<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997 Commission file No. 0-6764
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Mobile America Corporation
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
FLORIDA 59-1218935
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
10475 Fortune Parkway Suite 110
Jacksonville, Florida 32256
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (904) 363-6339
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
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Securities Registered pursuant to Section 12(g) of the Act:
</TABLE>
Common Stock $.025 par value
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(Title of Class)
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(Title of Class)
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 2, 1998: $46,438,837
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Common Stock ($.025 Par value) outstanding at March 2, 1998: 7,167,834 Shares
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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
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
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PART 1
Item 1. Business
Introduction
Mobile America Corporation (the "Registrant"), through its two (2)
principal, wholly owned subsidiaries, Mobile America Insurance Group, Inc.
("MAIG"), a managing general agent for the Registrant's insurance company
subsidiaries, and Fortune Insurance Company ("Fortune"), a Florida domiciled
property and casualty insurance company, is engaged primarily in the
underwriting and marketing of minimum requirement automobile insurance in
Florida. This business has accounted for more than 80% of the Registrant's
consolidated revenues in each of the last five (5) years.
The Registrant's other significant wholly owned subsidiaries are as
follows:
Fortune Life Insurance Company ("Fortune Life"), an Arizona domiciled
company, is engaged in the business of writing life insurance coverage primarily
in Florida. Fortune Life is also licensed in Louisiana.
Pegasus Insurance Company ("Pegasus"), an Oklahoma domiciled property
and casualty insurance company, was acquired in 1993 to operate as an excess and
surplus lines insurer in Florida.
Fortune Financial Corporation ("Fortune Financial") acts as a servicing
provider for Fortune Insurance Company which is a servicing carrier for the
Florida Automobile Joint Underwriting Association (FAJUA) and a subcontractor,
through a third party arrangement, for the Florida Residential Property and
Casualty Joint Underwriting Association (FRPCJUA).
Big Gorilla, Inc., a licensed Florida premium finance company, provides
a policy financing source for MAIG's brokers.
Operations
The Registrant and its subsidiaries are primarily engaged in insurance
and insurance, related services with the bulk of the business being minimum
requirement automobile insurance coverages in the State of Florida. The
insurance operations of the Registrant generated gross insurance premiums earned
of $92.1 million during 1997. Insurance premiums earned, net of reinsurance
cessions, have increased from $40.4 million in 1996 to $44.3 million in 1997.
Automobile Insurance
During 1980, Fortune began to market automobile insurance, placing
emphasis on physical damage, personal injury protection, and in recent years,
property damage liability coverage in the private passenger automobile market.
Because of the nature of private passenger and commercial automobile insurance,
Fortune carefully monitors underwriting results in these lines. Fortune's
marketing and underwriting will strive to improve results and the Registrant
will continue to emphasize and actively market these lines. Total written
premium for all automobile lines totaled $80.7 million, with $75.6 million from
private passenger personal Injury protection and property damage liability
coverage.
Personal Property Insurance
The Registrant's property and casualty insurance subsidiaries, Fortune
and Pegasus, have continued to write homeowners and dwelling fire policies
throughout the State of Florida. As of December 31, 1997, these companies
insured nearly 9,700 property risks, with a total written premium for all
property lines of $6.5 million in 1997. Growth in this area is primarily related
to the expansion of excess and surplus lines business written through Pegasus.
The Registrant plans to be active in this line of business, however, extreme
caution will be exercised with respect to rates, profitability and the
competitive market.
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Commercial Lines
The Registrant's two property and casualty insurance subsidiaries also
write special multi-peril insurance on restaurants, small offices, businesses,
and churches, all in Florida. In 1997, gross earned premiums totaled
approximately $222,000.
Life Insurance
Fortune Life sells annual renewable term life insurance with limited
first year benefits. During 1997, total life insurance premium written was
$135,000.
Excess and Surplus Lines Insurance
During 1993, the Registrant purchased Pegasus which was subsequently
admitted on an excess and surplus lines basis in Florida during December 1993.
In September 1994, Pegasus marketed its first insurance program, a commercial
general liability (CGL) policy for artisan contractors. Pegasus wrote $133,000
in premiums in 1995 and has increased its premium writings to $1,858,000 in 1996
and $4,367,000 in 1997. This growth has been accomplished by expanding its
product line to include homeowners, mobile homeowners and commercial multi-peril
products.
Fee for Service Operations
During 1993, Fortune Financial was formed to act as a servicing
provider for Fortune which was selected as one of eight servicing carriers for
the FRPCJUA, the first residential underwriting association in the nation. This
association was formed to function as an insurance pool for individuals who,
because of Hurricane Andrew, either lost their homeowners insurance or could not
obtain homeowners insurance.
Since 1993, Fortune Financial has written in excess of $40 million in
premiums on approximately 45,000 policies for the FRPCJUA. As a servicing
provider, Fortune Financial underwrites and pays claims with no risk of loss
because the FRPCJUA provides the funds for claim payments. For providing this
service, Fortune Financial retains a percentage of the gross written premiums
generated from the policies it services. This agreement terminated during 1996
and is currently in runoff status. Fortune Financial continues to service
policies in force. In June 1996, Fortune Financial entered into an agreement to
act as a subcontractor for Policy Management Systems Corporation (PMSC) with
responsibility for processing FRPCJUA policies. For providing this service,
Fortune Financial retains a percentage of the gross written premiums (less
catastrophe premiums) generated from policies it services. As of year-end,
Fortune Financial has written in excess of $20.1 million in premiums on 23,000
policies under the June 1996 agreement. In October 1997, the FRPCJUA extended
this contract through March 1999.
In October 1997, the Registrant was awarded a three year contract by
the FAJUA, effective January 1,1998. Fortune Financial has been servicing this
business since October of 1994. During the first two months of 1998 the
registrant has processed approximately 2,350 policies with a total written
premium volume of over $1.7 million.
While it is impossible to predict with certainty, service fees
generated from these new contracts could be as much as $14 million.
In November 1994, Fortune was selected by the Federal Insurance
Administration to be a producer of the Federal Government's Write Your Own Flood
Program. Fortune has written $294,000 in gross premium during 1997.
Premium Finance
The Registrant's premium finance company subsidiary, now entering it's
fifth year in the Premium Finance business, will provide some 300 broker agents
a source for financing their policy premiums. During 1997, the subsidiary
financed nearly 15,200 policies and thus far in 1998, is writing about 1,434
contracts per month. The subsidiary is planning for significant growth in this
area since 95% of Fortune's and Pegasus' insureds utilize this method of
financing.
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Financial Information about Industry Segments
The financial information regarding the Registrant's Industry segments
presented in Note 10 of Notes to Consolidated Financial Statements for the three
years ended December 31, 1997, is incorporated herein by reference.
Competitive Conditions
The insurance industry is a highly competitive industry. Certain of the
Registrant's competitors have been in the business longer, have a larger volume
of business and have substantially greater financial resources than the
Registrant. Since the Registrant's insurance operations are modest compared to
several of its significant competitors (the Registrant employed 288 people at
year-end), management is continuing to focus its marketing and other operations
on specialized insurance coverages. Additionally, since the Registrant's
insurance subsidiaries transact their business in a heavily regulated industry,
they are sensitive to both adverse legislation and administrative directives.
Loss and Loss Adjustment Expense Reserves
Reserves for unpaid claims and adjustment expenses are maintained to
cover the probable ultimate cost of settling all losses incurred, including
those not yet reported. Reserves for losses incurred in prior years may be
adjusted by review or by payment which could result in either a redundancy or
deficiency to the reserve reported at the end of the prior year. Such changes
are reflected in current operations.
The Registrant's insurance subsidiaries have entered into several
reinsurance agreements covering specific lines of business, which provide
reinsurance protection on a quota share or excess of loss basis.
Adverse loss and loss adjustment expense development is generally
experienced in liability lines where settlements may not be reached until
several years following the initial claim. Claims adjustment costs consisting
primarily of legal expenses, are traditionally high on these particular losses.
The following tables present loss and loss adjustment expenses on a
paid and incurred basis for the past three one year periods, and development of
losses and loss adjustment expenses over the past ten years, all net of
reinsurance.
<TABLE>
<CAPTION>
Losses and Loss Adjustment Expenses
Unpaid Incurred Related to Payments Related to Unpaid
Beginning Current Prior Total Current Prior End of
of Year Year Year Incurred Year Year Year
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<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
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$20,040,739 $35,706,903 $(2,736,845) $32,970,058 $23,961,413 $13,143,680 $15,905,704
Year ended December 31, 1996:
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$20,808,027 $27,215,881 $(3,390,000) $23,825,881 $15,428,840 $9,164,329 $20,040,739
Year ended December 31, 1995:
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$19,103,286 $30,737,734 $ 188,772 $30,926,506 $15,949,259 $13,272,506 $20,808,027
</TABLE>
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<TABLE>
<CAPTION>
Analysis of Loss and Loss Adjustment Expense Development
(In Thousands)
Year Ended December 31, 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Liability for Unpaid Losses
And Loss Adjustment
Expenses $7,194 $7,981 $13,577 $14,996 $14,906 $17,207 $19,410 $19,103 $20,808 $20,041 $15,906
Paid (Cumulative) As of:
End of Year -- -- -- -- -- -- -- -- -- -- --
One Year Later 3,275 3,792 6,311 8,583 6,245 13,306 13,641 13,273 9,164 13,143
Two Years Later 4,525 4,528 8,854 10,899 11,806 15,520 16,292 17,601 13,361
Three Years Later 4,419 5,173 9,772 11,918 12,380 16,355 17,912 19,809
Four Years Later 4,671 5,459 10,297 12,170 12,783 16,856 18,782
Five Years Later 4,820 5,603 10,390 12,313 12,939 17,175
Six Years Later 4,872 5,632 10,455 12,373 13,083
Seven Years Later 4,891 5,636 10,496 12,445
Eight Years Later 4,891 5,661 10,565
Nine Years Later 4,917 5,720
Ten Years Later 4,917
Liability Reestimated as of:
End of Year 7,194 7,981 13,577 14,996 14,906 17,207 19,410 19,103 20,808 20,041 15,906
One Year Later 6,108 7,090 10,173 12,653 12,434 16,488 19,392 19,292 16,485 17,304
Two Years Later 5,901 5,555 10,496 12,203 12,916 17,507 18,856 21,027 16,732
Three Years Later 4,925 5,674 10,204 12,332 13,111 17,235 19,458 20,799
Four Years Later 4,922 5,605 10,396 12,382 13,009 17,414 19,339
Five Years Later 4,879 5,626 10,464 12,373 13,190 17,528
Six Years Later 4,891 5,675 10,487 12,517 13,388
Seven Years Later 4,924 5,655 10,628 12,731
Eight Years Later 4,910 5,788 10,832
Nine Years Later 5,044 5,982
Ten Years Later 5,179
Redundancy (Deficiency) 2,015 1,999 2,745 2,283 1,518 (321) 71 (1,696) 4,076 2,737
</TABLE>
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Item 2. Properties
The executive and general offices of the Registrant and its subsidiaries,
consisting of approximately 22,915 square feet, are located at 10475 Fortune
Parkway, Suite 110, Jacksonville, Florida. In 1997 the Registrant exercised a
renewal option extending the term of the lease on this space to 2002. Annual
lease payments range from $207,839 to $231,442 in the final year of the lease.
In 1997, the Registrant expanded its facilities by leasing approximate
7,500 square feet for its personal property, excess and surplus lines and fee
for service processing. Annual lease payments range from $58,155 to $61,445 over
a three year period.
The Registrant's subsidiaries, Fortune Insurance Company and Fortune
Life Insurance Company own property in Jacksonville, Florida for which there are
no definite plans for development at this time. Fortune Insurance Company
purchased land in 1987 and 1986 for $165,000 and $140,000 respectively. During
1982, Fortune Life Insurance Company purchased land and a building for $88,000.
In 1996 the Registrant purchased land and a building in Jacksonville, Florida
for $167,000. This facility serves as off-sight storage.
Item 3. Legal Proceedings
The Registrant, through its subsidiaries, is routinely a party to
pending or threatened legal proceedings and arbitrations. These proceedings may
include claims for punitive damages in addition to other specified relief. Based
upon information currently available, and in light of legal and other defenses
available to the Registrant and its subsidiaries, management does not consider
liability from threatened or pending litigation to be material.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.
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PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Market Information
The Registrant's common stock is traded on the NASDAQ Stock Market under
the symbol MAME.
The following table shows the range of high and low sale quotations for
the Registrant's common stock for each of the last eight quarters ended December
31, 1997, as obtained from the National Association of Securities Dealers.
<TABLE>
<CAPTION>
Quarterly Period Ended
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High Low
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<S> <C> <C>
March 31, 1996 $ 11.75 $ 10.75
June 30, 1996 11.75 11.00
September 30, 1996 10.88 9.75
December 31, 1996 10.50 8.88
March 31, 1997 11.85 9.13
June 30, 1997 11.75 9.78
September 30, 1997 10.50 9.38
December 31, 1997 14.75 9.63
</TABLE>
Holders
At March 2, 1997, the Registrant had 394 record holders of its common
stock.
Dividends (adjusted for stock dividends)
In January, 1993 the Registrant declared and paid a dividend of $.29 per
share on each of its shares of $.025 par value common stock.
In September, 1993 the Registrant declared and paid a dividend of $.09
per share on each of its shares of $.025 par value common stock.
In January, 1994 the Registrant declared and paid a dividend of $.18 per
share on each of its shares of $.025 par value common stock.
In January, 1995 the Registrant declared and paid a dividend of $.16 per
share on each of its shares of $.025 par value common stock.
In January, 1996 the Registrant declared and paid a dividend of $.30 per
share on each of its shares of $.025 par value common stock.
In January, 1997 the Registrant declared and paid a dividend of $.35 per
share on each of its shares of $.025 par value common stock.
In January, 1998 the Registrant declared and paid a dividend of $.35 per
share on each of its shares of $.025 par value common stock.
