SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO _________________.
Commission file number 0-2500111
21ST CENTURY HOLDING COMPANY
----------------------------
(Exact name of registrant as specified in its charter)
FL 65-0248866
-- ----------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
4161 N.W. 5TH STREET, PLANTATION, FL 33317
------------------------------------------
(Address of principal executive offices) (Zip Code)
954-581-9993
------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
CHECK WHETHER THE REGISTRANT (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING
12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE
SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST
90 DAYS. YES [X ] NO [ ]
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICAL DATE:
COMMON STOCK PAR VALUE $.01 PER SHARE - 3,370,000 SHARES OUTSTANDING AS OF
NOVEMBER 10, 1999.
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21ST CENTURY HOLDING COMPANY
INDEX
PART I: FINANCIAL INFORMATION PAGE
----
<S> <C>
ITEM 1:
Consolidated Balance Sheets
as of September 30, 1999
and December 31, 1998 (Unaudited)................................................................... 3
Consolidated Statements of Income
for the three and nine months ended September 30, 1999
and 1998 (Unaudited)................................................................................ 4
Consolidated Cash Flow Statements
for the nine months ended September 30, 1999
and 1998 (Unaudited)................................................................................ 5
Notes to Consolidated Financial Statements (Unaudited)................................................... 6
ITEM 2:
Management's Discussion and Analysis
of Financial Condition and Results of Operations.................................................... 10
PART II: OTHER INFORMATION
Other Information........................................................................................ 16
Signature................................................................................................ 17
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2
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PART I
ITEM I. FINANCIAL INFORMATION
21ST CENTURY HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
SEPTEMBER 30, 1999 DECEMBER 31,1998
ASSETS (UNAUDITED)
<S> <C> <C>
Investments
Fixed maturities, available for sale, at fair value $ 13,055,011 $ 14,605,582
Equity securities 1,323,264 2,936,520
Mortgage loan 120,000 163,164
------------ ------------
Total investments 14,498,275 17,705,266
------------ ------------
Cash and cash equivalents 1,901,784 2,250,061
Finance contracts receivable and consumer loans receivable, net of
allowances for credit losses of $54,000 and $195,000, respectively 8,660,369 7,093,593
Prepaid reinsurance premiums 2,824,820 2,648,098
Premiums receivable 1,187,367 0
Due from reinsurers 1,537,852 1,926,736
Deferred acquisition costs, net 107,725 89,524
Deferred income taxes 1,567,804 1,085,255
Property, plant and equipment, net 2,522,444 1,763,254
Other assets 771,267 866,335
Goodwill, net 3,459,368 2,748,281
------------ ------------
TOTAL ASSETS $ 39,039,075 $ 38,176,403
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses $ 6,146,977 $ 7,603,460
Unearned premiums 8,885,760 8,534,320
Premium deposits 163,573 492,422
Revolving credit outstanding 4,636,092 2,062,948
Bank overdraft 1,296,669 1,199,941
Unearned commissions 802,293 586,592
Accounts payable and accrued expenses 372,487 1,932,950
Notes payable 563,629 500,000
Drafts payable to insurance companies 320,565 295,947
------------ ------------
TOTAL LIABILITIES $ 23,188,045 $ 23,208,580
============ ============
Shareholders' equity:
Common stock of $.01 par value. Authorized 25,000,000 shares,
issued and outstanding 3,370,000 and 3,350,000 shares,
respectively 33,700 33,500
Additional paid in capital 12,675,087 12,460,287
Accumulated other comprehensive deficit (1,147,771) (257,227)
Retained earnings 4,290,014 2,731,263
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 15,851,030 14,967,823
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 39,039,075 $ 38,176,403
============ ============
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
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21ST CENTURY HOLDING COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
(Restated)
<S> <C> <C> <C> <C>
Revenues:
Gross premiums written $ 3,691,802 $ 4,452,847 $ 15,529,597 $ 16,622,184
Gross premiums ceded (1,215,394) (1,367,888) (4,930,729) (5,140,635)
------------ ------------ ------------ ------------
Net premiums written 2,476,408 3,084,959 10,598,868 11,481,549
Decrease (increase) in unearned premiums,
net of prepaid reinsurance premiums 918,752 511,468 (224,213) (1,207,421)
------------ ------------ ------------ ------------
Net premiums earned 3,395,160 3,596,427 10,374,655 10,274,128
Commission income 1,174,465 512,217 3,228,962 1,490,792
Finance revenue 958,075 526,955 2,589,997 1,289,779
Net investment income 184,118 264,880 656,107 770,527
Net realized gains (losses) 87,707 (17,304) 566,805 372,237
Other income 429,748 310,904 1,456,507 1,099,180
------------ ------------ ------------ ------------
Total revenue 6,229,273 5,194,079 18,873,033 15,296,643
------------ ------------ ------------ ------------
Expenses:
Losses and loss adjustment expenses 2,069,023 2,242,483 5,970,362 6,923,709
Operating and underwriting expenses 1,710,495 1,007,475 4,909,764 3,113,438
Salaries and wages 1,856,105 963,498 5,344,314 2,590,467
Amortization of deferred acquisition
costs, net 123,296 (11,416) (82,709) 29,007
Amortization of goodwill 131,828 52,720 385,893 158,999
------------ ------------ ------------ ------------
Total expenses 5,890,747 4,254,760 16,527,624 12,815,620
------------ ------------ ------------ ------------
Income before provision for
income tax expense 338,526 939,319 2,345,409 2,481,023
Provision for income tax expense 102,391 354,947 786,658 933,086
------------ ------------ ------------ ------------
Net income $ 236,135 $ 584,372 $ 1,558,751 $ 1,547,937
============ ============ ============ ============
Net income per share $ 0.07 $ 0.28 $ 0.46 $ 0.74
============ ============ ============ ============
Net income per share-
assuming dilution $ 0.07 $ 0.28 $ 0.46 $ 0.74
============ ============ ============ ============
