SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Year Ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the Transition Period From to
Commission File Number
A. Full title of the Plan and the address of the
Plan, if different from that of the issuer
named below:
ACCEPTANCE INSURANCE COMPANIES INC.
EMPLOYEE STOCK OWNERSHIP AND TAX DEFERRED SAVINGS PLAN
B. Name of issuer of the securities held
pursuant to the Plan and the address of its
principal executive office:
ACCEPTANCE INSURANCE COMPANIES INC.
ONE CENTRAL PARK PLAZA
222 SOUTH 15TH STREET, SUITE 600 NORTH
OMAHA, NEBRASKA 68102
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the employee
benefit plan) have duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
ACCEPTANCE INSURANCE COMPANIES INC.
EMPLOYEE STOCK OWNERSHIP AND TAX
DEFERRED SAVINGS PLAN
----------------------------------
(Name of Plan)
June 27, 1997 /s/ Georgia M. Mace
Date: __________________ By ________________________________
Georgia M. Mace
Plan Administrator
<PAGE>
REQUIRED INFORMATION
Plan financial statements and schedules are prepared in
accordance with the financial reporting requirements of ERISA and
are included therein as listed in the table of contents below.
Table of Contents
(a) Financial Statements and Annual Report Schedules
Independent Auditors' Report
Statement of Net Assets Available for Benefits,
December 31, 1996
Statement of Net Assets Available for Benefits,
December 31, 1995
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1996
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1995
Notes to Financial Statements
(b) Annual Report Schedules
Item 27a - Schedule of Assets Held for Investment
Purposes, December 31, 1996
Item 27d - Schedule of Reportable Transactions for
the Year Ended December 31, 1996
(c) Exhibits
Exhibit 23 - Independent Auditors' Consent
Schedules not filed herewith are omitted because of the absence
of the conditions under which they are required.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Administrative Committee
Acceptance Insurance Companies Inc. Employee Stock
Ownership and Tax Deferred Savings Plan
Omaha, Nebraska
We have audited the accompanying statements of net assets
available for benefits of the Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan (the Plan)
as of December 31, 1996 and 1995, and the related statements of
changes in net assets available for benefits for the years then
ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audit 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 text 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, such financial statements present fairly, in all
material respects, the net assets available for benefits of the
Acceptance Insurance Companies Inc. Employee Stock Ownership and
Tax Deferred Savings Plan as of December 31, 1996 and 1995, and
the changes in net assets available for benefits for the years
then ended in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an opinion
on the basic financial statements taken as a whole. The
supplemental annual report schedules are presented for purposes
of additional analysis and are not a required part of the basic
financial statements, but are supplementary information required
by the Department of Labor's Rules and Regulations for Reporting
and Disclosure under the Employee Retirement Income Security Act
of 1974. These schedules are the responsibility of the Plan's
management. Such schedules have been subjected to auditing
procedures applied in the audit of the basic financial statements
and, in our opinion, are fairly stated in all material respects
when considered in relation to the basic financial statements
taken as a whole.
/s/ Pfeister & Blackman, LLP
June 5, 1997
Omaha, Nebraska<PAGE>
<TABLE>
<CAPTION>
Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan
Statement of Net Assets Available for Benefits
December 31, 1996
- ---------------------------------------------------------------------------------------------------
Guaranteed Capital
Interest Market Balanced Income Appreciation
Contracts Other Funds Portfolio Portfolio Portfolio
--------- ----- ------ --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments at Fair Value:
Acceptance Insurance
Companies Inc.