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Item 6. Selected Financial Data
Mobile America Corporation & Subsidiaries
Years Ended December 31, 1997, 1996, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
Total Revenues $ 58,810,207 48,163,935 52,925,874 43,767,330 50,300,201
Net Income $ 6,175,796 7,571,392 5,999,694 4,048,446 4,565,307
Basic and diluted earnings per share $ 0.86 1.05 0.84 0.56 0.63
Total Assets at Year-End $138,242,138 168,414,452 182,771,162 143,815,295 134,939,579
Long-Term Obligations $ 12,000,000 12,000,000 12,000,000 0 0
Cash Dividends Per Common Share $ 0.35 0.30 0.16 0.18 0.38
</TABLE>
Earnings per share and cash dividends per share amounts have been
restated to conform with stock dividends and splits.
Earnings per share amounts are presented in conformity with
Statement of Financial Accounting Standards No. 128.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations 1997 Compared to 1996
Operations
Income before provision for income taxes decreased 1.3% in 1997 to $8,867,896
compared to $8,986,164 reported in 1996 primarily due to increased earned
premium and lower acquisition costs being offset by reduced service fee income
and higher salaries, wages and general and administrative costs. Net income
decreased 18.4% in 1997 to $6,175,796 compared to $7,571,392 reported in 1996
principally due to a nonrecurring tax benefit resulting from the release of a
valuation allowance and the recognition of income tax credits during 1996.
Total consolidated revenues, exclusive of state mandated automobile assigned
risk pool business, increased 3.9% from $57,836,017 in 1996 to $58,921,414 in
1997. Overall, total consolidated revenues increased 22.1% to $58,810,207 during
1997 from $48,163,935 for 1996. This change was influenced by an increase in
insurance premiums earned (which was adversely effected by adjustments to state
mandated assigned risk pool business in 1996), offset by a decline in service
fees earned and lower net investment income.
Insurance premiums earned, exclusive of state mandated automobile assigned risk
pool business, increased 9.7% during 1997 due primarily to a 55.6% increase in
property earned premium and a 6.7% increase in private passenger automobile
personal injury protection/property damage earned premium. Overall insurance
premiums earned increased 43.9% after giving effect to business associated with
the state mandated automobile assigned risk pool.
Direct written premium in the Registrant's automobile lines decreased 10% in
1997 to $80,727,841 reflecting a decrease in market share as a result of rate
increases instituted in December 1996 and increased competition in the market
place. The Registrant believes premium volume may increase if competitors adjust
their premium rates to offset the impact of adverse loss experience. The
Registrant has taken steps, with the March 1998 rate revision, to exploit
pockets of opportunity resulting in the establishment of new territories, more
competitive rates and a revised commission structure.
Property insurance direct written premium produced through the Registrant's
surplus lines insurance subsidiary increased 135% in 1997 to $4,367,466. The
Registrant plans to remain active in this market.
Service fees earned declined 18.6% in 1997 to $8,957,080 compared to $11,001,222
reported in 1996. This decrease is the result of lower fee-for-service revenue
due to the cancellation of certain service agreements with the FRPCJUA during
the second quarter of 1996. In the fourth quarter of 1997, the Registrant was
awarded a three year servicing contract by the FAJUA, effective January 1, 1998.
In November 1997, the FRPCJUA extended a major servicing contract through March
1999. While it is impossible to predict with certainty, service fees generated
over the life of these contracts could be as much as $14,000,000.
Investment income decreased 9.2% in 1997 due to lower available rates and the
utilization of cash to meet the maturation of prior years loss costs.
Total consolidated expenses, exclusive of state mandated automobile assigned
risk pools, increased 3.7% from $48,385,265 during 1996 to $50,173,849 during
1997. Overall, total consolidated expenses increased 27.5% from $39,177,771 in
1996 to $49,942,311 in 1997, primarily due to losses and expenses associated
with assigned risk pool business.
Loss and loss adjustment expenses incurred increased 5.0% during 1997 over 1996,
exclusive of assigned risk pool business, for all lines of business written by
the Registrant's insurance company subsidiaries. However, substantially all of
this increase is attributable to the minimum limits automobile personal injury
protection line of business. Loss and loss adjustment expenses incurred as a
percentage of earned premium were 81.3% in 1995, 78.2% in 1996 and 74.8% in
1997, in each case, exclusive of assigned risk pool business. In its efforts to
reduce loss and loss adjustment expenses incurred, as it relates to earned
premium, the Registrant initiated a significant rate increase in the minimum
limits personal injury protection line of business in the fourth quarters of
1995 and 1996. The Registrant will introduce a new rate increase in March 1998.
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1997 Compared to 1996 (continued)
Due to the inherent uncertainty in estimating reserves for losses and loss
adjustment expenses, which are estimates of the amounts necessary to settle
reported and unreported claims and their related loss adjustment expenses, there
can be no assurance that the ultimate liability will not exceed the amounts
reserved, resulting in an adverse effect on the Registrant. At year end 1997,
the Registrant's loss and loss adjustment expense reserves were at the lower end
of a range which the Registrant's independent actuary deems appropriate. The
Registrant believes its current reserves are adequate. The Registrant's
independent actuary's range of reasonable direct reserve estimates as of
December 31, 1997 is between $31.8 million and $43.0 million and net of
reinsurance recoveries the reserve range is between $15.1 million to $20.5
million.
The loss and loss adjustment expense experienced on the business which the
Registrant originates and cedes to its reinsurers may also adversely affect the
Registrant's profitability in the future. The Registrant decreased the ceding
percentage from 70% to 60% on certain lines effective January 1, 1996. The
Registrant will increase the ceding percentage to 75% in 1998, taking advantage
of reduced reinsurance costs. If the Registrant's ratio of loss and loss
adjustment expenses to earned premium deteriorates, it is likely that over time,
the Registrant's cost of reinsurance would increase, and it is possible that at
some future point the Registrant could not obtain reinsurance on economically
viable terms.
Policy acquisition costs decreased 13.5% during 1997 due principally to a
reduction in direct premium volume. Salary and wages increased 10.3% due to the
hiring of a number of key personnel to help manage the Registrant into the next
century. This included a senior vice president of claims, a vice president of
information systems and a vice president of human resources.
Financial Position, Liquidity and Capital Resources
Net cash flow from operations was negative in 1997 as loss and loss adjustment
expense payments and consolidated operating expense payments exceeded premiums,
fees and investment revenues. The Registrant put forth a concerted effort in
1997 to settle outstanding claims, thereby reducing the number of claims
outstanding in the minimum limits automobile personal injury protection line of
business. This process accelerated loss payments contributing to the negative
cash flow the Registrant experienced. The Registrant believes this practice will
improve overall loss and loss expense experience by reducing ultimate loss
settlement costs and litigation expenses. The Registrant's practice of
maintaining a highly liquid investment portfolio allowed the Registrant to meet
cash demands with no adverse impact on operating performance. The Registrant is
optimistic that cash flow will improve as rate increases take effect and the
settlement of losses returns to a more normal pattern.
In January 1998, the Registrant is scheduled to begin making principal payments
on the $12,000,000 note payable. Payments of $600,000 plus accrued interest are
due quarterly with the entire unpaid balance due October 2002.
The Registrant is in the process of purchasing a new computer system to meet the
year 2000 transition and provide support for a growing business. The Registrant
has budgeted $1.4 million for this project. The new computer system will allow
the Registrant to process more business in-house eliminating the costs of using
third party providers as well as providing cost saving opportunities on the
Registrant's core business.
In prior years, certain computer programs were written using two digits rather
than four to define the applicable year. These programs were written without
considering the impact of the upcoming change in the century and may experience
problems handling dates beyond the year 1999. This could cause computer
applications to fail or create erroneous results unless corrective measures are
taken. Incomplete or untimely resolution of the Year 2000 issue could have a
material adverse impact on the Registrant's business, operations or financial
condition in the future. However, with the number of options available in the
form of software solutions, the Year 2000 issue should not pose a significant
problem to the Registrant.
On June 10, 1997, the Registrant issued 924,018 shares of common stock pursuant
to a 15% stock dividend on its $.025 par value common stock, effective for
shareholders of record on June 23, 1997. Earnings per share and dividend per
share amounts have been adjusted to reflect this stock dividend.
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<PAGE> 11
1997 Compared to 1996 (continued)
The Registrant paid an annual dividend of $.35 per share on February 3, 1998 to
shareholders of record on January 20, 1998. The dividend payment totaled
$2,526,724.
The Registrant maintains sufficient liquidity to meet operational needs. Cash
dividend, capital expenditure and operating requirements will be provided by
operations and investment activities. The investment policy continues to
emphasize higher quality securities matched closely with the short liability
duration.
Forward-Looking Statements
This Form 10-K contains certain forward-looking statements within the meaning of
section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements are deemed by the Registrant to be covered by and to
qualify for safe harbor protection provided by the Private Securities Litigation
Reform Act of 1995. These forward-looking statements relate to, among other
things, (a) the expected benefits from (i) the award of a three year servicing
contract by the Florida Automobile Joint Underwriting Association, and (ii) the
extension of a service contract by the Florida Residential Property and Casualty
Joint Underwriting Association, and (b) the improvement of cash flow as a result
of rate increases and a return to a more normal pattern of loss settlements.
Such statements reflect the current views of the Registrant and are subject to
certain risks and uncertainties that include, but are not limited to, obtaining
policy volume service levels under the Joint Underwriting Association service
contracts, continued market acceptance of premium rate increases in the
automobile minimum limits personal injury protection line of business and
adequacy of loss reserves. The Registrant disclaims any intent or obligation to
update publicly these forward-looking statements, whether as a result of new
information, future events or otherwise.
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<PAGE> 12
1996 Compared to 1995
Operations
Total consolidated revenues, exclusive of state mandated automobile assigned
risk pool business, increased 18% from $48,917,912 in 1995 to $57,836,017 in
1996. Overall, total consolidated revenues decreased 9% to $48,163,935 during
1996 from $52,925,874 for 1995.
Insurance premiums, exclusive of state mandated automobile assigned risk pool
business, increased 20% during 1996 due primarily to an increase in automobile
personal injury protection and property damage rates initiated in September and
October 1995 as well as the continued earning of premiums at a lower reinsurance
cession rate. Overall insurance premiums decreased 19% as a result of an
amendment of premiums assumed from the state mandated automobile assigned risk
pool. This amendment resulted in no material effect on net income.
Service fees earned during 1996 increased 28% over 1995 due to increases in the
number of policies administered for the FAJUA and FRPCJUA/PMSC, fees earned on
business produced by the Registrant's managing general agency subsidiary and
continued growth in the number of policies financed by the Registrant's premium
financing subsidiary. Investment income increased 7% from $5,562,074 for 1995 to
$5,935,194 in 1996. This increase is attributable to an increase in interest
rates on taxable fixed assets combined with a repositioning of securities from
tax exempt to taxable investments in the Registrant's principal property and
casualty insurance subsidiary. Net realized gains on the sale of investments
increased 107% from $252,153 in 1995 to $521,995 in 1996.
Total consolidated expenses, exclusive of state mandated automobile assigned
risk pools, increased 20% from $40,429,009 during 1995 to $48,385,265 during
1996. Overall, total consolidated expenses decreased 12% from $44,340,175 in
1995 to $39,177,771 in 1996.
The reserves for loss and loss adjustment expenses established by the insurance
subsidiaries of the Registrant are estimates of the amounts necessary to settle
reported and unreported claims and their related loss adjustment expenses. Loss
and loss adjustment expenses increased 15% during 1996 over 1995. This increase
is principally due to continued strengthening of the Registrant's property and
casualty insurance company subsidiary's loss and loss adjustment expense
reserves relating to the minimum limits automobile personal injury protection
line of business. Policy acquisition costs increased significantly due
principally to reduced ceding commission rates. Total consolidated expenses,
including the state mandated automobile assigned risk pool, decreased 12% as a
result of an amendment of losses assumed from the state mandated automobile
assigned risk pool. Interest payments due on the Note have to date been
generated from the proceeds of the $12,000,000 loan which was consummated in the
fourth quarter 1995.
Loss and loss adjustment expenses as a percentage of earned premium were 77.0%
in 1994, 81.6% in 1995 and 72.8% in 1996. The Registrant believes that its
current reserves are adequate and proper. However, additional reserve increases
may be required in the future. In it's efforts to reduce loss and loss
adjustment expenses, as it relates to earned premium, the Registrant initiated a
significant rate increase in the minimum limits personal injury protection line
of business during the fourth quarter 1996. This increase follows closely behind
a similar sized rate increase in the fourth quarter 1995. Due to the inherent
uncertainty in estimating reserves for losses and loss adjustment expenses there
can be no assurance that the ultimate liability will not exceed the amounts
reserved, resulting in an adverse effect on the Registrant. At year end 1996,
the Registrant's loss and loss adjustment expense reserves were at the lower end
of a range which the Registrant's independent actuary deems appropriate.
The increasing loss and loss adjustment expense experienced on the business
which the Registrant originates and cedes to its reinsurers may also adversely
affect the Registrant's profitability in the future. In an effort to reduce it's
reliance on reinsurance, the Registrant decreased the ceding percentage from 70%
to 60% on certain lines effective January 1, 1996.
II-6
<PAGE> 13
1996 Compared to 1995 (continued)
Financial Condition
Cash dividend and capital expenditure requirements continue to be provided by
funds generated from operations. The Registrant maintains sufficient liquidity
to meet operational needs. The Registrant's investment policy continues to
emphasize high quality securities matched closely with the Registrant's short
liability duration.
Net cash flow from operations was negative in 1996 as loss and loss adjustment
expense payments and consolidated operating expense payments exceeded premium
and investment revenues. Such negative cash flow resulted in part from poor loss
development in the minimum limit automobile personal injury protection line of
business for the years prior to 1996. The Registrant's practice of maintaining a
highly liquid investment portfolio allowed the Registrant to meet cash demands
with no adverse impact on operating performance.
