<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 MARCH 31, 1999
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 MAY 7, 1999, 1,962,410 SHARES OF REGISTRANT'S COMMON STOCK, $3.33 1/3 PAR
VALUE, WERE OUTSTANDING.
<PAGE> 2
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INDEMNITY FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
PREMIUMS AND OTHER INCOME:
Premiums earned $ 15,060,358 $ 15,778,094
Net investment income (net of investment
expenses of $93,610 in 1999 and $99,686
in 1998) 1,102,188 1,179,394
Realized investment gains 35,073 279,707
Interest on premium bills receivable and other
income 218,358 221,772
------------ ------------
TOTAL 16,415,977 17,458,967
------------ ------------
EXPENSES:
Losses and loss adjustment expenses 11,180,789 13,005,277
Policy acquisition costs 5,916,818 6,450,654
Retrospective premium adjustments on workers'
compensation policies (67,789) (183,917)
------------ ------------
TOTAL 17,029,818 19,272,014
------------ ------------
NET LOSS BEFORE FEDERAL INCOME TAX (613,841) (1,813,047)
PROVISION (CREDIT) FOR FEDERAL INCOME TAX:
Current
Deferred
------------ ------------
TOTAL -- --
------------ ------------
NET LOSS $ (613,841) $ (1,813,047)
============ ============
AVERAGE SHARES OUTSTANDING 1,962,410 1,962,410
BASIC AND DILUTED EARNINGS PER SHARE:
NET LOSS $ (0.31) $ (0.92)
============ ============
DIVIDENDS DECLARED PER SHARE $ -- $ --
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 3
AMERICAN INDEMNITY FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Investments - at market value:
Fixed maturities - bonds:
Available for sale $ 67,148,245 $ 66,827,552
Preferred stocks 1,107,420 1,136,433
Common stocks 13,759,024 15,595,049
------------ ------------
Total Investments 82,014,689 83,559,034
Cash and Cash Equivalents 7,814,235 9,822,369
Accrued Investment Income 871,930 767,166
Premiums in Course of Collection, Net 5,467,831 4,697,268
Direct Premium Bills Receivable 9,498,675 9,671,775
Reinsurance Balances Receivable 23,274,852 23,470,118
Prepaid Reinsurance Premiums 2,914,426 2,580,950
Property and Equipment - less accumulated deprecia-
tion of $5,599,587 in 1999 and $5,509,125 in 1998 3,685,171 3,768,975
Deferred Policy Acquisition Costs 8,845,048 8,799,976
Deferred Income Taxes 3,889,000 3,889,000
Other Assets 1,708,989 1,581,024
------------ ------------
TOTAL $149,984,846 $152,607,655
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Unpaid Losses and Loss Adjustment Expenses $ 71,770,489 $ 71,796,212
Unearned Premiums 30,264,606 31,189,456
Reinsurance Balances Held or Payable 7,557,198 6,889,131
Notes Payable to Bank 317,310 341,357
Accounts Payable and Other Accrued Liabilities 9,722,419 9,578,133
------------ ------------
Total Liabilities 119,632,022 119,794,289
------------ ------------
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 1999 and 1998 6,541,351 6,541,351
Paid-in surplus 13,097,668 13,097,668
Accumulated comprehensive income 3,673,130 5,519,831
Retained earnings 7,040,675 7,654,516
------------ ------------
Total Stockholders' Equity 30,352,824 32,813,366
------------ ------------
TOTAL $149,984,846 $152,607,655
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 4
AMERICAN INDEMNITY FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Loss $ (613,841) $ (1,813,047)
Adjustments to reconcile net loss to
net cash flow from operating activities:
Decrease (Increase) in:
Premiums in course of collection (770,563) (552,958)
Direct premium bills receivable 173,100 2,031,680
Reinsurance balances receivable 195,266 2,827,583
Prepaid reinsurance premiums (333,476) (72,225)
Deferred policy acquisition costs (45,072) 323,519
Other assets (127,965) (188,763)
Increase (Decrease) in:
Unpaid losses and loss adjustment expenses (25,723) (3,026,981)
Unearned premiums (924,850) (1,842,296)
Reinsurance balances held or payable 668,067 304,618
Accounts payable and other accrued liabilities 144,286 1,006,357
Realized investment gains (35,073) (279,707)
Depreciation 90,463 89,648
Other (70,490) (87,863)
------------ ------------
Net cash flow used in operating activities (1,675,871) (1,280,435)
------------ ------------
INVESTING ACTIVITIES:
Sale of bonds 3,330,875
Maturity of bonds 7,526,509 15,515,755
Sale of common stocks 1,859,211 1,278,884
Purchase of bonds (8,559,828) (16,605,096)