Common Stock $ -- $ -- $ -- $ -- $ -- $ --
Money Market Fund 101,885 -- 229,767 88,446 27,745 273,246
U.S. Government Securities
and Agencies -- -- -- 228,597 108,763 --
Corporate Bonds -- -- -- 139,174 97,845 1,526,181
Common Stock -- -- -- 531,703 90,117 3,499,464
Preferred Stock -- -- -- 70,750 32,800 --
Mutual Funds 510,891 -- -- -- -- --
Participant Loans -- 319,113 -- -- -- --
Investments at Contract Value:
Guaranteed Interest Contracts 131,441 -- -- -- -- --
Certificate of Deposit 172,141 -- -- -- -- --
Cash -- -- -- 34 51 --
Receivables:
Employer Contributions -- 848,536 -- -- -- --
Employee Contributions -- 111,659 -- -- -- --
Accrued Interest 6,974 -- 1,085 7,855 3,505 44,813
-------- -------- -------- -------- -------- ----------
Total Assets 923,332 1,279,308 230,852 1,066,559 360,826 5,343,704
-------- --------- -------- -------- -------- ----------
LIABILITIES
Excess Contributions Payable 3,204 -- 94 10,044 3,176 16,763
ESOP Loan -- -- -- -- -- --
-------- -------- -------- -------- -------- ----------
Total Liabilities 3,204 -- 94 10,044 3,176 16,763
-------- -------- -------- -------- -------- ----------
Net Assets Available for
Benefits $920,128 $1,279,308 $230,758 $1,056,515 $357,650 $5,326,941
======== ======== ======== ======== ======== ==========
<PAGE>
<CAPTION>
Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan
Statement of Net Assets Available for Benefits
December 31, 1996
- ---------------------------------------------------------------------------------------------------
Acceptance Employee Stock
Common Ownership
Stock Fund Allocated Unallocated Total
---------- --------- ----------- -----
<S> <C> <C> <C> <C>
Assets
Investments at Fair Value:
Acceptance Insurance
Companies Inc.
Common Stock $1,112,517 $1,116,823 $ 373,413 $2,602,753
Money Market Fund 17,175 289 -- 738,553
U.S. Government Securities -- -- -- 337,360
Corporate Bonds -- -- -- 1,763,200
Common Stock -- -- -- 4,121,284
Preferred Stock -- -- -- 103,550
Mutual Funds -- -- -- 510,891
Participant Loans -- -- -- 319,113
Investments at Contract Value:
Guaranteed Interest Contracts -- -- -- 131,441
Certificate of Deposit -- -- -- 172,141
Cash -- -- -- 85
Receivables:
Employer Contributions -- -- -- 848,536
Employee Contributions -- -- -- 111,659
Accrued Interest 65 1 -- 64,298
-------- -------- ---------- ----------
Total Assets $1,129,757 1,117,113 373,413 11,824,864
-------- -------- ---------- -----------
LIABILITIES
Excess Contributions Payable 7,113 -- -- 40,394
ESOP Loan -- -- 207,991 207,991
-------- -------- ---------- ----------
Total Liabilities 7,113 -- 207,991 248,385
-------- -------- ---------- ----------
Net Assets Available for
Benefits $1,122,644 $1,117,113 $165,422 11,576,479
========= ========== ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan
Statement of Net Assets Available for Benefits
December 31, 1995
- ---------------------------------------------------------------------------------------------------
Guaranteed Money Capital
Interest Market Balanced Income Appreciation
Contracts Other Funds Portfolio Portfolio Portfolio
--------- ----- ------ --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments at Fair Value:
Acceptance Insurance
Companies Inc.
Common Stock $ -- $ -- $ -- $ -- $ -- $ --
Money Market Fund 60,016 55 279,565 215,977 48,045 325,506
U.S. Government Securities -- -- -- 122,681 60,785 --
Corporate Bonds -- -- -- 36,875 31,125 1,232,524
Common Stock -- -- -- 167,076 45,189 2,621,669
Preferred Stock -- -- -- 72,193 33,377 --
Mutual Funds -- 212,762 -- -- -- 53,750
Participant Loans -- 130,619 -- -- -- --
Investments at Contract Value:
Guaranteed Interest Contracts 227,510 -- -- -- -- --
Certificate of Deposit 156,936 -- -- -- -- --
Cash -- -- 35,317 -- -- --
Receivables:
Employer Contributions -- 239,408 -- -- -- --
Accrued Interest 10,739 13 1,235 4,338 1,977 25,628
-------- -------- -------- -------- -------- ----------
Total Assets 455,201 582,857 316,117 619,140 220,498 4,259,077
-------- -------- -------- -------- -------- ----------
LIABILITIES
Excess Contributions Payable -- 2,201 -- 8,013 563 21,889
ESOP Loan -- -- -- -- -- --
-------- -------- -------- -------- -------- ----------
Total Liabilities -- 2,201 -- 8,013 563 21,889
-------- -------- -------- -------- -------- ----------
Net Assets Available for
Benefits $455,201 $580,656 $316,117 $611,127 $219,935 $4,237,188
======== ======== ======== ======== ======== ==========<PAGE>
<CAPTION>
Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan
Statement of Net Assets Available for Benefits
December 31, 1995
- --------------------------------------------------------------------------------------------------
Employee
Acceptance Stock
Common Ownership
Stock Fund Allocated Unallocated Total
---------- --------- ----------- -----
<S> <C> <C> <C> <C>
Assets
Investments at Fair Value:
Acceptance Insurance
Companies Inc.
