straight life annuity under FPIC's qualified defined benefit plan (the
"Retirement Plan") to an officer or employee retiring at age 65 with the
specified combination of final average compensation and years of credited
service.

<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------
AVERAGE COMPENSATION 5 10 15
- -------------------- ------- ------- -------
<S> <C> <C> <C>
$125,000................................................ $ 6,897 $13,795 $20,692
150,000................................................ 8,647 17,295 25,942
175,000................................................ 10,397 20,795 31,192
200,000................................................ 12,147 24,295 36,442
225,000................................................ 13,897 27,795 41,692
250,000................................................ 15,647 31,295 46,942
275,000................................................ 17,397 34,795 52,192
300,000................................................ 19,147 38,295 57,442
325,000................................................ 20,897 41,795 62,692
</TABLE>

The Retirement Plan is a funded, qualified, non-contributory plan that
covers substantially all of FPIC's employees including executive officers. Under
the Retirement Plan, benefits are calculated based upon (i) .75% of average
compensation below the Social Security covered compensation level plus 1.4% of
average compensation above the Social Security covered compensation level
multiplied by years of service not in excess of the Cumulative Disparity Limit
plus (ii) .75% of average compensation times years of service in excess of the
Cumulative Disparity Limit (but in total not in excess of 35 years) reduced by
(iii) benefits under the Florida Physicians Insurance Company of Ohio Defined
Benefit Plan and the Professional Insurance Management Company Pension Plan. The
Cumulative Disparity Limit is 35 minus the total number of years the participant
earned a year of service in any other FPIC plan. The total number of years of
service which

46
<PAGE> 49

may be taken into consideration under the Retirement Plan is limited to 15.
Average compensation is based upon the participant's highest average
compensation for five consecutive years within the ten years prior to
retirement. Credited years of service under the defined benefit plan as of
December 31, 1995, were approximately 7 years for Mr. Russell, 13 years for Mr.
Smith, 1 year for Mr. Rosenbloom, and 8 years for Mr. Finch.

The amounts shown in the table above were calculated using Social Security
covered compensation levels based upon the average age of the four executives.
The amounts shown on the table above have been calculated without reflection of
the current limit of $150,000 on includible compensation under the Internal
Revenue Code. Optional forms of payment available under the defined benefit plan
may result in substantially reduced payments to an employee electing such an
option.

In addition to the amounts shown in the above table, FPIC's Supplemental
Executive Retirement Plan (the "SERP") provides Messrs. Russell and Smith, who
have been selected to participate by the Compensation Committee, with income at
retirement. A participant in the SERP is eligible to retire and receive a
retirement benefit beginning on the earlier of such participant's (i) early
retirement date, (ii) disability retirement date, or (iii) normal retirement
date. The retirement benefit at the normal retirement date equals 60% of
pre-retirement base compensation, less Retirement Plan and all predecessor
plans' benefits and Social Security benefits. Pre-retirement base compensation
is the basic salary of a participant excluding bonuses, averaged over the
highest three consecutive years of service. The early retirement benefit equals
the retirement benefit at the normal retirement date times the percentage of
benefits vested, reduced by 0.005% for each month a participant's early
retirement date occurs prior to such participant's normal retirement date. A
participant terminating employment due to a permanent and total disability will
be eligible for a disability retirement benefit equal to 60% of pre-retirement
base compensation, less Retirement Plan and all predecessor plans' benefits and
Social Security benefits. In the event of the participant's death, such
participant's surviving spouse will be eligible to receive a death benefit equal
to 50% of the retirement benefit the participant would otherwise have been
eligible to receive. The SERP is an unfunded nonqualified plan. Retirement
benefits under the SERP vest ratably commencing on a participant's initial date
of employment with the Company with 1/240 of the total retirement benefit
vesting at the end of each month the participant is employed by the Company. A
participant's retirement benefit will be 100% vested if (i) such participant
attains age 64 and is an employee of the Company on such date, (ii) such
participant terminates employment due to a permanent and total disability, or
(iii) the Compensation Committee, in its sole discretion, vests 100% such
participant's retirement benefit. The estimated annual retirement benefits for
Messrs. Russell and Smith were calculated using 1995 base salary for
pre-retirement base compensation, Social Security benefits were based on the
maximum benefits payable for an individual retiring at age 65 in 1995, and
Retirement Plan benefits were based on 1995 base salary, including bonuses,
assuming 15 years of service. The estimated annual retirement benefits from the
SERP for officers named in the Summary Compensation Table on December 31, 1995,
is $68,319 for Mr. Russell and $51,980 for Mr. Smith. FPIC accrued $20,000 to
provide for the SERP during 1995, 1994 and 1993.

The Company's qualified defined contribution plan has two parts. In the
first part, the Company contributes 10% of each participant's compensation for
the plan year. In the second part, the Company allows employees to contribute up
to 2.5% of their compensation earned during the plan year. In addition, the
Company matches 100% of the employee's contribution.

The Company also offers certain key employees selected by the Board of
Directors a nonqualified deferred compensation plan. In this plan, key employees
may defer into the plan all or a portion of their compensation. In addition, the
Company, at the discretion of its Board of Directors, can match the
contributions made by key employees and may also make discretionary incentive
contributions for key employees. Participants' account balances generally will
be paid, as adjusted for investment gains or losses, following termination of
employment. Contributions amounted to $11,111 and $10,628 in 1995 and 1994,
respectively.

The Company's Excess Benefit Plan provides a means of equalizing the
benefits of those employees participating in the Retirement Plan, other than
those individuals covered under the SERP, whose funded benefits under that plan
are or will be limited by the application of ERISA, the Code, or any applicable
law or

47
<PAGE> 50

regulation. The Excess Benefit Plan is a nonqualified plan and benefits payable
under the Excess Benefit Plan are not funded and are payable out of the
Company's general funds.

EMPLOYMENT AGREEMENTS AND SEVERANCE AGREEMENTS

The Company has entered into employment agreements (the "Employment
Agreements") with Messrs. Russell and Smith. The Employment Agreements provide
for a minimum annual salary and the opportunity for annual salary increases,
incentive compensation, and other compensation and perquisites as approved by
the Board of Directors. The Employment Agreements are for a term of three years
and may be extended for an additional year by the Board of Directors prior to
the end of each year. If the Board of Directors does not extend the Employment
Agreements by the end of any year, Mr. Russell and Mr. Smith may terminate their
respective employment by providing at least 90 days' written notice of such
termination. Upon such termination, Mr. Russell and Mr. Smith would continue to
receive their respective annual salary and benefits for the remaining term of
their respective Employment Agreements, or until commencing work for a competing
company. Under the Employment Agreements, Mr. Russell's minimum annual salary
for 1996 is $235,624 and Mr. Smith's minimum annual salary for 1996 is $184,565.
Mr. Russell or Mr. Smith may also terminate their respective employment in the
event of a constructive discharge and continue to receive their respective
annual salary and benefits for the remaining term of their Employment
Agreements. Payments under the Employment Agreements are not limited to the
maximum amount which would avoid the excise tax imposed by Code Section 4999.

The Company has entered into severance agreements (the "Severance
Agreements") with Messrs. Russell, Smith, Rosenbloom and Finch. The Severance
Agreements which apply in the case of a change of control of the Company,
provide that if at any time during the coverage period, as defined under the
Severance Agreements, the employment of an individual covered under the
Severance Agreements is terminated by the Company for any reason other than
cause, death or disability, or by such individual in the event of a constructive
discharge the Company will pay severance pay in a lump sum cash amount equal to
three times the sum of such individual's (i) annual salary and (ii) the greater
of the target bonus opportunity for the current calendar year or the average of
the annual bonuses for the three prior calendar years. Payments under the
Severance Agreements are limited to the maximum amount that would not trigger
the excise tax imposed by Code Section 4999.

If Messrs. Russell and Smith are entitled to receive benefits under both
their Employment Agreements and their Severance Agreements then each will be
permitted to select and receive benefits under either their Employment Agreement
or their Severance Agreement, but not benefits from both the Employment
Agreement and the Severance Agreement.

BUDGET COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal year 1995, no executive officer of the Company served as a
director of, or as a member of the compensation or equivalent committee, of
another entity, one of whose executive officers served on the Board of
Director's Budget Committee or otherwise as a member of the Board of Directors.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

MCCREARY

The Company, through its wholly owned subsidiary McCreary, purchased the
assets of MEI, formerly known as McCreary Corporation, on July 1, 1995. In
addition to assuming certain liabilities, McCreary paid MEI $2.0 million and
agreed to pay an additional $4.0 million over a five year period subject to
certain adjustments. A number of employees of MEI were shareholders of MEI and
thus benefited from such transaction. Six of these persons, including William T.
McCreary, the principal shareholder of MEI and the President and Chief Executive
Officer of McCreary, are now employed by McCreary. In connection with this asset
acquisition, these six persons entered into employment and non-competition
agreements with McCreary. Mr. McCreary's employment agreement is for a term of
five years at an annual salary of $150,000. In addition to the above payments,
McCreary has agreed to pay MEI $6,000 per month to pay for all of William T.
McCreary's business-related travel expenses such as transportation, meals,
entertainment and lodging for so long as Mr. McCreary is employed by McCreary.
Management believes that these expenses are justified by

48
<PAGE> 51

the frequent business-related travel demands upon Mr. McCreary. McCreary also
leases its office building from Mr. McCreary and pays Mr. McCreary a monthly
rental of $17,769, which is subject to future adjustments.

FMA AND FDA

Pursuant to FPIC's bylaws, the FMA recommends to the Board of Directors a
nominee for FPIC's Board of Directors each year. Current directors that were
recommended for their current terms by the FMA are Drs. Van Eldik, Bagby and
Shapiro. Drs. Van Eldik, Bagby and Acosta-Rua are members of the FMA Board of
Directors. Dr. Acosta-Rua is a non-voting member of the FMA's Board of
Governors. Dr. Bagby is President of the FMA.

The FMA has endorsed FPIC and cooperates with FPIC's marketing efforts. In
recognition of the FMA's endorsement and marketing assistance, FPIC pays the FMA
each year 1% of FPIC's net premium earned from physician MPL insurance in
Florida during that year.

Pursuant to FPIC's bylaws, the FDA recommends to the Board of Directors a
nominee for FPIC's Board of Directors every three years. Dr. Gause presently
serves as the FDA's recommended nominee. The FDA has an insurance agency that
received a commission of approximately $500,000 from FPIC in 1995.

OTHER RELATIONSHIPS

All of the members of the Board of Directors, other than Mr. Russell, are
also policyholders of FPIC and as such may experience claims from time to time
in the usual course of business that may require coverage under their policies
that FPIC would provide to any policyholder.

The Company intends that any future business transactions between the
Company and any of its officers, directors, principal shareholders and their
affiliates will be approved by a majority of the Company's independent and
disinterested directors and will be on terms at least as favorable to the
Company as could be obtained from unaffiliated third parties.

49
<PAGE> 52

PRINCIPAL SHAREHOLDERS AND SECURITIES OWNERSHIP OF MANAGEMENT

According to the Company's stock transfer records, as of June 30, 1996, no
shareholder owns five percent (5%) or more of the Company's outstanding shares
of common stock.

The following table sets forth the beneficial ownership of the Company's
common stock by each of the directors and nominees, each of the executive
officers named in the Summary Compensation Table and all of the Company's
directors and executive officers as a group as of May 21, 1996.

<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF SHARES PRIOR TO AFTER
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OFFERING OFFERING(2)
- --------------------------------------------------------- --------------------- -------- -----------
<S> <C> <C> <C>
Gaston J. Acosta-Rua, M.D................................ 5,000(3) * *
Richard J. Bagby, M.D.................................... 23,250(4) * *
Robert O. Baratta, M.D................................... 1,000 * *
James W. Bridges, M.D.................................... 4,000 * *
Robert B. Finch.......................................... 0 * *
Curtis E. Gause, D.D.S................................... 1,000 * *
J. Stewart Hagen, M.D.................................... 7,500 * *
Louis C. Murray, M.D..................................... 2,500 * *
Steven M. Rosenbloom..................................... 0 * *
William R. Russell....................................... 0 * *
Guy T. Selander, M.D..................................... 1,000 * *
David M. Shapiro, M.D.................................... 7,500 * *
Steven R. Smith.......................................... 0 * *
D. L. Van Eldik, M.D..................................... 1,000(5) * *
James G. White, M.D...................................... 1,000 * *
Henry M. Yonge, M.D...................................... 1,000 * *
Directors and Executive Officers as a Group (21
persons)............................................... 55,750 * *
</TABLE>

- ---------------

* Less than 1.0% of the Company's outstanding common stock.
(1) Except as otherwise noted below, each person named in the table has sole
voting and investment power with respect to all shares of common stock
listed as owned by such person. Shares beneficially owned include shares
that may be acquired pursuant to the exercise of outstanding warrants that
are exercisable within 60 days of the date hereof.
(2) Assumes that each person named in the table will neither sell nor purchase
any shares of common stock in the Offering.
(3) Dr. Acosta-Rua disclaims beneficial ownership of 1,000 of these shares,
which are owned by his wife.
(4) These shares are owned by Morgan, Hiatt, Hines, Culbert and March P.A., of
which Dr. Bagby is a member.
(5) These shares are owned by D.L. Van Eldik, M.D., P.A., of which Dr. Van Eldik
is a member.

50
<PAGE> 53

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 25,000,000 shares of
Common Stock and 50,000,000 shares of preferred stock, par value $.10 per share.
The Company has no shares of preferred stock currently issued and outstanding.
For a description of certain transferability restrictions on the Common Stock
that is not sold pursuant to the Offering, see "Shares Eligible for Future
Sale."

COMMON STOCK

Holders of Common Stock of the Company are entitled to such dividends as
the Company's Board of Directors may declare from funds legally available
therefor, subject to the preferential rights of Company preferred stock, if any,
and the requirements of Florida law. Holders of Common Stock are entitled to one
vote per share on any matter subject to shareholder approval, including the
election of directors. The Company's articles of incorporation do not provide
for cumulative voting in connection with the election of directors. No holder of
Common Stock will have any preemptive right to subscribe for any shares of
capital stock issued in the future.

Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, the holders of common stock are entitled to share
ratably in any distribution of the Company's net assets remaining after payment
of creditors and, subject to preferential rights of the Company's preferred
stock, if any. All of the outstanding shares of Common Stock are, and the shares
being offered by the Company and the selling shareholders will be, fully paid
and non-assessable.

PREFERRED STOCK

Pursuant to the Company's articles of incorporation, the Company's Board of
Directors may by resolution establish one or more classes or series of preferred
stock having such number of shares and relative voting rights, designation,
dividend rates, liquidation and other rights, preferences and limitations as may
be fixed by the Company's Board of Directors without further shareholder
approval. Preferred stock may be entitled to preferences over Common Stock with
respect to dividends, liquidation, dissolution or winding up of the Company in
such amounts as are established by the Board resolutions issuing such shares.
Preferred stock may also enjoy redemption or sinking fund rights or voting
rights including the right to vote as a class with respect to the election of
directors, major corporate transactions or otherwise, that may limit, qualify or
otherwise adversely affect the voting rights of the Common Stock. Such rights,
preferences, privileges and limitations as may be established could also have
the effect of impeding the acquisition and control of the Company.

SHAREHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS

Florida corporate law generally limits Florida corporations, including the
Company, in engaging in a broad range of transactions with any shareholder who
owns more than 10% of a corporation's outstanding voting shares or with any
affiliate of such shareholder. The Florida "Affiliated-Transaction" statute
provides that a Florida corporation may not engage in such transactions unless,
among other things, the transaction is: (a) approved by two-thirds of the
corporation's outstanding voting shares other than the shares owned by the
interested shareholders; (b) approved by a majority of the corporation's
disinterested directors; or (c) the corporation's shareholders receive a "fair
price" for their shares as such price is defined in the statutes. The Florida
Statutes further provide that a corporation may opt out of these provisions by
including in its articles of incorporation a provision expressly electing not to
be governed by these provisions. The Company has not elected to opt out of these
provisions.

