<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
[ ] 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 0-8483
CENTRAL RESERVE LIFE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 34-1017531
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17800 ROYALTON ROAD, STRONGSVILLE, OHIO 44136
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 572-2400
---------------
____________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
The number of shares outstanding of the registrant's Common stock at June 30,
1997 was 4,195,172.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
A. Consolidated Condensed Balance Sheets
B. Consolidated Condensed Statements of Operations
C. Consolidated Condensed Statements of Cash Flows
D. Notes to Consolidated Condensed Financial Statements
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<PAGE> 3
CENTRAL RESERVE LIFE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
------------- -------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Investments:
Fixed maturities held to maturity, at amortized cost $ 11,897,402 $ 11,892,925
Fixed maturities available for sale, at fair value 65,847,112 67,608,937
------------- -------------
Total fixed maturities 77,744,514 79,501,862
Policy loans 116,917 111,646
Short-term investments, at cost which approximate market 12,981,002 11,109,910
------------- -------------
Total investments 90,842,433 90,723,418
Cash 8,298,954 8,472,255
Accrued investment income 962,295 988,536
Premiums receivable 2,818,754 3,049,026
Property and equipment, at cost 10,628,466 11,196,987
Deferred federal income taxes 948,363 948,363
Federal income taxes recoverable 1,146,000 2,245,530
Other assets 3,507,842 1,764,582
------------- -------------
$ 119,153,107 $ 119,388,697
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities and accruals:
Future policy benefits, losses and claims $ 33,604,362 $ 33,741,819
Other policy claims and benefits payable 43,003,513 42,909,065
Other policyholders' funds 7,415,211 6,510,894
Other liabilities 5,159,178 6,255,346
------------- -------------
89,182,264 89,417,124
Note payable 5,200,000 --
Mortgage note payable 8,452,641 8,503,776
------------- -------------
Total liabilities 102,834,905 97,920,900
------------- -------------
Commitments and contingencies
Shareholders' equity:
Non-Voting Preferred shares, no par value -- --
Common shares, no par value, stated value $.50 2,097,586 2,072,586
Additional paid-in capital 4,122,319 4,005,819
Net unrealized holding gain (loss) (162,608) (247,637)
Retained earnings 10,260,905 15,637,029
------------- -------------
Total shareholders' equity 16,318,202 21,467,797
------------- -------------
$ 119,153,107 $ 119,388,697
============= =============
</TABLE>
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<PAGE> 4
CENTRAL RESERVE LIFE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30 JUNE 30
1997 1996 1997 1996
--------------- -------------- --------------- ----------------
REVENUES
<S> <C> <C> <C> <C>
Premiums $ 64,896,072 $ 65,110,506 $ 132,120,141 $ 126,507,853
Net investment income 1,592,919 1,589,963 3,217,774 3,279,169
Net realized investment gains 22,476 7,149 23,326 7,406
--------------- -------------- --------------- ----------------
66,511,467 66,707,618 135,361,241 129,794,428
--------------- -------------- --------------- ----------------
BENEFITS, LOSSES AND EXPENSES
Benefits, claims, losses and settlement expenses 51,696,958 51,556,074 104,901,447 101,681,638
Commissions 8,901,410 8,849,137 18,086,274 17,323,296
Other operating expenses 10,132,198 9,678,714 18,895,644 18,404,558
--------------- -------------- --------------- ----------------
70,730,566 70,083,925 141,883,365 137,409,492
--------------- -------------- --------------- ----------------
Income (loss) before federal income taxes (4,219,099) (3,376,307) (6,522,124) (7,615,064)
Federal income tax expense (benefit) (671,000) (706,479) (1,146,000) (1,546,479)
=============== ============== =============== ================
Net income (loss) $ (3,548,099) $ (2,669,828) $ (5,376,124) $ (6,068,585)
=============== ============== =============== ================
Weighted average shares outstanding 4,274,285 4,220,069 4,266,284 4,224,552
=============== ============== =============== ================
Net (loss) per share $ (.83) $ (.63) $ (1.26) $ (1.43)
=============== ============== =============== ================
</TABLE>
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<PAGE> 5
CENTRAL RESERVE LIFE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1997 1996
-------------- ---------------
INSURANCE COMPANY ACTIVITIES
<S> <C> <C>
Cash provided by (used by) operating activities $ (7,523,363) $ (3,406,359)
Purchases of investments (3,157,783) (9,890,254)
Sales or maturities of investments 5,105,210 11,476,943
Purchase of property and equipment -- (167,055)
Dividends paid -- (1,000,000)
Paid in capital 5,000,000 --
----------- ------------
Increase (decrease) in cash from insurance company activities (575,936) (2,986,725)
----------- ------------
NON-INSURANCE COMPANY ACTIVITIES
Capital contribution to subsidiary (5,000,000) --
Note payable 5,200,000 --
Dividends from subsidiaries -- 1,000,000
Dividends paid to shareholders -- (1,051,050)
Other, net 202,635 (244,834)
----------- ------------
Increase from non-insurance company activities 402,635 (295,884)
----------- ------------
Cash at beginning of period 8,472,255 9,102,020
----------- ------------
Cash at end of period $ 8,298,954 $ 5,819,411
=========== ============
</TABLE>
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<PAGE> 6
CENTRAL RESERVE LIFE CORPORATION
AND SUBSIDIARIES
D. Notes to Consolidated Condensed Financial Statements
----------------------------------------------------
1. These consolidated condensed financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996,
as certain information and footnote disclosures required to be included
with financial statements prepared in accordance with generally accepted
accounting principles have either been condensed or omitted.
