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 JUNE 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 - 3,350,000 SHARES OUTSTANDING AS OF
AUGUST 10, 1999.
<PAGE>
21ST CENTURY HOLDING COMPANY
INDEX
PART I: FINANCIAL INFORMATION PAGE
----
ITEM 1:
Consolidated Balance Sheets
as of June 30, 1999
and December 31, 1998 (Unaudited).................................... 3
Consolidated Statements of Income
for the three and six months ended June 30, 1999
and 1998 (Unaudited)................................................. 4
Consolidated Cash Flow Statements
for the six months ended June 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................................................................. 18
2
<PAGE>
PART I
ITEM I. FINANCIAL INFORMATION
21ST CENTURY HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER
31,1998
ASSETS
<S> <C> <C>
Investments
Fixed maturities, available for sale, at fair value $14,836,884 $14,605,582
Equity securities 2,611,425 2,936,520
Mortgage loan 0 163,164
-----------
Total investments 17,448,309 17,705,266
----------- -----------
Cash and cash equivalents 797,008 2,250,061
Finance contracts receivable and auto title loans receivable, net of
allowances for credit losses of $140,000 and $195,000, respectively 8,447,564 7,093,593
Prepaid reinsurance premiums 3,169,288 2,648,098
Premiums receivable 1,156,565 0
Due from reinsurers 1,497,672 1,926,736
Deferred acquisition costs, net 162,221 89,524
Deferred income taxes 1,444,210 1,085,255
Property, plant and equipment, net 2,431,010 1,763,254
Other assets 1,230,158 866,335
Goodwill, net 3,380,886 2,748,281
--------- -----------
TOTAL ASSETS $41,164,891 $38,176,403
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses $6,451,008 $7,603,460
Unearned premiums 10,149,368 8,534,320
Premium deposits 237,147 492,422
Revolving credit outstanding 4,539,625 2,062,948
Bank overdraft 1,548,579 1,199,941
Unearned commissions 753,061 586,592
Accounts payable and accrued expenses 694,952 1,932,950
Notes payable 675,000 500,000
Drafts payable to insurance companies 4,587 295,947
----------- -----------
TOTAL LIABILITIES $25,053,327 $23,208,580
=========== ===========
Shareholders' equity:
Common stock of $.01 par value. Authorized 25,000,000 shares,
issued and outstanding 3,390,000 and 3,350,000 shares,
respectively 33,900 33,500
Additional paid in capital 12,744,887 12,460,287
Accumulated other comprehensive deficit (721,101) (257,227)
Retained earnings 4,053,878 2,731,263
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 16,111,564 14,967,823
---------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $41,164,891 $38,176,403
=========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
3
<PAGE>
21ST CENTURY HOLDING COMPANY
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1999 1998 1999 1998
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues:
Gross premiums written $ 5,776,332 $ 6,060,618 $ 11,837,795 $ 12,169,337
Gross premiums ceded (1,799,955) (2,058,648) (3,715,335) (3,772,747)
------------ ------------ ------------ ------------
Net premiums written 3,976,377 4,001,970 8,122,460 8,396,590
Increase in unearned premiums, net
of prepaid reinsurance premiums (410,831) (953,255) (1,142,965) (1,718,889)
------------ ------------ ------------ ------------
Net premiums earned 3,565,546 3,048,715 6,979.495 6,677,701
Commission income 1,148,891 574,453 2,054,497 978,575
Finance revenue 837,100 473,690 1,631,922 762,824
Net investment income 244,104 203,042 471,989 505,647
Net realized gains 306,032 71,012 479,098 389,541
Other income 513,075 416,379 1,026,759 788,276
------------ ------------ ------------ ------------
Total revenue 6,614,748 4,787,291 12,643,760 10,102,564
------------ ------------ ------------ ------------
Expenses:
Losses and loss adjustment expenses 1,963,810 2,213,740 3,901,339 4,681,226
Operating and underwriting expenses 1,737,850 1,136,818 3,199,269 2,105,963
Salaries and wages 1,874,374 795,176 3,488,209 1,626,969