II-7
<PAGE> 14
<TABLE>
<CAPTION>
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
<S> <C> <C>
Index to Financial Statements and Supplementary Data
Report of Independent Certified Public Accountants II-9
Consolidated Balance Sheets, December 31, 1997 and 1996 II-10
Consolidated Statements of Operations II-11
Years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows II-12
Years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Changes in Stockholders' Equity II-13
Years ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements II-14-37
Item 9. Disagreements on Accounting and Financial Disclosure
- -------------------------------------------------------------
None.
</TABLE>
II-8
<PAGE> 15
Report of Independent Certified Public Accountants
To the Board of Directors
and Stockholders
Mobile America Corporation
Jacksonville, Florida
We have audited the accompanying consolidated balance sheets of Mobile
America Corporation and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements and schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Mobile
America Corporation and Subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the accompanying
Index in Item 14(a)2 of this Form 10-K are presented for purposes of complying
with the Securities and Exchange Commission's rules and are not part of the
basic financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
CHERRY, BEKAERT & HOLLAND, L.L.P.
Orlando, Florida
March 27, 1998
II-9
<PAGE> 16
Mobile America Corporation and Subsidiaries
Consolidated Balance Sheets
December 31, 1997 and 1996
<TABLE>
<CAPTION>
Assets 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments:
Securities held to maturity
at amortized cost (fair value
$43,511,416 and $48,991,063) $ 43,620,417 $ 49,094,824
Securities available for sale at fair value
(amortized cost $30,557,149
and $38,651,393) 30,676,634 38,955,502
Short-term investments 16,940,962 22,231,475
------------- -------------
Total investments 91,238,013 110,281,801
------------- -------------
Cash 4,518,020 1,802,644
Receivables:
Insurance premiums 3,324,666 3,916,439
Accrued investment income 1,181,450 1,601,798
Reinsurance on paid losses 100,486 31,935
Reinsurance recoverable 17,720,613 27,638,632
Current Income taxes 384,568 327,551
------------- -------------
Total receivables 22,711,783 33,516,355
------------- -------------
Deferred income tax 1,581,487 2,043,257
Prepaid reinsurance premiums 16,752,315 20,347,436
Deferred policy acquisition costs (2,047,989) (2,734,995)
Property and Equipment:
Land, at cost 524,043 524,043
Equipment and leasehold improvements
at cost less accumulated
depreciation and amortization of
$2,219,088 and $2,077,991 1,029,640 547,663
------------- -------------
Total property and equipment: 1,553,683 1,071,706
------------- -------------
Equity in pools and associations 996,160 1,185,843
Other assets 938,666 900,405
------------- -------------
$ 138,242,138 $ 168,414,452
============= =============
Liabilities and Stockholders' Equity 1997 1996
- --------------------------------------------------------------------------------------------------------
Insurance loss reserves, including
future policy benefits $ 33,643,295 $ 47,695,655
Unearned premium 32,893,437 38,118,629
Reinsurance funds withheld and
balances payable 7,001,015 17,353,367
Accrued expenses and other liabilities 12,409,880 15,636,751
Deferred income tax on net unrealized gains on
securities available for sale 40,625 103,397
Unearned service fees 568,215 1,329,632
Note payable 12,000,000 12,000,000
------------- -------------
Total liabilities 98,556,467 132,237,431
------------- -------------
Stockholders' equity:
Common stock, $.025 par value per share
Authorized - 18,000,000 shares
Issued - 7,644,414 shares and 6,720,396 shares 191,110 168,010
Preferred stock, $.10 par value per share
Authorized - 500,000 shares
Issued and outstanding - none 0 0
Capital in excess of par value 4,348,842 2,729,588
Net unrealized appreciation on securities
available for sale net of deferred
income taxes 78,861 200,712
Treasury stock at cost, 476,580 and
465,356 shares (1,229,403) (510,122)
Retained earnings 36,296,261 33,588,833
------------- -------------
Total stockholders' equity 39,685,671 36,177,021
------------- -------------
$ 138,242,138 $ 168,414,452
============= =============
</TABLE>
See notes to consolidated financial statements.
II-10
<PAGE> 17
Mobile America Corporation and Subsidiaries
Consolidated Statements of Operations
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------
<S> <C> <C> <C>
Revenues:
Insurance premiums earned net of
premiums ceded of $48,192,318,
$52,488,683 and $56,949,921 $ 44,282,566 $ 40,363,615 $33,634,884
Insurance premiums earned, pools and associations
net of premium ceded of $(278,099), $(6,296,113)
and $8,129,228 (111,207) (9,672,082) 4,007,962
Service fees earned 8,957,080 11,001,222 8,624,931
Investment income 5,390,681 5,935,194 5,562,074
Equipment rentals 0 1,520 67,510
Other 27,376 12,471 670,876
Sales of modular office equipment 0 0 105,484
Net realized gains on investments 263,711 521,995 252,153
------------------------------------------------
Total revenues 58,810,207 48,163,935 52,925,874
------------------------------------------------
Expenses:
Losses and loss adjustment expenses, net of
reinsurance recoveries of $39,290,318,
$45,237,935 and $52,018,005 33,107,714 31,545,501 27,367,484
Losses and expenses incurred pools and
associations net of reinsurance recoveries
of $(251,630), $(7,267,588) and $7,594,490 (231,538) (9,207,494) 3,911,166
Policy acquisition costs 2,295,965 2,653,599 311,980
Salaries and wages 7,454,778 6,756,416 5,478,820
General and administrative 6,301,231 6,423,989 7,114,350
Interest on note 1,014,161 1,005,760 156,375
------------------------------------------------
Total expenses 49,942,311 39,177,771 44,340,175
------------------------------------------------
Income before provision for income taxes 8,867,896 8,986,164 8,585,699
------------------------------------------------
Provision and (benefit) for income taxes:
Current 2,230,330 2,698,004 2,268,942
Deferred 461,770 (1,283,232) 317,063
------------------------------------------------
Total provision for income taxes 2,692,100 1,414,772 2,586,005
------------------------------------------------
Net income $ 6,175,796 $ 7,571,392 $ 5,999,694
================================================
Basic and diluted earnings per share:
Net income $ 0.86 $ 1.05 $ 0.84
================================================
Weighted average number of shares of common
stock outstanding 7,148,471 7,179,058 7,184,058
================================================
</TABLE>
See notes to consolidated financial statements.
II-11
<PAGE> 18
Mobile America Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 6,175,796 $ 7,571,392 $ 5,999,694
Adjustments to reconcile net income to
net cash provided (used) in operating activities:
Provision for depreciation 161,611 200,882 231,449
Gain on sale of investments (263,711) (521,995) (252,153)
Change in assets and liabilities:
Insurance premium receivable 781,455 2,373,767 (2,685,929)
Accrued investment income 420,348 369,558 (510,784)
Deferred policy acquisition costs (687,006) (1,474,845) 434,862
Prepaid expenses and other assets (38,260) (346,401) (425,275)
Insurance loss reserves (14,052,360) (6,950,031) 10,695,217
Unearned premium (5,225,192) (1,416,520) 4,895,469
Reinsurance funds held and balances payable (10,352,352) (8,767,138) (2,941,367)
Accrued expenses (3,226,871) (2,311) 6,287,984
Current income taxes (57,017) (879,419) 730,281
Deferred income taxes recoverable 461,770 (1,283,232) (152,627)
Prepaid reinsurance premium 3,595,121 3,913,258 (1,848,366)
Reinsurance recoverable 9,849,468 6,151,559 (8,989,725)
Unearned service fees (761,417) (1,281,270) 1,412,997
------------------------------------------------
Net cash provided (used) in operating activities
(13,218,617) (2,342,746) 12,881,727
------------------------------------------------
Cash Flows from Investing Activities:
Net change in short term investments 5,290,513 238,839 (8,100,504)
Purchase of investments (9,547,210) (32,924,649) (41,507,462)
Proceeds from sale and maturity of investments 23,472,111 32,817,300 27,029,634
Purchase of property and equipment (643,588) (282,162) (135,362)
Sale of modular offices and equipment 0 0 10,442
Notes receivable 0 2,491 2,362
------------------------------------------------
Net cash provided (used) in investing activities 18,571,826 (148,181) (22,700,890)
------------------------------------------------
Cash Flows from Financing Activities:
Purchase, sale of treasury stock, net (162,754) (45,650) (32,503)
Dividends paid to stockholders (2,474,416) (2,171,236) (1,117,776)
Stock dividend, fractional shares (663) 0 0
Proceeds from note payable 0 0 12,000,000
------------------------------------------------
Net cash provided by (used in)
financing activities (2,637,833) (2,216,886) 10,849,721
------------------------------------------------
Net increase (decrease) in cash 2,715,376 (4,707,813) 1,030,558
Cash, beginning of year
1,802,644 6,510,457 5,479,899
------------------------------------------------
Cash, end of year $ 4,518,020 $ 1,802,644 $ 6,510,457
================================================
</TABLE>
See notes to consolidated financial statements.
II-12
<PAGE> 19
Mobile America Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------
<S> <C> <C> <C>
Common stock:
Balance beginning of year $ 168,010 $ 168,010 $ 168,010
Stock dividend 23,100 0 0
------------------------------------------------
Balance end of year 191,110 168,010 168,010
------------------------------------------------
Preferred stock:
No change during year 0 0 0
------------------------------------------------
Capital in excess of par value:
Balance beginning of year 2,729,588 2,686,060 2,686,060
Stock dividend 970,219 0 0
Sale of treasury stock 556,527 43,528 0
Deferred compensation 92,508 0 0
------------------------------------------------
Balance end of year 4,348,842 2,729,588 2,686,060
------------------------------------------------
Net unrealized appreciation on securities
available for sale:
Balance beginning of year 200,712 691,185 0
Increase (decrease) (184,623) (742,076) 1,046,185
Deferred taxes 62,772 251,603 (355,000)
------------------------------------------------
Balance end of year 78,861 200,712 691,185
------------------------------------------------
Net unrealized investment gains (losses)
on equity securities:
Balance beginning of year 0 0 (158,099)
Increase (decrease) 0 0 158,099
------------------------------------------------
Balance end of year 0 0 0
------------------------------------------------
Treasury stock:
Balance beginning of year (510,122) (420,944) (388,441)
Purchases of 86,224, 10,000 and 4,000 shares (912,754) (93,750) (32,503)
Sale of 75,000, 5,000 and 0 shares 193,473 4,572 0
------------------------------------------------
Balance end of year (1,229,403) (510,122) (420,944)
------------------------------------------------
Retained earnings:
Balance beginning of year 33,588,833 28,188,679 23,306,761
Net income 6,175,796 7,571,392 5,999,694
Cash dividends $.35, $.30 and $.16 per share (2,474,416) (2,171,238) (1,117,776)
Stock dividend (993,952) 0 0
------------------------------------------------
Balance end of year 36,296,261 33,588,833 28,188,679
------------------------------------------------
Total stockholders' equity end of year $ 39,685,671 $ 36,177,021 $31,312,990
================================================
</TABLE>
See notes to consolidated financial statements.
II-13
<PAGE> 20
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
(a) Basis of Financial Statement Presentation
The consolidated financial statements have been prepared on the basis of
generally accepted accounting principles which vary from statutory reporting
practices prescribed or permitted for insurance companies by regulatory
authorities.
(b) Principles of Consolidation
The accompanying consolidated financial statements include Mobile
America Corporation (the Company) and its subsidiaries, including Fortune
Insurance Company (Fortune), Pegasus Insurance Company (Pegasus), both property
and casualty insurers and Fortune Life Insurance Company (Fortune Life), all of
which are wholly-owned. All significant intercompany transactions have been
eliminated in consolidation.
(c) Nature of Operations
The Company is a publicly held holding company providing property and
casualty insurance, life insurance, insurance administrative services to various
state underwriting associations on a fee for service basis and premium
financing. The Company is principally involved in writing personal lines
automobile insurance in Florida.
(d) Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
(e) Method for Valuing Investments
The Company classifies all of its fixed maturities and equity securities
as either available-for-sale or held- to-maturity. Fixed maturities
held-to-maturity consist of certain bonds, presented at amortized cost, that
management intends and has the ability to hold to maturity. Fixed maturities
available-for-sale consist of bonds, presented at fair value, that management
may not hold until maturity. Equity securities available-for-sale are comprised
of common and preferred stock which are carried at fair value. Unrealized gains
or losses on investments classified as available-for-sale, net of deferred
income taxes, are included as a separate component of stockholders' equity. Fair
values are based on quoted market prices or dealer quotes, if available. If a
quoted
II-14
<PAGE> 21
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies (continued)
market price is not available, fair value is estimated using quoted market
prices for similar securities.
Realized gains and losses on sale of fixed maturities and equity
securities are determined on the specific identification basis using amortized
cost for fixed maturities and cost for equity securities. Any gains and losses
are reflected in the accompanying statements of operations.
(f) Cash and Short-term Investments
For purposes of the consolidated statement of cash flows, cash includes
balances in bank deposit accounts maintained with high credit quality financial
institutions. Short-term investments are stated at cost, and consist primarily
of certificates of deposits, money market accounts, commercial paper and
repurchase agreements. For purposes of the consolidated statement of cash flows,
the Company does not consider short-term investments to be cash equivalents as
they generally have original maturities in excess of three months.
(g) Financial Instruments
In the normal course of business, the Company enters into transactions
involving various financial instruments, including debt, investments such as
fixed maturities, and equity securities. These instruments involve credit risk
and also may be subject to risk of loss due to interest rate fluctuations. The
Company evaluates and monitors each financial instrument to minimize the risk of
loss.
(h) Deferred Policy Acquisition Costs
The costs, primarily commissions, associated with acquiring new
insurance contracts have been deferred. Such costs are being amortized to income
as premiums are earned or over the contracts premium paying period.
(i) Property and Equipment
Property and equipment is carried at cost and is depreciated principally
under the straight-line method over the estimated useful lives of the respective
assets. Maintenance and repairs are charged to expenses as incurred; additions
and major betterments are capitalized and depreciated. Upon retirement or
disposal of assets, the accounts are relieved of the cost and the related
accumulated depreciation and any gains or losses are reflected in the
consolidated statements of operations.
