<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
------------------------
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
----------------------
Commission File Number 0-8636
AMERICAN INDEMNITY FINANCIAL CORPORATION
----------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 510119643
-------- ---------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
One American Indemnity Plaza, Galveston, Texas 77550
---------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (409) 766-4600
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
--- ---
As of November 7, 1997, 1,962,410 shares of registrant's common stock, $3.33
1/3 par value, were outstanding.
<PAGE> 2
AMERICAN INDEMNITY FINANCIAL CORPORATION
AND SUBSIDIARIES
Item 1. Financial Statements
Consolidated Statements of Operations for the
Three Months Ended September 30, 1997 and 1996
Unaudited
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
<S> <C> <C>
PREMIUMS AND OTHER INCOME:
Premiums earned $ 16,904,968 $ 16,527,013
Net investment income (net of investment
expenses of $92,736 in 1997 and $100,733
in 1996) 1,088,516 1,179,821
Realized investment gains 342,040 425,092
Interest on premium bills receivable and other
income 241,287 192,258
------------ ------------
TOTAL 18,576,811 18,324,184
------------ ------------
EXPENSES:
Losses and loss adjustment expenses 11,844,334 11,409,360
Policy acquisition costs 6,518,850 6,229,392
Retrospective premium adjustments on workers'
compensation policies (177,429) (11,499)
------------ ------------
TOTAL 18,185,755 17,627,253
------------ ------------
NET INCOME BEFORE FEDERAL INCOME TAX 391,056 696,931
PROVISION FOR FEDERAL INCOME TAX:
Current
Deferred 54,000
------------ ------------
TOTAL 54,000
------------ ------------
NET INCOME $ 337,056 $ 696,931
============ ============
AVERAGE SHARES OUTSTANDING 1,962,410 1,948,610
EARNINGS PER SHARE:
NET INCOME $ 0.17 $ 0.36
============ ============
DIVIDENDS DECLARED PER SHARE $ 0.075 $ 0.075
============ ============
</TABLE>
See Notes to Consolidated Financial Information
<PAGE> 3
AMERICAN INDEMNITY FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
UNAUDITED
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
PREMIUMS AND OTHER INCOME:
Premiums earned $ 48,585,717 $ 50,167,518
Net investment income (net of investment
expenses of $290,113 in 1997 and $294,793
in 1996) 3,254,544 3,411,671
Realized investment gains 636,563 648,917
Interest on premium bills receivable and other
income 617,397 548,352
------------ ------------
TOTAL 53,094,221 54,776,458
------------ ------------
EXPENSES:
Losses and loss adjustment expenses 34,751,112 35,526,326
Policy acquisition costs 18,400,874 18,687,193
Retrospective premium adjustments on workers'
compensation policies (427,694) (32,807)
------------ ------------
TOTAL 52,724,292 54,180,712
------------ ------------
NET INCOME BEFORE FEDERAL INCOME TAX 369,929 595,746
PROVISION (CREDIT) FOR FEDERAL INCOME TAX:
Current (3,201)
Deferred (93,000)
------------ ------------
TOTAL (96,201)
------------ ------------
NET INCOME $ 466,130 $ 595,746
============ ============
AVERAGE SHARES OUTSTANDING 1,961,360 1,947,910
EARNINGS PER SHARE:
NET INCOME $ 0.24 $ 0.31
============ ============
DIVIDENDS DECLARED PER SHARE $ .225 $ .225
============ ============
</TABLE>
See Notes to Consolidated Financial Information
<PAGE> 4
AMERICAN INDEMNITY FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
UNAUDITED
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities - bonds:
Available for sale $ 69,971,519 $ 72,110,261
Preferred stocks 1,016,725 1,377,438
Common stocks 16,124,686 12,420,256
Mortgage loans on real estate 15,706 19,710
------------ ------------
Total Investments 87,128,636 85,927,665
Cash and Cash Equivalents 3,849,844 4,349,953
Accrued Investment Income 829,061 826,791
Premiums in Course of Collection 6,277,653 4,093,476
Direct Premium Bills Receivable 13,546,129 9,659,722
Reinsurance Balances Receivable 18,698,549 18,689,412
Prepaid Reinsurance Premiums 483,107 651,050
Property and Equipment - less accumulated deprecia-