Weighted average number of common
shares outstanding 3,380,000 2,100,000 3,386,667 2,100,000
Weighted average number of common
shares outstanding (assuming dilution) 3,380,000 2,100,000 3,386,667 2,100,000
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
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21ST CENTURY HOLDING COMPANY
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
1999 1998
<S> <C> <C>
Cash flow from operating activities:
Net income $ 1,558,751 $ 1,547,937
Adjustments to reconcile net income to net cash flow used in operating
activities:
Amortization of investment premium (1,959) 6,418
Depreciation and amortization of property, plant and equipment 93,230 22,469
Amortization of goodwill 385,893 158,998
Deferred income tax expense (2,520) (315,849)
Gain on sale of investment securities (566,805) (372,237)
Provision for credit losses 334,449 0
Changes in operating assets and liabilities:
Finance contracts receivable and consumer loans receivable (1,566,776) (2,811,397)
Prepaid reinsurance premiums (176,722) (668,714)
Premiums receivable (1,187,367) 0
Due from reinsurers 388,884 (547,363)
Deferred acquisition costs (18,201) (98,422)
Other assets 95,068 (1,789,659)
Unpaid loss and loss adjustment expenses (1,456,483) 847,141
Unearned premiums 351,440 1,876,136
Premium deposits (328,849) (1,058,806)
Unearned commissions 215,701 (141,518)
Accounts payable and accrued expenses (1,560,463) 1,392,779
Drafts payable to insurance companies 24,618 688,855
------------ ------------
Net cash flow used in operating activities (3,418,111) (1,263,232)
------------ ------------
Cash flow from investing activities:
Proceeds from sale of investment securities available for sale 26,244,237 36,207,427
Purchases of investment securities available for sale (24,112,923) (37,386,504)
Repayment of mortgage loan 163,164 111,763
Purchase of mortgage loan (120,000) 0
Purchases of property, plant and equipment (852,420) (1,144,534)
Acquisition of affiliates previously combined 0 189,103
Acquisition of agencies and majority owned subsidiary (425,725) 0
------------ ------------
Net cash flow used in investing activities 896,333 (2,022,745)
------------ ------------
Cash flows from financing activities
Bank overdraft 96,728 1,068
Acquisition of common stock (200,000) 0
Revolving credit outstanding 2,573,144 1,872,014
Capital contribution 0 394,470
Repayment of indebtedness (296,371) (183,626)
------------ ------------
Net cash flow provided by financing activities 2,173,501 2,083,926
------------ ------------
Net decrease in cash & cash equivalents (348,277) (1,202,051)
Cash & cash equivalents at beginning of period 2,250,061 1,684,451
------------ ------------
Cash & cash equivalents at end of period $ 1,901,784 $ 482,400
------------ ------------
Supplemental disclosure of cash flow information:
Non-cash investing activities:
Shares issued for acquisition of agency and majority owned subsidiary $ 415,000 0
------------ ------------
Notes payable issued for agency acquisitions $ 360,000 0
------------ ------------
Cash paid during the period for:
Interest $ 237,675 $ 267,103
------------ ------------
Income taxes $ 1,788,550 $ 202,620
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
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21ST CENTURY HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION AND BUSINESS
The accompanying unaudited consolidated financial statements of 21st
Century Holding Company (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly they do not include all of the information and notes required by
generally accepted accounting principles ("GAAP") for complete financial
statements. In the opinion of management, all adjustments, consisting of normal
recurring accruals, considered necessary for a fair presentation have been
included. Operating results for the nine-month period ended September 30, 1999
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1999. These consolidated financial statements and notes
should be read in conjunction with the audited consolidated financial statements
and notes thereto for the year ended December 31, 1998 included in the Company's
Annual Report on Form 10-KSB.
The Company is a vertically integrated insurance holding company,
which, through its subsidiaries controls substantially all aspects of the
insurance underwriting, distribution and claims process. Federated National
Insurance Company ("Federated National"), a wholly-owned subsidiary, underwrites
nonstandard and standard personal automobile insurance and mobile home property
and casualty insurance in the State of Florida. Through a wholly owned managing
general agent, Assurance Managing General Agents, Inc. ("Assurance MGA"), the
Company has underwriting and claims authority for third-party insurance
companies. The Company also offers premium financing, consumer loans and other
ancillary services to its customers.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(A) BASIS OF ACCOUNTING
In January 1998, the Company acquired all of the issued and outstanding
capital stock of eight affiliated corporations, principally the Company's
insurance agencies, in exchange for the issuance of shares of common stock. The
minority interest relative to the ownership of the affiliated corporations,
whose results were combined prior to their acquisition on January 1, 1998, was
accounted for as a component of equity of the Company. This treatment was
applied because the minority interest was in a deficit position due to
distributions to shareholders in excess of basis and deemed uncollectible from
the unaffiliated shareholders. The acquisition of the minority interest in the
affiliated corporations was accounted for by the purchase method. The aggregate
acquisition price was allocated to the portion of the net identifiable assets
pertaining to the minority interest based on their fair value. The allocation of
the acquisition price to the minority interest's net identifiable assets had an
excess of fair value over the new adjusted book basis creating goodwill of
approximately $1,035,000 and eliminated the minority interest deficit of
approximately $113,000. The acquisition of the net retained deficit of the
affiliated corporations, and the elimination of their common stock resulted in
the net credit to the equity of the Company of approximately $995,000.