II-15
<PAGE> 22
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies (continued)
(j) Insurance Contracts
The insurance contracts accounted for in these financial statements
include both short-duration contracts and long-duration contracts.
Short-duration contracts provide insurance protection for a fixed period of
short-duration, usually six months to one year, and enable the insurer to
cancel the contract or to adjust the provisions at the end of any contract
period. Most property-liability insurance contracts and certain term life
insurance contracts are short-term and generally are not subject to unilateral
changes in their provisions and require the performance of various functions and
services, including insurance protection, for the contract term. Long-duration
contracts include whole-life contracts and guaranteed renewable term life
contracts. The Company has not issued participating policies.
(k) Insurance Loss Reserves
The liabilities for unpaid claims of property-liability contracts and
related adjustment expenses are determined using case basis evaluations and
statistical analysis and represent estimates of the ultimate net cost of all
reported and unreported claims relating to insured events which are unpaid at
year-end. The liabilities include estimates of future trends in claims severity
and frequency and other factors which could vary as the claims are ultimately
settled. Although such estimates may vary, management believes that the
liabilities for unpaid claims and related adjustment expenses are adequate. The
estimates are continually reviewed, and as adjustments to these liabilities
become necessary, they are reflected in current operations.
The liability for future policy benefits of long-duration contracts has
been provided for on a net level premium method based on estimated investment
yields, withdrawals, mortality, termination's, morbidity, and other assumptions
which were appropriate at the time the contracts were issued.
Estimates of future policy benefits were based on past experience as
adjusted to provide for possible adverse deviation from the estimates. Interest
assumptions are based on historical assumptions and experience, and range from
3% to 4.5% at December 31, 1997.
II-16
<PAGE> 23
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies (continued)
(l) Recognition of Premium Revenues and Related Expenses
Premiums for long-duration contracts are recognized as revenues when due
from the policyholders. Premiums for short-duration contracts are recognized as
revenues on a pro rata basis over the term of the policies. The portion of
premiums written applicable to the unexpected terms of the policies is recorded
as unearned premium. Benefits, losses and related expenses are matched with
premiums, resulting in their recognition over the lives of the contracts. This
matching is accomplished through the provision for future policy benefits,
estimates of unpaid losses and amortization of deferred policy acquisition
costs.
Earned premiums and incurred losses are stated after a reduction for
amounts ceded to reinsurers. The Company considers anticipated investment income
in determining if a premium deficiency exists on short-duration contracts.
(m) Recognition of Service Fee Income
Service fees represent proceeds from servicing insurance policies for
third parties on a fee-for-service basis. Fees are recognized as revenue over
the expected term of the underlying insurance policies.
(n) Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". Statement 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully dilutive earnings per share. All earnings per share
amounts for all periods have been presented , and where appropriate, restated to
conform to the Statement 128 requirements.
(o) Supplemental Cash Flow Information
Income Taxes Paid - Income taxes paid totaled $2,230,000 in 1997,
$3,577,423 in 1996 and $2,008,351 in 1995. Interest paid totaled $1,014,161 in
1997, $1,005,760 in 1996 and $156,375 in 1995.
II-17
<PAGE> 24
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies (continued)
(p) Income Taxes
Income taxes are calculated under the liability method. Deferred taxes
are provided for temporary differences between amounts of assets and liabilities
for financial reporting purposes and such amounts as measured by tax laws. Items
giving rise to such differences are insurance reserves and unearned premiums.
(q) Stock-Based Compensation
Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" , encourages, but does not require companies to record
compensation costs for stock-based employee compensation plans at fair value.
The Company has chosen to continue to account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations.
Accordingly, compensation cost of stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of grant over
the amount an employee must pay to acquire the stock.
(r) Stock Dividend
All common shares and per share amounts have been adjusted to give
effect to a 15% stock dividend distributed to shareholders on June 23, 1997.
(s) Pending Accounting Change
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income". Statement 130 requires the reporting and display of comprehensive
income and it's components in a full set of financial statements. Comprehensive
income is defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from nonowner
sources. It included all changes in equity, including net income, during a
period except those resulting from investments by owners and distributions to
owners. The Company will adopt Statement 130 in the first quarter of 1998 and,
based on current circumstances, the only additional component of comprehensive
income to be reported is the change in the net unrealized gain or loss on
securities available for sale.
II-18
<PAGE> 25
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies (continued)
(s) Pending Accounting Change (continued)
Also in June 1997, the FASB issued Statement No. 131, "Disclosure about
Segments of an Enterprise and Related Information". This Statement establishes
standards for the way enterprises report information about operating segments
and also establishes standards for related disclosure about products and
services, geographic area and major customers. The Company will adopt Statement
131 in 1998 and, based on current circumstances, does not believe the effect of
adoption will be material.
(t) Reclassifications
Certain prior-year amounts have been reclassified to conform with
current-year presentations.
II-19
<PAGE> 26
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 2. Investments
Major categories of investment income are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------
<S> <C> <C> <C>
Fixed Maturities $4,578,852 $4,961,776 $4,382,034
Equity Securities 30,364 51,884 94,330
Short Term Investments 781,465 921,534 1,085,222
Notes Receivable 0 0 488
---------- ---------- ----------
$5,390,681 $5,935,194 $5,562,074
========== ========== ==========
</TABLE>
Net realized and change in net unrealized gains (losses) on fixed
maturities and equity securities are summarized as follows:
<TABLE>
<CAPTION>
Fixed Equity
Maturities Securities Other Total
---------------------------------------------------
<S> <C> <C> <C> <C>
1997
- ----------
Realized $ (26,430) $284,396 $ 5,745 $ 263,711
Unrealized (157,110) (32,755) 0 (189,865)
---------- -------- -------- ----------
Combined $ (183,540) $251,641 $ 5,745 $ 73,846
========== ======== ======== ==========
1996
- ----------
Realized $ 126,194 $431,862 $(36,061) $ 521,995
Unrealized (997,948) (172,805) 0 (1,170,753)
---------- -------- -------- ----------
Combined $ (871,754) $259,057 $(36,061) $ (648,758)
========== ======== ======== ==========
1995
- ----------
Realized $ 48,330 $203,823 $ 0 $ 252,153
Unrealized 1,305,503 65,688 0 1,371,191
---------- -------- -------- ----------
Combined $1,353,833 $269,511 $ 0 $1,623,344
========== ======== ======== ==========
</TABLE>
II-20
<PAGE> 27
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 2. Investments (continued)
The aggregate fair value, gross unrealized gains, gross unrealized
losses and amortized cost of available for sale and held to maturity securities
by major security type at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale securities:
December 31, 1997
- ----------------------------------------
U. S. Government and
government agencies $11,510,997 $ 73,063 $ (6,442) $11,577,618
States, municipalities and
political subdivisions 12,273,279 336,565 (2) 12,609,842
Corporate debt securities 5,259,932 75,235 (219,062) 5,116,104
Equity securities 1,512,941 177,757 (317,629) 1,373,070
---------------------------------------------------------------
$30,557,149 $662,620 $(543,135) $30,676,634
===============================================================
Held to maturity securities:
December 31, 1997
- ----------------------------------------
U. S. Government and
government agencies $12,194,912 $ 27,567 $ (22,208) $12,200,271
States, municipalities and
political subdivisions 24,926,045 279,417 (62,055) 25,143,407
Corporate debt securities 5,253,806 29,095 (362,292) 4,920,609
Mortgage backed securities 1,245,654 4,459 (2,984) 1,247,129
---------------------------------------------------------------
$43,620,417 $340,538 $(449,539) $43,511,416
===============================================================
Available for sale securities:
December 31, 1996
- ----------------------------------------
U. S. Government and
government agencies $16,057,363 $ 84,332 $ (74,257) $16,067,438
States, municipalities and
political subdivisions 15,436,905 339,175 (1,191) 15,774,889
Corporate debt securities 5,701,832 92,177 (29,010) 5,764,998
Equity securities 1,455,293 69,506 (176,623) 1,348,177
---------------------------------------------------------------
$38,651,393 $585,190 $(281,081) $38,955,502
===============================================================
Held to maturity securities:
December 31, 1996
- ----------------------------------------
U. S. Government and
government agencies $13,280,990 $ 25,952 $(127,822) $13,179,120
States, municipalities and
political subdivisions 28,095,400 167,285 (152,729) 28,109,956
Corporate debt securities 5,683,205 25,326 (36,578) 5,671,953
Mortgage backed securities 2,035,229 5,330 (10,525) 2,030,034
---------------------------------------------------------------
$49,094,824 $223,893 $(327,654) $48,991,063
===============================================================
</TABLE>
II-21
<PAGE> 28
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 2. Investments (continued)
The scheduled maturities of available for sale and held to maturity
securities at December 31, 1997 are as follows. Expected maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations without penalties.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
----------- -------------
<S> <C> <C>
Available for sale securities:
Due in one year or less $ 8,404,804 $ 8,431,926
Due after one through five years 16,551,663 16,609,035
Due after five years through ten years 2,719,631 2,870,830
Due after ten years 1,368,110 1,391,773
----------- -----------
$29,044,208 $29,303,564
=========== ===========
Held to maturity securities:
Due in one year or less $ 8,103,904 $ 8,126,978
Due after one through five years 23,081,430 22,888,843
Due after five years through ten years 9,134,208 9,207,867
Due after ten years 2,055,221 2,040,599
Mortgage backed securities 1,245,654 1,247,129
----------- -----------
$43,620,417 $43,511,416
=========== ===========
</TABLE>
Proceeds from sales of held to maturity securities and related gross
realized gains and losses were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------
<S> <C> <C> <C>
Proceeds from sales $1,723,087 $3,695,874 $5,595,785
Gross realized gains 349 142,421 66,206
Gross realized losses 6,472 956 17,876
</TABLE>
The Company's three insurance subsidiaries, Fortune, Fortune Life, and
Pegasus maintain certain deposits with state regulatory agencies as a statutory
licensing requirement. The carrying value of the investments on deposit was
$1,550,000 at December 31, 1997 and $1,550,000 at December 31, 1996. These
deposits are included in the investment tables and exhibits of this report.
The Company's two finance companies also maintain certain deposits with
state regulatory agencies as a statutory licensing requirement. The carrying
value of these investments was $70,000 at December 31, 1997 and 1996.
II-22
<PAGE> 29
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 3. Deferred Policy Acquisition Costs
Costs, principally commissions, related to the production of new
business, are deferred and amortized as summarized below:
<TABLE>
<CAPTION>
Fortune 1997 1996 1995
- ------------------------------------- ------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ (40,541) $(1,421,049) $ (438,658)
Commissions and other costs
deferred 5,669,882 5,898,751 7,496,662
Charged to expense (6,343,455) (4,518,243) (8,479,053)
----------- ----------- -----------
Balance at end of year $ (714,114) $ (40,541) $(1,421,049)
=========== =========== ===========
Mobile America Insurance Group 1997 1996 1995
- ------------------------------------- ------------------------------------------
Balance at beginning of year $(2,971,365) $(2,812,521) $(3,343,007)
Commissions and other costs
deferred (3,997,252) (3,784,189) (7,113,083)
Charged to expense 5,104,959 3,625,345 7,643,569
----------- ----------- -----------
Balance at end of year $(1,863,658) $(2,971,365) $(2,812,521)
=========== =========== ===========
Fortune Life 1997 1996 1995
- ------------------------------------- ------------------------------------------
Balance at beginning of year $ 44,532 $ 7,690 $ 4,566
Commissions and other costs
deferred 106,402 60,855 10,221
Charged to expense (92,255) (24,013) (7,097)
----------- ----------- -----------
Balance at end of year $ 58,679 $ 44,532 $ 7,690
=========== =========== ===========
Pegasus 1997 1996 1995
- ------------------------------------- ------------------------------------------
Balance at beginning of year $ 232,379 $ 16,040 $ 2,121
Commissions and other costs
deferred 1,091,866 464,398 33,341
Charged to expense (853,141) (248,059) (19,422)
----------- ----------- -----------
Balance at end of year $ 471,104 $ 232,379 $ 16,040
=========== =========== ===========
Consolidated Totals $(2,047,989) $(2,734,995) $(4,209,840)
=========== =========== ===========
</TABLE>
Several of the automobile insurance lines written by Fortune have been
reinsured on a quota share basis, whereby a reinsurer provides ceding commission
to the Company in return for ceded premium. In some instances
II-23
<PAGE> 30
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 3. Deferred Policy Acquisition Costs (continued)
the ceding commissions received exceed the costs to the Company of soliciting
new business, thereby generating credits to commission expense and deferred
policy acquisition costs. Ceding commission received in 1997, 1996 and 1995 is
approximately $7,932,000, $7,527,000 and $15,694,000, respectively. Deferred
policy acquisition cost reinsurance credits reported in the Company's balance
sheet at December 31, 1997 and 1996 are $7,049,081 and $8,516,878, respectively.
Note 4. Property and Equipment
Property and equipment consists of the following at December 31, 1997
and 1996:
<TABLE>
<CAPTION>
1997 1996
--------------------------------
<S> <C> <C>
Land and buildings $ 538,522 $ 526,331
Transportation equipment 228,329 186,364
Office equipment and furniture 2,926,745 2,383,165
Leasehold improvements 68,193 42,855
Other 10,982 10,982
-----------------------------
3,772,771 3,149,697
Less accumulated depreciation (2,219,088) (2,077,991)
-----------------------------
Property and equipment, net $ 1,553,683 $ 1,071,706
=============================
</TABLE>
In 1995, Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" was issued. This statement requires the recognition of an impairment loss
for an asset held for use when the estimate of undiscounted future cash flows
expected to be generated by the asset is less than its carrying amount. Due to
the nature of the Company's business, with limited use of long-lived assets, it
has been determined that no impairment loss need be recognized.
II-24
<PAGE> 31
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 5. Reinsurance
The insurance subsidiaries have various reinsurance agreements which
significantly affect their operations. Risks are reinsured to limit loss size
and to increase underwriting capacity, although the Company remains primarily
liable to the policyholders on all risks transferred.