Purchase of common stocks (1,127,452) (907,384)
Purchase of property and equipment (6,656) (139,784)
Other
------------ ------------
Net cash flow from (used in) investing activities (308,216) 2,473,250
------------ ------------
FINANCING ACTIVITIES:
Payments on bank loan (24,047) (22,040)
------------ ------------
Net cash flow from financing activities (24,047) (22,040)
------------ ------------
Net Increase (Decrease) in Cash and Cash
Equivalents (2,008,134) 1,170,775
Cash and Cash Equivalents, January 1 9,822,369 8,174,074
------------ ------------
Cash and Cash Equivalents, March 31 $ 7,814,235 $ 9,344,849
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 5
AMERICAN INDEMNITY FINANCIAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(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 annual report on Form 10-K for the year ended December
31, 1998. The results of operations for this interim period are not
necessarily indicative of results for the full year.
(2) The Company paid total interest expense of $7,293 and $9,300 for
three months ended March 31, 1999 and March 31, 1998, respectively.
(3) The weighted-average number of shares outstanding was 1,962,410 for
each of the quarters ended March 31, 1999 and March 31, 1998. As the
effect of the diluted shares was anti-dilutive, all per share amounts
presented represent both basic and dilutive earnings per share.
REPORTING COMPREHENSIVE INCOME. Comprehensive income includes all changes
in equity during a period except those resulting from investments by
owners and distributions to owners. The comprehensive loss of the Company
was $2,460,542 for the three months ended March 31, 1999 compared with
$429,368 for the three months ended March 31, 1998. The difference
between net income (loss) and comprehensive income (loss) relates to the
change in the unrealized appreciation in market value of investments
during the periods.
(4) RECENT ACCOUNTING PRONOUNCEMENTS. In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No 133 establishes accounting
and reporting standards for derivative instruments and for hedging
activities. The Company is required to adopt the provisions of SFAS No.
133 in the third quarter of 1999.
In October 1998, the AICPA issued SOP 98-7, "Deposit Accounting:
Accounting for Insurance and Reinsurance Contracts that Do Not Transfer
Insurance Risk." SOP 98-7 addresses deposit accounting for certain
insurance and reinsurance contracts and direct business by insurance
enterprises and other enterprises. The Company is required to adopt the
provisions of SOP 98-7 in fiscal year 2000.
Management is currently evaluating but has not yet determined what effect
if any, there will be on the Company's financial statements and related
disclosures from the above-mentioned pronouncements that are not yet
effective.
(5) On March 4, 1999 the Company announced the signing of a definitive
agreement providing for the acquisition of American Indemnity Financial
Corporation by United Fire & Casualty Company of Cedar Rapids, Iowa. It
is anticipated that the acquisition will be completed during the third
quarter of 1999, subject to customary closing conditions including
shareholder and regulatory approval.
<PAGE> 6
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 three months ended
March 31, 1999 was negative primarily as a result of unfavorable underwriting
results. The underwriting results improved during the first three months of 1999
compared with the first three months of 1998 primarily as a result of a decrease
in the frequency of new claims occurrences for the automobile and other
liability lines of business for the comparison periods. Nevertheless,
underwriting results were unprofitable in all major lines of business.
The net cash flow from operating activities for the three months ended
March 31, 1998 was negative primarily as a result of a decrease in net premiums
written and unfavorable underwriting results. The decrease in net premiums
written was primarily the result of competitive pricing pressures and a policy
processing problem that caused a temporary inability to process certain policies
during the quarter. The unfavorable underwriting results were due primarily to
an unanticipated increase in the frequency of new claims occurrences for the
automobile and commercial multiple peril lines of business during the first
three months of 1998.