In November 1998, the Company consummated an initial public offering
(the "IPO") of 1,250,000 shares of its Common Stock at a price of $7.50 per
share. Proceeds from the IPO, which were approximately $7.9 million net of
underwriting costs and expenses of the offering, have been and are being used
for contributions to Federated National's capital, repayment of debt under the
Company's credit facility (the "Credit Facility"), the financing of
acquisitions, working capital and other general corporate purposes.
In December 1998, the Company consummated an asset acquisition of 18
agencies in exchange for $1.1 million in cash and a $500,000 note payable. The
aggregate acquisition price was allocated to the net identifiable assets based
on their fair value. The allocation of acquisition price to net identifiable
assets had an excess of fair value over the new adjusted book basis creating
goodwill of approximately $1.4 million.
In January 1999, the Company consummated an asset acquisition of two
agencies in exchange for $176,000 in cash and 40,000 shares of common stock. The
aggregate acquisition price was allocated to the net identifiable assets based
on their fair value. The allocation of acquisition price to net identifiable
assets had an excess of fair value over the new adjusted book basis creating
goodwill of approximately $456,000.
In June 1999, the Company consummated an asset acquisition of three
agencies in exchange for $130,000 in cash and a note payable in the amount of
$300,000. The aggregate acquisition price was allocated to the net identifiable
assets based on their fair value. The allocation of acquisition price to net
identifiable assets had an excess of fair value over the new adjusted book basis
creating goodwill of approximately $430,000.
In July 1999, the Company repurchased 40,000 shares of its outstanding
common stock for $200,000.
6
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21ST CENTURY HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(A) BASIS OF ACCOUNTING--(CONTINUED)
In August 1999, the Company acquired 80% of the outstanding stock of
Express Tax and Insurance Service, Inc., a licensor of tax return preparation
software, in exchange for $100,000 in cash and 20,000 shares of common stock.
The aggregate acquisition price was allocated to the net identifiable assets
based on their fair value. The allocation of acquisition price to net
identifiable assets had an excess of fair value over the new adjusted book basis
creating goodwill of approximately $215,000.
(B) COMPREHENSIVE INCOME (DEFICIT)
On January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." Comprehensive income (deficit) presents a measure of all
changes in shareholders' equity except for changes resulting from transactions
with shareholders in their capacity as shareholders. The Company's total
comprehensive income (deficit) presently consists of net income adjusted for the
change in net unrealized holding gains (losses) on debt investments available
for sale and equity investments. The net change in net unrealized holding losses
on debt investments available for sale and equity investments was ($890,544) and
($410,457) for nine months ended September 30, 1999 and 1998, respectively.
Total comprehensive income was $668,207 and $1,137,480 for the nine months ended
September 30, 1999 and 1998, respectively.
(C) ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
requires all derivatives to be recognized at fair value as either assets or
liabilities on the balance sheet. Any gain or loss resulting from changes in
such fair value is required to be recognized in earnings, to the extent the
derivatives are not effective as hedges. SFAS No. 137. "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of SFAS No. 133" issued in June 1999 defers the effective date of SFAS No. 133
to all fiscal quarters of all fiscal years beginning after June 15 of 2000.
Adoption of this statement is not expected to have a material impact on the
Company's results of operations or financial position.
(D) ACCOUNTING CHANGES
Effective January 1, 1999, the Company adopted Statement of Position
97-3, "Accounting by Insurance and Other Enterprises for Insurance Related
Assessments", which requires entities to recognize liabilities for insurance
related assessments when such assessments are probable and the amount of the
assessments can be reasonably estimated. Adoption of this statement did not
impact the Company's results of operations or financial position.
(E) RECLASSIFICATIONS
Certain 1998 financial statement amounts have been reclassified to
conform with 1999 presentation.
(3) RESTATEMENT
The Company's consolidated statement of income for the three months
ended September 30, 1998 has been restated from the amounts reported in the
10-QSB filing to reflect the effect of recording unearned ceding commissions for
ceded premiums. Previously, the Company had recognized ceding commissions on a
written basis. The Company's ceding commissions are now amortized over the life
of the related policy. The effect of the restatement was as follows:
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THREE MONTHS ENDED
SEPTEMBER 30, 1998
------------------
(UNAUDITED)
AS REPORTED
STATEMENT OF INCOME: IN 10-QSB FILING AS RESTATED
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<S> <C> <C>
Amortization of deferred
acquisition costs, net $ 85,529 (11,416)
Provision for income
taxes $318,599 354,947
Net income $523,775 584,372
Net income per share $0.25 $0.28
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7
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21ST CENTURY HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(4) REVOLVING CREDIT OUTSTANDING
In September 1997, the Company, through its subsidiary, Federated
Premium Finance, Inc. entered into a revolving loan agreement ("Revolving
Agreement") with Flatiron Funding Company LLC. Under the Revolving Agreement,
the Company can borrow up to the maximum credit commitment of $4.0 million. The
amount of an advance is subject to availability under a borrowing base
calculation, with maximum advances outstanding not to exceed the maximum credit
commitment. In January 1999, the maximum credit commitment was increased to $5.0
million and the annual interest rate was changed to the prime rate plus .75
percent.
(5) RELATED PARTY TRANSACTIONS
In January 1999, the Company purchased two office properties from
officers of the Company, which have been utilized for agencies' operations. One
of the properties had previously been sold to the officers at the same sales
price, resulting in no gain or loss to the officer. Consideration for the
acquisitions was cash in the amount of $605,000.
(6) SEGMENT INFORMATION
The Company and its subsidiaries operate principally in two business
segments consisting of insurance and financing. The insurance segment consists
of underwriting through Federated National, managing general agent services
through Assurance MGA, claims processing through its subsidiary, Superior
Adjusting Inc. and marketing and distribution through Company-owned agencies
(Federated Agency Group). The insurance segment sells primarily nonstandard
personal automobile insurance and includes substantially all aspects of the
insurance, distribution and claims process. The financing segment consists of
premium financing through Federated Premium Finance and consumer loans through
RPA Financial Corporation. The financing segment provides premium financing to
both Federated National's insureds and to third-party insureds and short-term
consumer loans and is marketed through the Company's distribution network of
Company-owned agencies (Federated Agency Group) and independent agents.