The Company acquires property and casualty excess of loss reinsurance
separately for it's primary insurance business lines. This program provides the
Company with coverage in the amount of $260,000 in excess of $40,000 on a per
risk basis, and up to $520,000 on a per occurrence basis.
Catastrophic property losses are reinsured under two programs. Fortune
limits it's liability to 5% of losses in excess of $500,000 up to $1,300,000 and
up to 10% of losses in excess of $1,400,000. Pegasus limits it's liability to 5%
of losses in excess $500,000 up to $10,000,000. Catastrophic reinsurance,
provided by various reinsures in multiple layers, serves to protect the insurer
from significant aggregate loss exposure arising from a single event such as
windstorm, hail, tornado, hurricane, riot, vandalism, earthquake, freezing
temperatures or other extraordinary events. The Company also maintains
reinsurance coverage for extra contractual obligations and excess limits
judgements up to $1,500,000 for each property risk and/or each casualty
occurrence subject to a deductible of the greater of $100,000 or a loss in
excess of its underlying reinsurance programs.
The effect of reinsurance on premiums written and earned for 1997, 1996
and 1995 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ ----------------------- -------------------------
Written Earned Written Earned Written Earned
--------------------- -------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Direct $86,860 $92,085 $75,468 $76,884 $107,617 $102,722
Assumed 0 0 0 0 0 0
Ceded 44,319 47,914 42,279 46,193 66,928 65,079
--------------------- -------------------- ----------------------
Net $42,541 $44,171 $33,189 $30,691 $ 40,689 $ 37,643
===================== ==================== ======================
</TABLE>
The amount of reinsurance recoveries deducted from direct and pool
participation losses incurred during 1997, 1996 and 1995 was approximately
$39,000,000, $37,970,000 and $59,612,000, respectively.
II-25
<PAGE> 32
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 5. Reinsurance (continued)
The Company evaluates the financial condition of its reinsurers to
minimize its exposures to significant losses from reinsurer insolvency.
Reinsurance receivables, prepaid reinsurance premiums and offsetting funds
withheld/payable balances for each significant reinsurer at December 31, 1997 is
presented below (in thousands):
<TABLE>
<CAPTION>
Reinsurance Prepaid Funds Held
Recoverable Premium or Balances Due
------------ -------- ---------------
<S> <C> <C> <C>
Clarendon National Insurance Company $ 4,360 $ 2,764 $ (2,546)
Sirius Reinsurance Company 5,676 5,529 3,677
National Union Fire Insurance Company 3,763 4,147 6,091
Prudential Reinsurance Company 975 0 (3,719)
Ranger Insurance Company 618 0 (844)
Motors Insurance Company 1,557 2,764 3,001
Odyssey Reinsurance Company 750 1,382 1,526
Other 22 166 (185)
------------ -------- ---------------
$ 17,721 $ 16,752 $ 7,001
============ ======== ===============
</TABLE>
Note 6. Regulatory Restrictions
Fortune, Fortune Life and Pegasus are subject to regulation by the
insurance departments of the states in which they are licensed. Under the
regulations, cash dividends may only be paid out of accumulated surplus funds
derived from net operating profits and capital gains, or out of earned surplus
even though total surplus may be less than capital stock and paid-in capital.
Fortune, which is subject to Florida law, may not pay, unless otherwise approved
by the State Insurance Commissioner, dividends in any one year which exceed the
greater of (a) 10% of such surplus funds or (b) the total amount of such funds
derived during the immediate preceding year.
The insurance companies did not pay dividends in 1997, 1996 and 1995.
II-26
<PAGE> 33
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 6. Regulatory Restrictions (continued)
Following are reconciliations of net income and stockholders' equity for
Fortune, Fortune Life and Pegasus from a statutory basis to those presented on a
GAAP basis for the year ended December 31, 1997:
<TABLE>
<CAPTION>
Fortune
Fortune Life Pegasus
------------ ----------- -----------
<S> <C> <C> <C>
Net gain(loss) from operations -
statutory basis $ (926,786) $ 198,050 $ 54,065
------------ ----------- -----------
Change in deferred acquisition costs (2,141,372) 14,147 238,726
Change in deferred ceding commissions 1,467,797 0 0
Change in reserves 0 (4,791) 0
Other 257,282 (10,252) (2,102)
------------ ----------- -----------
(416,293) (896) 236,624
------------ ----------- -----------
Net gain(loss) from operations -
GAAP basis $ (1,343,079) $ 197,154 $ 290,689
============ =========== ===========
Stockholder's equity -
statutory basis $ 14,383,015 $ 3,145,469 $ 4,564,616
------------ ----------- -----------
Deferred acquisition costs 6,334,967 58,679 471,105
Deferred ceding commissions (7,049,081) 0 0
Adjustments to reserves 0 (38,423) 0
Deferred income taxes 1,370,526 (20,702) 0
Non-admitted assets 514,139 (17,218) 511
Unrealized gains 30,117 26,680 16,944
Other 741,441 10,804 0
------------ ----------- -----------
1,942,109 19,820 488,560
------------ ----------- -----------
Stockholder's equity - GAAP basis $ 16,325,124 $ 3,165,289 $ 5,053,176
============ =========== ===========
</TABLE>
Note 7. Pension Plan
The Company's defined contribution pension plan covers substantially all
full-time employees. Contributions are based on employee earnings. Total
contributions made by the Company during 1997, 1996, and 1995 were $288,000,
$240,000, and $210,000, respectively.
II-27
<PAGE> 34
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 8. Capital Stock
Stock Options
The Company's incentive plan, adopted in 1995, provides for the
issuance to key employees and directors of up to 300,000 shares of common stock
through options, stock appreciation rights and other stock-based awards as
defined under current tax laws. An additional 200,000 shares will be added to
the plan pending shareholder approval at the 1998 Annual Meeting. Incentive
stock options for employees are exercisable for periods of up to ten years from
the date of the grant at a price equal to the fair market value on the date of
the grant. In the case of an incentive option granted to an individual who
owns at least 10% of the total combined voting power of the Company, the
exercise price must be at least 110% of the fair market value of the common
stock on the date of grant and the option term cannot exceed five years. Stock
appreciation rights entitle the recipient to receive the difference between the
fair market value of the common stock on the date of exercise and the stock
appreciation rights price in cash or in shares of common stock, or a
combination. Restricted stock awards entitle the recipient to receive shares
of common stock subject to forfeiture restrictions that lapse over time or upon
the occurrence of specific events.
The options are accounted for under Accounting Principles Board
Opinion No. 25 (APB 25). Under APB 25, if the exercise price of the options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized. During 1997, the Company granted options to
purchase 5000 shares at $4.40 when the market price of the Company's common
stock was $9.63. These options vest 20% per year beginning on the first
anniversary date of grant. Compensation expense of $3,487 was charged to
operations in 1997. Deferred compensation of $48,813 is reported in other
assets and will be charged to operations over the vesting period.
Changes in Stock Options were as follows:
<TABLE>
<CAPTION>
Average
1997 Exercise Price 1996 1995
---- ---- ----
<S> <C> <C> <C> <C>
Beginning Balance 153,750 $9.90 92,500 -
Granted 170,000 $9.98 67,500 103,750
Exercised (75,000) $10.00 (5,000)
Cancelled/ Expired (2,000) $10.25 (1,250) (11,250)
-------- ------ ------- --------
Ending Balance 246,750 $9.92 153,750 92,500
======== ====== ======= ========
Exercisable 138,150 $9.84 87,250 61,250
======== ====== ======= ========
</TABLE>
II-28
<PAGE> 35
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 8. Capital Stock (continued)
In compliance with Statement of Financial Accounting Standards No.
123, the Company has elected to provide pro forma disclosures. As such, the
Company's net income and earnings per share for 1997, 1996 and 1995 adjusted to
reflect pro forma amounts are indicated below (dollar amounts in thousands
except for earnings per share) :
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Net Income:
<S> <C> <C> <C>
As reported $ 6,176 $ 7,571 $ 6,000
======= ======= =======
Pro forma $ 5,935 $ 7,469 $ 5,871
======= ======= =======
Earnings Per Share:
As reported $ 0.86 $ 1.05 $ 0.84
======= ======= =======
Pro forma $ 0.83 $ 1.04 $ 0.82
======= ======= =======
</TABLE>
The fair value of options granted in 1997, 1996 and 1995 was estimated using
the Black-Scholes option pricing model. The weighted average fair value and
related assumptions were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Weighted average fair value: $ 3.72 $ 3.61 $ 3.36
Expected volatility 39% 39% 39%
Risk free interest rate 6.20% 6.24% 6.15%
Expected lives 5 Years 5 Years 5 Years
Dividend yield 2.5% 2.5% 2.5%
</TABLE>
<TABLE>
<CAPTION>
Earnings Per Share:
- ------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Numerator:
Income available to common shareholders' $ 6,175,796 $ 7,571,392 $ 5,999,694
=========== =========== ===========
Denominator:
Basic earnings per share
weighted average shares 7,148,471 7,179,058 7,184,058
Effect of dilution:
Employee stock options 57,066 12,019 593
----------- ----------- -----------
Diluted earnings per share adjusted
weighted average shares and
assumed conversions 7,205,537 7,191,077 7,184,651
=========== =========== ===========
Basic earnings per share $ 0.86 $ 1.05 $ 0.84
=========== =========== ===========
Diluted earnings per share $ 0.86 $ 1.05 $ 0.84
=========== =========== ===========
</TABLE>
II-29
<PAGE> 36
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 9. Income Taxes
The following analysis reconciles the statutory Federal income tax
rate to the effective tax rates:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory Federal rate 34% 34% 34%
Increase (reductions) in effective tax
rate resulting from:
Tax exempt interest (8.5) (7.8) (8.0)
Dividends received deduction (0.1) (0.1) (0.2)
Special life insurance
company deductions (0.5) (0.4) (0.1)
State income taxes 3.4 2.9 7.4
Change in valuation allowance 0.0 (8.2) 0.0
Other 2.1 (4.7) (3.0)
----- ----- -----
Effective tax rate 30.4% 15.7% 30.1%
===== ===== =====
</TABLE>
Consolidated deferred tax expense (credit) results from timing
differences in the recognition of revenue and expense for tax and financial
statement purposes. The source of these differences and their tax effect are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C>
Increase (decrease) in discounted loss
and loss adjustment expense reserves $143 ($37) $733
Increase (decrease) in deferred
acquisition costs 0 0 (114)
Increase (decrease) in deferred
insurance premiums 124 (300) (204)
Decrease in valuation allowance 0 (733) 0
Various 195 (213) (98)
---- -------- ----
$462 ($1,283) $317
==== ======== ====
</TABLE>
Consolidated deferred taxes receivable resulting from temporary
differences in the recognition of revenue and expense for tax and financial
statement purposes are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Discounted loss and loss adjustment
expense reserves $ 627 $ 770
Deferred insurance premiums 1,209 1,333
Various (255) (60)
-----------------
$1,581 $2,043
Valuation allowance 0 0
-----------------
$1,581 $2,043
=================
</TABLE>
II-30
<PAGE> 37
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 9. Income Taxes (continued)
The Company believes, that based upon its lengthy and consistent
history of profitable operations, it is probable that the deferred tax asset
will be realized and no deferred tax allowance is deemed necessary at December
31, 1997.
Deferred taxes payable of $40,625 and $61,072 are provided on
unrealized gains, on equity securities and fixed maturities available for sale
at December 31, 1997 and 1996, respectively.
Beginning in 1995, the Company and its subsidiaries filed a
consolidated federal income tax return, while prior to 1995 the life insurance
subsidiary filed a separate return.
Note 10. Business Segments
The Company and its subsidiaries operate principally in five business
segments consisting of automobile insurance, personal property insurance,
commercial lines insurance, life insurance, and fee for service insurance
administration. The four insurance segments sell various forms of property,
liability and life insurance marketed through independent insurance agents in
the state of Florida. The Company acts as a servicing carrier for the Florida
Residential Property and Casualty Joint Underwriting Association, the Florida
Automobile Joint Underwriting Association and as a subcontractor for Policy
Management Systems Corporation performing various underwriting and claims
services for a service fee.
II-31
<PAGE> 38
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 10. Business Segments (continued)
Summarized financial information by business segment for 1997, 1996
and 1995 is as follows:
<TABLE>
<CAPTION>
Revenues from Unaffiliated Customers 1997 1996 1995
----------- ----------- ------------
<S> <C> <C> <C>
Automobile Insurance $86,263,673 $73,211,073 $100,426,747
Personal Property Insurance 5,370,286 3,283,170 1,807,125
Commercial Lines Insurance 291,968 312,159 432,468
Life Insurance 117,293 35,464 14,193
Property Rentals and Sales 0 1,520 176,894
Fee for service 8,972,353 11,001,221 8,624,931
Other 317,553 576,702 960,591
Reinsurance revenue ceded (47,914,218) (46,192,568) (65,079,149)
Investment Income 5,391,297 5,935,194 5,562,074
--------------------------------------------
Consolidated Revenues $58,810,205 $48,163,935 $52,925,874
============================================
</TABLE>
<TABLE>
<CAPTION>
Operating Profit (or loss) 1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Automobile Insurance $6,514,491 $5,431,895 $3,673,684
Personal Property Insurance 945,685 652,766 (110,955)
Commercial Lines Insurance 127,086 (103,625) (99,874)
Life Insurance 233,297 206,895 100,439
Property Rentals and Sales 0 1,520 140,692
Fee for service 2,111,976 3,418,080 2,843,555
Other 130,734 131,061 1,537,273
Investment Income 1,440,233 1,460,810 1,137,990
Corporate Expenses (2,635,607) (2,213,238) (637,105)
-------------------------------------------
Income before income taxes $8,867,895 $8,986,164 $8,585,699
===========================================
</TABLE>
<TABLE>
<CAPTION>
Identifiable Assets 1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Automobile Insurance $101,543,332 $130,850,415 $137,386,763
Personal Property Insurance 8,947,476 8,224,013 8,095,427
Commercial Lines Insurance 841,474 1,079,838 1,574,928
Life Insurance 3,277,395 4,045,916 3,864,996
Property Rentals and Sales 0 0 25,541
Fee for service 7,732,788 9,279,618 7,116,795
Other 8,987,566 6,208,977 15,568,154
General Corporate Assets 6,912,107 8,398,124 9,138,558
---------------------------------------------
Total Assets $138,242,138 $168,086,901 $182,771,162
=============================================
</TABLE>
II-32
<PAGE> 39
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 11. Pools and Associations
Fortune Insurance Company, as a direct premium writer in the state of
Florida, is required to participate in the Florida Automobile Joint
Underwriting Association (FAJUA). Fortune's participation is based on its
automobile premium to total automobile premiums written state wide by all
automobile insurers. A summary of FAJUA participation as reported in the
accompanying financial statements for 1997,1996 and 1995 is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Written premium ($165,306) ($10,682,231) $4,186,376
Earned premium (111,207) (9,672,082) 4,007,962
Losses and loss
adjustment expenses paid (43,252) (6,256,191) 3,224,745
Loss and loss
adjustment expenses incurred (119,464) (7,718,866) 3,361,142
Commissions (112,074) (1,488,628) 550,024
</TABLE>
In 1996 the FAJUA issued reports amending Fortune's participation for years
prior to 1996. These changes were reported in the 1996 financial statements.