2. The consolidated condensed balance sheets at June 30, 1997 and the
consolidated condensed statements of operations and cash flows for the six
months ended June 30, 1997 and 1996 were prepared without audit. In the
opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as
of June 30, 1997 and the results of operations for the six months then
ended and cash flows for the six months then ended.
3. The Federal income tax returns for the Company and its subsidiaries have
been examined by the Internal Revenue Service (IRS) for 1991 and 1992.
During the third quarter of 1994, the IRS issued a proposal for adjustments
to the Company's returns for 1991 and 1992. The proposed deficiencies are
approximately $2.4 million of which $215,303, pertaining to some non
deductible expenses and certain assets expensed and not capitalized, was
agreed to and paid in 1994. The balance primarily deals with whether or not
the Company's subsidiary, Central Reserve Life Insurance Company, qualified
as a life company, for tax purposes. The Company intends to vigorously
protest the proposed deficiency and management believes existing law
supports the Company's position. Therefore, the Company has not recorded a
liability for the difference. On June 2, 1997 the case was continued and
the stipulation of facts are to be submitted in August 1997.
4. The Ohio Department of Insurance imposes risk-based capital (RBC)
requirements on insurance enterprises, including the Company's subsidiary
Central Reserve Life Insurance Company (Central). The RBC Model serves as a
benchmark for the regulation of life insurance companies by state insurance
regulators and provides for targeted surplus levels based on formulas which
specify various weighting factors that are applied to financial balances or
various levels of activity based on the perceived degree of risk, and are
set forth in the RBC requirements. Such formulas focus on four general
types of risk: (a) the risk with respect to the company's assets (asset or
default risk); (b) the risk of adverse insurance experience with respect to
the company's liabilities and obligations (insurance or underwriting risk);
(c) the interest rate risk with respect to the company's business
(asset/liability matching); and, (d) all other business risks (management,
regulatory action, and contingencies). The amount determined under such
formulas is called the Authorized Control Level RBC (ACL).
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<PAGE> 7
The RBC guidelines define specific capital levels based on a company's ACL,
that are determined by the ratio of the company's total adjusted capital
(TAC) to its ACL. TAC is equal to statutory capital, plus or minus certain
other specified adjustments. The specific capital levels, in declining
order, and applicable ratios are generally as follows: "Company Action
Level" where TAC is less than or equal to 2.0 times ACL; "Regulatory Action
Level" where TAC is less than or equal to 1.5 ACL; "Authorized Control
Level" where TAC is less than or equal to 1.0 times ACL; and, "Mandatory
Control Level" where TAC is less than or equal to 0.7 times ACL. Companies
at the Company Action Level must submit a RBC financial plan to the
insurance commissioner of the state of domicile. Companies at the
Regulatory Action Level are subject to a mandatory examination or analysis
by the commissioner and possible required corrective actions. At the
Authorized Control Level, a company is subject to, among other things, the
commissioner placing it under regulatory control. At the Mandatory Control
Level, the insurance commissioner is required to place a company under
regulatory control. At December 31, 1996, Central's TAC was $17,137,515 or
1.4 times its ACL and accordingly, Central was at the Regulatory Action
Level. The RBC calculation is done annually.
On March 5, 1997, Central filed its RBC financial plan with the Ohio
Department of Insurance (ODI) outlining plans for attaining the levels of
RBC required to raise the Company's RBC above the Company Action Level. The
RBC financial plan identifies the conditions that contributed to the
Regulatory Action Level, including underpricing of a new product, PMO, sold
primarily in 1995, and state mandated benefits and guaranteed issue. The
RBC financial plan also contains corrective actions taken by Central
beginning April 1, 1996, including an increase of PMO premium rates,
changes in certain policy benefits and the renegotiating of certain
provider contracts to produce further cost savings. The PMO plan
represented approximately 40% of Central's premiums collected in 1996.