Common Stock $760,335 $860,638 $331,311 $1,952,284
Money Market Fund 148 38 -- 929,350
U.S. Government Securities -- -- -- 183,466
Corporate Bonds -- -- -- 1,300,524
Common Stock -- -- -- 2,833,934
Preferred Stock -- -- -- 105,570
Mutual Funds -- -- -- 266,512
Participant Loans -- -- -- 130,619
Investments at Contract Value:
Guaranteed Interest Contracts -- -- -- 227,510
Certificate of Deposit -- -- -- 156,936
Cash -- -- -- 35,317
Receivables:
Employer Contributions -- -- -- 239,408
Accrued Interest 12 -- -- 43,942
-------- -------- -------- ----------
Total Assets 760,495 860,676 331,311 8,405,372
-------- -------- -------- ----------
<PAGE>
LIABILITIES
Excess Contributions Payable 7,721 -- -- 40,387
ESOP Loan -- -- 245,010 245,010
-------- -------- -------- ----------
Total Liabilities 7,721 -- 245,010 285,397
-------- -------- -------- ----------
Net Assets Available for
Benefits $752,774 $860,676 $ 86,301 $8,119,975
======== ======== ======== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 1996
- ---------------------------------------------------------------------------------------------------
Guaranteed Capital
Interest Market Balanced Income Appreciation
Contracts Other Funds Portfolio Portfolio Portfolio
--------- ----- ------ --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Additions:
Investment Income:
Interest $ 19,313 $ -- $ 13,387 $ 29,663 $ 12,944 $ 155,630
Dividends -- -- -- 8,522 3,446 62,059
Realized (Loss) Gain -- -- -- 70,757 15,936 (72,055)
Unrealized (Loss) Gain 24,683 -- -- 35,268 3,710 413,068
-------- -------- ---------- -------- -------- ----------
43,996 -- 13,387 144,210 36,036 558,702
Allocation of 3,366 shares of
Company stock at market -- -- -- -- -- --
Contributions:
Employee -- 111,659 1,168,432 -- -- (83)
Employee Rollovers 6,679 -- 90,741 88,643 50,374 260,496
Employer -- 609,128 239,408 (2,395) -- (2,396)
Interest Paid by Acceptance
on Behalf of Plan -- -- -- -- -- --
-------- -------- ---------- -------- -------- ----------
6,679 720,787 1,498,581 86,248 50,374 258,017
-------- -------- ---------- -------- -------- ----------
Total Additions 50,675 720,787 1,511,968 230,458 86,410 816,719
Deductions:
Return of Excess
Contributions (3,204) -- (94) (10,044) (3,176) (16,763)
Distributions to Plan
Participants (15,919) -- (82,582) (65,354) (43,509) (268,068)
Allocation of 3,366 Shares
of Company Stock at
Market -- -- -- -- -- --
Interest on ESOP Loan -- -- -- -- -- --
-------- -------- --------- -------- -------- ----------
Total deductions (19,123) -- (82,676) (75,398) (46,685) (284,831)
Net Transfer of Assets
(to) From 433,375 (22,135) (1,514,651) 290,328 97,990 557,865
Net Increase (Decrease) 464,927 698,652 (85,359) 445,388 137,715 1,089,753
Net Assets Available for
Benefits Beginning of Year 455,201 580,656 316,117 611,127 219,935 4,237,188
Net Assets Available for
Benefits at End of Year $920,128 1,279,308 $ 230,758 $1,056,515 $357,650 $5,326,941
======== ======== ========== ======== ======== ==========
<PAGE>
<CAPTION>
Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 1996
- ---------------------------------------------------------------------------------------------------
Acceptance Employee Stock
Common Ownership
Stock Fund Allocated Unallocated Total
---------- --------- ----------- -----
<S> <C> <C> <C> <C>
Additions:
Investment Income:
Interest $ 342 $ 40 $ -- $ 231,319
Dividends -- -- -- 74,027
Realized (Loss) Gain 6,959 11,864 -- 33,461
Unrealized (Loss) Gain 267,395 261,886 106,478 1,112,488
-------- -------- -------- ----------
274,696 273,790 106,478 1,451,295
Allocation of 3,366 Shares of
Company Stock at Market -- 64,375 -- 64,375
Contributions:
Employee -- -- -- 1,280,008
Employee Rollovers 24,361 -- -- 521,294
Employer -- -- 37,019 880,764
Interest Paid by Acceptance
on Behalf of Plan -- -- 19,075 19,075
-------- -------- -------- ----------
24,361 -- 56,094 2,701,141
-------- -------- -------- ----------