Operating segments that are not individually reportable are included in the "All
Other" category.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates its
business segments based on GAAP pretax operating earnings.
Corporate overhead expenses are not allocated to business segments.
Information regarding components of pre-income tax operations for the
three-month and nine-month periods ending September 30, 1999 and 1998 follows:
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THREE-MONTHS ENDED SEPTEMBER 30, NINE-MONTHS ENDED SEPTEMBER 30
TOTAL REVENUE 1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Insurance Segment
Earned Premiums $ 3,395,160 $ 3,596,427 $ 10,374,655 $ 10,274,128
Investment Income 252,574 247,576 1,198,279 1,142,764
Adjusting Income 222,252 230,825 684,247 667,949
MGA Fee Income 217,111 214,177 723,917 784,531
Commission Income 1,405,832 801,627 4,447,313 2,190,740
Miscellaneous Income 224,578 96,494 689,328 314,319
------------ ------------ ------------ ------------
Total Insurance Revenue 5,717,507 5,187,126 18,117,739 15,374,431
------------ ------------ ------------ ------------
Financing Segment:
Premium Finance Income 693,928 451,538 2,079,802 1,167,562
Interest and Fees on Loans 283,922 75,320 527,844 122,217
Investment Income 0 0 0 0
Miscellaneous Income 0 330 9.330 330
------------ ------------ ------------ ------------
Total Financing Revenues 977,850 527,188 2,616,976 1,290,109
------------ ------------ ------------ ------------
All Other
Total All Other 597,527 120,000 1,605,927 360,000
------------ ------------ ------------ ------------
Total Operating Segments 7,292,884 5,834,314 22,340,642 17,024,540
Intercompany Eliminations (1,063,611) (640,235) (3,467,609) (1,727,897)
------------ ------------ ------------ ------------
Total Revenues $ 6,229,273 $ 5,194,079 $ 18,873,033 $ 15,296,643
============ ============ ============ ============
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8
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21ST CENTURY HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(6) SEGMENT INFORMATION (CONTINUED)
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<CAPTION>
EARNINGS BEFORE INCOME TAXES
<S> <C> <C> <C> <C>
Insurance Segment (50,476) 880,236 1,690,170 2,375,201
Financing Segment 494,195 180,866 1,202,575 458,967
All Other (136,466) (121,778) (584,093) (350,288)
----------- ----------- ----------- -----------
Total Operating Segments 307,253 939,324 2,308,652 2,483,880
Intercompany Eliminations 31,275 (5) 36,757 (2,857)
----------- ----------- ----------- -----------
Total Earnings before Income Taxes $ 338,528 $ 939,319 $ 2,345,409 $ 2,481,023
=========== =========== =========== ===========
</TABLE>
Information regarding components of the balance sheets for September 30, 1999
and December 31, 1998:
<TABLE>
<CAPTION>
TOTAL ASSETS SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
Insurance Segment $ 25,303,615 $ 28,706,376
Financing Segment 9,604,032 7,076,524
All Others 4,752,631 4,523,632
------------ ------------
Total Operating Segments 39,660,278 40,306,532
Intercompany Eliminations (621,203) (2,130,129)
------------ ------------
TOTAL ASSETS $ 39,039,075 $ 38,176,403
============ ============
</TABLE>
(7) ORGANIZATION OF NEW BANK
In September 1999, the Company filed applications with the Office of Thrift
Supervision for approval to charter a new federal savings bank and to become a
savings and loan holding company. In October 1999, the Company filed with the
Federal Deposit Insurance Corporation for deposit insurance coverage. All such
applications remain pending as of the date of this report.
(8) PRIVATE PLACEMENT
The Company is seeking to raise between $5.0 to $10.0 million in a private
offering of subordinated convertible debt in an offering exempt from the
Securities Act of 1933. The actual terms of the debt will be negotiated and the
proceeds of the offering will be used to capitalize the Bank and other general
corporate purposes.
9
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
21st Century Holding Company (the "Company") cautions readers that
certain important factors may affect the Company's actual annual results and
could cause such results to differ materially from any forward-looking
statements which may be deemed to have been made in this report or which are
otherwise made by or on behalf of the Company. For this purpose, any statements
contained in this report that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the generality of the
foregoing, words such as "may", "will", "expect", "believe", "anticipate",
"intend", "could", "would", "estimate", or "continue" or the negative other
variations thereof or comparable terminology are intended to identify
forward-looking statements. Factors which may affect the Company's results
include, but are not limited to, risks related to the nature of the Company's
business; the limit on the Company's ability to manage growth; reinsurance
considerations; dependence on investment income; the adequacy of its liability
for loss and loss adjustment expense ("LAE"); regulation; insurance agents;
claims experience; limited experience in the insurance industry; insurance
industry competition; ratings by industry services; catastrophe losses; reliance
on key personnel; risks related to its proposed bank and other risks discussed
elsewhere in this Report and in the Company's other filings with the Securities
and Exchange Commission.
OVERVIEW
The Company, through its subsidiaries, is engaged in the insurance
underwriting, distribution and claims business. Federated National Insurance
Company ("Federated National"), the Company's insurance subsidiary, generates
revenues from the collection and investment of premiums. The Company's agency
operations generate income from policy fees, commissions, premium financing
referral fees, auto tag agency fees and the marketing of ancillary services.