Since the PMO plan is monthly business, the rate action taken on April 1,
1996 will not be completed until the end of March 1997. In addition to
these corrective actions, the Company had engaged an investment banking
firm to assist the Company in its efforts to raise additional capital for
Central. Raising of additional capital will be necessary to raise Central's
RBC above the Company Action Level within the short term. The ODI notified
Central that the action plan submitted was acceptable for implementation,
subject to examination of Central's 1996 year-end claim reserves and
current premium rate levels. That examination was completed by ODI with no
specific action required at this time. Failure to meet the capital
requirements and interim capital targets included in Central's RBC
financial plan could expose Central to such actions by the ODI as being
placed under regulatory control. In line with the Company's plans to raise
additional capital for Central, it borrowed $5,200,000 in June 1997, from a
bank and contributed $5,000,000 to Central. The note payable is due
December 31, 1997 and the rate of interest is at prime. Management
believes, that Central will be able to meet the plan's capital requirements
and interim targets. The accompanying consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
5. RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"),
"Earnings per Share." SFAS No. 128 is required to be adopted on December
31, 1997. At that time, the Company will
- 7 -
<PAGE> 8
be required to change the method currently used to compute earnings per
share and to restate prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock
options and stock warrants will be excluded. Because the Company reported a
loss for the quarter and period ending June 30, 1997, no material change is
expected in reported loss per share.
6. The results of operations for the six months ending June 30, 1997 are not
necessarily indicative of the results for the full year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY: The assets of the Company and its major subsidiary, Central
Reserve Life Insurance Company (Central), decreased slightly to $119,153,107 for
the period ending June 30, 1997. Central primarily invests in bonds which
amounts to about 65% of the total assets. Central does not have any so-called
"junk" bonds or what is considered high yield type securities and 97% of the
bonds are of investment grade quality. Current assets and short term investments
(not including government bonds of about $22 million which have a ready market)
amounted to about 22% of total assets. In accordance with SFAS 115 the Company
recorded unrealized losses of $162,608 at June 30, 1997, to reflect the
reporting of certain investments at fair value which was lower than amortized
cost. This compares to unrealized losses of $247,637 at December 31, 1996. The
difference between the fair value and the amortized cost is reflected in
shareholders' equity.
Reserves and accruals for future claim payments decreased slightly from
$76,650,884 at December 31, 1996 to $76,607,875 at June 30, 1997, primarily due
to a decrease in the annuity reserves. Shareholders' equity decreased to
$16,318,202 at June 30, 1997 after the net loss of $5,376,124 for the period and
a change of $85,029, due to the SFAS 115 adjustment.
CAPITAL RESOURCES: Central suffered a large decrease in its statutory
capital and surplus to $16,595,497 at December 31, 1996 from $27,477,972 at
December 31, 1995. The decrease was primarily due to the $9,321,633 statutory
loss, after tax benefits of $2,810,830. This decrease caused Central to fall
under the regulatory action level (RAL) imposed by the Ohio Department of
Insurance under the recently adopted Risk-Based Capital (RBC) requirements on
insurance enterprises (see note 4). Central's adjusted capital, under the RBC
standards (which is only calculated annually), at December 31, 1996, was
$17,137,515 and the RAL was $18,508,044 at December 31, 1996. Central is
required to, and did, submit a RBC financial plan to the Ohio Department of
Insurance reflecting certain projections and steps to be taken to return the
adjusted capital to the required levels. In June 1997, the Company negotiated a
loan due December 31, 1997, from a bank for $5.2 million and contributed $5
million to the capital and surplus of Central. The statutory capital and surplus
of Central was $16,365,148 at June 30, 1997. With the assistance of the
investment banking firm it previously retained, the Company is engaged in
detailed discussions with entities which are interested in providing Central
means of returning adjusted capital to required levels.
- 8 -
<PAGE> 9
Certain of those entitles have expressed an interest in acquiring all of the
outstanding stock of, or making a substantial investment in, the Company as part
of any such transaction with Central. No agreement has been reached with any
such entities.