Total Additions 299,057 338,165 162,572 4,216,811
Deductions:
Return of Excess
Contributions (7,113) -- -- (40,394)
Distributions to Plan
Participants (78,604) (82,427) -- (636,463)
Allocation of 3,366 Shares
of Company Stock at
Market -- -- (64,375) (64,375)
Interest on ESOP Loan -- -- (19,075) (19,075)
-------- -------- -------- ----------
Total Deductions (85,717) (82,427) (83,450) (760,307)
Net Transfer of Assets
(to) From 156,530 699 (1) --
Net Increase (Decrease) 369,870 256,437 79,121 3,456,504
Net Assets Available for
Benefits Beginning of Year 752,774 860,676 86,301 8,119,975
Net Assets Available for
Benefits at End of Year $1,122,644 $1,117,113 $165,422 $11,576,479
======== ======== ======== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 1995
- ----------------------------------------------------------------------------------------
Guaranteed Money Capitol
Interest Market Balanced Income Appreciation
Contracts Other Funds Portfolio Portfolio Portfolio
---------- ------ --------- --------- ---------- ----------
<S> <C> <C> <C>> <C> <C> <C>
Additions:
Investment Income:
Interest $26,097 $ 772 $ 19,614 $ 20,028 $ 8,939 $ 116,298
Dividends -- -- -- 2,576 993 54,952
Realized (Loss) Gain -- 3,201 -- 17,632 4,899 351,523
Unrealized (Loss) Gain -- 6,722 -- 49,929 16,393 383,991
---------- -------- --------- --------- -------- ----------
26,097 10,695 19,614 90,165 31,224 906,764
Allocation of 4,737 Shares
of Company Stock at Market -- -- -- -- -- --
Contributions:
Employee -- 13,996 824,729 -- -- 7,886
Employee Rollovers -- -- 15,548 1,532 1,533 11,946
Employer -- 112,688 128,530 -- -- --
Interest Paid by Acceptance
on Behalf of Plan -- -- -- -- -- --
-------- -------- --------- -------- ------ --------
-- 126,684 968,807 1,532 1,533 19,832
--------- -------- --------- -------- ------ --------
Total Additions 26,097 137,379 988,421 91,697 32,757 926,596
Deductions:
Return of Excess
Contributions -- (2,201) -- (8,013) (563) (21,889)
Distributions to Plan
Participants (18,889) (2,137) (22,717) (4,809) (392) (126,573)
Allocation of 4,737 Shares
of Company Stock at Market -- -- -- -- -- --
Interst on ESOP Loan -- -- -- -- -- --
--------- -------- --------- ------- -------- --------
Total Deductions (18,889) (4,338) (22,717) (12,822) (955) (148,462)
Net Transfer of Assets
(to) From (31,955) 190,442 (1,156,269) 252,754 71,488 430,323
Net Increase (Decrease) (24,747) 323,483 (190,565) 331,629 103,290 1,208,457
Net Assets Available for
Benefits at
Beginning of Year 479,948 257,173 506,682 279,498 116,645 3,028,731
Net Assets Available for
Benefits at
End of Year $455,201 $ 580,656 $ 316,117 $ 611,127 $ 219,935 $ 4,237,188
========= ======== ========= ========= ========= ===========
<PAGE>
<CAPTION>
Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 1995
- ---------------------------------------------------------------------------------------------------
Employee
Acceptance Stock
Common Ownership
Stock Fund Allocated Unallocated Total
------------ --------- ----------- ----
<S> <C> <C> <C> <C>
Additions:
Investment Income:
Interest $ 2,428 $ 22 $ -- $194,198
Dividends -- -- -- 58,521
Realized (Loss) Gain 36,089 596 -- 413,940
Unrealized (Loss) Gain (6,105) (26,029) (17,892) 407,009
-------- -------- -------- -------
32,412 (25,411) (17,892) 1,073,668
Allocation of 4,737 Shares
of Company Stock at Market -- 74,016 -- 74,016
Contributions:
Employee -- -- -- 846,611
Employee Rollovers 2,428 -- -- 32,987
Employer -- -- 52,100 293,318
Interest Paid by Acceptance
on Behalf of Plan -- -- 3,994 3,994
-------- -------- --------- -------
2,428 -- 56,094 1,176,910
-------- -------- --------- ---------
Total Additions 34,840 48,605 38,202 2,324,594
Deductions:
Return of Excess
Contributions (7,721) -- -- (40,387)
Distributions to Plan
participants (20,103) (1,912) -- (197,532)
Allocation of 4,737 Shares
of Company Stock at Market -- -- (74,016) (74,016)