The Company's articles of incorporation contain a fair price provision that
is similar in certain respects to the Florida "Affiliated-Transaction" statute.
The Company's fair price provision requires the vote of the holders of at least
75% of the then outstanding voting shares of capital stock of the Company
entitled to vote other than those held by the Related Person (as defined herein)
to approve certain business combinations. This supermajority approval is not
required provided that (i) two-thirds of the Continuing Directors (as defined
herein) have expressly approved the business combination, or (ii) two-thirds of
the Continuing

51
<PAGE> 54

Directors determine that the cash or fair market value of the consideration to
be received by holders of the voting stock is not less than the highest price
paid by the Related Person in acquiring each class of voting stock.

Business combinations requiring this supermajority approval are: (i) any
merger or consolidation of the Company or one of its subsidiaries with or into a
Related Person or vice versa; (ii) any sale, lease, exchange, transfer or other
disposition of all or substantially all of the assets of the Company or any of
its subsidiaries to a Related Person; (iii) any sale, lease, exchange, transfer
of other disposition of all or substantially all of the assets of the Related
Person to the Company or one of its subsidiaries; (iv) the issuance of any
securities of the Company or one of its subsidiaries to a Related Person, other
than the issuance on a pro rata basis to all holders of the same class of
capital stock pursuant to a stock split, dividend, or a distribution of warrants
or rights; (v) any recapitalization that would have the effect of increasing the
voting power of a Related Person; or (vi) any agreement, contract, or other
arrangement providing for any of the above transactions.

The Company's articles of incorporation provide the following definitions:
"Related Person" shall mean and include any individual, corporation,
partnership, or other person or entity that, together with its affiliates and
associates, becomes the beneficial owner of an aggregate of 10% or more of the
outstanding voting stock of the Company, and any affiliate or associate of any
such individual, corporation, partnership or other person or entity; provided,
however, that the term "Related Person" shall not include (i) a person or entity
whose acquisition of such aggregate percentage of voting stock was approved in
advance by two-thirds of the Continuing Directors or (ii) any trustee or
fiduciary when acting in such capacity with respect to any employee benefit plan
of the Company or a wholly owned subsidiary of the Company. "Continuing
Director" shall mean a Director who was a member of the Board of Directors of
the Company immediately prior to the time that the Related Person involved in a
business combination became a Related Person, and any successor of a Continuing
Director who is unaffiliated with the Related Person and is recommended to
succeed a Continuing Director by a majority of the Continuing Directors then on
the Board of Directors.

Florida corporate law generally prohibits persons from exercising the
voting power of their shares of a Florida corporation if their ownership
percentage passes certain thresholds without obtaining approval from the
corporation's other shareholders. The statute generally governs acquisitions of
a Florida corporation's shares that when added with the shares previously owned
would cause a person to own either: (a) one-fifth or more but less than
one-third of all voting power; (b) one-third or more but less than a majority of
all voting power; or (c) a majority or more of all voting power. The statute
provides exceptions for certain transactions such as mergers, share exchanges,
satisfaction of a pledge or other security interest, gifts and testamentary
transfers. The statute further provides that these provisions do not apply to
corporations the articles of incorporation or bylaws of which expressly state
that such provisions do not apply to such corporation. The Company has not
elected to opt out of these provisions.

PROVISIONS THAT COULD DELAY, DETER OR PREVENT CHANGES IN CONTROL

Certain provisions of Florida law and the Company's articles of
incorporation that are described above under "Shareholder Approval of Certain
Business Combinations" or described later in this section may delay, deter or
prevent a change in control of the Company. In addition, Florida insurance law
generally provides that no person may acquire 5% or more of a Florida insurance
company unless such person has filed with the Department of Insurance certain
information required by the Florida Statutes and the acquisition has been
approved by the Department of Insurance. The Department of Insurance must
determine whether to approve or disapprove the transaction based on certain
statutory criteria, including whether the transaction is not likely to be
hazardous or prejudicial to the Florida insurance company's policyholders. Thus,
the Company will have to comply with these provisions whenever it attempts to
acquire 5% or more of a Florida insurance company. Conversely, any person
attempting to acquire 5% or more of the Company will also have to comply with
these provisions requiring approval by the Department of Insurance since an
acquisition of the Company will be deemed to be an indirect acquisition of FPIC.
A person acquiring 5% or more, but less than 10%, of a Florida insurance company
may avoid seeking the approval of the Department of Insurance if such person
files a disclaimer of affiliation and control with the Department of Insurance.

52
<PAGE> 55

The effect of these laws and the Company's articles of incorporation may be
to deter unfriendly offers or other efforts to obtain control of the Company
that are not approved by the Board of Directors and thereby protect the
continuity of management and enhance the Company's Board of Directors' ability
to protect the Company, its shareholders and its other constituencies as
appropriate under the circumstances. Such laws and provisions tend to induce any
persons seeking control of the Company or a business combination with the
Company to negotiate on terms acceptable to the then elected Board of Directors.

The Company's Board of Directors is authorized, without any further action
by its shareholders, to designate series of preferred stock and determine the
rights, preferences, privileges and restrictions of each series. The Company's
Board of Directors may issue preferred stock with voting and conversion rights
that could adversely affect the voting power of the holders of Common Stock, and
that could, among other things, have the effect of delaying, deterring or
preventing an acquisition or change in control of the Company.

One of the effects of the existence of unissued and unreserved Common Stock
and preferred stock may be to enable the Company's Board of Directors, without
seeking shareholder approval, to issue shares to persons friendly to current
management, which could render more difficult or discourage an attempt to obtain
control of the Company by means of a merger, tender offer, proxy contest or
otherwise. Such issuance may protect the continuity of management and enhance
the Company's Board of Directors' ability to protect the Company, its
shareholders and its other constituencies as appropriate under the
circumstances. Additional shares could also be used to dilute the stock
ownership of persons seeking to obtain control of the Company.

Pursuant to its articles of incorporation, the Company's Board of Directors
is divided into three classes of directors that serve staggered terms of three
years. The purpose of a classified board is to promote continuity and stability
in the composition of such board and in the policies formulated by such board,
by insuring that at least two thirds of the directors will at all times have had
at least one year's experience as directors. A classified board structure may
prevent shareholders who do not approve of the policies of a board from removing
a majority of such board's directors at a single meeting because it would
normally take two annual meetings of shareholders to elect a majority of such
board.

Certain executive officers of the Company have entered into severance
agreements and/or employment agreements that would provide certain amounts of
compensation to them in connection with certain changes of control of the
Company. See "Executive Compensation -- Employment Agreements." These agreements
are intended to allow such executive officers to honor their fiduciary duties to
shareholders by evaluating takeover bids without worry about whether they will
lose their jobs should the bid succeed. Such agreements, however, add to the
costs a person must pay in order to acquire the Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is First Union
National Bank of North Carolina, N.A.

53
<PAGE> 56

SELLING SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of July 19, 1996 by each of the Selling
Shareholders. Unless otherwise indicated, each person or entity named below has
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by such person or entity, subject to community
property laws where applicable and the information set forth in the footnotes to
the table below.

<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP BENEFICIAL
PRIOR TO OWNERSHIP
OFFERING(1) NUMBER OF AFTER THE OFFERING
------------------- SHARES -------------------
NUMBER OF BEING NUMBER OF
NAME SHARES PERCENT OFFERED SHARES PERCENT
- ------------------------------------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>

</TABLE>

- ---------------

(1) Less than one percent.

Each of the Selling Shareholders have elected to participate in the
Offering pursuant to a Letter of Transmittal and Custody Agreement. Shareholders
had the option to sell all or a portion of their shares and could rescind their
election at any time during the election period. As of the date of this
Prospectus the election period is scheduled to end at 5:00 p.m., July 19, 1996
unless extended by the Company. In addition, in the event more than 40% of the
outstanding shares of the Company were offered to the Underwriters, Selling
Shareholders were allowed to participate on a pro-rata basis.

Selling Shareholders who elected to participate submitted their share
certificates to First Union National Bank of North Carolina, N.A., as custodian,
and appointed William R. Russell, Steven R. Smith and Steven M. Rosenbloom, and
each acting individually, as their attorneys-in-fact to (i) enter into an
underwriting agreement with the Underwriters, (ii) sell, assign and transfer to
the Underwriters the shares and (iii) negotiate and agree upon the price
(including any discounts) at which shares could be sold to the Underwriters,
provided, however, that in no event would a price be set which would result in
any Selling Shareholder receiving less than $9.30 (taking into account discounts
paid to the Underwriters) per share.

54
<PAGE> 57

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding
9,519,420 shares of Common Stock which includes 379,780 shares that the Company
will issue on July 19, 1996. See "Risk Factors -- Prior Offering Issuance." The
3,000,000 shares of Common Stock sold in the Offering will be freely tradeable
without restriction or further registration under the Securities Act except for
any shares purchased by an "affiliate" of the Company, which will be subject to
the limitations of Rule 144.

In accordance with a provision in the Company's articles of incorporation,
the Company's shareholders generally may not sell any shares of Common Stock,
except for the shares offered hereby, for a period of 120 days following the
date of this Offering. The only transfers that the Company's shareholders will
be permitted to make of their currently owned shares during such 120 day period
are: (i) by will or the laws of descent and distribution upon a shareholder's
death; (ii) by order of a court of competent jurisdiction pursuant to bankruptcy
or other judicial proceedings; (iii) by bona fide pledge to a creditor as
security for indebtedness of the shareholder or by a creditor pursuant to its
rights as a pledgee of such stock; or (iv) by advance written approval from the
Company's Board of Directors or a designated officer upon a showing by a
shareholder that disapproval will result in substantial financial hardship.
Purchasers of Common Stock in the Offering will not be subject to the 120 day
transfer restriction.

After the 120 day period described above, all shares of Common Stock of the
Company will be freely transferable, except that the 379,780 shares that are
issued on July 19, 1996 and not sold in the Offering, if any, and shares of
Common Stock owned by persons who are deemed to be "affiliates" (as such term is
defined in Rule 144 under the Securities Act) may be resold only in transactions
permitted by the resale provisions of Rule 144 under the Securities Act or as
otherwise permitted under the Securities Act. Rule 144 defines an affiliate of
an issuer as a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such issuer.

In general, under Rule 144 as currently in effect, any person who is an
"affiliate" as that term is defined under the Securities Act, is entitled to
sell, within any three-month period, a number of shares that does not exceed the
greater of (i) one percent of the then outstanding shares of the Common Stock of
the Company (approximately 95,194 shares immediately following this Offering) or
(ii) the average weekly trading volume of the Common Stock during the four
calendar weeks preceding a sale by such person. Sales under Rule 144 are also
subject to certain manner-of-sale provisions, notice requirements and the
availability of current public information about the Company. A shareholder who
is deemed not to have been an "affiliate" of the Company for at least 90 days
and who has beneficially owned restricted securities for at least three years
would be entitled to sell such shares under Rule 144(k) without regard to the
volume or manner of sale limitations described above.

Following 120 days after the Offering, 6,083,890 shares of Common Stock
will be eligible for sale in the public market without regard to any Rule 144
limitations and 55,750 shares held by affiliates will be available for sale
pursuant to the limitations of Rule 144. Affiliates also hold options for
390,000 shares that may also be available for sale pursuant to the limitations
of Rule 144 following 120 days after the Offering.

Prior to this Offering, there has been no public market for the Common
Stock, and no predictions can be made as to the effect, if any, that sales of
shares or the availability of shares for sale will have on the prevailing market
price of the Common Stock. Nevertheless, sales of substantial amounts of Common
Stock in the public market could have an adverse effect on prevailing market
prices.

55
<PAGE> 58

UNDERWRITING

Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, a syndicate of the Underwriters named below
(the "Underwriters"), for whom Oppenheimer & Co., Inc., and The
Robinson-Humphrey Company, Inc. are acting as representatives (the
"Representatives"), have severally agreed to purchase 1,000,000 shares of Common
Stock from the Company and 2,000,000 shares of Common Stock from the Selling
Shareholders. The number of shares of Common Stock that each Underwriter has
agreed to purchase is set forth opposite its name below:

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ----------------------------------------------------------------------------- ----------------
<S> <C>
Oppenheimer & Co., Inc. .....................................................
The Robinson-Humphrey Company, Inc. .........................................

----------------
Total..............................................................
=============
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by counsel
and to certain other conditions, including the conditions that no stop order
suspending the effectiveness of the Registration Statement is in effect and no
proceedings for such purpose are pending before or threatened by the Commission
and there has been no material adverse change or any development involving a
prospective material change in the condition, financial or otherwise, or in the
earnings, affairs or business prospects of the Company from that set forth in
the Registration Statement. The Underwriters are obligated to take and pay for
all of the shares of Common Stock offered hereby (other than those covered by
the over-allotment option described below) if any are taken.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares directly to the public initially at the Price to the
Public set forth on the cover page hereof and to certain dealers at such price
less a concession not in excess of $ a share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $ a
share to other Underwriters or to certain other dealers.

Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to 450,000 additional shares of Common Stock at the
Price to the Public set forth on the cover page hereof, less underwriting
discounts and commissions. The Underwriters may exercise such option to purchase
solely for the purpose of covering over-allotments, if any, made in connection
with the offering of the shares of Common Stock offered hereby. To the extent
such option is exercised, each of the Underwriters will become obligated,
subject to certain conditions, to purchase approximately the same percentage of
such additional shares as the number set forth next to each such Underwriter's
name in the preceding table bears to the total number of shares offered hereby
by the Underwriters.

In addition, the Underwriting Agreement provides that 150,000 shares of
Common Stock offered by the Company will be reserved for sale to the directors,
officers and employees of the Company. Sales of Common Stock to such persons
will be at a price equal to the public offering price less a 7% discount. The
number of shares available for sale to the general public will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares not so
purchased will be offered by the Underwriters to the general public on the same
basis as the other shares of Common Stock offered hereby. Shares purchased by
such persons will be subject to a lock-up agreement that will restrict the
transferability of such shares for generally a two year period. However, up to
10% of such shares may be subject to a six month restriction on transferability
in lieu of a two year restriction if such shares are sold to employees of the
Company who are not deemed affiliates.

56
<PAGE> 59

See "Shares Eligible for Future Sale" for a description of certain
arrangements by which the Company's shareholders will not sell or otherwise
dispose of Common Stock, except for shares offered hereby, for 120 days after
the date of this Offering.

The Underwriters have advised the Company that they will not execute in
connection with the Offering any transactions in accounts over which they
exercise discretionary authority without the prior specific written approval of
the customer.

Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price was determined by negotiations among
the Company and the Representatives. Among the principal factors considered in
such negotiations were prevailing market conditions, the results of operations
of the Company in recent periods, market valuations of companies that the
Company and the Representatives believe to be comparable to the Company,
estimates of the business potential of the Company, the history of and prospects
for the industry in which the Company competes, and such other factors as the
Company and the Representatives deemed relevant.

Application has been made to have the Common Stock listed on the Nasdaq
National Market under the symbol "FPIC."

The Company, the Selling Shareholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

LEGAL MATTERS

The legality of the Common Stock offered hereby will be passed upon for the
Company by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited liability
partnership including professional corporations, Jacksonville, Florida. Certain
legal matters in connection with the issuance of the shares of Common Stock
offered hereby will be passed upon for the Underwriters by Morgan, Lewis &
Bockius LLP, New York, New York.