RESULTS OF OPERATIONS: During the quarter ending June 30, 1997, premiums
decreased slightly to $64,896,072 compared to $65,110,506 or a 12% increase for
the same quarter in 1996. For the six month period ending June 30, 1997,
premiums increased 4% to $132,120,141 compared to $126,507,853 or 10% for the
same six month period in 1996. The increase, which was primarily due to rate
renewals, was again, in the group life and health division. Certificates in
force at June 30, 1997 were 107,143. This represents a net decrease of 9,161 or
8% compared to a net increase of 7,524 or 4% for the same six month period in
1996. New certificates issued during the six month period ending June 30, 1997,
were 15,178, down 36% from 23,565 issued during the same period in 1996. Lapses
were 24,339, up 52% for the six month period ending June 30, 1997 compared
16,041 for the same period in 1996. Since Central started implementing more
significant rate increases in April 1996, more unprofitable business is
terminating faster than new profitable business is being issued. This has been a
major factor for the decrease in the number of certificates in force. Management
also believes the combination of Central's risk-based capital (RBC) level and
the new Kennedy-Kassebaum legislation, effective July 1, 1997, has had a
negative impact on sales during the first six months of 1997. With an additional
capital infusion into Central, as planned, net certificates in force should
increase.
Net investment income decreased about 2% to $3,217,774 for the six month
period ending June 30, 1997 compared to $3,279,169 or an increase of 5% for the
same period in 1996. Lower interest rates and a decrease of 2% in fixed
maturities invested were the main reasons for the decrease.
Policy benefits, claims, losses and settlement expenses increased slightly
to $51,696,958 for the quarter ending June 30, 1997 compared to $51,556,074 or a
30% increase in the same quarter in 1996. The loss ratio for the quarter ending
June 30, 1997 was 79.7% compared to 79.2% for the same quarter in 1996. The
decrease in the premiums for the quarter in 1997 was the primary cause for the
ratio increase. For the six month period ending June 30, 1997, policy benefits,
claims, losses and settlement expenses increased to $104,901,447 or 3% compared
to $101,681,638 or 27% for the same six month period in 1996. The loss ratio for
the six month period in 1997 was 79.4% compared to 80.4% for the same six month
period in 1996. There was no additional increase in the reserve established at
June 30, 1997 from the reserve at December 31, 1996, for group accident and
health claims, compared to a $4.6 million increase at June 30, 1996. Central has
paid and incurred a larger number of prior years claims (1996) during the first
six months of 1997 than anticipated when the December 31, 1996 reserves were
established. The year end 1996 reserves are estimated to be understated
approximately $5 to $6 million. Although a large portion of these claims were
paid during the period in 1997, no reserves were released as of June 30, 1997.
Also during the six month period ending June 30, 1997, Central paid
approximately $13 million in claims on policies that terminated and only
received approximately $9 million in premiums during the same period. This run
off in claims was attributed to the rate renewal actions taken and the
conversion program, for old business, started January 1, 1997 to convert certain
policies to a new policy with current rates and
- 9 -
<PAGE> 10
benefits. Inventory of claims since year end 1996 has been reduced and claim
turn-around time has also been reduced.
Commissions were 13.7% of premiums for the quarter ending June 30, 1997
compared to 13.6% for the same quarter in 1997. For the six month period ending
June 30, 1997 commissions were 13.7% of premiums, the same as in 1996.
Other operating expenses increased 5% in the second quarter ending June 30,
1997 to $10,132,198 compared with an increase in the second quarter in 1996 of
3% to $9,678,714. For the six month period ending June 30, 1997 other operating
expenses increased 3% to $18,895,644 compared to $18,404,558 or a 4% increase
for the same period in 1996. The increase in other operating expenses was
primarily one time charges in the second quarter of 1997 for payroll expenses
related to the claim backlog and printing, postage expenses related to the new
Kennedy-Kassebaum legislation effective July 1, 1997 and certain expenses
related to the installation of the new computer system. At June 30, 1997 the
ratio of other operating expenses to premiums was 14.3% compared to 14.5% at the
same time in 1996.
The Company incurred losses of $3,548,099 ($.83 per share) for the quarter
and $5,376,124 ($1.26 per share) for the six months ending June 30, 1997. This
compares to losses of $2,669,828 ($.63 per share) for the quarter and $6,068,585
($1.43 per share) for the six months ending June 30, 1996. The combination of
lower premiums in the quarter, a claims run off and prior year claims were the
primary reasons for the losses in 1997.
The book value per share at June 30, 1997 was $3.89 ($3.93 before
unrealized losses) compared to $5.18 ($5.24 before unrealized gains) at December
31, 1996.
Federal income taxes would increase in the future if the IRS, as indicated
in note 3 to the consolidated condensed financial statements, were to pursue
litigation and prevail in their position that Central no longer qualifies as a
life company for tax purposes. Presently, as a small life company, Central is
permitted, among other things, a deduction from the first $3,000,000 of income
of 60% or $1,800,000, which is decreased by 15% for amounts over $3,000,000. As
Central's income increases the effect is lowered. Management is relying on
existing case law applied favorably to another taxpayer to resolve this issue.