Interet on ESOP Loan -- -- (3,994) (3,994)
-------- --------- -------- ---------
Total Deductions (27,824) (1,912) (78,010) (315,929)
Net Transfer of Assets
(to) From 209,828 15,320 18,069 --
Net Increase (Decrease) 216,844 62,013 (21,739) 2,008,665
Net Assets Available for
Benefits at
Beginning of Year 535,930 798,663 108,040 6,111,310
Net Assets Available for
Benefits at
End of Year $752,774 $860,676 86,301 8,119,975
======== ======== ====== =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
/TABLE
<PAGE>
Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan
Notes to Financial Statements
Years Ended December 31, 1996 and 1995
1. DESCRIPTION OF THE PLAN
The following description of the Plan provides only general
information. Participants should refer to the Plan agreement
for a more complete description of the Plan's provisions.
General
The Acceptance Insurance Companies Inc. Employee Stock
Ownership (ESOP) and Tax Deferred Savings Plan (401[k]) (the
Plan) was established to enable participating employees of
Acceptance Insurance Companies Inc. (the Company) to share
in the growth of the employer and to provide participants
with future economic security. Participation in the Plan is
voluntary and is applicable to all employees who have been
credited with one year of service and attained the age of 21
for the ESOP portion and have been credited with six months
of service and attained the age of 21 for the 401(k)
portion. The Plan is administered by the Acceptance
Insurance Companies Inc. Administrative Committee.
Contributions
Employee contributions are invested in one or more funds as
elected by the employee. As of December 31, 1996, the
following funds were available for investment: Money Market
Fund, Income Portfolio, Balanced Portfolio, Capital
Appreciation Portfolio, Guaranteed Interest Contracts; and
Acceptance Insurance Companies Inc. Common Stock Fund.
Employer contributions are invested only in the Acceptance
Common Stock Fund for the ESOP portion of the Plan and in
one or more funds for the 401(k) portion of the Plan, as
directed by the participant. Participants may change their
investment options quarterly.
Each participant may, subject to the maximum limitations
under ERISA, contribute to the 401(k) portion from 1% to 15%
of their compensation, as defined under the Plan. The
Company may, but is not required to, contribute a matching
contribution. The Company may also make an additional
discretionary contribution. Any Company contributions are
determined by the Company's Board of Directors.
Vesting
Employer contributions to the ESOP portion of the Plan
become vested in accordance with a vesting schedule which
increases 20% for each consecutive year of service starting
with the third year of service and are fully vested after
seven years of service. For the 401(k) portion of the Plan,
except upon death, disability or retirement, whereupon
employer contributions become fully vested, employer
contributions are vested 10% with one year of service and
vesting increases to 30%, 50%, 75% and 100% through five
years of service. Employee contributions are fully vested at
all times.
The normal form of benefit for a participant who terminates
or retires is a lump sum payment. If the participant's
account was invested in Acceptance Insurance Companies Inc.
common stock, the payment can be in the form of stock or
cash. For all other account balances lump sum payment is in
cash only.
Forfeited Accounts
For terminated employees withdrawing their vested accounts,
forfeited nonvested accounts are reallocated to participants
in the same proportion each participant's salary reduction
is to the total of all participants' salary reduction. ESOP
forfeitures are allocated in the same manner as the Employer
Discretionary ESOP contribution. During the Plan Year ended
December 31, 1996 and 1995, forfeited account balances
totalled $1,877 and $702, respectively.