EXPERTS

The financial statements and schedules of the Company as of December 31,
1995 and 1994 and for each of the years in the three-year period ended December
31, 1995, have been included herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick LLP covering
the aforementioned financial statements refers to changes in the accounting
methods for certain investments in debt and equity securities and for
reinsurance.

57
<PAGE> 60

GLOSSARY

Actuary or actuarial
firm....................... A person or firm which conducts various statistical
studies used to evaluate risks, the adequacy of
premium charged and the adequacy of provisions
made for losses and loss expenses.

Adverse loss development... Increases in losses and LAE exceeding initial
estimates of loss and LAE experience between a
given period of time.

Admitted assets............ Assets of an insurer permitted by an insurer's
domiciliary state insurance department to be
taken into account in determining its financial
condition for statutory purposes.

Assume..................... To accept from the primary insurer or reinsurer all
or a portion of the liability underwritten by
such primary insurer or reinsurer.

Capitation................. Specified amount paid periodically to a health
provider for a group of specified healthcare
services regardless of quantity rendered.

Case reserves.............. Recorded estimates of unpaid liabilities associated
with specific reported claims. Case reserves may
pertain to losses, LAE or both.

Casualty insurance......... Insurance that is primarily concerned with the
losses caused by injuries to third persons (i.e.,
not the policyholder) and the legal liability
imposed on the insured resulting therefrom. It
includes, but is not limited to, employers'
liability, workers' compensation, public
liability, automobile liability, personal
liability and professional liability insurance.
It excludes certain types of loss that by law or
custom are considered as being exclusively within
the scope of other types of insurance, such as
fire or marine.

Cede....................... To transfer the risk and related premium in
connection with a reinsurance transaction.

Ceded premium.............. A portion of the premium paid to reinsurers by the
primary insurer or reinsurer.

Claims-free................ A medical professional is considered to be
"claims-free" if such medical professional has
had five or more years of experience with no
claim paid in excess of either $25,000 for
medical professionals practicing outside of Dade,
Broward and Palm Beach counties or $50,000 for
medical professionals practicing in one of those
three counties and the Company is not aware of
any claim pending against such medical
professional for which reserves of $100,000 or
more have been established.

Claims-made policy......... An insurance policy under which the insurer is
liable to the insured only for claims that arise
out of incidents occurring and of which notice to
the insurer is given, while coverage is
effective.

Combined ratio............. The sum of the underwriting expense ratio, and the
loss and LAE ratio. A combined ratio below 100%
indicates profitable underwriting results. A
combined ratio over 100% indicates unprofitable
underwriting results.

Commission................. The fee paid to an agent for placing insurance with
the Company, which is generally a percentage of
the premium.

Direct premium written..... Total premium for insurance written without regard
to reinsurance assumed or ceded.

58
<PAGE> 61

Excess of loss
reinsurance................ A generic term describing reinsurance that
indemnifies the reinsured against all or a
specified portion of losses on underlying
insurance policies in excess of a specified
dollar amount, called a "layer" or "retention."

Facultative reinsurance.... A form of reinsurance that is transacted between
the reinsurer and the reinsured on a risk-by-risk
basis.

Free Tail.................. Coverage given to an insured under a claims made
policy that insures free of premium charge all
claims that have been incurred but not yet
reported to the insurer in the event of death,
disability and retirement.

Frequency.................. Refers to the rate of recurrence. The number of
times claims or loss by a specific peril occurs
to a given body of exposures or insureds during a
particular time period.

Generally accepted
accounting principles
("GAAP")................. Accounting principles as set forth in opinions of
the Accounting Principles Board of the American
Institute of Certified Public Accountants and/or
in statements of the Financial Accounting
Standards Board and/or their respective
successors and that are applicable in the
circumstances as of the date in question.

General liability
insurance.................. Coverage for actual or alleged negligence resulting
in bodily injury or property damage to others.

Incurred but not reported
("IBNR") reserves........ Loss reserves for estimated losses and LAE that
have been incurred but not yet reported to the
insurer including future developments or losses
that are known to the insurer.

Incurred losses............ The total losses sustained by an insurance company
under a policy or policies, whether paid or
unpaid. Incurred losses include a provision for
claims that have occurred but have not yet been
reported to the insurer.

Loss adjustment expenses
("LAE").................. The expenses of settling claims, including legal
and other fees and the portion of general
expenses allocated to claim settlement costs.

Loss and LAE ratio......... The ratio of incurred losses and LAE to net earned
premium.

Loss reserves.............. A balance sheet liability for unpaid losses which
represents estimates of amounts needed to pay
losses and expenses both on claims that have been
reported but have not yet been resolved and on
claims that have occurred but have not yet been
reported.

MPL insurance.............. Medical professional liability insurance insures
the physician, dentist, hospital or other
healthcare provider against liabilities arising
from the rendering of or failure to render
professional healthcare service.

NAIC....................... The National Association of Insurance
Commissioners.

Net premium earned......... The portion of net premium written in a particular
period that is recognized for accounting purposes
as income during that period.

Net premium written........ Gross premium written plus premium on assumed
reinsurance for a given period less premiums
ceded to reinsurers.

59
<PAGE> 62

Occurrence policy.......... An insurance policy under which the insurer is
liable to the insured only for claims arising
from incidents that occur during the policy
period.

Premium ceded.............. The consideration paid or accrued by an insurer to
reinsurers in connection with one or more
reinsurance transactions.

Property insurance......... Insurance that provides coverage to a person with
an insurable interest in tangible property for
that person's property loss, damage or loss of
use.

Redundancy (Deficiency).... Estimates in reserves change as more information
becomes known about the frequency and severity of
claims for each year. A redundancy (deficiency)
exists when the original liability estimate is
greater (less) than the reestimated liability.
The cumulative redundancy (deficiency) is the
aggregate net changes in estimates over time
subsequent to establishing the original liability
estimate.

Reinsurance................ The practice whereby one party, called the
reinsurer, in consideration of a premium paid to
it agrees to indemnify another party, called the
reinsured, for part or all of the liability
assumed by the reinsured under a policy or
policies of insurance that it has issued. The
reinsured may be referred to as the original or
primary insurer, the direct writing company or
the ceding company. Reinsurance does not legally
discharge the primary insurer from its liability
to the insured.

Retention.................. The amount or portion of risk that an insurer
retains for its own account. Losses in excess of
the retention level up to the policy limit are
paid by the reinsurer. In pro rata treaties, the
retention may be a percentage of the original
policy's limit. In excess of loss reinsurance,
the retention is a dollar amount of loss, a loss
ratio or a percentage of loss.

Severity................... The average claim cost, statistically determined by
dividing dollars of losses by the number of
claims.

Statutory accounting
practices ("SAP").......... The rules and procedures prescribed or permitted by
United States state insurance regulatory
authorities for recording transactions and
preparing financial statements. Statutory
accounting principles generally reflect a
liquidating, rather than a going concern, concept
of accounting.

Statutory surplus.......... The excess of admitted assets over total
liabilities (including loss reserves), determined
in accordance with SAP.

Surplus as to
policyholders.............. The aggregate of capital and statutory surplus.

Tail....................... The period of time that elapses between the
occurrence of the loss event and the payment in
respect thereof.

Underwriting............... The insurer's process of reviewing applications
submitted for insurance coverage, deciding
whether to accept all or part of the coverage
requested and determining the applicable
premiums.

Underwriting expense
ratio...................... The ratio of underwriting expenses to net premium
earned.

Underwriting expenses...... The aggregate of policy acquisition costs,
including commissions, and the portion of
administrative, general and other expenses
attributable to underwriting operations.

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<PAGE> 63

Underwriting profit........ The amount of net premium earned less loss and LAE
and underwriting expenses. Underwriting profit is
calculated without regard to net investment
income.

Unearned premium........... The portion of premium that represents the
consideration for the assumption of risk in the
future. Such premium is not yet earned since the
risk has not yet been assumed.

61
<PAGE> 64

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1994 and March 31, 1996
(unaudited)......................................................................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1995, 1994 and 1993
and for the three months ended March 31, 1996 and 1995 (unaudited).................. F-4
Consolidated Statement of Changes in Shareholders' Equity for the Years Ended December
31, 1995, 1994 and 1993 and for the three months ended March 31, 1996 (unaudited)... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and
1993 and for the three months ended March 31, 1995 and 1996 (unaudited)............. F-6
Notes to the Consolidated Financial Statements........................................ F-7
Schedule I -- Summary of Investments Other Than Investments in Related Parties........ S-1
Schedule III -- Consolidated Supplementary Insurance Information...................... S-2
Schedule IV -- Reinsurance............................................................ S-3
Schedule V -- Valuation and Qualifying Accounts....................................... S-4
</TABLE>

F-1
<PAGE> 65

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Florida Physicians Insurance Company, Inc.

We have audited the consolidated financial statements of Florida Physicians
Insurance Company, Inc. and subsidiary as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Florida
Physicians Insurance Company, Inc. and subsidiary as of December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards (SFAS) No. 113, "Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration Contracts" in 1993
and SFAS No. 115 "Accounting for Certain Investments in Debt and Equity
Securities", at January 1, 1994.

KPMG Peat Marwick LLP

Jacksonville, Florida
February 21, 1996

F-2
<PAGE> 66

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
MARCH 31, ---------------------------
1996 1995 1994
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Bonds and U.S. Government securities:
Available-for-sale, at fair value............................ $219,035,467 $218,303,504 $185,693,846
Common stocks, at fair value................................. 140,000 125,000 65,000
Mortgage receivable.......................................... 0 0 2,200,000
Real estate investments...................................... 2,657,015 2,675,976 759,015
Short-term investments, at cost.............................. 0 500,000 4,149,143
------------ ------------ ------------
Total Investments..................................... 221,832,482 221,604,480 192,867,004
Cash and cash equivalents.................................... 3,170,738 494,095 12,669
Premiums receivable, net..................................... 13,927,079 10,846,007 9,916,835
Accrued investment income.................................... 3,615,804 3,064,866 3,292,519
Reinsurance recoverable on paid
losses..................................................... 968,475 808,900 54,051
Due from reinsurers on unpaid losses and advance premiums.... 8,951,670 9,480,277 9,497,716
Deposits with reinsurers..................................... 15,557,786 14,842,952 10,223,880
Property and equipment, net of accumulated depreciation...... 1,374,259 1,388,543 824,814
Deferred policy acquisition costs............................ 1,255,342 818,312 595,472
Federal income tax receivable................................ 1,618,465 1,665,764 1,264,042
Deferred income taxes........................................ 10,136,689 9,472,406 15,039,192
Finance charge receivable.................................... 309,129 204,641 207,571
Prepaid expenses............................................. 303,177 347,378 438,787
Goodwill..................................................... 1,089,736 1,108,117 0
Other assets................................................. 481,784 552,031 31,096
------------ ------------ ------------
Total Assets.......................................... $284,592,615 $276,698,769 $244,265,648
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Loss and loss adjustment expense reserves.................... $168,822,000 $164,506,000 $152,268,000
Unearned premiums............................................ 28,688,888 20,947,885 19,306,803
Paid in advance and unprocessed.............................. 683,761 3,982,143 4,501,636
FIGA accrual................................................. 2,840,968 3,032,234 3,762,529
Accrued expenses and other liabilities....................... 2,943,083 2,674,085 2,820,468
------------ ------------ ------------
Total Liabilities..................................... 203,978,700 195,142,347 182,659,436
------------ ------------ ------------
Commitments and contingencies (Note 13)
Shareholders' Equity
Common stock, $1 par value: 5,000,000 shares authorized;
1,627,928, 1,627,928 and 1,551,972 shares issued and
outstanding in 1996, 1995 and 1994, respectively........... 1,627,928 1,627,928 1,551,972
Additional paid-in capital................................... 17,640,745 17,640,745 17,716,701
Net unrealized gain (loss) on investments.................... (578,656) 1,625,175 (7,414,848)
Retained earnings............................................ 61,923,898 60,662,574 49,752,387
------------ ------------ ------------
Total Shareholders' Equity............................ 80,613,915 81,556,422 61,606,212
------------ ------------ ------------
Total Liabilities and Shareholders' Equity............ $284,592,615 $276,698,769 $244,265,648
============= ============= =============
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-3
<PAGE> 67

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- ---------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues
Net premiums earned........... $12,922,329 $11,100,694 $52,674,850 $46,836,152 $39,443,164
Net investment income......... 3,148,582 2,894,366 11,987,414 10,369,742 8,370,679
Net realized investment gains
(losses)................... (11,261) (557,017) 238,275 (6,657,852) 3,437,006
Claims administration and
management fees............ 1,001,781 0 1,904,324 0 0
Commission income............. 147,651 0 652,848 0 0
Finance charge and other
income..................... 556,168 428,154 2,072,811 1,758,125 1,434,639
----------- ----------- ----------- ----------- -----------
Total revenues........ 17,765,250 13,866,197 69,530,522 52,306,167 52,685,488
----------- ----------- ----------- ----------- -----------
Expenses
Losses and loss adjustment
expenses................... 12,213,663 10,419,674 44,839,234 39,177,762 34,663,029
Other operating expenses...... 2,516,267 1,227,288 7,095,280 4,003,935 4,393,777
----------- ----------- ----------- ----------- -----------
Total expenses........ 14,729,930 11,646,962 51,934,514 43,181,697 39,056,806
----------- ----------- ----------- ----------- -----------
Income before income
taxes and cumulative
effect of accounting
change.............. 3,035,320 2,219,235 17,596,008 9,124,470 13,628,682
Income taxes.................. 960,032 781,468 5,909,835 3,098,269 5,087,204
----------- ----------- ----------- ----------- -----------
Income before
cumulative effect of
accounting change... 2,075,288 1,437,767 11,686,173 6,026,201 8,541,478
Cumulative effect of
accounting change, net of
deferred income taxes of
$77,106.................... 0 0 0 (149,677) 0
----------- ----------- ----------- ----------- -----------
Net income............ $ 2,075,288 $ 1,437,767 $11,686,173 $ 5,876,524 $ 8,541,478
========== ========== ========== ========== ==========
Net income per common share
Income before cumulative
effect of accounting
change..................... $ 1.27 $ 0.93 $ 7.35 $ 3.88 $ 5.50
Cumulative effect of
accounting change.......... 0.00 0.00 0.00 (0.10) 0.00
----------- ----------- ----------- ----------- -----------
Net income per common
share............... $ 1.27 $ 0.93 $ 7.35 $ 3.78 $ 5.50
========== ========== ========== ========== ==========
Weighted average
shares
outstanding......... 1,627,928 1,551,972 1,589,950 1,551,972 1,551,928
========== ========== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-4
<PAGE> 68

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADDITIONAL NET UNREALIZED
COMMON PAID-IN GAIN (LOSS) RETAINED
STOCK CAPITAL ON INVESTMENTS EARNINGS TOTAL
---------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1993....... $ 775,685 $17,717,002 $ 0 $36,886,356 $55,379,043
Net Income.................... 8,541,478 8,541,478
Issuance of shares, net....... 301 (301) 0 0 0
---------- ----------- -------------- ----------- -----------
Balances, December 31, 1993..... 775,986 17,716,701 0 45,427,834 63,920,521
Cumulative effect of adopting
SFAS 115................... 0 0 (346,944) 0 (346,944)
Net Income.................... 0 0 0 5,876,524 5,876,524
Issuance of stock dividend.... 775,986 0 0 (775,986) 0
Payment of cash dividend...... 0 0 0 (775,985) (775,985)
Net unrealized loss on debt
securities................. 0 0 (7,067,904) 0 (7,067,904)
---------- ----------- -------------- ----------- -----------
Balances, December 31, 1994..... 1,551,972 17,716,701 (7,414,848) 49,752,387 61,606,212
Net income.................... 0 0 0 11,686,173 11,686,173
Issuance of shares, net....... 75,956 (75,956) 0 0 0
Payment of cash dividend...... 0 0 0 (775,986) (775,986)
Net unrealized gain on debt
securities................. 0 0 9,040,023 0 9,040,023
---------- ----------- -------------- ----------- -----------
Balances, December 31, 1995..... 1,627,928 17,640,745 1,625,175 60,662,574 81,556,422
Net income (unaudited)........ 0 0 0 2,075,288 2,075,288
Payment of cash dividend
(unaudited)................ 0 0 0 (813,964) (813,964)
Net unrealized loss on debt
securities (unaudited)..... 0 0 (2,203,831) 0 (2,203,831)
---------- ----------- -------------- ----------- -----------
Balances, March 31, 1996
(unaudited)................... $1,627,928 $17,640,745 ($ 578,656) $61,923,898 $80,613,915
========= ========== =========== ========== ==========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-5
<PAGE> 69