Federated Premium Finance, Inc. ("Federated Premium") generates revenue from
premium financing provided to Company and third party insureds. Assurance
Managing General Agents, Inc. ("Assurance MGA"), the Company's managing general
agent, generates revenue through policy fee income and other administrative fees
from the marketing of third parties' insurance products through the Company's
distribution network.
The Company's business, results of operations and financial condition
are subject to fluctuations due to a variety of factors. Abnormally high
severity or frequency of claims in any period could have a material adverse
effect on the Company's business, results of operations and financial condition.
Also, if Federated National's estimated liabilities for unpaid losses and LAE is
less than actual losses and LAE, Federated National will be required to increase
reserves with a corresponding reduction in Federated National's net income in
the period in which a deficiency is identified. The Company operates in a highly
competitive market and faces competition from both national and regional
insurance companies, many of whom are larger and have greater financial and
other resources than the Company, have more favorable A.M. Best ratings and
offer more diversified insurance coverage. The Company's competitors include
other companies, which market their products through agents, as well as
companies, which sell insurance directly to customers.
Large national writers may have certain competitive advantages over
agency writers, including increased name recognition, increased loyalty of their
customer base and reduced acquisition costs. The Company may also face
competition from new or temporary entrants in its niche markets. In some cases,
such entrants may, because of inexperience, desire for new business or other
reasons, price their insurance products below that of the Company. Although the
Company's pricing is inevitably influenced to some degree by that of its
competitors, management of the Company believes that it is generally not in the
Company's best interest to compete solely on price, choosing instead to compete
on the basis of underwriting criteria, its distribution network and superior
service to its agents and insureds. The Company competes with respect to
automobile insurance in Florida with more than 100 companies, which underwrite
personal automobile insurance.
The Company is seeking to become a diversified financial services
company by offering other financial products and services including payday
advances, short-term consumer loans, as well as tax return preparation and
electronic filing and ancillary services. The Company also intends to
significantly expand the financial products and services it offers by
establishing a newly chartered federal savings bank, FedFirst Bank, FSB (the
"Bank"), which will be a wholly-owned subsidiary of the Company.
10
<PAGE>
FINANCIAL CONDITION
AS OF SEPTEMBER 30, 1999 AS COMPARED TO DECEMBER 31, 1998
Investments decreased $3.2 million to $14.5 million as of September 30, 1999 as
compared to $17.7 million as of December 31,1998. This decrease in investments
is because of a decline in market value of investments of approximately $1.0
million and payment of accrued taxes of $1.7 million.
Cash and cash equivalents were $1.9 million as of September 30, 1999, as
compared to $2.3 million as of December 31,1998. This decrease of $348,000 is
due primarily to payment of income taxes and the related reduction in accounts
payable and accrued expenses.
Finance contracts receivable and consumer loans receivable increased $1.6
million from $7.1 million at December 31, 1998 to $8.7 million at September 30,
1999. This increase is due to the continued development and emphasis on this
product.
Prepaid reinsurance premiums were $2.8 million as of September 30, 1999 as
compared to $2.6 million as of December 31,1998, an increase of $177,000. The
increase is the result of more efficient processing of insurance policies and,
consequently, the faster ceding of premiums to reinsurance companies.
At September 30, 1999, the Company had $1.2 million in premiums receivable
compared to none at December 31, 1998. Prior to 1999, the Company did not write
policies unless the premium was paid in cash. Beginning in 1999, the Company
revised its policy and began billing premiums for certain customers.
Due from reinsurers decreased $389,000 to $1.5 million as of September 30, 1999
from $1.9 million as of December 31,1998. This decrease is the result of the
Company's effort to process insurance policies more quickly and, consequently,
the faster ceding of policies to reinsurance companies and quicker collection
from reinsurers.
The increase of $483,000 in the deferred income taxes from $1.1 million as of
December 31, 1998 to $1.6 million as of September 30, 1999 is due primarily to
the deferred tax asset associated with the unrealized loss on investments
available for sale.
The increase in property, plant and equipment of $759,000 to $2.5 million as of
September 30, 1999 from $1.8 million as of December 31, 1998 is due primarily to
the purchase of two office properties for $605,000.
Goodwill increased to $3.5 million as of September 30, 1999 from $2.7 million as
of December 31, 1998 due to the purchase of 7 agencies and Express Insurance and
Tax Services, Inc.
Unpaid losses and LAE decreased $1.5 million from $7.6 million as of December
31, 1998 to $6.1 million as of September 30, 1999 due primarily to an
improvement in loss experience in 1999 as well as an effort by the Company to
expedite the processing of claims.
Unearned premiums increased $351,000 to $8.9 million as of September 30, 1999
from $8.5 million as of December 31, 1998. This increase is the result of the
Company's effort to process insurance policies more quickly.
The outstanding borrowings under the Company's Credit Facility (the "Credit
Facility") increased $2.5 million to $4.6 million as of September 30, 1999 from
$2.1 million as of December 31, 1998 primarily to fund the increase of $1.6
million in finance contracts receivables and consumer loans receivable. In
addition, approximately $1.2 million was used to reduce an intercompany note to
Federated National, which in turn was used to reduce accounts payable and
accrued expenses.
Accounts payable and accrued expenses declined $1.5 million from $1.9 million as
of December 31, 1998 to $373,000 as of September 30, 1999 due primarily to the
payment of 1998 income taxes of $1.7 million.
Accumulated other comprehensive deficit increased $891,000 to $1.1 million as of
September 30, 1999 from $257,000 as of December 31, 1998 primarily because the
loss on the available for sale investment portfolio increased $1.3 million. The
increase in the loss on the available for sale investment portfolio was
principally due to the recent increases in interest rates.