Loans to participants
The Plan provides that participants may be granted loans
subject to certain terms and maximum dollar or vested
account balance limits, as defined by the Plan. These loans
mature within five years from the date they are granted,
except loans for the participant's principal residence can
be extended beyond five years. Loan payments are withheld
from employee payroll and submitted to the trustee.
Plan termination
The term of the plan is indefinite, but may be amended,
modified or terminated at any time by the Company.
Regardless of such actions, the principal and income of the
Plan remains for the exclusive benefit of the Plan's
participants and beneficiaries. In the event the Plan is
terminated, with certain exceptions, each participant's
account becomes 100% vested. The Company is required to
direct the Trustee to distribute the Plan's assets to
participants in lump sum distributions, which shall be made
in whole shares of the Acceptance Insurance Companies Inc.
stock to the extent the fund is so comprised and cash.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Acceptance Insurance
Companies Inc. Employee Stock Ownership and Tax Deferred
Savings Plan are prepared on the accrual basis of
accounting.
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires the plan
administrator to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly,
actual results may differ from those estimates.
Investment Valuation and Income Recognition
Investments in equity securities are recorded at fair value.
Mutual fund units are recorded at reported net asset value.
Investments in guaranteed interest contracts are valued at
contract value (see Note 3), which approximates fair value.
Participant loans are carried at the balance of outstanding
principal.
Purchases and sales of securities are recorded on a
settlement-date basis, which approximates trade-date basis.
Interest and dividend income are recorded on the accrual
basis.
Payment of benefits
Benefits are recorded when paid.
3. GUARANTEED INTEREST CONTRACTS WITH INSURANCE COMPANY
Assets that were merged into the Plan from the Redland Group
401(K) Plan include a Guaranteed Interest Account entered
into with Principal Mutual Life Insurance Company
(Principal) on September 1, 1992. Pursuant to the merger,
the contracts were transferred to the Plan trustee, who
maintains the contributions. During 1995 and 1996, funds
from contracts with Principal that had matured were
converted to a mutual fund. The contracts are included in
the financial statements at contract value, which
approximates fair value, as reported to the Plan by
Principal. Contract value represents contributions made
under the contract, plus earnings, less Plan withdrawals.
4. EXERCISE OF WARRANTS AND ESOP LOAN
Effective November 28, 1994, the Plan exercised its 27,010
warrants to purchase common stock of Acceptance Insurance
Companies Inc. at $11.00 a share, for a total purchase price
of $297,110, financed by a term note guaranteed by the
Company.
The term note bears interest at 7.5%, payable in annual
installments of $56,094 including principal. The annual
principal and interest payments are due beginning February
1, 1995, with any remaining principal due February 1, 2001.
Effective November 28, 1994, the Company entered into a
contribution agreement whereby the Company agrees to
contribute to the Plan a sufficient amount to allow the Plan
to pay the annual installments of principal and interest on
the loan. The Plan agrees to apply any amounts received
toward the annual principal and interest installments.
Interest of $19,747 was paid by the Company on behalf of the
Plan, for the year ended December 31, 1996. Loan repayments
will be made as follows:
<TABLE> <S> <C>
1997 39,893
1998 43,004
1999 46,352
2000 49,964
2001 28,778
--------
$207,991
========
</TABLE>
The loan is collateralized by the unallocated shares of
stock. As the ESOP loan is paid, stock is released from
encumbrance and allocated to participants' accounts based on
a predetermined formula. The lender has no right against
shares that have been released and allocated under the ESOP.
Accordingly, the financial statements present separately the
assets and liabilities and changes therein related to:
. Stock already released and allocated to
participant accounts.
. Stock not yet allocated to employees
(unallocated).
5. INCOME TAX STATUS
The Internal Revenue Service has informed the Company that
the Plan, as amended and restated October 1, 1990, is
qualified under Section 401(a) of the Internal Revenue Code
(IRC) and is, accordingly, exempt from federal income taxes
under the provisions of Section 501(a) of the IRC.
A participant's contributions to the 401(k) portion of the
Plan are made on a pre-tax basis, i.e., they are excluded
from gross income for tax purposes, but are subject to
social security taxes. A participant is not subject to
federal income taxes on the amount of participant
contributions, Company contributions or Plan earnings until
such amounts are withdrawn or distributed. The tax
consequences of distributions to participants will vary
depending on the circumstances at the time of distribution.