INVESTING ACTIVITIES
During the first three months of 1999, management invested a portion of
available cash balances and the proceeds from the disposition of investments
into investment grade bonds and common stocks. The net cash flow from investing
activities was negative for the first three months of 1999 because total
investment purchases exceeded total investment sales and maturities.
During the first three months of 1999, unrealized investment losses
decreased stockholders' equity by approximately $1,847,000; approximately
$678,000 of this amount was from debt securities, with the remaining losses from
equity securities. These unrealized investment losses were primarily the result
of bond and stock market fluctuations during the first three months of 1999.
The net cash flow from investing activities was positive for the first
three months of 1998 because total investment sales and maturities exceeded
total investment purchases. During the first three months of 1998, 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.
FINANCING ACTIVITIES
There were no new financing commitments entered into in the first three
months of 1999 and no significant increase in the cost of current financing
arrangements. The Company has not paid any dividends to stockholders since the
fourth quarter of 1997. It is not anticipated that dividends to stockholders
will resume within the foreseeable future.
<PAGE> 7
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 sufficient capital is retained in the business to
provide sufficient funds to meet its obligations. Management believes that the
Company meets 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.
On March 4, 1999, the Company and United Fire & Casualty Company
announced the signing of an agreement providing for United Fire & Casualty
Company's acquisition of American Indemnity Financial Corporation. It is
anticipated that the acquisition will be completed during the third quarter of
1999.
RESULTS OF OPERATIONS
Premiums earned decreased 4.5% for the three months ended March 31,
1999 compared with the three months ended March 31, 1998 primarily as a result
of soft market conditions experienced during the first quarter of 1999 as has
been the case in recent years. Despite such conditions, the Company endeavored
to remain competitive without engaging in severe price competition or
compromising its underwriting guidelines. Management intends to continue
marketing all lines of business at prices that reflect its experience.
Average invested assets decreased approximately $6,620,000, or 7.4% at
March 31, 1999 compared with March 31, 1998 primarily as a result of investing
activities during 1998 in which total investment sales and maturities exceeded
total investment purchases. During 1998, the Company's cash flow from operating
activities was negative. As a result, additional funds were raised through the
sale of investments. As a result of the decrease in average invested assets, net
investment income decreased 6.5% for the three months ended March 31, 1999
compared with the three months ended March 31, 1998. However, the Company's
average investment yield was 5.33% for the three months ended March 31, 1999
compared with 5.28% for the three months ended March 31, 1998.
The loss and loss adjustment expense ratio was 74.2% for the three
months ended March 31, 1999 compared with 82.4% for the three months ended March
31, 1998. The decrease in this ratio was primarily a result of a decrease in the
frequency of new claims occurrences for the automobile and other liability lines
of business for the comparison periods. Nevertheless, underwriting results were
unprofitable in all major lines of business. Management does not believe that
these unfavorable underwriting results are indicative of a trend.
The policy acquisition cost ratio was 39.3% for the three months ended
March 31, 1999 compared with 40.9% for the three months ended March 31, 1998.
The decrease in this ratio was primarily the result of an increase in deferral
of deferred policy acquisition costs during the first quarter of 1999. During
the first three months of 1999, policy acquisition costs included approximately
$248,000 from expenses related to the pending sale of the Company to United Fire
& Casualty Company.
Primarily as a result of unfavorable underwriting results during the
first three months of 1999 for the reasons discussed above, the net loss of the
Company was approximately $614,000 compared with a net loss of approximately
$1,813,000 during the first three months of 1998.
<PAGE> 8
YEAR 2000 ISSUES. The Year 2000 issue (i.e. the ability of computer systems to
accurately identify and process dates beginning with the year 2000 and beyond)
affects virtually all companies and organizations. Some of the Company's
computer systems are already Year 2000 compliant. However, certain of the
Company's computer systems use only two digits to identify a year in a date
field. For example, the year 2000 would be represented in these systems as "00,"
but might in many cases be interpreted by the computer as "1900" rather than
"2000," thereby potentially resulting in processing errors.