A summary of Fortune's 1996 participation and the prior year adjustment is
presented below.
<TABLE>
<CAPTION>
1996 Prior years Total
---- ----------- -----------
<S> <C> <C> <C>
Written premium $144,099 $(10,826,330) $(10,682,231)
Earned premium 65,169 (9,737,251) (9,672,082)
Losses and loss
adjustment expenses paid 32,863 (6,289,054) (6,256,191)
Loss and loss
adjustment expenses incurred 62,361 (7,781,227) (7,718,866)
Commissions (15,669) (1,472,959) (1,488,628)
</TABLE>
II-33
<PAGE> 40
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 12. Operating Leases
The Company leases office facilities under operating leases which
contain renewal options. Lease terms range from 18 months to five years. Rent
expense was $329,464, $295,499 and $297,597 for 1997, 1996 and 1995,
respectively.
Minimum future rental payments are as follows:
<TABLE>
<S> <C>
1998 $238,004
1999 $218,818
2000 $224,758
2001 $230,926
2002 $ 19,287
--------
$931,793
========
</TABLE>
Note 13. Concentrations of Credit Risk
The Company is subject to credit risk through short-term cash
investments, insurance premium receivables and reinsurance receivables.
Short-term investments are placed with high credit quality financial
institutions or in short duration high quality debt securities. At times, such
investments may be in excess of FDIC insurance limits. No losses have been
experienced on such investments.
A significant portion of insurance premium receivables relates to the
financing of automobile insurance premiums in south Florida. An allowance for
non-collection of $900,000 and $300,000 has been provided for at December 31,
1997 and 1996, respectively. The Company's exposure to loss is limited by the
fact that non-payment of premiums will result in cancellation of the underlying
insurance policy.
For a discussion of credit risk related to reinsurance see note (5) of
the consolidated financial statements.
II-34
<PAGE> 41
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 14. Note Payable
On October 24, 1995 the Company obtained a bank loan in the amount of
$12,000,000, for which the proceeds have been used primarily as additional
capital for the insurance subsidiaries. The note accrues interest at the 90
day LIBOR rate plus 275 basis points, reduced to 250 basis points during 1997.
Interest only is paid through January 24, 1998 with the first principal payment
due on the twenty seventh monthly interest payment date and quarterly
thereafter in the amount of $600,000 each payment. The entire unpaid principal
balance, together with accrued interest thereon is due and payable on the loan
maturity date of October 24, 2002.
The note was collateralized by the assignment of the capital stock of
the Company's subsidiaries on October 24, 1995, as well as the execution of
guaranty agreements between the bank and certain subsidiaries of the Company.
The following is a schedule of the required annual principal payments:
<TABLE>
<S> <C>
1998 $ 2,400,000
1999 2,400,000
2000 2,400,000
2001 2,400,000
2002 2,400,000
------------
$ 12,000,000
============
</TABLE>
Loan acquisition costs are being amortized on a straight-line basis
over the term of the loan and are included in the other asset section of the
consolidated balance sheets.
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Beginning Balance $ 363,262 $ 425,540
Less accumulated amortization 51,898 62,278
---------- ----------
Net loan acquisition costs $ 311,364 $ 363,262
========== ==========
</TABLE>
Note 15. Insurance Loss Reserves
Reserves for unpaid losses and loss adjustment expenses are maintained
to cover the probable ultimate cost of settling all losses incurred including
those not yet reported. Reserves for losses incurred in prior years may be
adjusted by review or by payment which could result in either a redundancy or
deficiency to the reserve reported at the end of the prior year. Such changes
are reflected in current operations.
II-35
<PAGE> 42
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 15. Insurance Loss Reserves (continued)
Activity in the liability for insurance loss reserves is summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Balance at beginning of year $47,695,655 $54,645,686
Less reinsurance recoverables 27,638,632 33,822,126
----------- -----------
Net balance at beginning of year 20,057,023 20,823,560
=========== ===========
Incurred related to:
Current year 35,725,095 27,216,632
Prior years (2,736,845) (3,390,000)
----------- -----------
Total incurred 32,988,250 23,826,632
=========== ===========
Paid related to:
Current year 23,978,911 15,428,840
Prior years 13,143,680 9,164,329
----------- -----------
Total paid 37,122,591 24,593,169
=========== ===========
Net balance at end of year 15,922,682 20,057,023
Plus reinsurance recoverables 17,720,613 27,638,632
----------- -----------
Balance at end of year $33,643,295 $47,695,655
=========== ===========
</TABLE>
Note 16. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument for which it is practicable to
estimate that value:
- - Cash and Short-term Investments
The carrying amounts approximates fair value because of the short-term
maturity of these investments.
- - Investment in Securities
Fair values are based on quoted market prices or dealer quotes, if
available. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities.
- - Insurance Premium Receivable
The carrying amount approximates fair value due to the short-term
nature of the receivable.
- - Note Payable
The interest rate on the note payable is reset monthly to reflect
current market rates, consequently the carrying value of the note
approximates fair value.
II-36
<PAGE> 43
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 16. Fair Value of Financial Instruments (continued)
The carrying amounts and fair values of the Company's financial
instruments at December 31, 1997 and 1996 are presented below:
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------------------- -------------------------
<S> <C> <C> <C> <C>
Cash and
short-term investments $21,458,982 $21,458,982 $24,034,119 $24,034,119
Fixed maturities:
Held to maturity 43,620,417 43,511,416 49,094,824 48,991,063
Available for sale 29,303,564 29,303,564 37,607,325 37,607,325
Equity securities 1,373,070 1,373,070 1,348,177 1,348,177
Premiums receivable 3,324,666 3,324,666 3,916,439 3,916,439
Note payable 12,000,000 12,000,000 12,000,000 12,000,000
</TABLE>
II-37
<PAGE> 44
Part III
Items 10, 11, 12, and 13 have been omitted pursuant to instructions to
Form 10-K. The Registrant intends to file with the Securities and Exchange
Commission not later than April 30, 1998 a definitive proxy statement to be
used in connection with its Annual Meeting of Shareholders, at which time
directors will be elected for the ensuing year.
III-1
<PAGE> 45
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8K
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a) 1. Financial Statements
--------------------
The following financial statements are included in Part II, Item 8:
Report of Independent Certified Public Accountants II-9
Consolidated Balance Sheets, December 31, 1997 and 1996 II-10
Consolidated Statements of Operations II-11
Years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows II-12
Years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Changes in Stockholders' Equity II-13
Years ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements II-14-37
2. Financial Statements Schedules
------------------------------
The following financial schedules are included in Part IV of this report:
Schedule I. Summary of Investments - Other than Investments in
Related Parties IV-11
December 31, 1997 and 1996
Schedule II. Condensed Financial Information of Registrant IV-12-14
Years ended December 31, 1997, 1996 and 1995
Schedule III. Supplementary Insurance Information IV-15-17
Years ended December 31, 1997, 1996 and 1995
Schedule IV. Supplementary Insurance Information - Reinsurance IV-18
Years ended December 31, 1997, 1996 and 1995
Schedule VI. Supplementary Insurance Information -
Consolidated Property-Casualty Entities IV-19
Years ended December 31, 1997, 1996 and 1995
</TABLE>
All other schedules are omitted as the required information is not
applicable or the required information is otherwise presented in the financial
statements or notes thereto.
IV-1
<PAGE> 46
(a) 3. Exhibits
3.3 The Articles of Incorporation and by-laws of the Company
originally filed on Form S-1 Registration Statement No. 2-42438,
effective March 3, 1972 are hereby incorporated herein by reference.
The Amendment to the Articles of Incorporation filed as Exhibit C
to the Registrant's form 10-Q for the quarter ended September 30,
1980, is also hereby incorporated herein by reference.
The Amendment to the Articles of Incorporation filed as Exhibit 4
to the Registrant's Form 10-Q for the quarter ended September 30,
1987, is also hereby incorporated by reference.
The Amendment to the Articles of Incorporation filed as Exhibit 4
to the Registrant's Form 10-Q for the quarter ended September 30,
1993 is also hereby incorporated by reference.
3.11 Earnings Per Share Computations IV-3
3.21 Subsidiaries of Registrant IV-4
3.27 Financial Data Schedule (for SEC use only)
3.29 Information from reports furnished to state insurance
regulatory authorities IV-5-10
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the
year ended December 31, 1997.
IV-2
<PAGE> 47
Exhibit 3.11 Schedule of Computation of Earnings Per Share
See Note 8 to the consolidated financial statements.
IV-3
<PAGE> 48
Exhibit 3.21 Subsidiaries of Registrant
The following table lists the Registrant and its subsidiaries as of
December 31, 1997, the jurisdiction in which each subsidiary was organized, and
the percentage of voting securities of each subsidiary owned by the immediate
parent:
<TABLE>
<CAPTION>
Percentage of
Jurisdiction Voting Securities
Where Owned by Immediate
Name Organized Parent
---- ------------ ------------------
<S> <C> <C>
Mobile America Corporation Florida
Mobile America Insurance
Group, Inc. Florida 100%
Fortune Insurance
Company Florida 100%
Fortune Life
Insurance Company Arizona 100%
Pegasus Insurance Company Oklahoma 100%
Fortune Financial Corporation Florida 100%
Big Gorilla Inc. Florida 100%
</TABLE>
All of the above subsidiaries are included in the Consolidated Financial
Statements of the Registrant and its subsidiaries. All unnamed subsidiaries
and other affiliates, when considered in the aggregate as a single subsidiary,
would not constitute a significant subsidiary.
IV-4
<PAGE> 49
Information From Reports Furnished to State Insurance Regulatory Authority
Exhbit 29
Schedule P
Detailed Information on Losses and Loss Expenses
(In Thousands)
<TABLE>
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
Years in -----------------------------------------------------------------------------------------------------------------------
which Allocated Loss
Premiums Loss Payments Expense Payment
were -------------------------------------------
Earned and (2) (5) (7) (9) (10) (11)
Losses Direct (4) Direct Direct Salvage and Unallocated Total
were and (3) Net and (6) and (8) Subrogtion Loss Expense Net Paid
Incurred Assumed Ceded (2 - 3) Assumed Ceded Assumed Ceded Received Payments (5-6+7-8+10)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prior XXX XXX XXX 50 0 7 0 0 0 57
1988 20,865 9,412 11,453 9,088 3,297 1,834 463 145 429 7,591
1989 31,658 13,998 17,660 14,278 4,901 3,112 851 54 469 12,107
1990 49,043 27,158 21,885 28,434 16,166 5,256 2,779 70 451 15,196
1991 61,555 33,228 28,327 37,665 21,312 5,739 2,988 87 1,614 20,718
1992 77,171 43,120 34,051 54,297 32,236 6,795 3,315 152 1,512 27,053
1993 94,541 53,094 41,447 63,246 35,707 9,131 4,835 231 1,410 33,245
1994 87,690 53,349 34,341 61,329 36,848 8,442 4,980 172 2,710 30,653
1995 102,709 65,079 37,630 64,376 43,612 7,105 5,071 309 2,640 25,438
1996 76,849 46,191 30,658 64,235 42,126 5,773 3,503 355 3,747 28,126
1997 91,969 47,913 44,056 40,505 17,909 2,378 1,012 77 2,150 26,112
Totals XXX XXX XXX 437,503 254,114 55,572 29,797 1,652 17,132 226,296
</TABLE>
The Registrant has no affiliations with unconsolidated subsidiaries or
50%-or-less owned equity investees.
IV-5
<PAGE> 50
Information From Reports Furnished to State Insurance Regulatory Authority
Exhbit 29
Schedule P
Detailed Information on Losses and Loss Expenses
(In Thousands)
<TABLE>
<CAPTION>
(1)
Years in Losses Unpaid Allocated Loss Expenses Unpaid
which ----------------------------------------- --------------------------------------
Premiums Case Basis Bulk & IBNR Case Basis Bulk & IBNR
were ------------------- ------------------ ---------------- ----------------- (23)
Earned and (13) (15) (17) (19) (22) Total
Losses Direct Direct Direct Direct Unallocated Net Losses
were and (14) and (16) and (18) and (20) Loss Expenses and Expenses
Incurred Assumed Ceded Assumed Ceded Assumed Ceded Assumed Ceded Unpaid Unpaid
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prior 117 90 55 0 262
1988 0
1989 7 2 5
1990 1 0 1
1991 38 8 14 9 2 1 1 37
1992 74 37 14 7 6 4 2 48
1993 227 108 157 98 45 27 8 204
1994 475 266 489 299 38 17 13 433
1995 938 566 1,988 800 1,369 576 28 2,381
1996 2,244 2,162 869 435 677 477 74 790
1997 16,046 7,939 3,062 1,705 3,782 2,179 678 11,745
Total 20,167 11,088 6,683 3,353 5,974 3,281 804 15,906
</TABLE>
The Registrant has no affiliations with unconsolidated subsidiaries or
50%-or-less owned equity investees.