11
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
Net income per share and net income per share assuming dilution decreased from
$.28 for the quarter ended September 30, 1998 to $.07 for the third quarter of
1999. Net income, as discussed below, decreased $348,000, and the weighted
average number common shares outstanding increased from 2.1 million during the
third quarter of 1998 to 3.4 million during the third quarter of 1999 due
primarily to the issuance of 1,250,000 shares in an initial public offering (the
"IPO") completed in November 1998.
Net income decreased $348,000, or 59.6%, from $584,000 for the three months
ended September 30, 1998, to $236,000 for the three months ended September
30,1999. This decrease resulted from an increase in total expenses of $1.6
million, which was partially offset by an increase in total revenue of $1.0
million and a decrease in income taxes of $252,000. The increase in total
expenses, as well as, the increase in total revenue are primarily the result of
an increase in Company owned agencies from 15 in the third quarter of 1998 to 38
in the third quarter of 1999. The increase in revenue and expenses is discussed
in more detail below.
Total revenue increased $1.0 million, or 19.2%, from $5.2 million for the
quarter ended September 30,1998 to $6.2 million for the quarter ended September
30,1999. This increase is primarily due to increases in commission income of
$662,000 and finance revenue of $431,000, net realized gains of $105,000, and
other income of $119,000, partially offset by a decrease in net premiums earned
of $201,000 and investment income of $81,000
Net premiums earned decreased 5.6% to $3.4 million for the three-month period
ended September 30, 1999 from $3.6 million for the same period in 1998. Despite
the increase in the number of Company owned agencies, net premiums written
declined mainly because the Company, in order to remain profitable, maintained
its price structure in a highly competitive market with decreasing prices.
Commission income increased 129.3% to $1.2 million for the three-month period
ended September 30, 1999 from $512,000 for the same period in 1998. Commission
income consists of fees earned by the Company-owned agencies placing business
with third party insurers and third party premium finance companies. The
increase is attributable to the increase in Company-owned agencies. During the
last quarter of 1998, the Company acquired 18 agencies, two agencies were
acquired during the first quarter of 1999 and five agencies were acquired during
the second quarter of 1999. (Two of the purchased agencies were consolidated
with existing agencies).
Finance revenues increased 81.8% to $958,000 for the three-month period ended
September 30, 1999 from approximately $527,000 for the same period in 1998. The
increase was attributable to an increase in the number of premium contracts
financed by Federated Premium.
Net investment income decreased 30.6% to $184,000 for the three-month period
ended September 30, 1999 from $265,000 for the same period in 1998 due to a
decline in investments as well as overall lower interest rates on investments
held during the period.
Other income increased 38.3% to $430,000 for the three-month period ended
September 30, 1999 from $311,000 for the same period in 1998. Other income is
comprised mainly of the managing general agent's policy fee income on all new
and renewal insurance policies, income tax preparation, and revenue on auto tag
products.
Total expenses increased $1.6 million, or 37.2%, from $4.3 million for the
three-month period ended September 30, 1998 to $5.9 million for three-month
period ended September 30, 1999. This increase is primarily due to increases in
operating and underwriting expenses of $703,000, salaries and wages of $893,000,
amortization of goodwill of $79,000 and amortization of deferred acquisition
costs of $135,000 partially offset by decreases in losses and LAE of $173,000.
The Company's loss ratio, for the three-month period ended September 30, 1999
was 60.9% compared with 62.4% for the same period in 1998. Losses and LAE
incurred decreased 7.7% to $2.1 million for the three-month period ended
September 30, 1999 from $2.2 million for the same period in 1998. Losses and
LAE, the Company's most significant expense, represent actual payments made and
changes in estimated future payments to be made to or on behalf of its
policyholders, including expenses required to settle claims and losses. Losses
and LAE are influenced by loss severity and frequency. The decrease in the loss
ratio is attributable to the increase in Company-owned agencies, which
historically have produced a lower loss ratio. In addition, the loss ratio in
the three-month period ended September 30, 1999 reflects a reduction of the
incurred loss and LAE in the amount of $132,000 relating to prior periods. This
reduction is principally the result of the Company's efforts to settle claims
more quickly and better than anticipated results on settled claims.
12
<PAGE>
Operating and underwriting expenses increased 70.0% to $1.7 million for the
three-month period ended September 30, 1999 from $1.0 million for the same
period in 1998. The increase is due to the increase in Company-owned agencies
from 15 during the third quarter of 1998, to 38 in the third quarter of 1999.
Salaries and wages increased 97.3% to $1.9 million for the three-month period
ended September 30, 1999 from $963,000 for the same period in 1998, the increase
is due to the increase in Company-owned agencies.
Amortization of deferred policy acquisition costs increased to $123,000 for the
three-month period ended September 30, 1999 from ($11,416) for the same period
in 1998. Amortization of deferred policy acquisition costs consists of the
actual amortization of deferred policy acquisition costs less commissions earned
on reinsurance ceded. This increase is due to a decrease in premiums written by
independent agencies.
The decrease in income tax expense is due to the decrease in pretax income.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
Net income per share and net income per share assuming dilution decreased from
$.74 for the nine-month period ended September 30, 1998 to $.46 for the
nine-month period ended September 30, 1999. Net income, as discussed below, was
relatively stable, but net income per share was reduced by an increase in the
weighted average number common shares outstanding during 1999 due primarily to
the issuance of 1,250,000 shares in the IPO in November 1998.
Net income was $1,559,000 for the nine-month period ended September 30, 1999,
compared to $1,548,000 for the nine- months ended September 30, 1998. Total
revenues and total expenses increased by $3.6 million and $3.7 million,
respectively. The increase in total revenues and the increase in total expenses
are primarily the result of an increase in Company owned agencies from 15 as of
September 30, 1998 to 38 at September 30, 1999. The increase in revenue and
expenses is discussed in more detail below.