Amortization of deferred acquisition costs, net (132,748) (9,852)
(206,005) 40,423
Amortization of goodwill 129,592 55,108 254,065 106,279
------------ ------------ ------------ ------------
Total expenses 5,572,878 4,190,990 10,636,877 8,560,860
------------ ------------ ------------ ------------
Income before provision for income
tax expense 1,041,870 596,301 2,006,883 1,541,704
Provision for income tax expense 328,980 223,613 684,268 578,139
------------ ------------ ------------ ------------
Net income $ 712,890 $ 372,688 $ 1,322,615 $ 963,565
============ ============ ============ ============
Net income per share $ 0.21 $ 0.18 $ 0.39 $ 0.46
============ ============ ============ ============
Net income per share-
assuming dilution $ 0.21 $ 0.18 $ 0.39 $ 0.46
============ ============ ============ ============
Weighted average number of common shares outstanding 3,390,000 2,100,000 3,390,000 2,100,000
Weighted average number of common shares outstanding 3,390,000 2,100,000 3,390,000 2,100,000
(assuming dilution)
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
4
<PAGE>
21ST CENTURY HOLDING COMPANY
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 1998
(Restated)
<S> <C> <C>
Cash flow from operating activities:
Net income $ 1,322,615 $ 963,565
Adjustments to reconcile net income to net cash flow used in operating
activities:
Amortization of investment premium 8,184 6,300
Depreciation and amortization of property, plant and equipment 59,878 9,926
Amortization of goodwill 254,065 106,279
Deferred income tax expense (109,177) (481,630)
Gain on sale of investment securities (479,098) (389,541)
Provision for credit losses 223,957 2,590
Changes in operating assets and liabilities:
Finance contracts receivable and auto title loans receivable (1,353,971) (2,601,726)
Prepaid reinsurance premiums (521,190) (881,505)
Premiums receivable (1,156,565) 0
Due from reinsurers 429,064 22,152
Deferred acquisition costs (72,697) (113,117)
Other assets (363,823) (453,350)
Unpaid loss and loss adjustment expenses (1,152,452) 896,685
Unearned premiums 1,615,048 2,600,394
Premium deposits (255,275) (1,201,832)
Unearned commissions 166,469 (41,481)
Accounts payable and accrued expenses (1,237,998) 1,292,636
Drafts payable to insurance companies (291,360) 35,457
------------ ------------
Net cash flow used in operating activities (2,914,326) (228,198)
------------ ------------
Cash flow from investing activities:
Proceeds from sale of investment securities available for sale 16,451,359 28,673,773
Purchases of investment securities available for sale (16,835,380) (30,764,738)
Repayment of mortgage loan 163,164 103,150
Purchases of property and equipment (727,634) (715,501)
Acquisition of agencies (290,551) (198,000)
------------ ------------
Net cash flow used in investing activities (1,239,042) (2,901,316)
------------ ------------
Cash flows from financing activities
Bank overdraft 348,638 788,743
Revolving credit advances 2,476,677 2,256,713
Repayment of indebtedness (125,000) (183,625)
------------ ------------
Net cash flow provided by financing activities 2,700,315 2,861,831
------------ ------------
Net increase (decrease) in cash & cash equivalents (1,453,053) (267,683)
Cash & cash equivalents at beginning of period 2,250,061 1,684,451
------------ ------------
Cash & cash equivalents at end of period $ 797,008 $ 1,416,768
============ ============
Supplemental disclosure of cash flow information:
Non-Cash investing activities:
Shares issued for agency acquisition $ 280,000 0
============ ============
Note payable issued for agency acquisition $ 300,000 0
============ ============
Cash paid during the period for:
Interest $ 150,230 143,224
============ ============
Income taxes $ 1,660,550 0
============ ============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
5
<PAGE>
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 six-month period ended June 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.
