UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark one)
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997 .
TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-13538
NATIONAL AFFILIATED CORPORATION
(Exact Name of small business issuer as specified in its charter)
Louisiana 72-0947819
(State or other jurisdiction of(I.R.S. Employer Identification
incorporation or organization)Number)
7228 England Drive, Suite 24, P.O. Box 12190, Alexandria, LA 71315
(Address of principal executive offices)
(318) 473-4355
(Insurer's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Registrant had 8,786,415 Voting Common Shares outstanding on June 30, 1997.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL AFFILIATED CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
1997 1996
ASSETS:
Cash $62,770 $195,835
Invested assets:
Fixed maturities available-for-sale at mark 1,486,908 1,227,902
Equity securities available-for-sale at mar 708,280 80,938
Mortgage loans 1,662,212 1,425,000
Collateral loans 1,244,322 881,822
Other long-term investments at equity 99,947 127,775
Other long-term investments at market 39,000 0
Certificates of deposit, time deposits and 843,255 24,673
Restricted assets at market 1,030,209 1,032,000
Accrued investment income 132,163 62,313
Finance notes receivable - net 2,670 7,117
Policy loans 102,790 107,830
Reinsurance receivable 705,338 679,623
Other amounts receivable:
Premiums due and uncollected 74,155 25,458
Agents' balances (net of allowance for unco
account of $150,000 in 1997 and 1996) 186,146 138,133
Other 814,739 2,139,330
Property - net 134,050 136,839
Deferred policy acquisition costs 809,381 966,545
Other assets 968,024 21,482
TOTAL $11,106,359 $9,280,615
LIABILITIES AND STOCKHOLDERS' EQUITY:
Policy benefit reserves 3,372,172 $3,650,190
Policy claims 725,992 961,697
Unearned premiums 24,583 24,642
Dividends left on deposit 277,703 304,697
Advance premium deposits 162,141 168,141
Other policyholders' funds 10,287 11,452
Accounts payable and accruals 363,597 301,464
Debentures 1,500,000 0
Total liabilities 6,436,475 5,422,283
Commitments and contingent liabilities
Stockholders' equity:
Voting common shares, no par; 14,000,000 sh
authorized; 8,786,415 and 8,740,915 share 9,300,003 9,275,003
Additional paid-in capital 154,500 154,500
Net unrealized investment gains (losses) (148,181) (508,846)
Accumulated deficit (4,636,438) (5,062,325)
Total stockholders' equity 4,669,884 3,858,332
TOTAL $11,106,359 $9,280,615
</TABLE>
See notes to consolidated financial statements.
NATIONAL AFFILIATED CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<S> <C> <C> <C> <C>
Three Months Six Months
1997 1996 1997 1996
REVENUES:
Insurance premiums $610,529 $469,636 $1,215,680 $1,003,555
Net investment income 109,594 180,238 170,296 314,846
Other income 657,049 18,662 701,256 31,835
Total revenues 1,377,172 668,536 2,087,232 1,350,236
EXPENSES:
Increase (decrease) in policy be 45,782 (18,283) (315,303) (40,329)
Claims and other benefits 357,738 361,961 892,800 695,523
Policyholder dividends 3,300 5,468 5,552 7,679
Commission expense 65,008 69,443 122,962 154,769
Depreciation and amortization 20,099 8,327 21,539 14,890
Interest expense 20,420 20,653 33,459 30,192
Salaries, wages and taxes 90,805 182,849 213,325 368,126
Operating expense 301,016 382,058 434,524 691,842
Restructuring expense 24,642 0 95,324 0
Amortization of deferred acquisi 67,225 79,783 157,164 237,697
Total expenses 996,035 1,092,259 1,661,346 2,160,390
GAIN (LOSS) BEFORE INCOME TAXES 381,137 (423,723) 425,886 (810,154)
PROVISION FOR INCOME TAXES 0 0 0 0
NET GAIN (LOSS) $381,137 ($423,723) $425,886 ($810,154)
GAIN (LOSS) PER COMMON SHARE $0.04 ($0.12) $0.05 ($0.23)
(primary and fully diluted)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,779,415 3,579,489 8,767,582 3,579,489
</TABLE>
See notes to consolidated financial statements.