tion of $5,343,673 in 1997 and $4,954,633 in 1996 3,920,050 4,072,394
Deferred Policy Acquisition Costs 9,587,331 9,375,133
Deferred Income Taxes 4,836,000 4,743,000
Other Assets 4,023,700 2,511,152
============ ============
TOTAL $153,180,060 $144,899,748
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Unpaid Losses and Loss Adjustment Expenses $ 53,962,673 $ 55,601,929
Unearned Premiums 36,812,517 36,325,073
Reinsurance Balances Held or Payable 5,010,499 1,657,874
Notes Payable to Bank 454,037 515,981
Accounts Payable and Other Accrued Liabilities 12,376,602 9,179,918
------------ ------------
Total Liabilities 108,616,328 103,280,775
------------ ------------
Stockholders' Equity:
Preferred stock, authorized 2,000,000 shares;
none outstanding
Common stock, $3.33 1/3 par value; authorized
2,500,000 shares; outstanding shares 1,962,410
in 1997 and 1,949,110 in 1996 6,541,351 6,506,351
Paid-in surplus 13,097,668 13,061,709
Unrealized appreciation in market value
of investments 4,929,601 2,080,388
Retained earnings 19,995,112 19,970,525
------------ ------------
Total Stockholders' Equity 44,563,732 41,618,973
------------ ------------
TOTAL $153,180,060 $144,899,748
============ ============
</TABLE>
See Notes to Consolidated Financial Information
<PAGE> 5
AMERICAN INDEMNITY FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
UNAUDITED
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 466,130 $ 595,746
Adjustments to reconcile net income to
net cash flow from operating activities:
Decrease (Increase) in:
Premiums in course of collection (2,184,177) (1,838,905)
Direct premium bills receivable (3,886,407) (1,318,518)
Reinsurance balances receivable (9,137) (870,859)
Prepaid reinsurance premiums 167,943 70,224
Deferred policy acquisition costs (212,198) (713,494)
Deferred income taxes (93,000)
Other assets (1,512,547) (500,144)
Increase (Decrease) in:
Unpaid losses and loss adjustment expenses (1,639,256) 1,090,902
Unearned premiums 487,444 2,334,654
Reinsurance balances held or payable 3,352,625 520,149
Accounts payable and other accrued liabilities 3,196,684 476,121
Realized investment (gains) losses (636,564) (648,917)
Depreciation 344,739 340,263
Other 42,522 (10,752)
------------ ------------
Net cash flow from operating activities (2,115,199) (473,530)
------------ ------------
INVESTING ACTIVITIES:
Sale of bonds 3,705,528 6,939,258
Maturity of bonds 3,217,277 7,119,196
Sale of preferred stocks 184,396
Redemption of preferred stocks 405,302 605,368
Sale of common stocks 1,413,215 2,881,265
Purchase of bonds (3,747,096) (16,856,177)
Purchase of common stocks (2,758,216) (1,000,606)
Purchase of property and equipment (192,395) (302,840)
Maturity of long-term certificates of deposit 10,000
Other 4,004 3,624
------------ ------------
Net cash flow from investing activities 2,047,619 (416,516)
------------ ------------
FINANCING ACTIVITIES:
Proceeds received from bank loan 580,500
Payments on bank loan (61,944) (44,755)
Cash dividends paid to stockholders (441,544) (438,315)
Proceeds received from exercise of stock options 70,959 12,760
------------ ------------
Net cash flow from financing activities (432,529) 110,190
------------ ------------
Net Increase (Decrease) in Cash and Cash
Equivalents (500,109) (779,856)
Cash and Cash Equivalents, January 1 4,349,953 4,781,566
------------ ------------
Cash and Cash Equivalents, September 30 $ 3,849,844 $ 4,001,710
============ ============
See Notes to Consolidated Financial Information
</TABLE>
<PAGE> 6
AMERICAN INDEMNITY FINANCIAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
- -------------------------------------------------------------------------------
(1) The financial information included herein is unaudited but, in the
opinion of management, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation have been included. These
interim consolidated financial statements should be read in conjunction
with the Company's report on Form 10-K for the year ended December 31,
1996. The results of operations for this interim period are not
necessarily indicative of results for the full year.