The ability to process information in a timely and accurate manner is
vital to the Company's data-intensive insurance business. The Company recognizes
that the computer systems used must be Year 2000 compliant by December 31, 1999
and, in some instances, well in advance of that date (e.g., by January 1999 in
the case of certain property and casualty insurance policies with one-year terms
expiring on or after January 1, 2000). The Company has been taking steps it
deems appropriate to meet this challenge, including replacing or upgrading
certain of its existing computer applications that improve functionality in
addition to being Year 2000 compliant, and planning alternative measures, if
necessary, including manual processing of data.
During 1997, the Company upgraded the principal portion of its policy
processing and claims system to the PMSC Point system as a part of its
technology enhancement and Year 2000 compliance initiatives. The Point system is
one of the Company's most critical software programs as it is used for the daily
administration of the insurance operations. A migration plan was developed and
implemented to move from a non-compliant release of the PMSC Point system to a
subsequent release which, the Company was advised by PMSC, is fully Year 2000
compliant. This migration was completed in September 1998. Company personnel
tested the system for compliance before moving the upgrade into production. In
order to perform this testing, the software's system date was moved forward into
the years 2000 and 2001. In every test case, the software generated the expected
results.
A Year 2000 project plan has been developed and all Company systems
have been addressed as to Year 2000 compliance. According to the plan, 90% of
all software packages have been identified as Year 2000 compliant by either
their vendors or Company resources. The remaining non-compliant software can be
classified into three groups: i) non-critical, ii) scheduled to be modified or
replaced before the year 2000 and iii) those scheduled to be discarded. Computer
related hardware has been found to be 74% compliant, and the remaining hardware,
which includes items such as desktop personal computers and network equipment is
currently being tested for compliance. The telecommunications system is
non-compliant, however, plans are for this to be compliant by the end of the
third quarter of 1999. All other types of equipment such as copiers and fax
machines have been found to be 60% compliant and the remaining items are under
investigation for compliance. In general, 86% of all the items in the Year 2000
project plan have been completed and with one exception, the remaining items are
scheduled to be completed by the end of the third quarter of 1999.
The Company currently utilizes a policy processing system for
commercial lines of business for states other than Texas that is not Year 2000
compliant. During 1998, the Company intended to purchase the rating algorithms
from PMSC which are required to process this business under the Point system.
However, this decision was not implemented during 1998 pending the outcome of
identifying the strategic alternatives for the Company which has now lead to the
previously discussed merger with United Fire & Casualty Company. The Company was
informed by PMSC in December 1998 that even if it purchased and proceeded with
implementation of these rating algorithms during the first quarter of 1999 that
it was unlikely that all states would be implemented in time. The Company
currently processes the majority of its commercial business utilizing a
combination of manual systems and automated systems. Management believes that,
if necessary, the policies issued by this system could be entirely processed on
a manual basis.
<PAGE> 9
The Company has received information from certain of its vendors to
assure their systems' compliance as well, or alternatively, to determine to the
extent possible the extent the Company is vulnerable to those third parties'
failure to achieve Year 2000 compliance, and if necessary, to develop
alternatives. As a result of the Company's ongoing efforts to reengineer its
business processes and assuming compliance by third parties with whom the
Company conducts business, management believes that the impact on future
earnings from efforts to achieve Year 2000 compliance will not be significant.
However, there can be no assurance that the systems of other companies on which
the Company's systems and operations rely will be timely compliant, or that a
failure to be compliant by another company would not have a material adverse
effect on the Company's future operations.
The Company believes that in an emergency situation resulting from the
severe failure of computer systems, it could revert to the use of manual systems
that rely on personal computers and spreadsheet software. Through these manual
systems, the Company could perform the minimum functions required to maintain
insurance services and provide a minimum level of information reporting to
maintain a level of control over the business processes. Should the Company have
to utilize manual systems in an emergency as noted above, it is uncertain that
it could maintain current levels of operations and this could have a material
adverse impact on the business. The Company intends to maintain constant
surveillance on its Year 2000 issues.