NATIONAL AFFILIATED CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<S> <C> <C>
1997 1996
Cash flows from operating activities:
Net loss $425,887 ($810,155)
Non-cash and non-operating items:
Gain on sale of invested assets 1,532 (191,408)
Depreciation and amortization 2,789 14,890
Change in assets and liabilities:
Deferred policy acquisition costs 157,164 237,697
Policy benefit reserves and unearned premiu (278,077) (85,551)
Policy claims (235,705) (193,486)
Equity write-down of other long-term invest 27,828 7,888
Accounts payable and accruals 62,133 (1,674,871)
Due from reinsurance companies (25,715) 80,032
Other 258,337 208,667
Net cash provided from (used in) operating act 396,173 (2,406,297)
Cash flows from investing activities:
Acquisitions of:
Invested assets
Fixed maturities available-for-sale (880,784) (1,269,585)
Equity securities available-for-sale (262,500) (250,000)
Mortgage loans (237,212) 0
Collateral loans (362,500) 0
Other long-term investments (39,000) 0
Certificates of deposit, time deposits, (818,582) 0
Finance notes receivable 0 (10,000)
Property 0 (6,301)
Proceeds from:
Invested assets
Fixed maturities available-for-sale 617,860 2,971,255
Other long-term investments 0 29,000
Certificates of deposit and time deposit 0 93,943
Finance notes receivable 4,447 0
Policy loans 5,040 (19,635)
Agent's balances - net (48,013) 20,887
Net cash (used in) provided from investing act (2,021,244) 1,559,564
Cash flows from financing activities:
Withdrawals of dividends and advance premiums (32,994) (54,981)
Sale of preferred and common stock 25,000 695,000
Sale of convertible debentures 1,500,000 0
Net cash provided from financing activities 1,492,006 640,019
Net decrease in cash (133,065) (206,714)
Cash at beginning of year 195,835 306,686
Cash at end of period $62,770 $99,972
Supplemental cash flows disclosures:
Interest paid $13,736 $18,264
Income taxes paid $0 $0
</TABLE>
See notes to consolidated financial statements.
NATIONAL AFFILIATED CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
NOTE 1 - REPRESENTATION BY MANAGEMENT
The unaudited consolidated financial statements included herein reflect all
normal, recurring adjustments which are necessary to a fair presentation of the
consolidated financial position, results of operations and cash flows for the
interim periods presented.
The results of operations for the six month period ended June 30, 1997, are not
necessarily indicative of the results to be expected for the entire year of
1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Management's discussion and analysis reviews the consolidated financial
condition of National Affiliated Corporation ("NAC" or "the Company") at
June 30, 1997 and 1996, the consolidated results of operations for the periods
ended June 30, 1997 and 1996, and, where appropriate, factors that may affect
future financial performance. This discussion should be read in conjunction
with the accompanying consolidated financial statements, notes thereto and
selected financial data.
Previously, the Company, through its wholly-owned subsidiary, National
Affiliated Investors Life Insurance Company ("NAIL"), issued life and accident
and health insurance policies to customers in targeted niche markets in urban
and rural areas. Beginning in 1997, the Company changed its focus to reduce its
operating and marketing costs and to begin steps to acquire other life insurance
companies.
Financial Condition
The Company's assets at June 30, 1997, totaled $11,106,359 as compared to
$9,280,615 on December 31, 1996. Liabilities totaled $6,436,475 and $5,422,283
on June 30, 1997 and December 31, 1996, respectively. Stockholder's equity
increased to $4,669,884 at June 30, 1997, from $3,858,332 at December 31, 1996.