6
<PAGE>
21ST CENTURY HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES--(CONTINUED)
(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 gains
(losses) on debt investments available for sale and equity investments was
($463,874) and ($233,332) for six months ended June 30, 1999 and 1998,
respectively. Total comprehensive income was $858,741 and $730,233 for the six
months ended June 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 financial statements as of June 30, 1998 and for the six
months then ended have been restated from the amounts reported in the SB-2
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:
June 30, 1998
(Unaudited)
As Reported
In SB-2 Filing As Restated
BALANCE SHEET:
Deferred acquisition costs $1,110,827 274,051
Deferred income taxes $1,016,645 1,330,418
Retained earnings $2,388,827 1,865,824
7
<PAGE>
21ST CENTURY HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(3) RESTATEMENT (CONTINUED)
Six Months Ended
June 30, 1998
(Unaudited)
As Reported
STATEMENT OF INCOME: In SB-2 Filing As Restated
Amortization of deferred
acquisition costs ($ 196,868) 40,423
Provision for income
taxes $ 667,257 578,139
Net income $ 1,111,738 963,565
Net income per share $ 0.53 $ 0.46
(4) REVOLVING CREDIT OUTSTANDING
In September 1997, the Company, through 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 Superior Adjusting and
marketing and distribution through 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 auto title loans through Florida State Discount Auto Title Loans.
The financing segment provides premium financing to both Federated National's
insureds and to third-party insureds and short-term auto title loans and is
marketed through the Company's distribution network of Company-owned agencies
(Federated Agency Group) and independent agents.
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.
Operating segments that are not individually reportable are included in
the "All Other" category, which includes the operations of 21st Century (holding
company).
8
<PAGE>
21ST CENTURY HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(6) SEGMENT INFORMATION (CONTINUED)
Information regarding components of pre-income tax operations for the
three-month and six-month periods ending June 30, 1999 and 1998 follows:
<TABLE>
<CAPTION>
Three-Months Ended Six-Months Ended
Total Revenue June 1999 June 1998 June 1999 June 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Insurance Segment
Earned Premiums $ 3,565,546 $ 3,048,715 $ 6,979,49 $ 6,677,701
Investment Income 519,800 274,054 945,705 895,188
Adjusting Income 234,950 222,237 461,995 437,124
MGA Fee Income 256,129 304,554 506,806 570,354
Commission Income 1,595,928 664,609 3,041,481 1,389,113
Miscellaneous Income 221,241 193,261 464,749 217,825
------------ ------------ ------------ ------------
Total Insurance Revenue 6,393,594 4,707,430 12,400,231 10,187,305
------------ ------------ ------------ ------------
Financing Segment:
Premium Finance Income 700,302 426,890 1,385,874 716,024
Title Loan Interest 134,672 46,897 243,922 46,897
Investment Income 0 0 0 0
Miscellaneous Income 0 0 9.330 0
------------ ------------ ------------ ------------
Total Financing Revenues 834,974 473,787 1,639,126 762,921
------------ ------------ ------------ ------------
All Other
Total All Other 599,311 147,000 1,008,400 240,000
----------- ------------ ------------ ------------
Total Operating Segments 7,827,879 5,328,217 15,047,757 11,190,226
Intercompany Eliminations (1,213,131) (540,926) (2,403,997) (1,087,662)
------------ ------------ ------------ ------------
Total Revenues $ 6,614,748 $ 4,787,291 $ 12,643,760 $ 10,102,564
============ ============ ============ =============
Earnings Before Income Taxes
Insurance Segment 834,910 557,175 1,740,647 1,494,965
Financing Segment 393,579 166,664 708,380 278,101
All Other (184,995) (124,684) (447,628) (228,509)
------------ ------------ ------------ ------------
Total Operating Segments 1,043,494 599,155 2,001,399 1,544,557
Intercompany Eliminations (1,624) (2,854) 5,484 (2,853)
------------ ------------ ------------ -------------
Total Earnings before Income Taxes $ 1,041,870 $ 596,301 $ 2,006,883 $ 1,541,704
============ ============ ============ =============
Information regarding components of the balance
sheets for June 30, 1999 and December 31, 1998:
Total Assets June 30, 1999 December 31, 1998
------------ ------------
Insurance Segment $ 28,233,229 $ 28,706,376
Financing Segment 8,801,303 7,076,524
All Others 6,377,408 4,523,632
------------ ------------
Total Operating Segments 43,411,940 40,306,532
Intercompany Eliminations (2,247,049) (2,130,129)
------------ ------------
Total Assets $ 41,164,891 $ 38,176,403
============ ============
</TABLE>
(7) ORGANIZATION OF NEW BANK
In June 1999, the Company's board of directors approved the organization of a
new wholly-owned bank. The Company's management intends to file an application
with the Office of Thrift Supervision for approval.