Historical expenses recognized directly related to replacing existing
applications with Year 2000 compliant applications cannot be determined with
precise accuracy because the Point system project was initiated as a result of
management's decision to modernize the business processes of the Company and
accomplish Year 2000 compliance at the same time. Also, the implementation of
the Point system resulted in some staff reductions within the Company. Including
the total costs of conversion to PMSC Point system, expenses recognized directly
related to replacing existing applications with Year 2000 compliant applications
totaled approximately $1,700,000 from January 1, 1996 through December 31, 1998
with funds obtained through operating revenues. The Company currently
anticipates that it will incur future costs of less than $100,000 for additional
third-party vendors and other expenses to achieve Year 2000 readiness for its
information technology systems ("IT systems") excluding the Point System rating
algorithms previously discussed.
Equipment and systems other than IT systems could also be affected.
Such systems typically include built-in or "embedded" technology such as
microcontrollers. The Company has reviewed non-IT system issues relating to Year
2000 compliance. As a result, the Company believes there are no such issues
which might have a significant effect on the Company's operations as a result of
failure to be Year 2000 compliant.
The foregoing statements in this section are intended to be and are
hereby designated "Year 2000 Readiness Disclosure" statements within the meaning
of the Year 2000 Information and Readiness Disclosure Act.
RECENT ACCOUNTING PRONOUNCEMENTS. The Company is aware of several newly issued
accounting pronouncements which require adoption by the Company either in 1999
or 2000. These recent accounting pronouncements are more thoroughly discussed in
the accompanying notes to consolidated financial statements.
<PAGE> 10
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 including, but not limited to changes in interest rates;
changes in premium volumes; the frequency and severity of catastrophic events;
increased competition; regulatory and legislative changes; changes in loss
payment patterns; changes in estimated overall adequacy of loss and loss
adjustment expense reserves; changes in key management personnel; Year 2000
compliance problems; changes in general market or economic conditions; the
pending acquisition of the Company by United Fire & Casualty Company; and other
risk factors. 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, the factors that are disclosed in
conjunction with the forward-looking statements included herein and in other
public filings and releases by the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE MARKET RISK DISCLOSURES.
The Company's market risk disclosures set forth in the annual report on
Form 10K for the year ended December 31, 1998 have not changed significantly
during the quarter ended March 31, 1999.
<PAGE> 11
AMERICAN INDEMNITY FINANCIAL CORPORATION
AND SUBSIDIARIES
ITEM 6. (a) EXHIBIT 27 - FINANCIAL DATA SCHEDULE.
(b) REPORTS ON FORM 8-K
THE COMPANY FILED A REPORT ON FORM 8-K, DATED MARCH 9,
1999, REGARDING THE ANNOUNCEMENT THAT THE COMPANY AND
UNITED FIRE & CASUALTY COMPANY HAVE SIGNED A DEFINITIVE
AGREEMENT PROVIDING FOR UNITED FIRE'S ACQUISITION OF
AMERICAN INDEMNITY FINANCIAL CORPORATION.
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 MAY 12, 1999 /s/ PHILLIP E. APGAR
--------------------- -------------------------------------------------
PHILLIP E. APGAR
VICE PRESIDENT-TREASURER - CHIEF
FINANCIAL OFFICER
(PRINCIPAL FINANCIAL & ACCOUNTING OFFICER)
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<DEBT-HELD-FOR-SALE> 67,148,245
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 14,866,444
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 82,014,689
<CASH> 7,814,235
<RECOVER-REINSURE> 23,274,852
<DEFERRED-ACQUISITION> 8,845,048
<TOTAL-ASSETS> 149,984,846
<POLICY-LOSSES> 71,770,489
<UNEARNED-PREMIUMS> 30,264,606
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 317,310
0
0
<COMMON> 6,541,351
<OTHER-SE> 23,811,473
<TOTAL-LIABILITY-AND-EQUITY> 149,984,846
15,060,358
<INVESTMENT-INCOME> 1,102,188
<INVESTMENT-GAINS> 35,073
<OTHER-INCOME> 218,358
<BENEFITS> 11,180,789
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 5,916,818
<INCOME-PRETAX> (613,841)
<INCOME-TAX> 0
<INCOME-CONTINUING> (613,841)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (613,841)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> (.31)
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