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------------- -----------------------------------------------
1996 1995 1995 1994 1993
----------- ------------ ------------- ------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income.................................. $ 2,075,288 $ 1,437,767 $ 11,686,173 $ 5,876,524 $ 8,541,478
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense..... 478,658 258,959 1,687,038 1,063,377 1,680,694
Cumulative effect of accounting change.... 0 0 0 149,677 0
Realized (gains) losses on investments.... 11,261 557,017 (238,275) 6,657,852 (3,437,006)
Bad debts expense (benefit)............... 0 37,738 153,498 (36,870) 63,226
Loss on write down of real estate
investment.............................. 0 0 500,000 0 0
Deferred income taxes..................... 471,024 227,451 1,032,055 1,694,967 2,569,026
Proceeds from sale or maturity of trading
securities.............................. 0 0 0 471,014,750 0
Purchase of trading securities............ 0 0 0 (475,578,751) 0
Changes in assets and liabilities:
Premiums receivable..................... (3,081,072) (2,743,834) (1,082,670) (890,072) (2,081,463)
Accrued investment income............... (550,938) 452,170 227,653 (827,249) 6,608
Reinsurance recoverable on paid
losses................................ (159,575) 22,757 (754,849) 610,386 (505,427)
Due from reinsurers on unpaid losses and
advance premiums...................... 528,607 9,497,716 17,439 3,940,962 (3,246,839)
Deposits with reinsurers................ (714,834) (750,619) (4,619,072) (2,856,880) (9,829,000)
Deferred policy acquisition costs....... (437,030) (214,383) (222,840) (92,368) (36,385)
Federal income tax receivable........... 47,299 501,763 (401,722) (1,741,151) 250,326
Mortgage receivable..................... 0 0 0 50,000 25,000
Note receivable......................... 0 0 0 0 780,000
Other assets............................ 70,247 (390,942) (520,935) 3,945,977 (3,895,781)
Prepaid expenses and finance charge
receivable............................ (60,287) (185,160) (48,371) 24,782 (418,742)
Loss and loss adjustment expense
reserves.............................. 4,316,000 (5,868,000) 12,238,000 13,523,000 5,704,000
Unearned premiums....................... 7,741,003 7,152,880 1,641,082 235,324 3,805,628
Paid in advance and unprocessed......... (3,298,382) (3,930,534) (519,493) (171,975) 775,890
FIGA accrual............................ (191,266) (182,574) (730,295) (653,092) (574,379)
Accrued expenses and other
liabilities........................... 268,998 465,911 (146,383) 526,245 143,394
----------- ------------ ------------- ------------- ---------------
Net cash provided by operating
activities.......................... 7,515,001 6,346,083 19,898,033 26,465,415 320,248
Cash flows from investing activities
Proceeds from sale of short-term
investments............................... 500,000 1,000,434 4,148,996 45,622,378 5,819,459
Purchase of short-term investments.......... 0 (1,889,495) (803,760) (4,101,081) (43,162,327)
Proceeds from sale or maturity of securities
available-for-sale........................ 19,688,097 54,271,907 162,456,887 287,890,129 1,969,494,732
Purchase of securities available-for-sale... (24,197,491) (48,319,521) (182,116,512) (355,643,413) (1,931,695,834)
Purchase of goodwill........................ 0 0 (1,144,879) 0 0
Purchase of real estate investments......... 0 0 (225,000) (200,000) 0
Purchase of common stock.................... (15,000) (15,000) (60,000) (65,000) 0
Purchase of subsidiary's net other assets... 0 0 (855,121) 0 0
Purchase of property and equipment, net..... 0 0 (41,232) (187,194) (2,533)
----------- ------------ ------------- ------------- ---------------
Net cash (used in) provided by
investing activities................ (4,024,394) 5,048,325 (18,640,621) (26,684,181) 453,497
----------- ------------ ------------- ------------- ---------------
Cash flows from financing activities
Dividends paid on common stock.............. (813,964) (775,986) (775,986) (775,985) 0
----------- ------------ ------------- ------------- ---------------
Net cash used in financing
activities.......................... (813,964) (775,986) (775,986) (775,985) 0
----------- ------------ ------------- ------------- ---------------
Net increase (decrease) in cash....... 2,676,643 10,618,422 481,426 (994,751) 773,745
Cash and cash equivalents, beginning of
period...................................... 494,095 12,669 12,669 1,007,420 233,675
----------- ------------ ------------- ------------- ---------------
Cash and cash equivalents, end of
period.............................. $ 3,170,738 $ 10,631,091 $ 494,095 $ 12,669 $ 1,007,420
========== =========== ============ ============ ==============
Supplemental disclosure of cash flow
information:
Federal income taxes paid................... $ 0 $ 0 $ 6,071,000 $ 2,425,000 $ 2,287,718
Exchange of mortgage note for deed on real
estate investment......................... $ 0 $ 0 $ 2,200,000 $ 0 $ 0
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-6
<PAGE> 70

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Florida Physicians Insurance Company, Inc. (the Company) is a licensed
casualty insurance carrier and writes professional liability insurance for
physicians, dentists, hospitals and other healthcare providers in the state of
Florida. The Company's wholly-owned subsidiary, McCreary Corporation (McCreary),
is a third-party administrator of various lines of business in the insurance
segment, operating in Florida.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Company and McCreary. The consolidated statements of income, shareholders'
equity and cash flows include the activity of McCreary for the period July 1,
1995, date of acquisition, to December 31, 1995. All significant intercompany
transactions and balances have been eliminated in consolidation.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles (GAAP).

Interim Unaudited Financial Information

The accompanying interim unaudited consolidated financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of management, all
adjustments and eliminations, consisting only of normal recurring adjustments,
necessary to present fairly the consolidated financial position of the Company
as of March 31, 1996, and the consolidated results of its operations and cash
flows for the three months ended March 31, 1996 and 1995, have been included.
The results of operations for such interim periods are not necessarily
indicative of the results for the full year.

Deferred Policy Acquisitions

Deferred policy acquisition costs, principally commissions, are amortized
over the life of the insurance contracts.

Goodwill

Goodwill represents the excess of the purchase price of McCreary over the
fair value of the assets and liabilities of McCreary at the date of purchase by
the Company. Goodwill is amortized over 15 years on a straight-line basis. The
carrying value of the goodwill is reviewed regularly by management by
determining whether the amortization of goodwill can be recovered through
discounted future operating cash flows of the acquired operation. Goodwill at
December 31, 1995 was $1,108,117, net of amortization expense of $36,762.

Investments

Effective January 1, 1994, the Company adopted the Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS No. 115). Under the provisions of SFAS No. 115, the
Company is required to classify investments in debt securities (bonds,
redeemable preferred stocks and mortgage-backed securities) into one of three
categories: held-to-maturity, available-for-sale, or trading. As permitted by
SFAS No. 115, no retroactive effect has been included in the

F-7
<PAGE> 71

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1993 financial statements which would have been caused by the cumulative effect
adjustment described below.

Investments in available-for-sale securities, including investments in
nonaffiliated common stocks, are investments that would be available to be sold
in the future in response to the Company's liquidity needs, changes in market
interest rates, and asset-liability management strategies, among other reasons.
Available-for-sale securities are recorded at fair value, with unrealized gains
and losses excluded from earnings and reported as a separate component of
shareholders' equity, net of deferred taxes. The effect of adopting SFAS No. 115
was to report a net unrealized loss on available-for-sale securities of
$346,944, and deferred taxes of $178,728, as a decrease in shareholders' equity
as of January 1, 1994. Investments were reduced by $525,672.

Investments in debt securities which were held with the objective of
trading to maximize investment returns or which were expected to be sold before
maturity were recorded at fair value. The effect of adopting SFAS No. 115 was to
report a net unrealized loss of $149,677 related to the trading portfolio as a
cumulative effect adjustment in the 1994 consolidated statement of income, and
deferred taxes of $77,106. Investments were reduced by $226,783. Effective July
1, 1994, the Company transferred its portfolio of $46,625,652 in trading
securities, at market value, to the available-for-sale category.

Market values for debt and equity securities were based on quoted market
prices or dealer quotations. Where a quoted market price was not available, fair
value was measured utilizing quoted market prices for similar securities or by
using discounted cash flow methods. Purchases and sales of debt and equity
securities were recorded on the trade date. Purchases and sales of mortgage
loans were recorded on the closing date.

Short-term investments, consisting primarily of money market instruments
and other debt issues purchased with an original maturity of over 90 days to one
year, were considered available-for-sale at December 31, 1995 and 1994 and were
stated at cost, which approximates fair value.

Income on investments is net of amortization of premium and accretion of
discount on the yield-to-maturity method relating to debt securities acquired at
other than par value. Realized investment gains and losses were determined on
the specific identification basis. Declines in the fair value of securities
considered to be other than temporary, if any, would be recorded as realized
losses in the consolidated statements of income.

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company
considers all demand deposits, overnight investments and instruments with a
maturity of three months or less to be cash equivalents.

Recognition of Revenues

Premiums were generally recognized as revenues on a monthly pro rata basis
over the terms of the policies. Policy terms generally do not exceed one year.

Loss and Loss Adjustment Expense Reserves

As more fully described in Note 7, loss and loss adjustment expense
reserves were based on actuarial projections of the best estimate of ultimate
losses and loss adjustment expenses as interpreted by the Company's independent
consulting actuary. The estimated liability is continually reviewed and any
adjustments which become necessary were included in current operations.

Reinsurance

The Company adopted the provisions of the Statement of Financial Accounting
Standards No. 113, "Accounting and Reporting for Reinsurance of Short-Duration
and Long-Duration Contracts" (SFAS No. 113), which requires that amounts due
from reinsurers and amounts paid to reinsurers relating to the

F-8
<PAGE> 72

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

unexpired portion of reinsured contracts (prepaid reinsurance premiums) be
disclosed separately as assets. This statement also established the risk
transfer criteria necessary for a contract to be accounted for as reinsurance.
These provisions were adopted effective December 31, 1993.

In the normal course of business, the Company seeks to reduce the loss that
may arise from events that cause unfavorable underwriting results by reinsuring
certain levels of risk in various areas of exposure with other insurance
enterprises or reinsurers. Amounts recoverable from reinsurers were estimated in
a manner consistent with the claim liability associated with the reinsured
policy. The Company evaluates the financial condition of reinsurers since
failure of reinsurers to honor their obligations could result in losses to the
Company. The Company generally obtains collateral in the form of letters of
credit for amounts recoverable from reinsurers that are not designated as
authorized reinsurers by the Florida Department of Insurance. Reinsurance
assumed is not material. The Company retains a maximum of $500,000 per
occurrence.

Real Estate Investments

Real estate investments consist of a building, which includes the Company's
home office, various rental units and vacant lots. Depreciation is computed over
the estimated useful lives of the property, using the straight-line method.
Estimated useful lives range from 27.5 to 39 years. Rental income and expenses
were included in net investment income.

Pension and Other Postretirement Plans

The Company has a defined benefit plan covering substantially all of its
employees. The benefits were based on years of service and the employee's
compensation during the years of service (maximum 15 years). The cost of this
program is being funded currently.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments,
litigation, fines and penalties, and other sources are recorded when it is
probable that a liability has been incurred and the amount of the assessment
and/or remediation can be reasonably estimated.

Income Taxes

Income taxes were accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

Per Share Data

Net income per common share is based upon the weighted average number of
common shares outstanding during each year. Earnings per share for 1993 has been
stated giving retroactive effect for the 100 percent stock dividend declared in
December 1994.

Concentration of Credit Risk

Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of premiums receivable and
deposits with reinsurers. The Company has not experienced significant losses
related to premiums receivable from individual policyholders or groups of
policyholders in a particular

F-9
<PAGE> 73

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

industry or geographic area. Management believes no additional credit risk
beyond amounts provided for collection losses is inherent in the Company's
premiums receivable. The Company typically requires that deposits with
reinsurers be held in trust and, as a result, has not experienced significant
losses related to such deposits.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

2. INVESTMENTS

The amortized cost and estimated fair value of investments in securities
were as follows:

<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Securities Available-for-Sale:
U.S. Treasury securities and
obligations of U.S.
Government corporations and
agencies..................... $ 52,331,531 $ 205,525 $ 195,775 $ 52,341,281
Debt securities issued by states
and political subdivisions... 60,094,723 147,909 512,879 59,729,753
Corporate securities............ 36,472,849 321,041 456,875 36,337,015
Mortgage-backed securities...... 71,013,116 636,319 1,022,017 70,627,418
------------ ---------- ---------- ------------
Totals.................. $219,912,219 $1,310,794 $2,187,546 $219,035,467
=========== ========= ========= ===========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
Securities Available-for-Sale:
U.S. Treasury securities and
obligations of U.S.
Government corporations and
agencies..................... $ 60,752,413 $ 586,666 $ 76,517 $ 61,262,562
Debt securities issued by states
and political subdivisions... 49,020,097 534,104 44,226 49,509,975
Corporate securities............ 33,447,560 794,719 82,760 34,159,519
Mortgage-backed securities...... 72,621,048 1,396,325 645,925 73,371,448
------------ ---------- ---------- ------------
Totals.................. $215,841,118 $3,311,814 $ 849,428 $218,303,504
=========== ========= ========= ===========
</TABLE>

F-10
<PAGE> 74

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31, 1994
------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
Securities Available-for-Sale:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies...... $ 86,857,091 $ 0 $ 4,515,566 $ 82,341,525
Debt securities issued by states
and political subdivisions..... 34,886,444 0 2,084,588 32,801,856
Corporate securities.............. 21,527,786 74,681 1,328,732 20,273,735
Mortgage-backed securities........ 53,657,143 11,747 3,392,160 50,276,730
------------ ---------- ----------- ------------
Totals.................... $196,928,464 $ 86,428 $11,321,046 $185,693,846
=========== ======== ========== ===========
</TABLE>

The Company's available-for-sale investments also include an investment in
the common stock of a nonaffiliate, which had an amortized cost and market value
of $140,000 (unaudited) at March 31, 1996, $125,000 at December 31, 1995 and
$65,000 at December 31, 1994.

The amortized cost and estimated fair value of debt securities, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities, because borrowers have the right to call or prepay these
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
--------------------------- ---------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Securities Available-for-Sale:
Due in one year or less....... $ 11,224,030 $ 11,224,913 $ 10,581,598 $ 10,616,662
Due after one year through
five years................. 58,697,630 58,994,019 70,094,006 70,815,186
Due after five years through
ten years.................. 46,460,339 45,983,671 37,677,678 38,262,628
Due after ten years, primarily
U.S. Government and
mortgage-backed
securities................. 103,530,220 102,832,864 97,487,836 98,609,028
------------ ------------ ------------ ------------
Totals................ $219,912,219 $219,035,467 $215,841,118 $218,303,504
=========== =========== =========== ===========
</TABLE>

Treasury notes with a carrying value of $2,510,437 and a market value of
$2,550,775 were on deposit with the Insurance Department of the State of Florida
as of December 31, 1995, as required by law.