IV-6
<PAGE> 51
Information From Reports Furnished to State Insurance Regulatory Authority
Exhbit 29
Schedule P
Detailed Information on Losses and Loss Expenses
(In Thousands)
<TABLE>
<CAPTION>
(1)
Years in
which Total Losses and Loss and Loss Expense Percentage Time Value Net Balance Sheet
Premiums Expenses Incurred (Incurred/Premiums Earned) of Money Reserves After Discount
were --------------------------------------------------------------------------------- (33) -----------------------
Earned and (25) (28) Inter-Company (35)
Losses Direct Direct (32) Pooling (34) Loss
were and (26) (27) and (29) (30) (31) Loss Participation Losses Expense
Incurred Assumed Ceded Net Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prior XXX XXX XXX XXX XXX XXX 207 55
1988 11,351 3,760 7,591 54.4 39.9 66.3 0 0
1989 17,866 5,754 12,112 56.4 41.1 68.6 5 0
1990 34,142 18,945 15,197 69.6 69.8 69.4 1 0
1991 45,073 24,318 20,755 73.2 73.2 73.3 35 2
1992 62,700 35,599 27,101 81.2 82.6 79.6 44 4
1993 74,224 40,775 33,449 78.5 76.8 80.7 178 26
1994 73,496 42,410 31,086 83.8 79.5 90.5 399 34
1995 78,444 50,625 27,819 76.4 77.8 73.9 1,560 821
1996 77,619 48,703 28,916 101.0 105.4 94.3 516 274
1997 68,601 30,744 37,857 74.6 64.2 85.9 9,464 2,281
Totals XXX XXX XXX XXX XXX XXX 12,409 3,497
</TABLE>
The Registrant has no affiliations with unconsolidated subsidiaries or
50%-or-less owned equity
IV-7
<PAGE> 52
Exhbit 29
Information From Reports Furnished to State Insurance Regulatory Authority
Schedule P
History of Incurred Losses and Allocated Expenses
(In Thousands)
<TABLE>
<CAPTION>
Incurred Losses and Allocated Expenses Reported at Year End Development
----------------------------------------------------------------------------------------- ---------------------
(1)
Years in which (12) (13)
Losses were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) One Two
Incurred 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Year Year
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prior 2,626 2,479 1,620 1,602 1,572 1,589 1,617 1,603 1,852 1,446 (406) (157)
1988 8,016 7,473 7,040 7,157 7,137 7,149 7,164 7,160 7,158 7,162 4 2
1989 12,521 11,367 11,561 11,377 11,559 11,578 11,623 11,632 11,642 10 19
1990 17,489 14,833 14,800 14,795 14,777 14,749 14,754 14,746 (8) (3)
1991 19,886 18,580 19,037 19,162 19,094 19,134 19,141 7 47
1992 25,323 24,973 25,777 25,644 25,658 25,586 (72) (58)
1993 32,774 31,877 31,774 32,218 32,032 (186) 258
1994 25,881 27,127 28,356 28,362 6 1,235
1995 29,790 24,412 25,150 738 (4,640)
1996 27,317 25,094 (2,223)
1997 35,029
Totals (2,130) (3,297)
</TABLE>
The Registrant has no affiliations with unconsolidated subsidiaries or
50%-or-less owned equity
IV-8
<PAGE> 53
Exhbit 29
Information From Reports Furnished to State Insurance Regulatory Authority
Schedule P
History of Cumulative Paid Losses and Allocated Expenses
(In Thousands)
<TABLE>
<CAPTION>
(12) (13)
Number of Number of
Cummulative Paid Losses and Allocated Expenses at Year End Claims Claims
(1) ------------------------------------------------------------------------------------------- Closed Closed
Years in which with with
Losses were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Loss Loss
Incurred 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Payment Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prior 0 1,253 1,119 1,373 1,521 1,570 1,589 1,589 1,127 1,184
1988 3,162 5,685 6,527 6,919 7,055 7,146 7,154 7,160 7,160 7,162
1989 2,996 8,571 10,469 11,099 11,485 11,550 11,610 11,627 11,637
1990 6,555 12,595 13,993 14,489 14,648 14,725 14,743 14,746
1991 9,886 16,815 18,355 18,677 18,936 19,032 19,105
1992 12,210 22,953 24,591 25,022 25,366 25,541
1993 16,925 28,351 30,166 31,284 31,835
1994 13,275 23,896 26,605 27,942
1995 15,950 20,813 22,797
1996 15,427 24,378
1997 23,962
</TABLE>
The Registrant has no affiliations with unconsolidated subsidiaries or
50%-or-less owned equity
IV-9
<PAGE> 54
Exhbit 29
Information From Reports Furnished to State Insurance Regulatory Authority
Schedule P
History of Bulk and Incurred but not Reported Reserves
(In Thousands)
<TABLE>
<CAPTION>
Bulk and Incurred but not Reported Reserves on Losses and Allocated Expenses at Year End
- ---------------------------------------------------------------------------------------------------------------------------------
(1)
Years in which
Losses were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Incurred 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prior 1,036 1,183 319 134 16 117 145
1988 661 698 243 162 24 4
1989 3,749 806 707 164 35 16 3 1
1990 3,323 1,047 457 192 82 20 4
1991 3,635 697 403 303 102 64 6
1992 3,335 1,055 897 499 247 8
1993 4,475 2,165 1,019 789 78
1994 4,281 1,583 1,253 210
1995 5,278 2,566 1,981
1996 4,488 634
1997 2,960
</TABLE>
The Registrant has no affiliations with unconsolidated subsidiaries or
50%-or-less owned equity investees.
IV-10
<PAGE> 55
Schedule I
Mobile America Corporation and Subsidiaries
Summary of Investments - Other than Related Parties
December 31, 1997
<TABLE>
<CAPTION>
Amount
which carried
in balance Market
Consolidated Cost sheet Value
-------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Industrial Bonds $10,513,738 $10,369,910 $10,036,713
Municipal Bonds 37,199,324 37,535,888 37,753,249
U.S. Government Bonds 24,951,563 25,018,183 25,025,018
----------- ----------- -----------
Total Bonds 72,664,625 72,923,981 72,814,980
----------- ----------- -----------
Common Stock 1,269,859 1,188,566 1,188,566
Preferred Stock 243,082 184,504 184,504
----------- ----------- -----------
Total Stocks 1,512,941 1,373,070 1,373,070
----------- ----------- -----------
Certificates of Deposit 14,119,180 14,119,180 14,119,180
Industrial Bonds 2,446,881 2,446,881 2,446,881
U.S. Government Bonds 374,901 374,901 374,901
----------- ----------- -----------
Total Short Term Investments 16,940,962 16,940,962 16,940,962
----------- ----------- -----------
Total Investments $91,118,528 $91,238,013 $91,129,012
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
Amount
which carried
in balance Market
Consolidated Cost sheet Value
-------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Industrial Bonds $ 11,431,370 $ 11,448,203 $ 11,436,951
Municipal Bonds 44,515,993 43,870,289 43,884,845
U.S. Government Bonds 30,343,561 31,383,657 31,276,592
----------- ----------- -----------
Total Bonds 86,290,924 86,702,149 86,598,388
----------- ----------- -----------
Common Stock 1,063,711 984,169 984,169
Preferred Stock 391,582 364,008 364,008
----------- ----------- -----------
Total Stocks 1,455,293 1,348,177 1,348,177
----------- ----------- -----------
Certificates of Deposit 16,898,070 16,898,070 16,898,070
Industrial Bonds 1,567,351 1,567,351 1,567,351
Municipal Bonds 579,391 579,391 579,391
U.S. Government Bonds 3,186,663 3,186,663 3,186,663
----------- ----------- -----------
Total Short Term Investments 22,231,475 22,231,475 22,231,475
----------- ----------- -----------
Total Investments $109,977,692 $110,281,801 $110,178,040
=========== =========== ===========
</TABLE>
IV-11
<PAGE> 56
SCHEDULE II
Mobile America Corporation and Subsidiaries
Condensed Financial Information of Registrant
December 31, 1997 and 1996
Parent Company - Balance Sheets
<TABLE>
<CAPTION>
Assets
1997 1996
--------------------------------
<S> <C> <C>
Cash $ 6,520 $ (5,456)
Receivables:
Accrued investment income 145,599 184,592
Accounts receivable 209,343 0
Income taxes recoverable 0 581,194
Intercompany receivables 6,693,156 7,221,806
--------------------------------
Total receivables 7,048,098 7,987,592
--------------------------------
Investments:
Short-term investments 5,083,684 2,225,173
Securities - held to maturity at
amortized cost 5,160,183 5,883,085
Securities - available for sale at market 3,974,555 4,957,436
--------------------------------
Total investments 14,218,422 13,065,694
--------------------------------
Investments in subsidiaries 30,969,042 27,453,235
Other assets 360,177 392,113
Deferred income taxes 282,946 312,578
Equipment less accumulated depreciation 198,576 188,445
--------------------------------
$53,083,781 $49,394,201
===============================
Liabilities and Stockholders' Equity
Note payable $12,000,000 $12,000,000
Income taxes payable 213,850 0
Accrued expenses and other liabilities 165,026 132,946
Intercompany payables 1,019,234 1,084,234
--------------------------------
Total liabilities 13,398,110 13,217,180
--------------------------------
Stockholders' equity:
Common stock 191,110 168,010
Capital in excess of par 4,348,842 2,729,588
Net unrealized appreciation on
securities available for sale
net of deferred taxes 78,861 200,712
Treasury stock, at cost (1,229,403) (510,122)
Retained earnings 36,296,261 33,588,833
--------------------------------
Total stockholders' equity 39,685,671 36,177,021
--------------------------------
$53,083,781 $49,394,201
================================
Cash dividends paid by consolidated subsidiaries to parent 1997 $ 2,489,378
1996 $ 2,425,000
1995 $ 3,744,319
</TABLE>
IV-12
<PAGE> 57
SCHEDULE II
Mobile America Corporation and Subsidiaries
Condensed Financial Information of Registrant
Years Ended December 31, 1997, 1996 and 1995
Parent Company - Statements of Operations
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
Revenues:
Investment Income $679,988 $704,100 $382,764
Rental Income 0 1,520 67,510
Other 758,589 752,962 246,273
Realized gains 102,383 109,915 7,017
Sales of modular office equipment 0 0 105,484
Service fees 237,014 7,327 170,826
--------------------------------------------
Total revenues 1,777,974 1,575,824 979,874
--------------------------------------------
Expenses:
General and administrative 865,376 624,380 348,811
Interest on note payable 1,014,161 1,005,760 156,375
Cost of sales of modular office equipment 0 0 7,453
--------------------------------------------
Total expenses 1,879,537 1,630,140 512,639
--------------------------------------------
Income (loss) before taxes (101,563) (54,316) 467,235
Deferred taxes 0 0 149,063
Current taxes (credit) (92,802) (501,870) 45,076
--------------------------------------------
(92,802) (501,870) 194,139
Income (loss) before equity in
earnings of subsidiaries (8,761) 447,554 273,096
Equity in earnings of subsidiaries 6,184,557 7,123,838 5,726,598
--------------------------------------------
Net income $6,175,796 $7,571,392 $5,999,694
============================================
</TABLE>
IV-13
<PAGE> 58
SCHEDULE II
Mobile America Corporation and Subsidiaries
Condensed Financial Information of Registrant
Years Ended December 31, 1997, 1996 and 1995
Parent Company - Statements of Cash Flows
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 6,175,796 $ 7,571,392 $ 5,999,694
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of investments (102,383) (109,915) (7,017)
Provisions for depreciation 6,500 3,002 5,674
Equity in earnings of subsidiaries (6,184,557) (7,123,838) (5,726,598)
Decrease (increase) in accrued investment
income 38,993 62,925 (90,026)
Decrease (increase) in prepaid and
other assets (177,407) 133,427 (425,540)
Decrease (increase) in intercompany
balances 463,650 691,972 (6,096,907)
Net change in current income taxes 795,044 (639,722) (50,472)
Increase (decrease) in accrued
expenses and other liabilities 32,080 105,677 (5,831)
Decrease (increase) in deferred taxes 29,632 9,010 (320,627)
----------- ----------- -----------
Net cash provided by (used in)
operating activities 1,077,348 703,930 (6,717,650)
----------- ----------- -----------
Cash Flows from Investing Activities:
Dividends from subsidiaries 2,489,378 2,425,000 3,744,319
Investment in subsidiaries 0 (1,100,000) (1,000,000)
Net change in short term investments (2,858,511) 774,730 (1,998,213)
Purchase of investments (520,565) (4,642,577) (5,530,286)
Proceeds from sale and maturity of investments 2,478,790 1,997,631 2,791,589
Purchase of property and equipment (16,631) (167,073) 0
Sales of modular offices and equipment 0 0 7,453
----------- ----------- -----------
Net cash provided by (used in)
investing activities 1,572,461 (712,289) (1,985,138)
----------- ----------- -----------
Cash Flows from Financing Activities:
Proceeds from note payable 0 0 12,000,000
Purchase, sale of treasury stock (162,754) (45,650) (32,503)
Dividends paid to stockholders (2,474,416) (2,171,238) (1,117,776)
Stock dividend, fractional shares (663) 0 0
----------- ----------- -----------
Net cash provided by (used in)
financing activities (2,637,833) (2,216,888) 10,849,721
----------- ----------- -----------
Net increase (decrease) in cash 11,976 (2,225,247) 2,146,933
Cash, beginning of year (5,456) 2,219,791 72,858
----------- ----------- -----------
Cash, end of year $ 6,520 $ (5,456) $ 2,219,791
=========== =========== ===========
</TABLE>
IV-14
<PAGE> 59
Schedule III
Mobile America Corporation and Subsidiaries
Supplementary Insurance Information