6. FEES AND EXPENSES
Fees and expenses that are incurred directly in the interest
of the Plan were paid by Acceptance Insurance Companies Inc.
for the years ended December 31, 1996 and 1995.
7. RELATED PARTY TRANSACTIONS
Mammel and Associates, a related party through common
management, began administering the Plan on July 1, 1994. As
stated in Note 6, all fees incurred for Plan administration
were paid by Acceptance Insurance Companies Inc.
<PAGE>
8. INVESTMENTS
Investments held by the Plan at December 31, are:
<TABLE>
<caption
1996 1995
Description Cost Market Cost Market
----------- ---- ------ ---- ------
<S> <C> <C> <C> <C>
Acceptance Insurance Companies Inc.
Common Stock (112,878 and 108,973
shares) $1,418,759 $2,229,340 $1,342,354 $1,620,973
Acceptance Insurance Companies Inc.
Common Stock (18,907 and 22,273
shares encumbered by ESOP Loan
(Note 4)) 207,977 373,413 $ 245,003 $ 331,311
Common Stock of Unaffiliated
Companies 3,508,195 4,121,284 2,384,774 2,833,934
Preferred Stock 103,375 103,550 103,375 105,570
Mutual Funds 479,486 510,891 259,166 266,512
U.S. Government Obligations 329,675 337,360 169,675 183,466
Corporate Bonds 1,719,211 1,763,200 1,261,267 1,300,524
Guaranteed Interest Contracts 131,441 131,441 227,510 227,510
Certificate of Deposit 172,141 172,141 156,936 156,936
Money Market Fund 738,553 738,553 929,350 929,350
Participant Loans 319,113 319,113 130,619 130,619
---------- ----------- ---------- ----------
$9,127,926 $10,800,286 $7,210,029 $8,086,705
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan
Annual Report Schedules
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1996
- ---------------------------------------------------------------------------------------------------
Column B Column C Column D Column E
Description of Investment, Including
Identity of Issue, Borrower Collateral, Rate of Interest, Current
Lessor or Similar Party Maturity Date, Par or Maturity Value Cost Value
Common Stock: Number of Shares
<S> <C> <C> <C>
*Acceptance Insurance Companies Inc. 112,878 $1,418,759 $2,229,340
*Acceptance Insurance Companies Inc. 18,907, collateralized by term note,
7.5%, maturing 2/1/2001 207,977 373,413
Aliant Communications 1,015 18,233 17,255
Allied Group 2,250 39,188 73,406
Allstate Corp 650 29,189 37,618
American International Group 140 13,562 15,155
Amtech Corp 396 4,158 2,617
Arrow Electronics Inc. 900 40,323 48,150
AT & T Corp 1,280 49,808 55,520
Banco Latinoamericano 1,200 55,094 60,900
Belden & Blake Corp 2,400 63,119 88,800
Brierly Investments Ltd 48,200 34,800 44,667
Brunswick Corp 2,700 54,500 64,800
Cairn Energy USA Inc 10,700 106,475 107,000
Calenergy Inc 3,800 97,682 127,775
Cali Realty Corp 2,600 70,382 80,275
Calpine Corporation 6,500 104,000 130,000
Cavalier Homes Inc 707 3,672 8,132
Central Newspapers CL A 360 10,135 15,840
Central Telephone Enterprise Inc 2,200 70,807 67,925
CNS Inc 1,250 17,969 17,969
Collective Bancorp Inc 2,600 70,031 91,325
Compania Boliviana Energia 900 27,072 38,475
Developers Divers Realty Corp 2,000 64,587 74,250
Dial Corporation 3,500 50,400 51,187
Du Pont E I DeNemours & Co 600 54,648 56,475
Excel Realty Trust Inc 3,000 64,529 76,125
FMLMC VT 330 27,463 36,423
Florida East Coast Inds 100 6,866 8,738
Foremost Corp of America 1,180 37,317 70,800
Franklin Quest Co 980 20,487 20,580
Frontier Ins Group Inc Com 3,850 61,194 147,263
Fruit of the Loom CL A 920 29,813 34,845
Gallagher Arthur J & Co 400 12,189 12,400
General Motors Corp 900 49,773 50,175
General Nutrition Co 4,600 64,688 77,625