F-11
<PAGE> 75

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net investment income earned was as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------
1996 1995 1995 1994 1993
---------- ---------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Investment income earned:
Bonds and U.S. Government
securities............... $3,392,867 $3,054,491 $13,072,522 $10,132,676 $8,226,057
Real estate investments.... 87,753 16,650 159,224 32,995 59,728
Mortgage receivable........ 0 0 (48,889) 176,889 180,944
Other invested assets...... 19,939 0 34,777 392 43,962
Short-term investments..... 45,194 141,745 497,313 850,333 702,871
Cash on hand and on
deposit.................. 6,266 4,956 23,872 19,866 19,385
---------- ---------- ----------- ----------- ----------
Total investment income
earned................... 3,552,019 3,217,842 13,738,819 11,213,151 9,232,947
Investment expenses........ (403,437) (323,476) (1,251,405) (843,409) (862,268)
Loss on write down of real
estate................... 0 0 (500,000) 0 0
---------- ---------- ----------- ----------- ----------
Net investment income...... $3,148,582 $2,894,366 $11,987,414 $10,369,742 $8,370,679
========= ========= ========== ========== =========
</TABLE>

Proceeds and the related gross realized gains and gross realized losses on
sales of debt securities based on specific identification, were as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31, YEARS ENDED DECEMBER 31,
------------------------- --------------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ------------ ------------ --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Proceeds..................... $19,688,097 $54,271,907 $162,456,887 $758,904,879 $1,969,494,732
============ ============ ============= ============= ==============
Gross realized
gains -- available-
for-sale................... $ 17,961 $ 64,553 $ 1,100,705 $ 42,227 $ 8,748,596
Gross realized
gains -- trading........... 0 0 0 971,079 0
Gross realized
losses -- available-
for-sale................... (29,222) (621,570) (862,430) (742,044) (5,311,590)
Gross realized
losses -- trading.......... 0 0 0 (6,929,114) 0
----------- ----------- ------------ ------------ --------------
Net gross realized (losses)
gains...................... $ (11,261) $ (557,017) $ 238,275 $ (6,657,852) $ 3,437,006
============ ============ ============= ============= ==============
</TABLE>

The changes in net unrealized gains (losses) on available-for-sale fixed
maturities and other investments were as follows:

THREE MONTHS
ENDED YEARS ENDED DECEMBER 31,
MARCH 31, --------------------------------------
1996 1995 1994 1993
------------ ----------- ------------ ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Fixed maturities.................... $ (3,339,138) $13,697,004 $(10,482,163) $(783,297)
Other............................... 0 0 0 0
------------ ----------- ------------ ---------
Totals.................... $ (3,339,138) $13,697,004 $(10,482,163) $(783,297)
========== ========== =========== =========
</TABLE>

F-12
<PAGE> 76

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. DEFERRED POLICY ACQUISITION COSTS

Changes in deferred policy acquisition costs were as follows:

4. PROPERTY AND EQUIPMENT

At December 31, 1995, and 1994, property and equipment consisted of the
following:

<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Leasehold improvements........................................ $ 634,598 $ 503,891
Data processing equipment, including software................. 747,648 335,415
Automobiles................................................... 199,442 235,902
Furniture, fixtures and equipment............................. 778,126 452,443
---------- ----------
2,359,814 1,527,651
Accumulated depreciation...................................... (971,271) (702,837)
---------- ----------
Net property and equipment.......................... $1,388,543 $ 824,814
========= =========
</TABLE>

Total depreciation expense of property and equipment was $328,420,
$256,484, and $208,670 in 1995, 1994, and 1993, respectively.

5. REAL ESTATE INVESTMENTS

At December 31, 1995 and 1994, real estate investments consisted of the
following:

<TABLE>
<CAPTION>
1995 1994
---------- --------
<S> <C> <C>
Building, net................................................ $1,925,000 $ 0
Rental Units................................................. 853,002 853,002
Other........................................................ 37,670 0
---------- --------
2,815,672 853,002
Accumulated depreciation..................................... (139,696) (93,987)
---------- --------
Net real estate investments........................ $2,675,976 $759,015
========= ========
</TABLE>

The Company held a $2,200,000 mortgage loan on real estate, which was due
in full on December 20, 1994. The loan went into default in early 1995. In lieu
of foreclosing on the property, the Company accepted the deed to the property,
at an additional cost of $225,000, and held the property in its current use,
which includes the Company's home office. The building's fair value was believed
to be in excess of the outstanding loan amount, and the additional cost, and
therefore, the outstanding loan amount and additional cost, totaling $2,425,000,
was established as the building's book value. Subsequent to investing additional
amounts in building improvements and attempting to rent out the available space
in the building, the Company determined that the fair value of the building was
approximately $500,000 less than its carrying value. Accordingly, a loss for
this amount was recognized on the building during the last quarter of 1995,
which was reflected in net investment income.

F-13
<PAGE> 77

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Total depreciation expense of real estate investments was $45,709, $23,743,
and $23,743 in 1995, 1994, and 1993, respectively.

6. BUSINESS ACQUISITIONS

The Company acquired McCreary on July 1, 1995, for a cost of $2,000,000.
The purchase had the following impact, which is included in the consolidated
financial statements:

SIX MONTHS
THREE MONTHS ENDED
ENDED MARCH DECEMBER 31,
31, 1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenues................................................... $1,199,347 $2,721,311
Operating expenses......................................... 999,584 1,960,755
Net income................................................. 121,975 464,396
Earnings per share......................................... .07 .29
</TABLE>

Had McCreary been included in the consolidated results of operations for
the Company for the full year ended December 31, 1995, and for the year ended
December 31, 1994, the following increases would have resulted:

THREE MONTHS SIX MONTHS TWELVE MONTHS
ENDED ENDED JUNE ENDED DECEMBER
MARCH 31, 1995 30, 1995 31, 1994
-------------- ------------- -----------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues.................................... $1,062,562 $ 2,140,550 $ 4,339,989
Operating expenses.......................... 853,116 1,836,485 3,506,790
Net income.................................. 131,909 304,065 733,215
Earnings per share.......................... .09 .19 .47
</TABLE>

The acquisition agreement specified annual payments to be made to McCreary
from 1996 through 2000 as follows:

These specific payments shall be subject to adjustment in accordance with
the agreement based on attainment of projections of annual earnings from 1996
through 2000. No individual annual payment shall exceed the specified amount,
yet may be reduced if the projected earnings are not attained for that year. The
annual payment will be reduced by a percentage based on the shortfall in the
actual earnings for that year. Prior shortfalls in actual earnings may be offset
by subsequent earnings, but no later than 2000, that are greater than projected
earnings. Such offset shall be paid as a part of the annual payment of such
subsequent period. At the end of the five year period, the agreement allows for
an additional payment based on the aggregate earnings of the five year period
compared to the aggregate projected earnings of the same five year period. The
total effect of the payments is to increase the original purchase price and the
recorded goodwill.

In April 1996, the Company paid $500,000 to McCreary, representing one half
of the amount of the 1996 annual payment. The remainder of the 1996 annual
payment, up to the aggregate $1,000,000, will be paid, if projected earnings are
attained, when the results of the twelve-month period ended June 30, 1996 are
available.

F-14
<PAGE> 78

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

Loss and loss adjustment expense (LAE) reserves are generally determined on
the basis of individual claims and actuarially determined estimates of future
claims based upon the Company's actual experience, assumptions and projections
as to claims frequency, severity and inflationary trends and settlement
payments. Such estimates may vary significantly from the eventual outcome. The
ranges of reasonably expected ultimate unpaid losses and LAE are estimated by
the Company's consulting actuary on an undiscounted basis. The assumptions used
in making such estimates and for establishing the resulting reserves are
continually reviewed and updated based upon current circumstances, and any
adjustments resulting therefrom are reflected in current income.

Activity in the reserves for losses and loss adjustment expenses was as
follows:

YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED ------------------------------------------
MARCH 31, 1996 1995 1994 1993
------------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Balance at January 1................ $164,506,000 $152,268,000 $138,745,000 $133,041,000
Less reinsurance recoverables..... 9,188,000 8,853,000 6,555,000 6,391,000
------------------ ------------ ------------ ------------
Net balance at January 1............ 155,318,000 143,415,000 132,190,000 126,650,000
------------------ ------------ ------------ ------------
Incurred related to:
Current year...................... 13,855,000 54,868,000 49,702,000 52,369,000
Prior year........................ (1,641,000) (10,029,000) (10,524,000) (17,706,000)
------------------ ------------ ------------ ------------
Total incurred............ 12,214,000 44,839,000 39,178,000 34,663,000
------------------ ------------ ------------ ------------
Paid related to:
Current year...................... 8,000 4,320,000 3,035,000 2,960,000
Prior year........................ 7,890,000 28,616,000 24,918,000 26,163,000
------------------ ------------ ------------ ------------
Total paid................ 7,898,000 32,936,000 27,953,000 29,123,000
------------------ ------------ ------------ ------------
Net balance at end of period........ 159,634,000 155,318,000 143,415,000 132,190,000
Plus reinsurance recoverables..... 9,188,000 9,188,000 8,853,000 6,555,000
------------------ ------------ ------------ ------------
Balance at end of period............ $168,822,000 $164,506,000 $152,268,000 $138,745,000
=============== =========== =========== ===========
</TABLE>

The provision for losses and loss adjustment expenses for prior years (net
of reinsurance recoveries of $5,328,000, $3,018,000, and $1,621,000 in 1995,
1994, and 1993, respectively) decreased because of lower-than-anticipated
losses.

8. REINSURANCE

The Company presently has excess of loss reinsurance contracts that serve
to limit the Company's maximum loss to $500,000 per occurrence. To the extent
that any reinsuring company might be unable to meet its obligations, the Company
would be liable for such defaulted amounts not already covered by letters of
credit.

The amount of earned premiums ceded to reinsurers for the three months
ended March 31, 1996 and 1995 was $1,892,544 (unaudited) and $1,873,748
(unaudited), respectively, and for the years ended December 31, 1995, 1994, and
1993 was $2,325,634, $5,198,324, and $6,137,179, respectively.

On July 1, 1993, the Company entered into a contingent aggregate excess of
loss reinsurance contract to cover the Company against the following risks:
extended reporting endorsement claims; extra contractual obligations and/or
excess of policy limits claims; and stop loss coverage insuring the Company in
the event its loss ratio on a net basis exceeds 120 percent for any report year
during the term of the contract. This contract expires on December 31, 1997. It
was determined that the contract did not meet the risk transfer requirements

F-15
<PAGE> 79

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of SFAS No. 113 and, therefore, has been accounted for as a deposit. The amounts
deposited under this contract were $10,000,000 in 1993 and $4,000,000 in 1995.
Under the provisions of this contract, 3.35 percent of the amount deposited is
not available for return to the Company for profit commission purposes.
Accordingly, this amount is being amortized over the life of the contract.

The effect of reinsurance on premiums written and earned was as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------
1996 1995
------------------------- -------------------------
WRITTEN EARNED WRITTEN EARNED
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Direct & assumed.................... $22,555,877 $14,814,873 $20,127,320 $12,974,442
Ceded............................... (1,892,544) (1,892,544) (1,873,748) (1,873,748)
----------- ----------- ----------- -----------
Net premiums........................ $20,663,333 $12,922,329 $18,253,572 $11,100,694
========== ========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1995 1994 1993
------------------------- ------------------------- -------------------------
WRITTEN EARNED WRITTEN EARNED WRITTEN EARNED
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Direct & assumed...... $56,641,565 $55,000,484 $52,454,789 $52,034,476 $51,568,767 $45,580,343
Ceded............... (2,335,577) (2,325,634) (4,945,182) (5,198,324) (6,141,939) (6,137,179)
----------- ----------- ----------- ----------- ----------- -----------
Net premiums........ $54,305,988 $52,674,850 $47,509,607 $46,836,152 $45,426,828 $39,443,164
============ ============ ============ ============ ============ ============
</TABLE>

9. INCOME TAXES

The provision for income taxes consisted of the following:

<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Current income tax expense:
Federal........................................ $4,199,925 $1,070,918 $2,104,768
State.......................................... 800,105 332,384 413,410
---------- ---------- ----------
Total.................................. 5,000,030 1,403,302 2,518,178
---------- ---------- ----------
Deferred income tax expense:
Federal........................................ 777,578 1,492,880 2,226,818
State.......................................... 132,227 202,087 342,208
---------- ---------- ----------
Total.................................. 909,805 1,694,967 2,569,026
---------- ---------- ----------
Net income tax expense........................... $5,909,835 $3,098,269 $5,087,204
========= ========= =========
</TABLE>

The provision for income taxes differed from the statutory corporate tax
rate of 34 percent for 1995, 1994, and 1993, as follows:

<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Computed "expected" tax expense.................. $5,982,643 $3,102,320 $4,633,752
Municipal bond interest.......................... (770,301) (478,118) (469,440)
State income taxes, net of federal benefit....... 615,339 352,751 498,708
Other, net....................................... 82,154 121,316 424,184
---------- ---------- ----------
Actual expense................................... $5,909,835 $3,098,269 $5,087,204
========= ========= =========
</TABLE>

F-16
<PAGE> 80

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1995 and 1994, the significant components of the net
deferred tax asset were as follows:

<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
Deferred tax assets arising from:
Loss reserve discounting........................................... $8,762,282 $ 9,499,442
Unearned premium reserves.......................................... 1,421,228 1,312,862
FIGA assessment.................................................... 1,030,960 1,279,259
Unrealized losses on securities.................................... 0 3,819,770
Other.............................................................. 375,045 64,046
---------- -----------
Total deferred tax assets.................................. 11,589,515 15,975,379
---------- -----------
Deferred tax liabilities arising from:
Unrealized gains on securities..................................... 837,211 0
Deferred acquisition costs......................................... 278,226 202,460
Accrued interest on reinsurance deposits........................... 446,064 190,019
Other.............................................................. 555,608 543,708
---------- -----------
Total deferred tax liabilities.................................. 2,117,109 936,187
---------- -----------
Net deferred tax asset............................................... $9,472,406 $15,039,192
========= ==========
</TABLE>

The Company has not recorded a valuation allowance, as the deferred tax
assets were presently considered by management to be realizable based on the
level of anticipated future taxable income. Net deferred tax assets and federal
income tax expense in future years can be significantly affected by changes in
enacted tax rates or by unexpected adverse events that would impact management's
conclusions as to the ultimate realizability of deferred tax assets.

10. GUARANTY FUND ASSESSMENTS

As a Florida insurer, the Company is subject to assessment by the Florida
Insurance Guaranty Association, Inc. (FIGA) for the provision of funds necessary
for the settlement of covered claims under certain policies of insolvent
insurers. Under the Florida Insurance Guaranty Association Act, FIGA can assess
member insurers on the basis of net direct written premiums in the State of
Florida at a level established by the Florida Legislature. For statutory
purposes, such assessments are recognized in the year in which they become due
and payable. On a statutory basis, FIGA assessments totaling $1,046,146,
$1,358,114, and $1,726,154 were levied against the Company in 1995, 1994, and
1993, respectively.

The accompanying financial statements include amounts related to a special
assessment levied by FIGA related to the retirement of a bond issue utilized by
FIGA to fund losses incurred as a result of Hurricane Andrew. The Company
estimates the accrual at each year end based on FIGA's estimate of the remaining
liability necessary to retire the bonds at that point in time. The liability is
discounted at 7.5 percent to record the net present value due, with actual
payments allocated to principal and interest expense. The principal reduction
was $730,295, $677,687, and $574,379, and interest expense was $315,851,
$310,032, and $329,008 in 1995, 1994, and 1993, respectively. Damages caused by
future hurricanes could subject the Company to additional FIGA assessments.