Equity securities increased by $627,342 due to common stocks included in the
recapture of the life insurance block. Effective December 31, 1995, NAIL and
Maryland Southern Life Insurance Company (MSLIC) entered into a coinsurance
agreement whereby MSLIC assumed 80% of all the life insurance business retained
by NAIL. This agreement was terminated December 31, 1996 and the ceded
business was recaptured by NAIL. This is a
nonrecurring transaction. Insurance companies use coinsurance and reinsurance to
increase their statutory capital. This practice is more common in small
insurance companies. The practice provides additional statutory capital
immediately, but also has a negative impact on profits in the long run. The
securities were sold in the
second quarter of 1996 for a profit. Other amounts receivable decreased by
$1,324,591 primarily as a result of the reversal of the coinsurance transaction
in February 1997. Policy benefit reserves decreased by $278,018 due to a
decrease in the number and amount of policies. The reserves also decreased due
to the reduction in cash outflows, which is a component of reserves if the
company is losing money. The reduction in cash outflows resulted from the cost
reduction program.
In the first half of 1997, the Company's earnings per share were $.05 on net
income of $425,886, as compared to a loss per share in the first half of 1996 of
$.23 on a loss of $810,154. Premium revenues exceeded the first half of 1996 by
$212,125, or 16%, due to recapture of the 80% coinsurance from MSLIC in the
first quarter of 1997. Other income increased $669,421 due to restructuring
of the New Mexico Health program. Policy claims and other benefits increased by
$197,277, or 28%. This was due to large health claims which occurred in the
first four months of the year. Salaries were reduced by 42% and other operating
expenses were reduced by $257,000, or 37%. These improvements were due to
outsourcing of operations and cost reduction programs implemented by new
management.
Results of Operations
1997 Compared to 1996
The Company had a net profit for the first six months of 1997 of $425,886
compared to a loss of $810,154 for the six months ended June 30, 1996. The
earnings per common share were $.05 for the first half of 1997 compared to a
loss of $.23 for the same period 1996. Total revenues in the first half 1997
increased to $2,087,232 from $1,350,236 in 1996. Premium revenues increased to
$1,215,680 in the first half of 1997 from $1,003,555 in 1996.
<TABLE>
<S> <C> <C>
Six months ended June 30,
1997 1996
Life premium $ 410,302 $ 542,446
Life reinsurance premiums (11,266) (349,310)
A & H premiums 936,805 912,790
A & H reinsurance premiums (120,161) (102,371)
Total premium revenues $1,215,680 $1,003,555
</TABLE>
Although total premiums increased, life premiums declined as a result of
continuing lapses of FLA-100 policies. The Company ceased paying significant
dividends on these policies in 1992 when the Board of Directors determined the
projected dividend to be excessive. This action has caused the lapse rate of
these policies to increase.
The increase in the accident and health (A&H) premium is the result of adding
additional members to the New Mexico group business. Management expects the
number of lives covered to increase by 25% to 30% in 1997. The Company has
received a 33% rate increase, which will be effective October 1, 1997.
Additional savings of 6% were also obtained through benefit reductions.
Net investment income decreased to $170,296 as of June 30, 1997 as compared to
$314,846 at June 30, 1996. This decrease was due to capital gains realized from
the sale of assets in connection with a coinsurance transaction in the first
quarter of 1996.