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Losses, Claims and Policy Acquisition Costs
--------------------------------------------
Premiums Commissions
------------------------------------------------------ and
Unearned Unearned Premiums Losses Losses brokerage
premiums Net premiums earned outstanding incurred incurred
beginning premiums end of during end of during during
Lines of Insurance of period written period period period period period
------------ ----------- ---------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Fortune Insurance Company
Homeowners $ 556,850 $ 1,443,579 $ 791,308 $ 1,209,121 $ 387,357 $ 803,827 $ 393,467
Business Owners Package 236,931 215,687 161,624 290,994 285,881 295,557 72,813
Automobile Physical Damage 519,485 4,664,818 1,856,644 3,327,659 876,910 3,096,325 775,274
Automobile Liability 10,892,355 34,234,855 12,388,788 32,738,422 19,224,250 26,704,606 7,238,035
Other 0 0 0 0 7,636 200 (535)
------------------------- ----------- ----------- ----------- ----------- ----------
$12,205,621 $40,558,939 $15,198,364 $37,566,196 $20,782,034 $30,900,515 $8,479,054
------------------------- ----------- ----------- ----------- ----------- ----------
Fortune Life Insurance
Individual Credit Life $ 834 $ 0 $ 541 $ 293 $ 0 $ 0 $ 96
Ordinary Life 5,471 19,821 11,392 13,900 15,540 30,758 7,001
Accident and Health 0 0 0 0 0 0 0
------------------------- ----------- ----------- ----------- ----------- ----------
$ 6,305 $ 19,821 $ 11,933 $ 14,193 $ 15,540 $ 30,758 $ 7,097
------------------------- ----------- ----------- ----------- ----------- ----------
Pegasus Insurance Company
Homeowners $ 0 $ 83,089 $ 48,058 $ 35,031 $ 10,509 $ 10,509 $ 13,404
Business Owners Package 953 4,399 2,094 3,258 977 977 894
Other Liability 14,473 23,701 14,006 24,168 14,500 14,500 5,124
------------------------- ----------- ----------- ----------- ----------- ----------
$ 15,426 $ 111,189 $ 64,158 $ 62,457 $ 25,986 $ 25,986 $ 19,422
------------------------- ----------- ----------- ----------- ----------- ----------
Eliminations 0 0 0 0 0 (228,633) (7,643,569)
------------------------- ----------- ----------- ----------- ----------- ----------
Consolidated Totals $12,227,352 $40,689,949 $15,274,455 $37,642,846 $20,823,560 $30,728,626 $ 862,004
========================= =========== =========== =========== =========== ==========
</TABLE>
IV-15
<PAGE> 60
Schedule III
Mobile America Corporation and Subsidiaries
Supplementary Insurance Information
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Losses, Claims and Policy Acquisition Costs
-------------------------------------------
Premiums Commissions
---------------------------------------------------- and
Unearned Unearned Premiums Losses Losses brokerage
premiums Net premiums earned outstanding incurred incurred
beginning premiums end of during end of during during
Lines of Insurance of period written period period period period period
----------- ------------ ---------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Fortune Insurance Company
Homeowners $ 791,308 $ 1,580,533 $ 739,609 $ 1,632,232 $ 640,362 $ 925,804 $ 520,625
Business Owners Package 161,624 159,949 77,049 244,524 482,564 304,639 52,682
Automobile Physical Damage 1,856,644 3,574,174 1,397,118 4,033,700 722,143 3,411,448 914,071
Automobile Liability 12,388,788 26,254,197 14,668,654 23,974,331 17,874,116 18,749,139 3,030,867
Other 0 0 0 0 7,460 326 0
----------- ----------- ----------- ----------- ----------- ----------- ----------
$15,198,364 $31,568,853 $16,882,430 $29,884,787 $19,726,645 $23,391,356 $4,518,245
----------- ----------- ----------- ----------- ----------- ----------- ----------
Fortune Life Insurance Company
Individual Credit Life $ 541 $ 0 $ 369 $ 172 $ 0 $ 0 $ 0
Ordinary Life 11,392 77,410 53,978 34,824 16,291 751 24,013
Accident and Health 0 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- ----------- ----------
$ 11,933 $ 77,410 $ 54,347 $ 34,996 $ 16,291 $ 751 $ 24,013
----------- ----------- ----------- ----------- ----------- ----------- ----------
Pegasus Insurance Company
Homeowners $ 48,058 $ 1,500,450 $ 818,032 $ 730,476 $ 270,379 $ 406,297 $ 236,932
Business Owners Package 2,094 (172) 0 1,922 2,246 1,269 567
Other Liability 14,006 41,730 16,384 39,352 41,462 26,962 10,559
----------- ----------- ----------- ----------- ----------- ----------- ----------
$ 64,158 $ 1,542,008 $ 834,416 $ 771,750 $ 314,087 $ 434,528 $ 248,058
----------- ----------- ----------- ----------- ----------- ----------- ----------
Eliminations 0 0 0 0 0 0 (3,625,344)
----------- ----------- ----------- ----------- ----------- ----------- ----------
Consolidated Totals $15,274,455 $33,188,271 $17,771,193 $30,691,533 $20,057,023 $23,826,635 $1,164,972
=========== =========== =========== =========== =========== =========== ==========
</TABLE>
IV-16
<PAGE> 61
Schedule III
Mobile America Corporation and Subsidiaries
Supplementary Insurance Information
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Losses, Claims and Policy Acquisition Costs
-------------------------------------------
Premiums Commissions
------------------------------------------------------ and
Unearned Unearned Premiums Losses Losses brokerage
premiums Net premiums earned outstanding incurred incurred
beginning premiums end of during end of during during
Lines of Insurance of period written period period period period period
--------- ------------ ------------ ---------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Fortune Insurance Company
Homeowners $ 739,609 $ 1,125,121 $ 579,759 $ 1,284,971 $ 549,356 $ 484,418 $ 391,120
Business Owners Package 77,049 223,125 69,383 230,791 308,601 34,832 49,439
Automobile Physical Damage 1,397,118 3,572,259 1,108,801 3,860,576 1,082,960 3,135,312 860,730
Automobile Liability 14,668,654 33,830,649 12,427,143 36,072,160 13,393,970 27,978,986 5,042,166
Other 0 0 0 0 4,085 1,676 0
------------------------- ----------- ----------- ----------- ----------- ----------
$16,882,430 $38,751,154 $14,185,086 $41,448,498 $15,338,972 $31,635,224 $6,343,455
------------------------- ----------- ----------- ----------- ----------- ----------
Fortune Life Insurance
Individual Credit Life $ 369 $ 0 $ 230 $ 139 $ 0 $ 0 $ 0
Ordinary Life 53,978 134,193 71,697 116,474 16,983 18,192 92,255
Accident and Health 0 0 0 0 0 0 0
------------------------- ----------- ----------- ----------- ----------- ----------
$ 54,347 $ 134,193 $ 71,927 $ 116,613 $ 16,983 $ 18,192 $ 92,255
------------------------- ----------- ----------- ----------- ----------- ----------
Pegasus Insurance Company
Homeowners $ 818,032 $ 3,612,626 $ 1,869,292 $ 2,561,366 $ 497,642 $ 1,282,636 $ 840,600
Business Owners Package 0 487 0 487 3,408 1,162 287
Other Liability 16,384 42,828 14,817 44,395 65,676 51,034 12,254
------------------------- ----------- ----------- ----------- ----------- ----------
$ 834,416 $ 3,655,941 $ 1,884,109 $ 2,606,248 $ 566,726 $ 1,334,832 $ 853,141
------------------------- ----------- ----------- ----------- ----------- ----------
Eliminations 0 0 0 0 0 0 (5,104,959)
------------------------- ----------- ----------- ----------- ----------- ----------
Consolidated Totals $17,771,193 $42,541,288 $16,141,122 $44,171,359 $15,922,681 $32,988,248 $2,183,892
========================= =========== =========== =========== =========== ==========
</TABLE>
IV-17
<PAGE> 62
Schedule IV
Mobile America Corporation and Subsidiaries
Supplementary Insurance Information - Reinsurance
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed of Amount
Gross Other From Other Assumed
Amount Companies Companies Net Amount to Net
------------- -------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997
- ----------------------------
Life insurance in force $ 8,949,000 $ 13,000 $ 0 $ 8,936,000 $ 0
============ =========== ======= =========== =====
Insurance premiums earned:
Life insurance $ 117,293 $ 680 $ 0 $ 116,613 $ 0
Property and Casualty 91,968,284 47,913,538 0 44,054,746 0
------------ ----------- ------- ----------- -----
$ 92,085,577 $47,914,218 $ 0 $44,171,359 $ 0
============ =========== ======= =========== =====
Year ended December 31, 1996
- ----------------------------
Life insurance in force $ 5,138,000 $ 13,000 $ 0 $ 5,125,000 $ 0
============ =========== ======= =========== =====
Insurance premiums earned:
Life insurance $ 35,464 $ 468 $ 0 $ 34,996 $ 0
Property and Casualty 76,848,640 46,192,103 0 30,656,537 0
------------ ----------- ------- ----------- -----
$ 76,884,104 $46,192,571 $ 0 $30,691,533 $ 0
============ =========== ======= =========== =====
Year ended December 31, 1995
- ----------------------------
Life insurance in force $ 1,304,702 $ 12,500 $ 0 $ 1,292,202 $ 0
============ =========== ======= =========== =====
Insurance premiums earned:
Life insurance $ 14,661 $ 468 $ 0 $ 14,193 $ 0
Property and Casualty 102,707,334 65,078,681 0 37,628,653 0
------------ ----------- ------- ----------- -----
$102,721,995 $65,079,149 $ 0 $37,642,846 $ 0
============ =========== ======= =========== =====
</TABLE>
IV-18
<PAGE> 63
Schedule VI
Mobile America Corporation and Subsidiaries
Supplemental Insurance Information
Consolidated Property-Casualty Entities
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Reserves for Discount
Deferred Unpaid Claims if any,
Policy and Claim deducted in Net
Acquisition Adjustment previous Unearned Earned Investment
Costs Expenses column Premiums Premiums Income
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1997
($243,009) $15,905,698 $0 $16,069,195 $44,054,746 $3,858,580
Year Ended December 31, 1996
$191,839 $20,040,734 $0 $17,716,845 $30,656,536 $4,337,687
Year Ended December 31, 1995
($1,405,008) $20,808,027 $0 $15,262,522 $37,628,653 $4,337,330
<CAPTION>
Claim and Claim
Adjustment Expenses Paid
Incurred Related to Amortization Claims
(1) (2) of Deferred and Claim
Current Prior Policy Adjustment Premium
Year Years Costs Expenses Written
- --------------------------------------------------------------------
<C> <C> <C> <C> <C>
Year Ended December 31, 1997
$36,833,718 ($3,863,662) ($7,196,596) $37,105,090 $42,407,097
Year Ended December 31, 1996
$27,317,000 ($3,491,118) ($4,766,302) $24,593,170 $33,110,861
Year Ended December 31, 1995
$30,737,734 $188,772 ($8,498,476) $29,221,765 $40,670,127
</TABLE>
IV-19
<PAGE> 64
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MOBILE AMERICA CORPORATION
--------------------------
Registrant
March 27, 1998 By: /s/ Allan J. McCorkle
-------------------------
Allan J. McCorkle
President
March 27, 1998 By: /s/ Thomas L. Stinson
-------------------------
Thomas L. Stinson
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<S> <C>
By /s/ Allan J. McCorkle Chairman of the Board,
- ------------------------------------------------------- and Director March 27, 1998
Allan J. McCorkle
By /s/ Thomas J. McCorkle Director
- ------------------------------------------------------- March 27, 1998
Thomas J. McCorkle
By /s/ R. Lee Smith Director
- ------------------------------------------------------- March 27, 1998
R. Lee Smith
By /s/ Robert Thomas III Director
- ------------------------------------------------------- March 27, 1998
Robert Thomas III
By /s/ Jack Horne Chambers Director
- ------------------------------------------------------- March 27, 1998
Jack Horne Chambers
By /s/ John Michael Garrity Director
- ------------------------------------------------------- March 27, 1998
John Michael Garrity
By /s/ Thomas Edwin Perry Director
- ------------------------------------------------------- March 27, 1998
Thomas Edwin Perry
By /s/ Randal Lee Ringhaver Director March 27, 1998
- -------------------------------------------------------
Randal Lee Ringhaver
</TABLE>
IV-20
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MOBILE AMERICA CORPORATION FOR THE YEAR ENDED DECEMBER
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<DEBT-HELD-FOR-SALE> 29,303,564
<DEBT-CARRYING-VALUE> 43,620,417
<DEBT-MARKET-VALUE> 43,511,416
<EQUITIES> 1,373,070
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 91,238,013
<CASH> 4,518,020
<RECOVER-REINSURE> 100,486
<DEFERRED-ACQUISITION> (2,047,989)
<TOTAL-ASSETS> 138,242,138
<POLICY-LOSSES> 33,643,295
<UNEARNED-PREMIUMS> 32,893,437
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 12,000,000
0
0
<COMMON> 191,110
<OTHER-SE> 39,494,561
<TOTAL-LIABILITY-AND-EQUITY> 138,242,138
44,171,359
<INVESTMENT-INCOME> 5,390,681
<INVESTMENT-GAINS> 263,711
<OTHER-INCOME> 8,984,456
<BENEFITS> 32,876,176
<UNDERWRITING-AMORTIZATION> 2,295,965
<UNDERWRITING-OTHER> 14,770,170
<INCOME-PRETAX> 8,867,896
<INCOME-TAX> 2,692,100
<INCOME-CONTINUING> 6,175,796
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,175,796
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
<RESERVE-OPEN> 20,040,739
<PROVISION-CURRENT> 35,706,903
<PROVISION-PRIOR> (2,736,845)
<PAYMENTS-CURRENT> 23,961,413
<PAYMENTS-PRIOR> 13,143,680
<RESERVE-CLOSE> 15,905,704
<CUMULATIVE-DEFICIENCY> 2,736,845
</TABLE>