Amounts paid for FIGA assessments, which may be levied annually by FIGA on
an "as needed" basis, were expensed as paid. Amounts included in the financial
statements for these special assessments were $0, $370,395, and $822,767 in
1995, 1994, and 1993, respectively.

11. STOCK TRANSACTIONS

In January 1996, a cash dividend of 50 cents per common share was declared
amounting to $813,964. In January 1995, a cash dividend of 50 cents per common
share was declared amounting to $775,986. In January

F-17
<PAGE> 81

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1994, a cash dividend of 50 cents per common share was declared amounting to
$775,985, after giving effect for the 100 percent stock dividend in December
1994. The 100 percent stock dividend was declared on the 775,986 common shares
outstanding at that date. This transaction was valued at par value and retained
earnings was charged $775,986.

Earnings per share data for 1994 and 1993 have been stated as if the 1994
stock dividend had been declared on January 1, 1993.

12. EMPLOYEE BENEFIT PLAN

Starting January 1, 1988, the Company's employees became covered by a
qualified defined benefit plan and a defined contribution pension plan sponsored
by the Company.

The benefits of the defined benefit plan are based on years of service and
the employee's compensation. The actuarially computed net periodic pension cost
for December 31, 1995, 1994, and 1993 included the following:

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Service cost -- benefits earned during the
period................................. $ 72,802 $ 92,913 $ 74,936
Interest cost on projected benefit
obligation............................. 81,879 74,788 64,446
Actual return on plan assets.............. (83,334) (22,988) (38,671)
Net amortization and deferral............. 63,737 19,131 37,902
----------- ----------- -----------
Net periodic pension cost................... $ 135,084 $ 163,844 $ 138,613
========== ========== ==========
</TABLE>

Actuarial present value of benefit obligation:

<TABLE>
<S> <C> <C> <C>
Vested benefit obligation................. $ (795,082) $ (634,524) $ (682,787)
Accumulated benefit obligation............ $ (811,070) $ (642,308) $ (698,576)
Projected benefit obligation for service
rendered to date....................... $(1,383,634) $(1,104,347) $(1,257,734)
Plan assets at fair value................. 748,937 602,598 500,201
----------- ----------- -----------
Projected benefit obligation in excess of
plan assets............................ (634,697) (501,749) (757,533)
Unrecognized net loss/(gain) from past
experience different from that assumed
and effects of changes in
assumptions............................ 32,513 (65,029) 247,855
Prior service cost not yet recognized in
net periodic pension cost.............. (57,303) (61,615) (65,927)
Unrecognized net obligation at inception
recognized over 15.29 years............ 375,832 406,412 436,992
----------- ----------- -----------
Accrued pension cost.............. $ (283,655) $ (221,981) $ (138,613)
========== ========== ==========
</TABLE>

Assumptions used in the accounting for net periodic pension cost at
December 31, 1995, 1994, and 1993, were as follows:

<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Discount rates................................................. 7.00% 7.50% 6.00%
Rate of increase in compensation levels........................ 5.19% 5.19% 5.19%
Expected long-term rate of return on assets.................... 7.25% 7.25% 7.25%
</TABLE>

The defined contribution plan has two parts. The first part is a
profit-sharing plan. The second part allows employees to contribute up to 2.5
percent of their annual compensation, which is matched 100 percent by the
Company. The Company's funding policy is to fully fund the liability at the end
of each year. At December 31,

F-18
<PAGE> 82

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1995, the fair market value of plan assets was $2,571,939. The expense for this
plan amounted to $310,112, $281,599, and $268,082 in 1995, 1994, and 1993,
respectively.

The Company also has a supplemental executive retirement plan (SERP) that
provides two executive employees with income at retirement equal to 60 percent
of preretirement base compensation, less qualified pension plan benefits paid by
the Company and all predecessor plans and Social Security benefits. This is a
nonqualified plan that has no vesting prior to age 64. The Company accrued
$20,000 to cover any liability under this plan for each of the years 1995, 1994,
and 1993.

In 1994, the Company established a non-qualified deferred compensation plan
to cover directors and certain executives. Contributions are at the discretion
of the Board of Directors. The expense for this plan amounted to $11,111 and
$10,628 in 1995 and 1994, respectively.

McCreary has established a salary reduction plan (401K) covering all
eligible employees which has been qualified with the Internal Revenue Service.
The plan matches 20 percent of employee contributions and McCreary's
contribution for the period ended December 31, 1995 was $9,888.

McCreary also provides medical and dental coverage to its employees on a
self-funded basis. They have purchased aggregate and specific loss insurance
policies for medical claims through commercial reinsurance carriers. For the
period ended December 31, 1995, the aggregate and specific Self-Insured
Retention (SIR) was $156,358 and $12,500, respectively.

13. COMMITMENTS AND CONTINGENCIES

The Company is a shareholder in HCIF Management Company, a reinsurance
pool. Under the terms of the formation of HCIF, the Company is required to
further invest $60,000 in HCIF in 1996 and $15,000 in 1997.

The future maximum annual rentals under noncancellable leases were as
follows:

<TABLE>
<S> <C>
1996................................................................... $ 288,845
1997................................................................... 284,789
1998................................................................... 282,689
1999................................................................... 283,383
2000................................................................... 297,120
Thereafter............................................................. 620,952
----------
$2,057,778
=========
</TABLE>

Total rental expense was $219,380, $277,714, and $260,360 for 1995, 1994,
and 1993, respectively.

The Company is involved in numerous legal actions arising primarily from
claims made under insurance policies. The legal actions arising from claims made
under insurance policies 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 is 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.

14. STATUTORY ACCOUNTING

The Company is required to file statutory financial statements with state
insurance regulatory authorities. Shareholders' equity on a statutory basis was
$70,645,185 (unaudited) and $60,414,463 (unaudited) at March 31, 1996 and 1995,
respectively, and $70,038,945, $60,184,541, and $54,278,250 at December 31,
1995, 1994, and 1993, respectively. Statutory net income amounted to $1,405,727
(unaudited) and $1,114,776 (unaudited) for the three months ended March 31, 1996
and 1995, respectively, and $11,283,820, $6,583,635, and $10,340,290 for the
years ended December 31, 1995, 1994, and 1993, respectively.

F-19
<PAGE> 83

FLORIDA PHYSICIANS INSURANCE COMPANY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company is restricted under the Florida Insurance Code as to the amount
of dividends it may pay without regulatory consent. In 1996, the Company can pay
dividends up to approximately $11,600,000 without regulatory consent.

15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of unaudited quarterly results of operations for
1995 and 1994:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------
FIRST SECOND THIRD FOURTH
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Direct premium written....................... $20,127,320 $12,731,079 $14,849,023 $8,934,143
Net investment income........................ 2,894,366 3,339,559 3,289,917 2,463,572
Net income................................... 1,437,767 3,683,421 4,111,260 2,453,725
Per share net income......................... $.93 $2.37 $2.61 $1.55
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------
FIRST SECOND THIRD FOURTH
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Direct premium written....................... $18,936,179 $11,629,227 $13,601,526 $8,287,857
Net investment income........................ 2,224,890 2,519,453 2,928,510 2,696,889
Net income (loss)............................ (866,963) 633,072 3,192,770 2,917,645
Per share net income (loss).................. $(.55) $.41 $2.05 $1.88
</TABLE>

Quarterly earnings per share for 1994 were stated after giving retroactive
effect as if the 1994 dividend had been declared on January 1, 1994.

F-20
<PAGE> 84

SCHEDULE I

FLORIDA PHYSICIANS INSURANCE COMPANY

SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1995

<TABLE>
<CAPTION>
AMOUNT AT
WHICH SHOWN IN
COST(1) VALUE BALANCE SHEET
------------ ------------ --------------
<S> <C> <C> <C>
Securities Available-for-Sale
Fixed Maturities:
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies............ $ 60,752,413 $ 61,262,562 $ 61,262,562
Debt securities issued by states & political
subdivisions.................................... 49,020,097 49,509,975 49,509,975
Corporate securities............................... 33,447,560 34,159,519 34,159,519
Mortgage-backed securities......................... 72,621,048 73,371,448 73,371,448
------------ ------------ --------------
Total fixed maturities..................... 215,841,118 218,303,504 218,303,504
Equity Securities:
Industrial, miscellaneous, and other............... 125,000 125,000 125,000
Short-term investments............................... 500,000 500,000 500,000
Real Estate.......................................... 2,675,976 2,675,976 2,675,976
------------ ------------ --------------
Totals..................................... $219,142,094 $221,604,480 $ 221,604,480
=========== =========== ===========
</TABLE>

- ---------------

(1) Original cost of equity securities, short-term investments and real estate
adjusted for any permanent write downs, and, as to fixed maturities,
original cost reduced by repayments, write downs and adjusted for
amortization of premiums or accrual of discounts.

S-1
<PAGE> 85

SCHEDULE III

FLORIDA PHYSICIANS INSURANCE COMPANY

CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION
(IN THOUSANDS)
DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
OTHER AMORTIZATION
DEFERRED FUTURE POLICY POLICY BENEFITS OF DEFERRED
POLICY BENEFITS CLAIMS & NET LOSSES AND POLICY OTHER
ACQUISITION LOSSES, CLAIMS UNEARNED BENEFITS PREMIUM INVESTMENT LOSS ACQUISITION OPERATING PREMIUMS
SEGMENT COSTS LOSS EXPENSES PREMIUMS PAYABLE REVENUE INCOME EXPENSES COSTS EXPENSES WRITTEN
- -------------- ----------- -------------- -------- -------- ------- ---------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995:
Medical
professional
and other
liability... $ 818 $ 164,506 $20,948 $0 $52,675 $ 11,987 $ 44,839 $2,020 $3,114 $54,306
1994:
Medical
professional
and other
liability... $ 595 $ 152,268 $19,307 $0 $46,836 $ 10,370 $ 39,178 $1,425 $2,579 $47,509
1993:
Medical
professional
and other
liability... $39,443 $ 8,371 $ 34,663 $1,482 $2,912 $45,426
</TABLE>

S-2
<PAGE> 86

SCHEDULE IV

FLORIDA PHYSICIANS INSURANCE COMPANY

REINSURANCE
FOR THE YEARS ENDING DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
CEDED TO ASSUMED PERCENTAGE
GROSS OTHER FROM OTHER NET OF AMOUNT
PROPERTY AND LIABILITY INSURANCE AMOUNT COMPANIES COMPANIES AMOUNT ASSUMED TO NET
- ----------------------------------- ----------- ---------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
1995............................... $54,948,908 $2,325,634 $ 51,576 $52,674,850 0.10%
1994............................... $52,034,476 $5,198,324 $ 0 $48,836,152 0.00%
1993............................... $45,580,343 $6,137,179 $ 0 $39,443,164 0.00%
</TABLE>

S-3
<PAGE> 87

SCHEDULE V

FLORIDA PHYSICIANS INSURANCE COMPANY

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ----------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year-ended December 31, 1995
Allowance for Doubtful Accounts, net............... $ 82,660 $153,498 $ 0 $ 236,158
Year-ended December 31, 1994
Allowance for Doubtful Accounts, net............... $ 119,530 $ 0 $ 36,870 $ 82,660
</TABLE>

S-4
<PAGE> 88

------------------------------------------------------------
------------------------------------------------------------

NO DEALER, REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, IN ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT
TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information.................... 2
Summary................................... 3
Risk Factors.............................. 7
The Company............................... 13
Use of Proceeds........................... 14
Dividend Policy........................... 14
Dilution.................................. 15
Capitalization............................ 16
Selected Consolidated Financial Data...... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 19
Business.................................. 25
Management................................ 40
Certain Relationships and Related
Transactions............................ 48
Principal Shareholders and Securities
Ownership of Management................. 50
Description of Capital Stock.............. 51
Selling Shareholders...................... 54
Shares Eligible for Future Sale........... 55
Underwriting.............................. 56
Legal Matters............................. 57
Experts................................... 57
Glossary.................................. 58
Index to Consolidated Financial
Statements.............................. F-1
</TABLE>

UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------

3,000,000 SHARES

FPIC INSURANCE GROUP, INC.

COMMON STOCK

------------------------

PROSPECTUS
------------------------

OPPENHEIMER & CO., INC.

THE ROBINSON-HUMPHREY
COMPANY, INC.
, 1996
------------------------------------------------------------
------------------------------------------------------------
<PAGE> 89

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table lists the expenses incurred in connection with the
distribution of the securities offered pursuant to this Registration Statement.
All expenses are estimates, other than the registration fee, the New York Stock
Exchange listing fee and the NASD filing fee. The Company will pay for all of
the expenses incurred in connection with this offering.

<TABLE>
<CAPTION>
TOTAL
--------
<S> <C>
Registration Fee -- Securities and Exchange Commission............................ $ 17,844
Nasdaq National Market listing fee................................................ 40,099
NASD filing fee................................................................... 5,675
Blue Sky fees and expenses (including counsel).................................... 20,000
Accounting fees and expenses...................................................... 50,000
Legal fees and expenses........................................................... 150,000
Printing and engraving expenses................................................... 150,000
Transfer Agent's and registrar's fees and expenses................................ 35,000
Miscellaneous..................................................................... 100,000
--------
Total................................................................... $568,618
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Subsection (1) of Section 607.0850 of the Florida Business Corporation Act
(the "FBCA") empowers a corporation to indemnify any person who was or is a
party to any proceeding (other than an action by or in the right of the
corporation) by reason of the fact that he or she is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against liability incurred in connection with such proceeding
(including any appeal thereof) if he or she acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.

Subsection (2) of Section 607.0850 of the FBCA empowers a corporation to
indemnify any person who was or is a party to any proceeding by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth in the preceding paragraph,
against expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expenses of litigating the proceeding
including appeals, provided that the person acted under the standards set forth
in the preceding paragraph. However, no indemnification may be made for any
claim, issue or matter as to which such person is adjudged to be liable unless,
and only to the extent that, the court in which such proceeding was brought, or
any other court of competent jurisdiction, determines upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses that the court deems proper.

Section 607.0850(3) of the FBCA provides that to the extent a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in the defense of any proceeding referred to in subsections (1) and
(2) of Section 607.0850 or in the defense of any claim, issue or matter therein,
he or she shall be indemnified against expenses actually and reasonably incurred
by him or her in connection therewith. Subsection (4) provides that any
indemnification under subsections (1) and (2) of Section 607.0850, unless
determined by a court, shall be made by the corporation only as authorized in
the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances

II-1
<PAGE> 90

because he or she has met the applicable standard of conduct set forth in
subsections (1) and (2) of Section 607.0850. Such determination shall be made:

(a) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;

(b) if such a quorum is not obtainable, or, even if obtainable, by a
majority vote of a committee duly designated by the board of directors (in
which directors who are parties may participate) consisting solely of two
or more directors not at the time parties to the proceeding;

(1) selected by the board of directors as prescribed in paragraph
(a) or a committee selected as prescribed in paragraph (b); or

(2) if no quorum of directors can be obtained under paragraph (a)
no committee can be designated under paragraph (b), by a majority vote
of the full board of directors (in which directors who are parties may
participate); or

(d) by the shareholders by a majority vote of a quorum of shareholders
who were not parties to such proceedings or if no quorum is obtainable, by
a majority vote of shareholders who were not parties to such proceeding.

Expenses incurred by a director or officer in defending a civil or criminal
proceeding may be paid by the corporation in advance of the final disposition
thereof upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it is ultimately determined that such director
or officer is not entitled to indemnification under Section 607.0850.