The Company's claims and other benefits increased to $892,800 for the first half
of 1997 from $695,523 for the first half of 1996. The increase is the result of
the claims incurred on the New Mexico policies described above. These claims
were due to seven extraordinary cases including several leukemia cases and
several premature births. Reinsurance covered a portion of the costs. Only one
case of this magnitude occurred in the six years previous to this period. This
unusual number of claims is not expected to occur again in future periods. The
composition of benefits and claims for the six months ending June 30 are as
follows:
<TABLE>
<S> <C> <C>
Six months ended June 30,
1997 1996
Life benefits $ 155,577 $ 23,770
A & H benefits 737,223 671,753
Total benefits $ 892,800 $ 695,523
</TABLE>
Commission expense decreased to $122,962 for the first six months of 1997 from
$154,769 for the first six months of 1996, primarily as a result of decreased
sales of life policies. The composition of commission expense was as follows:
<TABLE>
<S> <C> <C>
Six months ended June 30,
1997 1996
Life commissions $ 26,200 $ 76,118
A & H commissions 96,762 78,651
Total $ 122,962 $ 154,769
</TABLE>
Salaries and operating expenses decreased to $647,849 in the first half of 1997
from $1,059,968 in 1996. The Company expects additional decreases in salaries
and other operating expenses during the remainder of 1997. The Company has
moved its offices and decreased its rent, utility and maintenance costs. The
Company has downsized its staff by 76% and outsourced its computer and policy
administrative services. These changes are expected to result in a further
decrease in these expenses in 1997. Management is continuing to evaluate
operations to further reduce operating costs.
Conseco Capital Management (CCM), an asset management company with $29
billion of assets under management, manages the assets of the Company. Based on
CCM's historical record of investing assets, the Company expects to see an
improvement in its investment income.
Deferred policy acquisition costs decreased to $157,164 for the first six months
of 1997 as compared to $237,697 for the first six months of 1996. The lapse of
FLA-100 policies is still causing a decrease in deferred acquisition costs. The
decrease in deferred acquisition costs is allocated between life and health as
follows:
<TABLE>
<S> <C> <C>
Six months ended June 30,
1997 1996
Life $ 99,836 $ 146,763
A & H 57,328 90,934
Total $ 157,164 $ 237,697
</TABLE>
Liquidity and Capital Resources
The liquidity requirements for the Company's operations generally arise from the
insurance operations of NAIL and the administrative activities of NAC, and
include payment of claims to policyholders, payment of commissions and other
costs of acquiring new policies, payment of operating costs, and payment of cash
values upon termination of policies. These demands have generally been met by
NAIL with funds generated by its operations, from its reserves and liquid
assets, and from capital contributions by NAC. NAC has funded its operations
primarily through management fees charged to its subsidiaries, including NAIL.
NAIL is prohibited by Louisiana law from paying dividends to NAC other than from
statutory profits.
Statutory losses in the previous six years by NAIL have had a substantial
negative impact on the amount of its surplus. Due to the decline in surplus and
continual operating losses, NAIL was notified during 1996 that its licenses were
suspended in the states of Alabama, Tennessee and Wyoming. With the stock
purchase by The Southern Group, the Company contributed $2,766,913 to NAIL's
surplus at December 31, 1996. The latest liquidity test published by A.M. Best
Insurance Reports rates NAIL's Current Liquidity as 123%. The usual range stated
by Best for this test is 95% to 120%. NAIL's Quick Liquidity, which measures the
portion of liabilities covered by cash and quickly convertible investments, is
56.8% while the usual range is 10% to 20%.
Acquisition of Life Insurance Companies
The Company's business plans will focus on growth through the acquisition and
consolidation of other small life insurance companies. The Company plans to
seek to acquire undervalued life insurance companies in the $2 million to $50
million equity range. The acquisitions are expected to be made through a joint
venture with The Southern Group. This acquisition strategy will require
acquisition candidates, evaluation, acquisition finance, and regulatory
approvals. The Southern Group has implemented a program of identifying potential
acquisition candidates and the Company intends to review acquisition
opportunities presented by The Southern Group. Maryland Southern Life Insurance
Company and Southern Mortgage, Inc. are under agreement to be added to the joint
venture in the third quarter.
The Southern Group signed a strategic alliance with CCM to provide assistance in
the evaluation of the assets of target life insurance companies during the due
diligence phase. CCM has done a full evaluation of acquisition candidates and
will continue to do so in the future.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company and National Affiliated Investors
Life (NAIL), NAC's life insurance subsidiary, are involved in
lawsuits related to their operations. In most cases, such lawsuits
involve claims under insurance policies of NAIL or other contracts
of the Company.