(8) SUBSEQUENT EVENTS
In July 1999, the Company repurchased 40,000 shares of its outstanding common
stock for $200,000.
9
<PAGE>
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 expand due to a consent order
entered into with the Florida Department of Insurance; reinsurance; 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; competition; ratings by industry services;
catastrophe losses; reliance on key personnel 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.
10
<PAGE>
FINANCIAL CONDITION
AS OF JUNE 30, 1999 AS COMPARED TO DECEMBER 31, 1998
Cash and cash equivalents were $797,000 as of June 30, 1999, as compared to $2.3
million as of December 31,1998. This decrease of $1.5 million is due primarily
to payment of income taxes and the related reduction in accounts payable and
accrued expenses.
Finance contracts receivable and auto title loans receivable increased $1.3
million from $7.1 million at December 31, 1998 to $8.4 million at June 30, 1999.
This increase is due to the continued development and emphasis on this product.
Prepaid reinsurance premiums were $3.2 million as of June 30, 1999 as compared
to $2.6 million as of December 31,1998, an increase of $600,000. The increase is
the result of more efficient processing of insurance policies and, consequently,
the faster ceding of policies to reinsurance companies.
At June 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 $400,000 to $1.5 million as of June 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 $359,000 in the deferred income taxes from $1.1 million as of
December 31, 1998 to $1.4 million as of June 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 $668,000 to $2.4 million as of
June 30, 1999 from $1.8 million as of December 31, 1998 is due primarily to the
purchase of two office properties for $605,000.
Other assets increased $364,000 from $866,000 as of December 31,1998 to $1.2
million as of June 30,1999 due to an increase in receivables from the retail
customers of the Company owned agencies.
Unpaid losses and LAE decreased $1.1 million from $7.6 million as of December
31, 1998 to $6.5 million as of June 30, 1999 due primarily to a decrease in loss
experience from 65.4% in 1998 to 55.9% in 1999 as well as an effort by the
Company to expedite claims.
Unearned premiums increased $1.6 million to $10.1 million as of June 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 $2.4 million to $4.5 million as of June 30, 1999 from $2.1
million as of December 31, 1998 primarily to fund the increase of $1.3 million
in finance contracts receivables and auto title loans receivable. In addition,
approximately $300,000 was used to reduce drafts payable to insurance companies
and approximately $500,000 was used to reduce an intercompany note to Federated
National which in turn was used to expedite claim payments.
Bank overdraft increased $349,000 from $1.2 million as of December 31,1998 to
$1.5 million as June 30, 1999 due primarily to an increase in claim and refund
checks outstanding.
Accounts payable and accrued expenses declined $1.2 million from $1.9 million as
of December 31, 1998 to $700,000 as of June 30, 1999 due primarily to the
payment of 1998 income taxes of $1.7 million.