(2) Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes, and (b) operating loss carryforwards. The tax effects of
significant items comprising the Company's net deferred income taxes as
of September 30, 1997 and December 31, 1996 are as follows:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Deferred tax liabilities:
Deferred policy acquisition costs $ (3,259,693) $ (3,187,545)
Differences between book and tax
basis of property (341,035) (320,161)
Unrealized investment gains (1,676,064) (707,332)
Other (349,399) (341,959)
------------ ------------
(5,626,191) (4,556,997)
------------ ------------
Deferred tax assets:
Reserves not currently deductible 5,249,049 5,167,237
Operating loss carryforwards 12,384,112 12,189,198
------------ ------------
17,633,161 17,356,435
------------ ------------
Net Asset 12,006,970 12,799,438
Valuation allowance (7,170,970) (8,056,438)
------------ ------------
Net deferred tax assets $ 4,836,000 $ 4,743,000
============ ============
</TABLE>
The credit for income tax for the nine months ended September 30, 1997 was
$96,201. The Company did not pay any federal income taxes during the first nine
months of 1997, whereas the company paid $15,000 in federal income taxes during
the first nine months of 1996.
The Company has net operating loss carryforwards for tax purposes of
$36,423,860, which expires if not previously utilized, in 1998-$3,163,998;
1999-$7,384,546; 2000-$5,712,421; 2001-$4,927,522; 2002-$2,271,256;
2003-$621,205; 2004-$4,596,950; 2005-$1,246,728; 2006-$118,137; 2007-$43,352;
2008-$13,450; 2009-$13,410; 2010-$4,604,277; 2011 - $1,133,330; and 2012 -
$573,278.
<PAGE> 7
(3) The Company paid total interest expense of $32,076 and $28,372 for the
nine months ended September 30, 1997 and September 30, 1996, respectively.
(4) In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS No.
128, which is effective for periods ending after December 15, 1997,
establishes standards for computing and presenting earnings per share
("EPS"). SFAS No. 128 replaces the presentation of primary EPS previously
prescribed by Accounting Principles Board Opinion No. 15 ("APB No. 15")
with a presentation of basic EPS, which is computed by dividing income
available to common stockholders by the weighted-average number of common
shares outstanding for the period. SFAS No. 128 also requires dual
presentation of basic and diluted EPS. Diluted EPS is computed similar to
fully diluted EPS pursuant to APB No. 15. Pro forma basic and diluted EPS
for all historical periods presented, assuming that SFAS No. 128 was
effective at the beginning of each such historical period, would not be
materially different from what has been presented using APB No. 15.
Also in February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure", which establishes standards for
disclosing information about an entity's capital structure. SFAS No. 129
is effective for periods ending after December 15, 1997. The Company
believes that its disclosures already comply with the requirements of SFAS
No. 129.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", and SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information". SFAS No. 130 establishes standards for reporting
and displaying of comprehensive income and its components. SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments and related information in interim
and annual financial statements. SFAS Nos. 130 and 131 are effective for
periods beginning after December 15, 1997. Management is evaluating what,
if any, additional disclosures may be required upon the implementation of
SFAS Nos. 130 and 131.
<PAGE> 8
AMERICAN INDEMNITY FINANCIAL CORPORATION
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
LIQUIDITY
The Company has consistently been able to generate adequate amounts of
cash to meet its needs and management is unaware of any trends, demands or
commitments which will or are reasonably likely to have a significant effect on
the Company's liquidity.