In a lawsuit styled Newsome v. NAIL, et. al., filed in the Jefferson
County Circuit Court in Alabama, the plaintiff alleged breach of
contract, fraud and related causes of action based on the alleged
failure of NAIL to provide coverage under a short term medical
policy. On August 22, 1997, a jury verdict was rendered against
NAIL and Edward Carroll, the former president of NAIL, for
actual damages of $250,000 and punitive damages of an additional
$600,000. After consultation with counsel, management believes
that the size of the jury award was excessive and that grounds exist
under Alabama law for a reduction in the amount of such damages.
Insurance coverage is available from the insurer that has
underwritten the officers' and directors' liability coverage for
NAIL. While the officers' and directors' liability coverage may not
extend to recoveries of punitive damages, management of NAIL
has made a claim against a second insurance policy held by NAIL as
general liability insurance. NAIL has made demand on its general
liability insurance carrier to pay this claim, including the punitive
damages. NAIL is also engaged in settlement discussions with the
plaintiff. In the event this case is not settled on a timely basis,
NAIL has already filed a vigorous challenge to this jury verdict and
has submitted motions with the court for elimination or reduction of
the amount of the jury award. If NAIL is unsuccessful in its attempts
to request that the court reduce the amount of the jury awarded
damages, in its efforts to cause its insurance carriers to pay the
amount of the damages as a covered claim or in its efforts to settle
the case for a payment of a lesser amount to the plaintiffs, the
payment of the jury award would have a material adverse effect on
the operations and business of NAIL.
However, based on the settlement discussions and Alabama case
law, management believes that this case will be disposed of without
any payments from NAIL in excess of the amounts previously
included in the reserves established for litigation.
NAIL has outstanding two lawsuits related to claims by purchasers
of the FLA 100 founders policies. NAIL issued more than 14,000
individual FLA 100 founders policies from 1982 to 1988. At
December 31, 1996, approximately 1,200 of these policies
remained in force of which approximately 600 were premium
paying. These founders policies were participating life policies that
paid a dividend to policyholders. According to the terms of the
policy, NAIL was not required to pay dividends after the third
anniversary date of each policy. While NAIL did pay dividends
during the required three anniversary dates on each policy, in 1992,
NAIL ceased paying dividends with respect to any FLA 100
policies. In Landreneau, et. al.v. NAIL, plaintiff filed a lawsuit in
Louisiana's 13th Judicial District Court on May 10, 1995, alleging
breach of contract and fraud regarding the sale of FLA 100
founders policies. The plaintiff had purchased six units of coverage
and paid for renewal for a total of five years on these policies. The
trial court rendered a judgment in favor of the plaintiff in the
approximate amount of $34,000, less the cost of insurance, which is
approximately $7,000, plus interest. This judgment was in general
computed as the amount of the premiums paid less the value of the
life insurance coverage provided plus attorneys' fees. This judgment
was affirmed by the Third Court of Appeals of the State of
Louisiana and NAIL filed an appeal with the Supreme Court of the
State of Louisiana. On May 9, 1997, the Supreme Court of the
State of Louisiana denied the request of NAIL to hear an appeal of
this matter. Accordingly, NAIL will be required to pay the amount
of the judgment entered by the trial court. A separate lawsuit,
Classert et. al. v. NAIL et. al., filed in the 18th Judicial District
Court, on August 26, 1996, also relates to the FLA 100 founders
policies. Five plaintiffs asserting to represent the class of persons
that purchased FLA 100 founders policies allege fraudulent sales
practices by former employees of NAIL and are seeking unspecified
damages. NAIL opposes the certification of these plaintiffs as
representatives of the class of persons that purchased FLA 100
policies and intends to continue to vigorously oppose such
certification and otherwise to defend this case. Although discovery
has begun in the Classert case, there remain significant procedural
matters to be resolved and significant additional discovery before
NAIL will be able to make an accurate prediction of the likely
outcome of this case. Based on the best estimates of the schedule
for resolving the procedural and discovery matters in connection
with this case, management believes that the issue of whether the
case will proceed as a class action will be heard by the trial court
in the third or fourth quarter of 1997 with a possible trial date not
set until late 1998 or mid 1999. If the court certifies a class of
persons including a significant number of the former FLA 100
policyholders and a judgment is rendered in favor of such a class of
plaintiffs, such an adverse judgment would have a material adverse
effect on NAIL.