Accumulated other comprehensive deficit increased $464,000 to $721,000 as of
June 30, 1999 from $257,000 as of December 31, 1998 primarily because the loss
on the available for sale investment portfolio increased $714,000. The increase
in the loss on the available for sale investment portfolio was principally due
to the recent increase in interest rates.
11
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Net income per share and net income per share assuming dilution increased from
$.18 for the quarter ended June 30, 1998 to $.21 for the second quarter of 1999.
Net income, as discussed below, increased $340,000, but net income per share was
reduced by an increase in the weighted average number common shares outstanding
during the second quarter of 1999 due primarily to the issuance of 1,250,000
shares in an initial public offering (the "IPO") completed November 1998 and the
issuance of 40,000 shares related to a January 1999 acquisition.
Net income increased $340,000, or 91.2%, from $373,000 for the three months
ended June 30, 1998, to $713,000 for the three months ended June 30,1999. This
increase was driven by an increase in total revenue of $1.8 million, which was
partially offset by an increase in total expenses of $1.4 million and income
taxes of $105,000. The increase in total revenues and the increase in total
expenses are primarily the result of an increase in Company owned agencies from
15 in the second quarter of 1998 to 38 in the second quarter of 1999. Below is
more detailed discussion of these increases.
Total revenue increased $1.8 million, or 37.5%, from $4.8 million for the
quarter ended June 30,1998 to $6.6 million for the quarter ended June 30,1999.
This increase is primarily due to increases in net premiums earned of $517,000,
commission income of $574,000, finance revenue of $363,000, investment income of
$276,000 and other income of $97,000.
Net premiums earned increased 20.0% to $3.6 million for the three-month period
ended June 30, 1999 from $3.0 million for the same period in 1998, mainly due to
an increase in mobile home written premiums.
Commission income increased 91.6% to $1.1 million for the three-month period
ended June 30, 1999 from $574,000 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 (one of which was consolidated with an
existing agency), two agencies were acquired during the first quarter of 1999
and three agencies were acquired during the second quarter of 1999. The increase
in company-owned agencies had an impact in the total operating expenses during
the second quarter of 1999 compared to the second quarter of 1998.
Finance revenues increased 76.6% to $837,000 for the three-month period ended
June 30, 1999 from approximately $474,000 for the same period in 1998. The
increase was attributable to an increase in the number of premium contracts
financed by Federated Premium.
Investment income increased 20.2% to $244,000 for the three-month period ended
June 30, 1999 from $203,000 for the same period in 1998. The Company experienced
realized gains on the sale of investments in the amount of $306,000 for the
three-month period ended June 30, 1999 compared to realized gains of $71,000 for
the same period in 1998.
Other income increased 23.3% to $513,000 for the three-month period ended June
30, 1999 from $416,000 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.
Income tax preparation was implemented during 1999. Total income derived under
this product during the three-month period ended June 30, 1999 was $24,000.
Total expenses increased $1.4 million, or 33.3%, from $4.2 million for the
three-month period ended June 30, 1998 to $5.6 million for three-month period
ended June 30, 1999. This increase is primarily due to increases in operating
and underwriting expenses of $601,000, salaries and wages of $1,079,000 and
amortization of goodwill of $74,000 partially offset by decreases in losses and
loss adjustment expenses of $250,000 and amortization of deferred acquisition
costs of $123,000. Below is a more detail discussion of these increases and
decreases in expenses.
The Company's loss ratio, for the three-month period ended June 30, 1999 was
55.1% compared with 72.6% for the same period in 1998. Losses and LAE incurred
decreased 9.0% to $2.0 million for the three-month period ended June 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 June 30, 1999 reflects a reduction of the incurred loss and LAE
expense in the amount of $303,000 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 54.5% to $1.7 million for the
three-month period ended June 30, 1999 from $1.1 million for the same period in
1998. The increase is due to the increase in Company-owned agencies from 15
during the second quarter of 1998, to 38 in the second quarter of 1999.