Total revenue increased $3.6 million, or 23.5%, from $15.3 million for the
nine-month period ended September 30,1998 to $18.9 million for the nine-month
period ended September 30, 1999. This increase is primarily due to increases in
commission income of $1.7 million, finance revenue of $1.3 million, net realized
gains of $195,000 and other income of $357,000.
Net premiums earned were comparable for the nine-month periods ended September
30, 1999 and 1998. While the Company had more Company owned agencies and was
offering mobile home policies, premiums earned did not increase because the
company chose not to lower premiums in order to maintain its margin, in a highly
competitive market with declining prices.
Commission income increased 113.3% to $3.2 million for the nine-month period
ended September 30, 1999 from $1.5 million for the same period in 1998.
Commission income consists of fees earned by the Company-owned agencies placing
business with third party insurers and third party premium finance companies.
The increase is attributable to the increase in Company-owned agencies.
Finance revenues increased 100% to $2.6 million for the nine-month period ended
September 30, 1999 from approximately $1.3 million for the same period in 1998.
The increase was attributable to an increase in the number of premium contracts
financed by Federated Premium.
Net investment income decreased 14.9% to $656,000 for the nine-month period
ended September 30, 1999 from $771,000 for the same period in 1998 due primarily
to a decrease in investments. The Company experienced net realized gains of
$567,000 for the nine-month period ended September 30, 1999 compared to realized
gains of $372,000 for the same period in 1998.
Other income increased 36.4% to $1.5 million for the nine-month period ended
September 30, 1999 from $1.1 million for the same period in 1998. Other income
is comprised mainly of the managing general agent's policy fee income on all new
and renewal insurance policies, income tax preparation, and revenue on auto tag
products. Income tax preparation was implemented during 1999. Total income
derived under this product during the nine-month period of 1999 was $172,000.
Total expenses increased $3.7 million, or 28.9%, from $12.8 million for the
nine-month period ended September 30, 1998 to $16.5 million for nine-month
period ended September 30, 1999. This increase is primarily due to increases in
operating and underwriting expenses of $1.8 million, salaries and wages of $2.8
million and amortization of goodwill of $227,000 partially offset by decreases
in losses and LAE of $1.0 million and amortization of deferred acquisition costs
of $112,000. Following is a more detail discussion of these increases and
decreases in expenses.
13
<PAGE>
The Company's loss ratio for the nine-month period ended September 30, 1999 was
57.6% compared with 67.4% for the same period in 1998. Losses and LAE incurred
decreased 13.0% to $6.0 million for the nine-month period ended September 30,
1999 from $6.9 million for the same period in 1998. Losses and LAE, the
Company's most significant expense, represent actual payments made and changes
in estimated future payments to be made to or on behalf of its policyholders,
including expenses required to settle claims and losses. Losses and LAE are
influenced by loss severity and frequency. The automobile program experienced a
decrease in the loss ratio, caused mainly by the increase in policies sold by
Company-owned agencies, which historically has experienced a lower loss ratio.
In addition, the loss ratio reflects a reduction of the incurred loss and LAE
expense $834,000 relating to prior years. This reduction is principally the
result of the Company's effort to settle claims more quickly and better than
anticipated results on settled claims.
Operating and underwriting expenses increased 58.1% to $4.9 million for the
nine-month period ended September 30, 1999 from $3.1 million for the same period
in 1998. The increase is due to the increase in Company-owned agencies from 15
during the 1998 to 38 in 1999. During the last quarter of 1998 and first and
second quarter of 1999, the Company acquired a total of 23 agencies.
Salaries and wages increased 103.9% to $5.3 million for the nine months ended
September 30, 1999 from $2.6 million for the same period in 1998, primarily due
to the increase in Company-owned agencies.
Amortization of deferred policy acquisition costs decreased to a credit of
$83,000 for the nine-month period ended September 30, 1999 from $29,000 for the
same period in 1998. Amortization of deferred policy acquisition costs consists
of the actual amortization of deferred policy acquisition costs less commissions
earned on reinsurance ceded. The decrease is due to a decrease in premiums
written by independent agencies.
The Company's estimated effective income tax rate was 33.5% for the nine months
ended September 30, 1999 compared to 37.6% for the same period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of capital are revenues generated from
operations, the net proceeds of the IPO, investment income and borrowings under
the Credit Facility. Because the Company is a holding company, it is largely
dependent upon dividends from its subsidiaries for cash flow. Federated National
is restricted under the Florida Statutes as to the amount of dividends it can
declare and pay. The maximum amount of dividends that Federated National is
allowed to pay, without approval of the State of Florida Department of Insurance
is $1.4 million for the year ended December 31, 1999.
In November 1998, the Company generated net proceeds of approximately
$7.9 million from the IPO in which it sold 1,250,000 shares of Common Stock at a
price of $7.50 per share. The net proceeds of the IPO were used for
contributions to Federated National's capital, repayment of debt under the
Credit Facility, the finance of acquisitions and working capital and other
general corporate purposes.
The Company is seeking to raise between $5.0 to $10.0 million in a
private offering of subordinated convertible debt in an offering exempt from the
Securities Act of 1933. The actual terms of the debt will be negotiated and the
proceeds of the offering will be used to capitalize the Bank and other general
corporate purposes.
Federated Premium is a party to the Credit Facility, which is used to
fund its operations. Each advance is subject to availability under a borrowing
base calculation based upon a percentage of eligible accounts receivable, with
maximum advances outstanding not to exceed the maximum credit commitment which
is currently $5.0 million, increased from $4.0 million pursuant to a
modification effective January 25, 1999. The outstanding balance of the Credit
Facility as of September 30, 1999 was $4.6 million. The annual interest rate on
borrowings under the Credit Facility is currently the prime rate plus .75%,
decreased from the prime rate plus 1.75% due to the January 1999 modification.