OPERATING ACTIVITIES
The net cash flow from operating activities for the nine months ended
September 30, 1997 was negative primarily as a result of unfavorable
underwriting results in the commercial automobile line of business during the
first nine months of 1997. The unfavorable underwriting results for the
commercial automobile line of business were due primarily to the occurrence of
several large liability claims in the period. Management believes that these
claims are not indicative of a trend.
The net cash flow from operating activities for the nine months ended
September 30, 1996 was negative primarily as a result of unfavorable
underwriting results. The underwriting results during the first nine months of
1996 were caused primarily by the occurrence of several weather-related natural
catastrophes in the period.
INVESTING ACTIVITIES
The net cash flow from investing activities was positive for the first
nine months of 1997 because total investment sales and maturities exceeded total
investment purchases. During the first nine months of 1997, the Company's cash
flow from operating activities was negative. As a result, additional funds were
raised through the sale of investments. However, whenever possible, management
invested a portion of available cash balances and the proceeds received from
disposition of investments into investment grade bonds and common stocks.
During the first nine months of 1997, unrealized investment gains
increased stockholders' equity by approximately $2,849,000, of which
approximately $1,099,000 of this amount was from debt securities, with the
remaining gains from equity securities. These unrealized investment gains were
primarily the result of overall favorable investment market conditions during
the first nine months of 1997.
The $1,099,000 unrealized investment gains on debt securities included
approximately $754,000 unrealized investment gains related to six derivative
issues purchased by the Company in 1993. On September 30, 1997, the value
carried in the Company's balance sheet for these six issues was approximately
$19,396,000. The Company's debt and equity securities are reported on the
Company's balance sheet at their respective market values which fluctuate based
upon a variety of market factors. Such fluctuations will result in changes to
the Company's unrealized investment gains or losses and will have a
corresponding impact on the Company's stockholders' equity. The derivative
securities
<PAGE> 9
previously mentioned are known as inverse floaters as their yields, which are
adjusted periodically, vary inversely to certain LIBOR rates. These derivative
securities will probably exacerbate swings in unrealized investment gains and
losses and stockholders' equity in the event of significant movement in interest
rates, particularly LIBOR rates. Additionally, the yield formulas for these
securities will result in commensurate swings in investment income. At current
yield rates and considering future yield resets for these securities and the
guarantee (see discussion below) that was obtained with respect to certain of
these securities, net investment income during the final quarter of 1997 earned
by these securities should not change significantly compared to the
corresponding period in 1996. This is subject to change, either positively or
negatively, depending on future investment market conditions.
Because these derivative securities were issued by government agencies,
the Company believes that their principal is assured at maturity. Barring
unforeseen circumstances, the Company has the ability to hold these debt
securities until their stated maturity. However, if conditions are favorable for
their disposition, the Company may dispose of all or a portion of these
securities prior to maturity. As a matter of investment policy, the Company no
longer invests in inverse floating rate securities.
In connection with an arbitration proceeding in 1995, the Company
received an agreement, effective December 8, 1995, guaranteeing the yield rate
on the largest derivative issue held by it (Guaranteed Yield Security). The
Guaranteed Yield Security has a par value of $11,000,000 and matures in March
1998. The yield rate that is guaranteed will equal the weekly average yield rate
for three month treasury bills during each interest period of the security. The
maximum amount guaranteed is $1,500,000 and the guarantee will terminate no
later than the security's maturity date. As of September 30, 1997, the remaining
amount guaranteed, reduced by settlements received, is approximately $554,000.
This guarantee was originally secured by two letters of credit. One letter of
credit is in the amount of $500,000 and expires two years from its issue date.
The second letter of credit in the amount of $500,000 expired in December 1996.
At September 30, 1997, the stated interest rate for the Guaranteed Yield
Security was .063% and the guaranteed yield rate was 5.17%. Based on such
guaranteed yield rate, and assuming no change in the yield rate that determines
the guaranteed yield rate, net investment income earned by this security during
the final quarter of 1997 should not change significantly compared with the
corresponding period in 1996.