Salaries and wages increased 139.0% to $1.9 million for the three-month period
ended June 30, 1999 from $795,000 for the same period in 1998, the increase is
due to the increase in Company-owned agencies.
Amortization of deferred policy acquisition costs decreased to ($133,000) for
the three-month period ended June 30, 1999 from ($10,000) 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 increase in income tax expense is due to the increase in pretax income
offset partially by a lower effective tax rate.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Net income per share and net income per share assuming dilution decreased from
$.46 for the six-month period ended June 30, 1998 to $.39 for the six-month
period ended June 30, 1999. Net income, as discussed below, increased $359,000,
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 and the issuance of 40,000 shares
related to a January 1999 acquisition.
Net income increased $359,000, or 37.1%, from $964,000 for the six-month period
ended June 30, 1998, to $1,323,000 for the six- months ended June 30,1999. This
increase was due to an increase in total revenue of $2.5 million, which
partially offset by an increase in total expenses of $2.1 million and income
taxes of $106,000. 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 June 30, 1998 to 38 at June 30, 1999, as well as the an increase of
$869,000 in finance revenues. Following is more detailed discussion of these
increases.
Total revenue increased $2.5 million, or 24.8%, from $10.1 million for the
six-month period ended June 30,1998 to $12.6 million for the six-month period
ended June 30, 1999. This increase is primarily due to increases in net premiums
earned of $302,000, commission income of $1.1 million, finance revenue of
$869,000, investment income of $56,000 and other income of $238,000.
Net premiums earned increased 4.5% to $7.0 million for the six-month period
ended June 30, 1999 from $6.7 million for the same period in 1998, mainly due to
an increase in mobile home written premiums.
Commission income increased 114.5% to $2.1 million for the six-month period
ended June 30, 1999 from $979,000 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.
Finance revenues increased 109.7% to $1.6 million for the six-month period ended
June 30, 1999 from approximately $763,000 for the same period in 1998. The
increase was attributable to an increase in the number of premium contracts
financed by Federated Premium.
Investment income decreased 6.7% to $472,000 for the six-month period ended June
30, 1999 from $506,000 for the same period in 1998. The Company experienced
realized gains of $479,000 for the six-month period ended June 30, 1999 compared
to realized gains of $390,000 for the same period in 1998.
Other income increased 26.9% to $1.0 million for the six-month period ended June
30, 1999 from $788,000 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.
Income tax preparation was implemented during 1999. Total income derived under
this product during the six-month period of 1999 was $172,000.
Total expenses increased $2.1 million, or 24.4%, from $8.6 million for the
six-month period ended June 30, 1998 to $10.7 million for six-month period ended
June 30, 1999. This increase is primarily due to increases in operating and
underwriting expenses of $1,093,000, salaries and wages of $1,861,000 and
amortization of goodwill of $148,000 partially offset by decreases in losses and
loss adjustment expenses of $780,000 and amortization of deferred acquisition
costs of $246,000. Following is a more detail discussion of these increases and
decreases in expenses.
13
<PAGE>
The Company's loss ratio for the six-month period ended June 30, 1999 was 55.9%
compared with 70.1% for the same period in 1998. Losses and LAE incurred
decreased 17.0% to $3.9 million for the six-month period ended June 30, 1999
from $4.7 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. An increase in the net earned
premiums relating to the mobile home program and a decrease in the loss ratio to
18.3% at June 30, 1999 compared to 56.7% for the same period last year
contributed to the decrease in the Company's loss ratio for this period. In
addition, 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 $646,000 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 52.4% to $3.2 million for the
six-month period ended June 30, 1999 from $2.1 million for the same period in
1998. The increase is due to the increase in Company-owned agencies from 15
during the second quarter of 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. The increase in company-owned agencies had an impact in the total
operating expenses in the second quarter of 1999.
Salaries and wages increased 118.8% to $3.5 million for the six months ended
June 30, 1999 from $1.6 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
$206,000 for the six-month period ended June 30, 1999 from $40,000 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 34.1% for the six months
ended June 30, 1999 compared to 37.5% 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 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 have been and are being
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.