Section 607.0850(7) of the FBCA states that indemnification and advancement
of expenses are not exclusive and empowers the corporation to make any other
further indemnification or advancement of expenses of it directors, officers,
employees or agents under any bylaw, agreement, vote of shareholders or
disinterested directors or otherwise, for actions in an official capacity and in
other capacities while holding an office. However, a corporation cannot
indemnify or advance expenses if a judgment or other final adjudication
establishes that the actions of the director, officer, employee or agent (a)
violated criminal law, unless the director, officer, employee or agent had
reasonable cause to believe his or her conduct was lawful or had no reasonable
cause to believe his or her conduct was unlawful, (b) derived an improper
personal benefit from such transaction, (c) was or is a director in a
circumstance where the liability under Section 607.0834 of the FBCA (relating to
unlawful distributions) applies, or (d) engages in willful misconduct or
conscious disregard for the best interests of the corporation in a proceeding by
or in right of the corporation to procure a judgment in its favor or in a
proceeding by or in right of a shareholder.

Section 607.0850(9) of the FBCA permits any director, officer, employee or
agent who is or was a party to a proceeding to apply for indemnification or
advancement of expenses to any court of competent jurisdiction. Section
607.0850(12) of the FBCA permits a corporation to purchase and maintain
insurance for a director, officer, employee or agent against any liability
incurred in his or her official capacity or arising out of his or her status as
such regardless of the corporation's power to indemnify him or her against such
liability under this section.

The Company's articles provide that the Company's directors and officers
will not be liable for any monetary damages to the Company or its shareholders
to the full extent permitted by Florida law.

The Company's articles and bylaws provide that the Company's directors and
officers shall be indemnified to the fullest extent allowed by law. The Company
has also entered into indemnification agreements with its directors and officers
and has committed to obtaining directors and officers liability insurance.

II-2
<PAGE> 91

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

(a) Securities sold.

<TABLE>
<CAPTION>
DATE OF SALE TITLE AMOUNT
-------------------------------------------------------- ------------- -------------
<S> <C> <C>
February, 1996.......................................... Common Stock 1,000 shares
</TABLE>

(b) Underwriters and other purchasers.

Underwriters were not retained in connection with the sale of any of the
Company's currently outstanding securities.

As part of the Company's formation, 1,000 shares of Common Stock were
issued to FPIC for cash in the amount of $1,000.

(d) Exemption from registration claimed.

The transaction is exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a. Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBITS
------- ----------------------------------------------------------------------------
<C> <C> <S>
1 -- Form of Underwriting Agreement
3(a) -- Articles of Incorporation of FPIC Insurance Group, Inc.
3(b) -- Bylaws of FPIC Insurance Group, Inc.
</TABLE>

<TABLE>
<C> <C> <S>
4 -- Specimen Common Stock Certificate
5 -- Legal Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.
10(a) -- Reinsurance Agreement with Cologne Reinsurance Company (Dublin) Ltd.
10(b) -- Casualty Second Excess Cession Treaty Agreement No.
CXS-3080(94)(Practitioner Liability Reinsurance) with CNA International
Reinsurance Company Limited.
10(c) -- Casualty Excess of Loss Treaty Agreement No. CXS-3014(95)(Practitioner
Liability Reinsurance)with Various Subscribing Reinsurers.
10(d) -- Casualty First Excess Cession Treaty Agreement No. CXS-3071(94)(Healthcare
Facilities Liability Reinsurance) with Various Subscribing Reinsurers
10(e) -- Casualty Second Excess Cession Treaty Agreement No. CXS-3072(94) (Healthcare
Facilities Liability Reinsurance) with Various Subscribing Reinsurers.
10(f) -- Casualty Third Excess Cession Treaty Agreement No. CXS-3073(94) (Healthcare
Facilities Liability Reinsurance) with CNA International Reinsurance Company
Limited
10(g) -- Employment Agreement dated December 30, 1992, amended November 4, 1995 and
amended February 28, 1996, between FPIC and William R. Russell
10(h) -- Employment Agreement dated December 30, 1992, amended November 4, 1995 and
amended February 28, 1996, between FPIC and Steven R. Smith
10(i) -- Severance Agreement dated February 28, 1996, between FPIC and William R.
Russell
10(j) -- Severance Agreement dated February 28, 1996, between FPIC and Steven R.
Smith
10(k) -- Severance Agreement dated February 28, 1996 between FPIC and Steven M.
Rosenbloom
10(l) -- Severance Agreement dated February 28, 1996, between FPIC and Robert B.
Finch
</TABLE>

II-3
<PAGE> 92

<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBITS
------- ----------------------------------------------------------------------------
<C> <C> <S>
10(m) -- Indemnity Agreement dated February 28, 1996, between FPIC and Gaston J.
Acosta-Rua, M.D.
10(n) -- Indemnity Agreement dated February 28, 1996, between FPIC and Curtis E.
Gause, D.D.S.
10(o) -- Indemnity Agreement dated February 28, 1996, between FPIC and David M.
Shapiro, M.D.
10(p) -- Indemnity Agreement dated February 28, 1996, between FPIC and Guy T.
Selander, M.D.
10(q) -- Indemnity Agreement dated February 28, 1996, between FPIC and James G.
White, M.D.
10(r) -- Indemnity Agreement dated February 28, 1996, between FPIC and Richard J.
Bagby, M.D.
10(s) -- Indemnity Agreement dated February 28, 1996, between FPIC and Robert O.
Baratta, M.D.
10(t) -- Indemnity Agreement dated February 28, 1996, between FPIC and Louis C.
Murray, M.D.
10(u) -- Indemnity Agreement dated February 28, 1996, between FPIC and William R.
Russell
10(v) -- Indemnity Agreement dated February 28, 1996, between FPIC and James W.
Bridges, M.D.
10(w) -- Indemnity Agreement dated February 28, 1996, between FPIC and J. Stewart
Hagen, M.D.
10(x) -- Indemnity Agreement dated February 28, 1996, between FPIC and D. L. Van
Eldik, M.D.
10(y) -- Indemnity Agreement dated February 28, 1996, between FPIC and Henry M.
Yonge, M.D.
10(z) -- Indemnity Agreement dated February 28, 1996, between FPIC and Steven R.
Smith
10(aa) -- Indemnity Agreement dated February 28, 1996, between FPIC and Steven M.
Rosenbloom
10(bb) -- Indemnity Agreement dated February 28, 1996, between FPIC and Robert B.
Finch
10(cc) -- Indemnity Agreement dated February 28, 1996, between FPIC and Donald J.
Sabia
10(dd) -- Indemnity Agreement dated February 28, 1996 between FPIC and R. Jeannie
Whitter
10(ee) -- Indemnity Agreement dated February 28, 1996 between FPIC and Charles W.
Emanuel
10(ff) -- Indemnity Agreement dated February 28, 1996 between FPIC and Ray A. Carey
10(gg) -- Indemnity Agreement dated February 28, 1996 between FPIC and Kurt F.
Driscoll
10(hh) -- Asset Purchase Agreement made as of May 10, 1995 among Florida Physicians
Acquisition Company, McCreary Corporation and William T. McCreary
10(ii) -- Omnibus Incentive Plan
10(jj) -- Director Stock Option Plan
10(kk) -- Supplemental Executive Retirement Plan, as amended
10(ll) -- Excess Benefit Plan
10(mm) -- Deferred Compensation Plan
10(nn) -- Employee Stock Purchase Plan*
21 -- List of Subsidiaries
23(a) -- Consent of KPMG Peat Marwick LLP, Independent Accountants
</TABLE>

II-4
<PAGE> 93

<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBITS
------- ----------------------------------------------------------------------------
<C> <C> <S>
23(b) -- Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included in Exhibit No.
5)
24 -- Powers of Attorney
27 -- Financial Data Schedule
28 -- Schedule P of FPIC's 1995 Annual Statement filed with the Florida Department
of Insurance.
</TABLE>

b. Financial Statement Schedules

<TABLE>
<CAPTION>
SCHEDULE
NO. SCHEDULES
-------- -------------------------------------------------------------------------------
<C> <C> <S>
I -- Summary of Investments Other than Investments in Related Parties
III -- Consolidate Supplemental Insurance Information
IV -- Consolidated Reinsurance
V -- Valuation and Qualifying Accounts
</TABLE>

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes that:

1. For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of Prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.

2. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

3. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted
against the registrant by such director, officer or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

II-5
<PAGE> 94

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to the Registration Statement on Form
S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Jacksonville, State of Florida, on July 24, 1996.

FPIC INSURANCE GROUP, INC.

By: /s/ STEVEN R. SMITH

------------------------------------
Steven R. Smith

Executive Vice President and Chief
Operating Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------------- --------------
<C> <S> <C>
* Chairman of the Board of July 24, 1996
- --------------------------------------------- Directors
Gaston J. Acosta-Rua, M.D.
* Director July 24, 1996
- ---------------------------------------------
Richard J. Bagby, M.D.
* Director July 24, 1996
- ---------------------------------------------
Robert O. Baratta, M.D.
* Director July 24, 1996
- ---------------------------------------------
James W. Bridges, M.D.
* Vice President and Chief July 24, 1996
- --------------------------------------------- Financial Officer (Principal
Robert B. Finch Financial Officer)
* Director July 24, 1996
- ---------------------------------------------
Curtis E. Gause, D.D.S.
* Director July 24, 1996
- ---------------------------------------------
J. Stewart Hagen, M.D.
* Director July 24, 1996
- ---------------------------------------------
Louis C. Murray, M.D.
* President, Chief Executive July 24, 1996
- --------------------------------------------- Officer and Director
William R. Russell (Principal Executive Officer)
* Controller (Principal Accounting July 24, 1996
- --------------------------------------------- Officer)
Donald J. Sabia
* Director July 24, 1996
- ---------------------------------------------
Guy T. Selander, M.D.
</TABLE>

II-6
<PAGE> 95

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------------- --------------
<C> <S> <C>
* Director July 24, 1996
- ---------------------------------------------
David M. Shapiro, M.D.
* Director July 24, 1996
- ---------------------------------------------
D. L. Van Eldik, M.D.
* Vice Chairman of the Board of July 24, 1996
- --------------------------------------------- Directors
James G. White, M.D.
* Director July 24, 1996
- ---------------------------------------------
Henry M. Yonge, M.D.
</TABLE>

*By: /s/ STEVEN R. SMITH

---------------------------------
Steven R. Smith
(Attorney-in-Fact)

II-7
<PAGE> 96

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS PAGE
- ------ ---------------------------------------------------------------------------- -----
<C> <C> <S> <C>
1 -- Form of Underwriting Agreement**............................................
3(a) -- Articles of Incorporation of FPIC Insurance Group, Inc.*....................
3(b) -- Bylaws of FPIC Insurance Group, Inc.*.......................................
4 -- Specimen Common Stock Certificate...........................................
5 -- Legal Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P......................
10(a) -- Reinsurance Agreement with Cologne Reinsurance Company (Dublin) Ltd.*.......
10(b) -- Casualty Second Excess Cession Treaty Agreement No. CXS-3080(94)
(Practitioner Liability Reinsurance) with CNA International Reinsurance
Company Limited*............................................................
10(c) -- Casualty Excess of Loss Treaty Agreement No. CXS-3014(95) (Practitioner
Liability Reinsurance) with Various Subscribing Reinsurers*.................
10(d) -- Casualty First Excess Cession Treaty Agreement No. CXS-3071(94) (Healthcare
Facilities Liability Reinsurance) with Various Subscribing Reinsurers*......
10(e) -- Casualty Second Excess Cession Treaty Agreement No. CXS-3072(94) (Healthcare
Facilities Liability Reinsurance) with Various Subscribing Reinsurers*......
10(f) -- Casualty Third Excess Cession Treaty Agreement No. CXS-3073(94) (Healthcare
Facilities Liability Reinsurance) with CNA International Reinsurance Company
Limited*....................................................................
10(g) -- Employment Agreement dated December 30, 1992, amended November 4, 1995, and
amended February 28, 1996, between FPIC and William R. Russell*.............
10(h) -- Employment Agreement dated December 30, 1992, amended November 4, 1995, and
amended February 28, 1996, between FPIC and Steven R. Smith*................
10(i) -- Severance Agreement dated February 28, 1996, between FPIC and
William R. Russell*.........................................................
10(j) -- Severance Agreement dated February 28, 1996, between FPIC and
Steven R. Smith*............................................................
10(k) -- Severance Agreement dated February 28, 1996, between FPIC and
Steven M. Rosenbloom*.......................................................
10(l) -- Severance Agreement dated February 28, 1996, between FPIC and
Robert B. Finch*............................................................
10(m) -- Indemnity Agreement dated February 28, 1996, between FPIC and
Gaston J. Acosta-Rua, M.D.*.................................................
10(n) -- Indemnity Agreement dated February 28, 1996, between FPIC and
Curtis E. Gause, D.D.S.*....................................................
10(o) -- Indemnity Agreement dated February 28, 1996, between FPIC and
David M. Shapiro, M.D.*.....................................................
10(p) -- Indemnity Agreement dated February 28, 1996, between FPIC and
Guy T. Selander, M.D.*......................................................
10(q) -- Indemnity Agreement dated February 28, 1996, between FPIC and
James G. White, M.D.*.......................................................
</TABLE>

<PAGE> 97

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS PAGE
- ------ ---------------------------------------------------------------------------- -----
<C> <C> <S> <C>
10(r) -- Indemnity Agreement dated February 28, 1996, between FPIC and
Richard J. Bagby, M.D.*.....................................................
10(s) -- Indemnity Agreement dated February 28, 1996, between FPIC and
Robert O. Baratta, M.D.*....................................................
10(t) -- Indemnity Agreement dated February 28, 1996, between FPIC and
Louis C. Murray, M.D.*......................................................
10(u) -- Indemnity Agreement dated February 28, 1996, between FPIC and
William R. Russell*.........................................................
10(v) -- Indemnity Agreement dated February 28, 1996, between FPIC and
James W. Bridges, M.D.*.....................................................
10(w) -- Indemnity Agreement dated February 28, 1996, between FPIC and
J. Stewart Hagen, M.D.*.....................................................
10(x) -- Indemnity Agreement dated February 28, 1996, between FPIC and
D. L. Van Eldik, M.D.*......................................................
10(y) -- Indemnity Agreement dated February 28, 1996, between FPIC and
Henry M. Yonge, M.D.*.......................................................
10(z) -- Indemnity Agreement dated February 28, 1996, between FPIC and
Steven R. Smith*............................................................
10(aa) -- Indemnity Agreement dated February 28, 1996, between FPIC and
Steven M. Rosenbloom*.......................................................
10(bb) -- Indemnity Agreement dated February 28, 1996, between FPIC and
Robert B. Finch*............................................................
10(cc) -- Indemnity Agreement dated February 28, 1996, between FPIC and
Donald J. Sabia*............................................................
10(dd) -- Indemnity Agreement dated February 28, 1996 between FPIC and
R. Jeannie Whitter*.........................................................
10(ee) -- Indemnity Agreement dated February 28, 1996 between FPIC and
Charles W. Emanuel*.........................................................
10(ff) -- Indemnity Agreement dated February 28, 1996 between FPIC and
Ray A. Carey*...............................................................
10(gg) -- Indemnity Agreement dated February 28, 1996 between FPIC and
Kurt F. Driscoll*...........................................................
10(hh) -- Asset Purchase Agreement made as of May 10, 1995 among Florida Physicians
Acquisition Company, McCreary Corporation and William T. McCreary*..........
10(ii) -- Omnibus Incentive Plan*.....................................................
10(jj) -- Director Stock Option Plan*.................................................
10(kk) -- Supplemental Executive Retirement Plan, as amended*.........................
10(ll) -- Excess Benefit Plan*........................................................
10(mm) -- Deferred Compensation Plan..................................................
10(nn) -- Employee Stock Purchase Plan*...............................................
21 -- List of Subsidiaries*.......................................................
23(a) -- Consent of KPMG Peat Marwick LLP, Independent Accountants...................
23(b) -- Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included in Exhibit No.
5)..........................................................................
</TABLE>

<PAGE> 98

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS PAGE
- ------ ---------------------------------------------------------------------------- -----
<C> <C> <S> <C>
24 -- Powers of Attorney**........................................................
27 -- Financial Data Schedule**...................................................
28 -- Schedule P of FPIC's 1995 Annual Statement filed with the Florida Department
of Insurance*...............................................................
</TABLE>

- ---------------

* Incorporated herein by reference to the designated exhibit of the Company's
Registration Statement on Form S-4 (Registration No. 333-2040).