As a result of this guarantee, the yield of the Guaranteed Yield
Security is similar to that of a floating rate instrument whose coupon yield
resets weekly to the average three month treasury bill yield rate during each
interest period. The market value of this security at September 30, 1997 was
determined based upon the market values of other securities with similar yield
resets and similar maturities. As a result, the market value for this security
as carried on the Company's balance sheet as of September 30, 1997 was
approximately $10,975,470.
During the first nine months of 1996, management invested a portion of
available cash balances and the proceeds received from the disposition of
investments into investment grade bonds and common stocks. The net cash flow
from investing activities was negative in the first nine months of 1996 as total
investment purchases exceeded total investment sales and maturities.
<PAGE> 10
FINANCING ACTIVITIES
There were no new financing commitments entered into in the first nine
months of 1997 and no significant increase in the cost of current financing
arrangements. The net cash flow from financing activities was negative for the
first six months of 1997 as a result of cash dividends paid to stockholders.
During the first nine months of 1997, the Company received approximately $71,000
in proceeds from the exercise of incentive stock options, whereas, during the
first nine months of 1996 the Company received approximately $13,000 in proceeds
from the exercise of incentive stock options.
In January, 1996, the Company received $580,500 proceeds from a loan
from United States National Bank. These funds were obtained to finance the
purchase of computer software designed to provide policy processing, claims
administration, billing and collection, reinsurance and management reporting
needed as part of the Company's ongoing effort to enhance its technology and
reengineer its business process. As a result of this loan, the net cash flow
from financing activities was positive for the first nine months of 1996.
CAPITAL RESOURCES
The activities of insurance companies are regulated by state
authorities and adequate levels of reserves and equity capital are required to
be maintained to ensure that enough capital is retained in the business to
provide sufficient funds to meet its obligations. Management believes that the
Company has met all statutory and regulatory requirements and that sufficient
funds have been retained to meet its obligations. The Company has no current
commitments or plans for debt or equity financing.
RESULTS OF OPERATIONS
Premiums earned increased 2.3% and decreased 3.2%, respectively, for
the three months and nine months ended September 30, 1997 compared with the
corresponding 1996 periods. Net premiums written increased 5.6% and decreased
6.3%, respectively, for the three months and nine months ended September 30,
1997 compared with the same 1996 periods. These decreases for the nine months
ended September 30, 1997 are primarily the result of experience based premium
increases due reinsurers charged to the Company under the retrospective premium
adjustment provisions of its casualty reinsurance contract.
As previously discussed, the Company raised additional funds through
the sale of investments to offset the negative cash flow from unfavorable
operating results during the first nine months of 1997. These sales resulted in
a decrease in invested assets; however, this decrease was largely offset by
unrealized gains in market value of investments experienced during the first
nine months of 1997, resulting in an increase in average invested assets of
approximately $194,000 at September 30, 1997 compared with September 30, 1996.
Additionally, net investment income decreased 7.7% and 4.6% , respectively, for
the three months and nine months ended September 30, 1997 compared with the same
1996 periods, primarily as a result of the sale of invested assets. This
decrease in net investment income reduced the Company's average investment yield
to 5.02% for the nine months ended September 30, 1997 compared with 5.27% for
the nine months ended September 30, 1996.
<PAGE> 11
The loss and loss adjustment expense ratio was 70.1% for the three
months ended September 30, 1997 compared with 69.0% for the three months ended
September 30, 1996 and was 71.5% for the nine months ended September 30, 1997
compared with 70.8% for the nine months ended September 1996. The cost of
weather-related natural catastrophes was significantly less in the first three
quarters of 1997 compared with 1996; however, the underwriting results of the
commercial automobile line of business were unfavorable for the same comparison
periods. The unfavorable underwriting results for the commercial automobile line
of business during 1997 were due primarily to the occurrence of several large
liability claims in the period.
The policy acquisition cost ratio was 38.6% for the three months ended
September 30, 1997 compared with 37.7% for the three months ended September 30,
1996 and was 37.9% for the nine months ended September 30, 1997, compared with
37.2% for the nine months ended September 30, 1996.