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 June 30, 1999 was $4.5 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 June 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 ithe 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 June 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 June 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 January 1999, the Company consummated an asset acquisition of two
insurance agencies in exchange for $176,000 in cash and 40,000 share of common
stock for a total consideration of $456,000.
The 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.
(b) Use of Proceeds
On November 5, 1998, the Commission declared effective the Company's
Registration Statement on Form SB-2 (File No. 333-63623). The IPO registered
pursuant to the Registration Statement also commenced on November 5, 1998. The
IPO terminated after the sale of 1,250,000 shares of the Company's Common Stock
for $7.50 per share.
The managing underwriter for the IPO was Gilford Securities Incorporated.
The Company incurred expenses of $1.5 million in connection with the IPO.
These expenses represented direct payments to others and not direct or indirect
payments to directors or executive officers of the Company or to persons owning
more than 10% of any class of securities of the Company. Net proceeds from the
IPO were $7.9 million and have been used for a contribution to Federated
National's capital ($2.0 million), repayment of indebtedness under the Credit
Facility ($1.0 million) and to finance acquisitions ($1.7 million). The balance
of net proceeds has been used for working capital and general corporate
purposes. None of the payments from the use of proceeds were made to directors
or executive officers of the Company or to persons owning more than 10% of any
class of securities of the Company.
ITEM 3
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) On June 10, 1999, the Company held its Annual Meeting of Shareholders
(the "Meeting).
b) Not applicable
c) At the Meeting, the following matters were voted upon:
(i) Election of Directors
16
<PAGE>
The following table sets forth the name of each nominee and the voting with
respect to each nominee for director:
Withhold
Name For Authority
---- --- ---------
Joseph A. Epstein 2,485,499 15,800
Carla Leonard 2,485,499 15,800
(ii) Ratification of the appointment of KPMG LLP as the Company's
independent certified public accountants for the year ended
December 31, 1999.
With respect to the foregoing matter, 2,500,499 shares were
voted in favor, 0 shares against and 800 shares abstained.
There were no broker non-votes.
ITEM 5
OTHER INFORMATION
None.
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: Financial Data Schedule: Ex. 27
(b) None
17
<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: AUGUST 11, 1999 By: /s/ Edward J. Lawson
------------------------
Title: President
18
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<DEBT-HELD-FOR-SALE> 14,836,884
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 2,611,425
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 17,448,309
<CASH> 797,008
<RECOVER-REINSURE> 1,497,672
<DEFERRED-ACQUISITION> 162,221
<TOTAL-ASSETS> 41,164,891
<POLICY-LOSSES> 6,451,008
<UNEARNED-PREMIUMS> 10,149,368
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 237,147
<NOTES-PAYABLE> 675,000
0
0
<COMMON> 33,900
<OTHER-SE> 16,077,664
<TOTAL-LIABILITY-AND-EQUITY> 41,164,891
6,979,495
<INVESTMENT-INCOME> 471,989
<INVESTMENT-GAINS> 479,098
<OTHER-INCOME> 1,026,759
<BENEFITS> 3,901,339
<UNDERWRITING-AMORTIZATION> (206,005)
<UNDERWRITING-OTHER> 3,199,269
<INCOME-PRETAX> 2,006,883
<INCOME-TAX> 684,268
<INCOME-CONTINUING> 1,322,615
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,322,615
<EPS-BASIC> 0.39
<EPS-DILUTED> 0.39
<RESERVE-OPEN> 7,603,460
<PROVISION-CURRENT> 6,117,152
<PROVISION-PRIOR> (898,087)
<PAYMENTS-CURRENT> 3,023,753
<PAYMENTS-PRIOR> 3,774,215
<RESERVE-CLOSE> 6,451,008
<CUMULATIVE-DEFICIENCY> (646,000)
</TABLE>