The Credit Facility contains various operating and financial covenants and is
collateralized by a first lien and assignment of all of Federated Premium's
finance contracts receivable. Federated Premium was in compliance with all
covenants under the Credit Facility as of September 30, 1999. The Credit
Facility expires on September 30, 2000 at which time management intends to
negotiate a new agreement.
In October 1996, Federated National purchased land in Plantation,
Florida to construct a headquarters building. In August 1998, the building was
completed and the Company consolidated its executive offices and administrative
operations in the building, which consists of approximately 14,000 square feet.
The cost of the project was approximately $1.4 million.
14
<PAGE>
To retain its certificate of authority, the Florida insurance laws and
regulations require that Federated National maintain capital surplus equal to
the greater of 10.0% of its liabilities or the 1998 statutory minimum capital
and surplus requirement of $2.25 million as defined in the Florida Insurance
Code. The Company is also required to adhere to prescribed premium-to-capital
surplus ratios. The Company is in compliance with these requirements.
The Company is party to a consent order with the Florida Department of
Insurance which limits the amount of premiums the Company can underwrite in 1998
and 1999.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related data presented herein
have been prepared in accordance with GAAP which requires the measurement of
financial position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money over time due to
inflation. The primary assets and liabilities of the Company are monetary in
nature. As a result, interest rates have a more significant impact on the
Company's performance than the effects of the general levels of inflation.
Interest rates do not necessarily move in the same direction or with the same
magnitude as the cost of paying losses and LAE.
Insurance premiums are established before the Company knows the amount
of loss and LAE and the extent to which inflation may affect such expenses.
Consequently, the Company attempts to anticipate the future impact of inflation
when establishing rate levels. While the Company attempts to charge adequate
rates, the Company may be limited in raising its premium levels for competitive
and regulatory reasons. Inflation also affects the market value of the Company's
investment portfolio and the investment rate of return. Any future economic
changes which result in prolonged and increasing levels of inflation could cause
increases in the dollar amount of incurred loss and LAE and thereby materially
adversely affect future liability requirements.
YEAR 2000 MATTERS
In 1996, the Company began converting its computer systems to be year
2000 compliant. The Company has evaluated its internal systems, both hardware
and software, facilities, and interactions with business partners in relation to
year 2000 issues. As of September 30, 1999, the Company believes that it has
completed its efforts to bring the systems in compliance. The total cost
incurred during the year ended December 31, 1998 and quarter ended September 30,
1999 to modify these existing systems, which include both internal and external
costs of programming, coding and testing, was not material. The Company
continually evaluates computer hardware and software upgrades and, therefore,
many of the costs to replace existing items with year 2000 compliant upgrades
are not likely to be incremental costs to the Company. During 1999, the Company
continues to contact its business partners (including agents, banks, motor
vehicle departments and rating agencies) to determine the status of their
compliance and to assess the impact of noncompliance on the Company. The Company
believes that it is taking the necessary measures to mitigate issues that may
arise relating to the year 2000. To the extent that any additional issues arise,
the Company will evaluate the impact on its business, results of operations and
financial condition and, if material, make the necessary disclosures and take
appropriate remedial action.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1
LEGAL PROCEEDINGS
None.
ITEM 2
CHANGES IN SECURITIES
(a) Changes in Securities
In August 1999, the Company purchased 80% of Express Tax and Insurance
Service, Inc., a licensor of tax return preparation software, for $100,000 cash
and 20,000 shares of common stock for a total consideration of $230,000. These
shares of common stock were all issued without registration under the Securities
Act of 1933, as amended, by reason of the exemption from registration afforded
by the provisions of Section 4(2) thereof, as transactions by an issuer not
involving a public offering, each recipient of shares having delivered
appropriate investment representations to the Company with respect thereto and
having consented to the imposition of restrictive legends upon the certificates
evidencing such shares.
ITEM 3
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5
OTHER INFORMATION
None.
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: Financial Data Schedule: Ex. 27
(b) None
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
21ST CENTURY HOLDING COMPANY
DATE: NOVEMBER 15, 1999 BY: /S/ SAMUEL A. MILNE
-----------------------
Title: Chief Financial Officer
17
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
18
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<DEBT-HELD-FOR-SALE> 13,055,011
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 1,323,264
<MORTGAGE> 120,000
<REAL-ESTATE> 0
<TOTAL-INVEST> 14,498,275
<CASH> 1,901,784
<RECOVER-REINSURE> 1,537,852
<DEFERRED-ACQUISITION> 107,725
<TOTAL-ASSETS> 39,039,075
<POLICY-LOSSES> 6,146,977
<UNEARNED-PREMIUMS> 8,885,760
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 163,573
<NOTES-PAYABLE> 563,629
0
0
<COMMON> 33,700
<OTHER-SE> 15,817,330
<TOTAL-LIABILITY-AND-EQUITY> 39,039,075
10,374,655
<INVESTMENT-INCOME> 656,107
<INVESTMENT-GAINS> 566,805
<OTHER-INCOME> 1,456,507
<BENEFITS> 5,970,362
<UNDERWRITING-AMORTIZATION> (82,709)
<UNDERWRITING-OTHER> 4,909,764
<INCOME-PRETAX> 2,345,409
<INCOME-TAX> 786,659
<INCOME-CONTINUING> 1,558,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,558,751
<EPS-BASIC> 0.46
<EPS-DILUTED> 0.46
<RESERVE-OPEN> 7,603,460
<PROVISION-CURRENT> 9,766,927
<PROVISION-PRIOR> (1,140,214)
<PAYMENTS-CURRENT> 5,698,386
<PAYMENTS-PRIOR> 4,384,811
<RESERVE-CLOSE> 6,146,977
<CUMULATIVE-DEFICIENCY> (834,000)
</TABLE>