** Previously filed

<PAGE> 1

EXHIBIT 4

[LOGO] FPIC
NUMBER SHARES
------ FPIC INSURANCE GROUP, INC. ------
FP
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA

SEE REVERSE CERTAIN DEFINITIONS

CUSIP 302563 10 1

THIS IS TO CERTIFY THAT

is the owner of

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF FPIC INSURANCE
GROUP, INC. OF THE PAR VALUE OF $.10 PER SHARE, transferable only on the books
of the Corporation in person or by duly authorized attorney upon the surrender
of this certificate properly endorsed.

This certificate and the shares represented hereby are subject to the
provisions of the Restated Articles of Incorporation and all amendments thereto,
and the Bylaws of the Corporation, the terms of all such provisions being
incorporated herein by reference.

This certificate shall not be valid until countersigned by the Transfer
Agent.

WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

Dated:

/s/ Steven R. Rosenblum [SEAL] /s/ William R. Russell
-------------------------- -------------------------
SENIOR VICE PRESIDENT PRESIDENT AND
AND ASSISTANT SECRETARY CHIEF EXECUTIVE OFFICER

COUNTERSIGNED:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
(CHARLOTTE, N.C.) TRANSFER AGENT

AUTHORIZED SIGNATURE

<PAGE> 1

LEBOEUF, LAMB, GREENE & MACRAE
L.L.P.
A LIMITED LIABILITY PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
50 N. LAURA STREET
SUITE 2800
JACKSONVILLE, FL 32202-3650
(904) 354-8000
FACSIMILE: (904) 353-1673

July 25, 1996

FPIC Insurance Group, Inc.
1000 Riverside Avenue
Jacksonville, FL 32204

Ladies and Gentlemen:

We have acted as counsel to FPIC Insurance Group, Inc., a Florida
corporation (the "Company"), in connection with the Registration Statement on
Form S-1 (Registration No. 333-4585) of the Company (the "Registration
Statement") initially filed on May 24, 1996 with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the proposed sale of up to 4,312,500 shares of
common stock, par value $0.10 per share (the "Common Stock"), of the Company.
The shares are to be sold by the Company and certain of the Company's
shareholders to the several underwriters named in the underwriting agreement
(the "Underwriting Agreement") between the Company and the representatives of
the underwriters, Oppenheimer & Co., Inc. and The Robinson-Humphrey Company,
Inc.

We have examined such documents, corporate records and other
instruments, and have made such other and further investigations as we have
deemed relevant and necessary for the purposes of this opinion. We have
assumed, without inquiry, the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of all natural
persons and the conformity with authentic original documents of any copies
thereof submitted to us for our examination.

Based upon and subject to the foregoing, we are of the opinion that:

1. The Company has been incorporated under the laws of the State
of Florida and the Company's status is active.

2 The issuance of the shares of Common Stock to be sold by the
Company as provided in the Underwriting Agreement has been authorized by all
necessary corporate action.
<PAGE> 2
FPIC Insurance Group, Inc
July 25, 1996
Page 2

3 Upon issuance and payment therefor in accordance with the
terms of the Underwriting Agreement, the shares of Common Stock will be validly
issued, fully paid and non-assessable.

The opinions rendered herein are limited to the laws of the State of
Florida and the Federal laws of the United States.

We hereby consent to the use of our name in the Registration Statement
as counsel that will pass upon the legality of the shares of Common Stock for
the Company and as having prepared this opinion, and to the use of this opinion
as an exhibit to the Registration Statement. We further consent to the use of
our name as counsel for the Company and to the reference to this firm in the
Prospectus that constitutes part of the Registration Statement.

In giving this consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act or the rules or regulations of the Commission promulgated
thereunder.

Very truly yours,

LEBOEUF, LAMB, GREENE & MACRAE L.L.P.

<PAGE> 1

EXHIBIT 10(mm)

[LOGO] The Merrill Lynch Special Non-Qualified Deferred
Compensation Plan Adoption Agreement

Please complete the information requested in the Adoption Agreement to establish
the specific provisions of your plan. You do not have to provide a copy to your
Financial Consultant. (Only the Merrill Lynch account opening agreements and an
original executed copy of the associated Trust Agreement need to be returned to
Merrill Lynch at the address printed on those forms.) This document and The
Merrill Lynch Special Deferred Compensation Plan for Select Employees govern the
rights of plan participants and should, therefore, be disclosed to participants
and retained as part of your permanent records.

1. EMPLOYER INFORMATION

A. Name of Plan: FPIC Deferred Compensation Plan
-------------------------------
B. Name and Address of employer sponsoring the Plan. Please provide employer's
business name.

FLORIDA PHYSICIANS INS. CO.
----------------------------------
Business Name

P.O. Box 44033
----------------------------------
Address

Jacksonville
----------------------------------
City

Florida 32231
----------------------------------
State Zip Code

C. Provide employer's primary contact for the Plan and telephone and FAX
numbers. Also include the employer's Tax Identification Number.

Steven R. Smith
----------------------------------
Primary Contact

Executive Vice President
----------------------------------
Title

904/354-5910
----------------------------------
Telephone

904/358-6728
----------------------------------
FAX

904/358-6728
----------------------------------
Employer Tax Identification Number

D. Give the first day of the 12-month period for which the employer pays taxes:
01/01
-----

2. PLAN INFORMATION

A. What is the effective date of the Plan?

11/01/94
----------------------------------

B. Plan Year Ends. Your "Plan Year" is the 12-consecutive-month period for which
you credit elective and matching deferrals and keep Plan records. Enter the
last day of your Plan Year. For example, if you use the calendar year as your
plan year, enter "December 31." If you use a different 12-month period --
for instance if your business is on a fiscal year -- enter the last day of
your fiscal year, e.g., "July 31."

December 31
----------------------------------

3. ELIGIBLE EMPLOYEES

The following persons or classes of persons shall be Participants (enter the
names or positions of individuals eligible to participate or the criteria used
to identify Participants, e.g., "Those key employees of the Company selected by
the Compensation Committee of the Board of Directors").

Members of the Board of Directors and key employees of FPIC selected by the
- ---------------------------------------------------------------------------
Board of Directors
- ------------------

4. COMPENSATION

Compensation is used to determine the amount of Elective Deferrals a Participant
can elect. Compensation under the Plan is defined as (select one):

[ ] the Participant's wages, salaries, fees for professional services and other
amounts received (without regard to whether or not an amount is paid in cash)
for personal services actually rendered in the course of employment with the
Employer or an Affiliate to the extent that the amounts are includable in gross
income, including but not limited to commissions paid to salesmen, compensation
for services on the basis of a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits, reimbursements, and expense
allowances, but not including those items excludable from the definition of
compensation under Treas. Reg. section 1.415-2(d)(3).

[ ] the regular or base salary payable to the individual by the Employer or an
Affiliate, excluding commissions and bonuses.

[x] the cash compensation payable to the individual by the Employer or an
Affiliate, including any commissions and bonuses.

[ ] the cash bonuses payable to the individual by the Employer or an Affiliate.

For purposes of the Plan, Compensation will be determined before giving effect
to Elective Deferrals and other salary reduction amounts which are not included
in the Participant's gross income under Code section 125, 401(k), 402(h) or
403(b).

5. CONTRIBUTIONS

A. Elective Deferrals. Participants may elect to reduce their Compensation
and to have Elective Deferrals credited to their Accounts by making an election
under the Plan (which may be changed each year for later Plan Years as described
in the plan), but no Participant may defer more than 100% (1%-100%) of his or
her Compensation for a Plan Year.

B. Matching Deferrals. If the Employer elects to match Elective Deferrals,
specify the matching rate and indicate the amount of the Participant's Elective
Deferrals that will be matched. You may also elect to decide each year whether
Matching Deferrals will be made and, if so, what that year's matching rate will
be.

For example, the Employer may decide to credit a Matching Deferral of, for
example, 50 cents for each dollar of a Participant's Elective Deferrals, but
limit the match to the first 5% of Compensation deferred by the Participant. If
you want to set a maximum dollar amount on the amount of Elective Deferrals that
will be matched, insert the dollar amount and interval over which that amount is
to be measured. For example, you could say that you will not match Elective
Deferrals in excess of $1,000 per month. Matching Deferrals can be made after
each payroll period, monthly, quarterly, or annually, at the Employer's
discretion. Matching Deferrals will be subject to the vesting schedule selected
in Item 6A (select one):

[ ] No Matching Deferrals will be credited.

[ ] The Employer will credit Matching Deferrals for each Participant equal to
____% of the first ___% of the Participant's Compensation which is elected as an
Elective Deferral, but no Matching Deferral will be made on Elective Deferrals
in excess of $______ per (specify time period if applicable).

- --------------------------------------------------------------------------------
[x] The Employer will decide from year to year whether Matching Deferrals will
be made and will notify Participants annually of the manner in which Matching
Deferrals will be calculated for the subsequent year.

<PAGE> 2

C. Discretionary Incentive Contributions. The Employer may make
Discretionary Incentive Contributions in any amounts the Employer selects.
These contributions will be subject to the vesting schedule selected in Item 6C.

The Employer will make Discretionary Incentive Contributions under the Plan.

[X] yes [ ] no

6. VESTING OF MATCHING DEFERRALS AND DISCRETIONARY INCENTIVE CONTRIBUTIONS

A. Vesting Schedule for Matching Deferrals.

Indicate how the portion of a Participant's Account attributable to Matching
Deferrals is to vest.

Matching Deferrals vest in accordance with the following schedule (select one):

[ ] 100% immediate.

[ ] 100% after _____ years of service.

[X] 20% after 2 years of service and an additional 20% for each year
thereafter.

[ ] Other vesting schedule (specify):

________________________________________________________________________________

B. Vesting Service.

Indicate whether you will give credit for vesting service for time spent with a
predecessor employer, and if so, specify the maximum number of years and the
type of predecessor service for which credit will be given. For vesting
purposes (select one):

[X] Service with a predecessor employer will not be considered.

[ ] Service (up to a maximum of _____ years) with the following employer(s)
will be considered:

________________________________________________________________________________

C. Vesting Schedule for Discretionary Incentive Contributions.

Indicate how the portion of a Participant's Account attributable to
Discretionary Incentive Contributions is to vest.

Unless otherwise specified by the Employer at the time a Discretionary Incentive
Contribution is made, Discretionary Incentive Contributions vest in accordance
with the following schedule (select one):

[ ] 100% immediate.

[ ] 100% after _____ years of service.

[X] 20% after 2 years of service and an additional 20% for each year
thereafter.

[ ] Other vesting schedule (specify):

________________________________________________________________________________

7. ACCOUNTS

The Trustee can either invest each Participant's Account balance as a separate
account (in which case the Trustee could, but would not be required to, take
into consideration the investment preferences of the Participants) or invest the
Account balances of all Participants as a single fund (in which case the Trustee
could, but would not be required to, take into consideration the investment
preference of the Employer).
(select one):

[X] Account balances are to be invested separately.

[ ] Account balances are to be invested as a single fund.

8. RETIREMENT AGE

The Retirement Age under the Plan is age 60. A Participant terminating
employment before Retirement Age for reasons other than death or Total and
Permanent Disability will not be entitled to receive any installment payments
elected on the Election Form.

9. WITHDRAWALS WHILE WORKING.

Withdrawals for Unforeseen Emergency. If you check the first box, Participants
may make withdrawals while working in the event they encounter an unforeseen
emergency. They generally can withdraw the vested portion of their Accounts.

NOTE: Withdrawals are strictly limited as described in Plan Section 7.5. It is
the Plan Administrator's responsibility to ensure that the limits are being
followed. Excess withdrawals may result in loss of the tax deferral on all
amounts credited under the Plan for the benefit of all Participants.

Withdrawals of the vested portion of a Participant's Account for unforeseen
emergencies (select one):

[X] Are permitted to the full extent allowable under the plan.

[ ] Are not permitted.

10. ADMINISTRATION

Plan Administrator. The Plan Administrator is legally responsible for the
operation of the Plan, including:

- - Keeping track of which employees are eligible to participate in the Plan
and the date each employee becomes eligible to participate.

- - Maintaining Participants' Accounts, including all sub-accounts required
for different contribution types and payment elections, and keeping track of all
elections made by Participants under the Plan and any other relevant
information.

- - Transmitting important communications to the Participants, and obtaining
relevant information from Participants such as changes in investment selections.

- - Filing important reports required to be submitted to governmental
agencies.

The Plan Administrator will be the person or persons identified below:

Steven R. Smith
- --------------------------------------------------------------------------------
Name

Executive Vice President
- --------------------------------------------------------------------------------
Title

William R. Russell
- --------------------------------------------------------------------------------
Name

President
- --------------------------------------------------------------------------------
Title

Steven M. Rosenbloom
- --------------------------------------------------------------------------------
Name

Vice President
- --------------------------------------------------------------------------------
Title

11. SIGNATURES

After reviewing the Adoption Agreement, enter the current date and the name of
the Employer. The signature of the Employer or the person signing for the
Employer must be witnessed. Note that the person signing for the Employer must
be authorized to do so, such as by a resolution of the Employer's board of
directors or governing by-laws.

While the Merrill Lynch Special Deferred Compensation Plan for Select Employees,
including this Adoption Agreement, has been designed in a manner to permit
Participants to defer federal income tax on amounts credited to their accounts
until the amounts are actually paid, neither Merrill Lynch, Pierce, Fenner &
Smith Incorporated, the sponsor of this document, nor any of its affiliates
("Merrill Lynch") provide any assurances of that result in the Employer's
particular situation or assume any responsibility in this regard. Please
consult your tax adviser regarding the tax consequences of this Plan to you and
your employees and the advisability of submitting this document to the Internal
Revenue Service to obtain a ruling concerning those consequences. By signing
this Adoption Agreement the Employer acknowledges that no representations or
warranties as to the tax consequences to the Employer and Participants of the
operation of this Plan have been made by Merrill Lynch.

Florida Physicians Insurance Company
- --------------------------------------------------------------------------------
Name of Employer (Print or Type)

By:

/s/ Steven R. Smith
- --------------------------------------------------------------------------------
Authorized Signature

Executive Vice President
- --------------------------------------------------------------------------------
Print Name and Title

Date:

WITNESS: [SEAL]

/s/ Carole E. Wilson
- --------------------------------------------------------------------------------
Signature

Notary
- --------------------------------------------------------------------------------
Print Name and Title

<PAGE> 1

EXHIBIT 23(a)

The Board of Directors
Florida Physicians Insurance Group, Inc.:

We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the Prospectus. Our report refers to a
change in the accounting method for certain investments in debt and equity
securities and for reinsurance.

/s/ KPMG Peat Marwick L.L.P.
----------------------------
KPMG Peat Marwick L.L.P.

Jacksonville, Florida
July 26, 1996