Net income for the Company was approximately $337,000 for the three
months ended September 30, 1997 compared with net income of $697,000 for the
three months ended September 30, 1996. The Company had net income of
approximately $466,000 for the nine months ended September 30, 1997, compared
with net income of $596,000 for the nine months ended September 30, 1996.
FORWARD-LOOKING STATEMENTS
Certain statements made herein and in other public filings and releases
by the Company contain "forward-looking" information (as defined in the Private
Securities Litigation Reform Act of 1995) that involve risk and uncertainty.
These forward-looking statements may include, but are not limited to, future
revenues, earnings, margins, costs, interest rates, market trends in the
insurance industry, inflation and various economic and business trends. Although
the Company believes that the expectations reflected in such forward looking
statements are based upon reasonable assumptions, the Company can give no
assurance that these expectations will be achieved. Actual results and trends in
the future may differ materially depending on a variety of factors including,
but not limited to, domestic economic activity and inflation, the Company?s
successful execution of internal operating plans and the factors that are
disclosed in conjunction with the forward looking statements included herein and
in other public filings and releases by the Company.
<PAGE> 12
AMERICAN INDEMNITY FINANCIAL CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C>
Item 6. (a) Exhibit 11 - Computation of Fully Diluted Net Income per Common and Common Equivalent
Share.
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.
</TABLE>
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.
AMERICAN INDEMNITY FINANCIAL CORPORATION
(Registrant)
Date November 12, 1997
----------------- ----------------------------------------
PHILLIP E. APGAR
VICE PRESIDENT-TREASURER - CHIEF
FINANCIAL OFFICER
(PRINCIPAL FINANCIAL & ACCOUNTING OFFICER)
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Exhibit 11 - Computation of Fully Diluted Net Income per Common and Common Equivalent
Share.
Exhibit 27 - Financial Data Schedule.
</TABLE>
<PAGE> 1
AMERICAN INDEMNITY FINANCIAL CORPORATION EXHIBIT 11
AND SUBSIDIARIES
COMPUTATION OF FULLY DILUTED NET INCOME
PER COMMON AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
09-30-97 09-30-96 09-30-97 09-30-96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Weighted average shares of common
stock outstanding 1,961,360 1,947,910 1,962,410 1,948,610
Stock options (treasury stock method) (1) 4,294 6,605 4,294 6,605
--------- --------- --------- ---------
Weighted average shares outstanding
for primary earnings per share
computation 1,965,654 1,954,515 1,966,704 1,955,215
========= ========= ========= =========
NET INCOME $ 0.24 $ 0.30 $ 0.17 $ 0.36
========= ========= ========= =========
FULLY DILUTED EARNINGS PER SHARE
Weighted average shares of common
stock outstanding 1,961,360 1,947,910 1,962,410 1,948,610
Stock options (treasury stock method) (1) 5,400 6,605 5,400 6,605
--------- --------- --------- ---------
Weighted average shares outstanding
for fully diluted computation 1,966,760 1,954,515 1,967,810 1,955,215
========= ========= ========= =========
NET INCOME $ 0.24 $ 0.30 $ 0.17 $ 0.36
========= ========= ========= =========
</TABLE>
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> SEP-30-1997
<PERIOD-END> SEP-30-1997
<DEBT-HELD-FOR-SALE> 69,971,519
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 17,141,411
<MORTGAGE> 15,706
<REAL-ESTATE> 0
<TOTAL-INVEST> 87,128,636
<CASH> 3,849,844
<RECOVER-REINSURE> 18,698,549
<DEFERRED-ACQUISITION> 9,587,331
<TOTAL-ASSETS> 153,180,060
<POLICY-LOSSES> 53,962,673
<UNEARNED-PREMIUMS> 36,812,517
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 454,037
0
0
<COMMON> 6,541,351
<OTHER-SE> 38,022,381
<TOTAL-LIABILITY-AND-EQUITY> 153,180,060
48,585,717
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