Also, Central may have, under certain circumstances, the ability to change and
market policies that could insure it's qualification as a life company for tax
purposes in the future, if the need arises.
IMPACT OF INFLATION: Inflation rates impact the financial statements and
operating results in several areas. Changes in inflation rates impact the market
value of the investment portfolio and yields on new investments.
Inflation has had an impact on claim costs and overall operating costs and
although it has been lower in the last few years, hospital and medical costs
have still increased at a higher rate than general inflation. While to a certain
extent these increased costs are offset by interest rates (investment income),
hospital charges increased, more than interest rates did. The Company will
continue to increase premium rates in accordance with trends in hospital and
medical costs along with concentrating on various cost containment programs.
- 10 -
<PAGE> 11
FORWARD LOOKING STATEMENTS: This report contains certain forward
looking statements with respect to the financial condition, results of
operations and business of the Company. Such forward looking statements are
subject to inherent risks and uncertainties that may cause actual results to
differ materially from those comtemplated by such forward looking statements.
Factors that may cause actual results to differ materially from those
contemplated by such forward looking statements include, among others, the
results of the Company's efforts to raise additional capital, rising health
care costs, business conditions and competition in the managed care industry,
developments in health care reform and other regulatory issues.
PART II - OTHER INFORMATION
---------------------------
All items of Part II other than Item 6 are either inapplicable to
Registrant or would not require a response.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
a) Central Reserve Life Corporation's 1996 Annual Meeting of
Shareholders was held on May 6, 1997.
b) Proxies were solicited by Central Reserve Life Corporation's
management pursuant to Regulation 14 under the Securities
Exchange Act of 1934, there was no solicitation in opposition
to management's nominees as listed in the proxy statement, and
all of such nominees were elected to the classes indicated in
the proxy statement pursuant to the vote of the stockholders.
The total number of shares of the Company's Common Stock, no par value,
outstanding as of March 31, 1997, the record date for the Annual Meeting, was
4,145,172.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
a) Exhibits.
Exhibit 11 - Statement Regarding Computation of Per Share
Earnings.
Exhibit 27 - Financial Data Schedule.
b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
- 11 -
<PAGE> 12
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 thereunto duly authorized.
CENTRAL RESERVE LIFE CORPORATION
Date: August 19, 1997 By: Frank W. Grimone
-------------------------- --------------------------------
Frank W. Grimone
Executive Vice President
Date: August 19, 1997 By: Frank W. Grimone
-------------------------- ---------------------------------
Frank W. Grimone
Principal Financial Officer and
Chief Accounting Officer
- 12 -
<PAGE> 13
Exhibit 11
----------
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
-----------------------------------------------------
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings
per Share." Statement 128 was issued to simplify the computation of EPS and to
make the U.S. standard more compatible with the EPS standards of other countries
and that of the International Accounting Standards Committee (IASC). It will
replace Primary EPS and Fully Diluted EPS with Basic EPS and Diluted EPS,
respectively.
Basic EPS, unlike Primary EPS, excludes all dilution while Diluted EPS,
like Fully Diluted EPS, reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity.
For the quarter and period ending June 30, 1997, the net loss per share was
computed using the weighted average number of common shares outstanding. These
shares were increased by the number of shares issuable on the exercise of
options, reduced by the number of shares assumed to have been purchased with the
proceeds from the exercise of these common stock equivalents.
- 13 -
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0000215403
<NAME> CENTRAL RESERVE LIFE CORPORATION
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 65,847,112
<DEBT-CARRYING-VALUE> 11,897,402
<DEBT-MARKET-VALUE> 11,684,346
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 90,842,433
<CASH> 8,298,954
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 324,715
<TOTAL-ASSETS> 119,153,107
<POLICY-LOSSES> 33,604,362
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 43,003,513
<POLICY-HOLDER-FUNDS> 7,415,211
<NOTES-PAYABLE> 13,652,641
<COMMON> 2,097,586
0
0
<OTHER-SE> 14,220,616
<TOTAL-LIABILITY-AND-EQUITY> 119,153,107
132,120,141
<INVESTMENT-INCOME> 3,217,774
<INVESTMENT-GAINS> 23,326
<OTHER-INCOME> 0
<BENEFITS> 104,901,447
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 36,981,918
<INCOME-PRETAX> (6,522,124)
<INCOME-TAX> (1,146,000)
<INCOME-CONTINUING> (5,376,124)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,376,124)
<EPS-PRIMARY> (1.26)
<EPS-DILUTED> (1.26)
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
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</TABLE>