The Company and NAIL have other outstanding lawsuits as well as
other claims that arise in the ordinary course of business. Even
though the Company and NAIL may be contesting the validity or
extent of its liability in response to such lawsuits, the Company has
established reserves in its consolidated financial statements that
approximate its estimated potential liability. Included in the
financial statements is a total reserve of $122,000 that has been
established with respect to all of the lawsuits and claims against the
Company and NAIL. In establishing this reserve, management has taken
into account the facts and circumstances of each case, the advice of
counsel, the availability of insurance coverages and other factors
deemed by them to be relevant.
ITEM 2. CHANGES IN SECURITIES
A former employee acquired 21,000 shares of common stock of the
Company upon the exercise of options at $0.50 per share in May,
1997. These shares were issued pursuant to a registration statement
filed by the Company on Form S-8.
On May 21, 1997, NAC completed the sale of $1,500,000 of
convertible debentures which was previously reported by the
Company in its Annual Report on Form 10-K for the fiscal year
ended December 31, 1996. The debentures were sold to purchasers
who were not United States persons in transactions occurring
outside of the United States. All of the purchasers were institutional
investors. The offering was completed with the assistance of
European American Securities, Inc., a NASDAQ licensed broker-
dealer domiciled in London, who was paid a commission of
$150,000 in connection with the placement. The offering is
intended to be exempt from registration pursuant to Regulation S
promulgated under the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT 11
NATIONAL AFFILIATED CORPORATION AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
The weighted average number of shares outstanding for the six
months ended June 30, 1997 was computed as follows:
<TABLE>
<S> <C>
Shares outstanding, beginning of period 8,740,915
Shares issued, first quarter, 1997 24,500
Shares issued, second quarter, 1997 21,000
Shares outstanding, end of period 8,786,415
</TABLE>
Shares outstanding,
January 8,740,915
February 8,760,915
March 8,765,415
April 8,765,415
May 8,786,415
June 8,786,415
52,605,490 / 6 = 8,767,582
April 8,765,415
May 8,786,415
June 8,786,415
26,338,245 / 3 = 8,779,415
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL AFFILIATED CORPORATION
(Registrant)
Date September 16, 1997 By: T. Brent Chapel, CPA
T. Brent Chapel, CPA
Chief Financial Officer (Duly
authorized officer and
principal accounting officer of
the Registrant)
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 1,416,509
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 337,187
<MORTGAGE> 1,661,875
<REAL-ESTATE> 0
<TOTAL-INVEST> 6,509,383
<CASH> 121,244
<RECOVER-REINSURE> 694,467
<DEFERRED-ACQUISITION> 876,606
<TOTAL-ASSETS> 9,149,774
<POLICY-LOSSES> 3,392,826
<UNEARNED-PREMIUMS> 25,670
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 453,387
<NOTES-PAYABLE> 0
0
0
<COMMON> 9,287,253
<OTHER-SE> (5,660,264)
<TOTAL-LIABILITY-AND-EQUITY> 9,149,774
1,215,680
<INVESTMENT-INCOME> 170,296
<INVESTMENT-GAINS> (1,532)
<OTHER-INCOME> 701,256
<BENEFITS> 583,049
<UNDERWRITING-AMORTIZATION> 157,164
<UNDERWRITING-OTHER> 921,133
<INCOME-PRETAX> 425,886
<INCOME-TAX> 0
<INCOME-CONTINUING> 425,886
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 425,886
<EPS-PRIMARY> .05
<EPS-DILUTED> 0
<RESERVE-OPEN> 961,697
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 1,109,417
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</TABLE>