Gilat Satellite Network Ltd 2,900 64,827 71,413
Great Western Financial 2,600 64,207 75,400
Grupo Televisa 480 7,154 12,300
Healthdyne Technologies Inc 5,300 64,263 47,038
Hexcel Corp 5,800 28,507 94,250
Home State Holdings Inc 1,200 10,713 9,300
Horizon/CMS Healthcare Corp 6,500 91,617 82,062
Integrated Health Services Inc 2,700 61,030 65,813
KCS Energy Inc 2,000 72,388 71,500
Lancaster Colony 1,900 71,686 87,400
--------- -------
Total this page 3,687,281 5,129,719
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan
Annual Report Schedules
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1996
- ---------------------------------------------------------------------------------------------------
Column B Column C Column D Column E
Description of Investment, Including
Identity of Issue, Borrower Collateral, Rate of Interest, Current
Lessor or Similar Party Maturity Date, Par or Maturity Value Cost Value
<S> <C> <C> <C>
Common Stock: Number of Shares
Balance forward 3,687,281 5,129,719
Legg Mason Inc 1,600 56,512 61,600
Lincoln Electric Co CL A 600 18,300 18,150
Masco Corp 3,400 97,486 122,400
Novell Inc 10,400 107,120 98,475
OEC Medical Systems, Inc 1,340 8,040 20,100
Patriot American Hospitality 2,200 62,367 94,875
Penn-America Group Inc 1,000 16,250 16,125
Prentiss Properties Trust SH Ben Int 3,500 70,000 87,500
Shoneys Inc 10,000 92,350 70,000
Skyline Corp 4,000 96,928 99,000
Sothebys Hldgs Inc CL A 6,700 95,810 124,788
Stet Soc Finanz Telef Sp ADR 1,800 55,458 79,875
Target Therapeutics Inc 460 6,469 19,320
TCA Cable TV Inc 270 7,973 8,134
Texaco Inc 670 64,363 65,744
The Great Atlantic & Pacific Tea Co 3,400 108,783 108,375
Titan Wheel Intl Inc 6,100 97,651 77,775
US Freightways Corp 5,000 105,850 137,187
UNR Industries Inc 4,900 19,968 29,400
Valassis Communications Inc 1,025 16,174 21,653
Viacom Inc CL B 220 9,219 7,672
Viad Corp 3,500 48,579 57,312
Vitro S.A. Sponsored ADR 11,000 70,675 60,500
Wang Laboratories 2,010 22,864 40,703
WHX Corporation 7,000 84,465 62,125
Zemex Corp 790 7,996 5,530
---------- ---------
Total Common Stock 5,134,931 6,724,037
*Represents a Party-In-Interest
Mutual Funds:
Society National Bank Magic Fund 44,300.478 479,486 510,891
Preferred Stock:
First Chicago NBD Corp 350 shares 33,425 33,600
Texas Utilities Elec Co 350 shares 33,950 33,950
Westbridge Cap Corp 40 shares 36,000 36,000
---------- ---------
Total Preferred Stock 103,375 103,550
U.S. Government Securities:
U.S. Treasury 105,000
Note Dated 11/15/94 -
7.375% Mat-11/15/97 104,934 106,542
U.S. Treasury 67,000
Note Dated 8/15/94 -
7.25% Mat-8/l5/2004 64,741 70,518
FHLB 160,000
Note Dated 4/25/96 -
8.055% Mat-4/25/2011 160,000 160,300
---------- ---------
Total U.S. Government Securities 329,675 337,360
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan
Annual Report Schedules
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1996
- ---------------------------------------------------------------------------------------------------
Column B Column C Column D Column E
Description of Investment, Including
Identity of Issue, Borrower Collateral, Rate of Interest, Current
Lessor or Similar Party Maturity Date, Par or Maturity Value Cost Value
<S> <C> <C> <C>
Corporate Bonds:
AAF-McQuay Inc 75,000 - 8.875% Mat-2/15/2003 75,243 75,375
AES Corp 5,000 - 10.25% Mat-7/15/2006-01 5,200 5,412
Agricul Mineral & Chems 30,000 - 10.75% Mat-9/30/2003-98 31,612 32,079
Alliant Techsystems Inc 30,000 - 11.75% Mat-3/1/2003-99 33,000 33,675
Arcadian Partners LP 30,000 - Ser B 10.75% Mat-5/1/2005-98 29,588 33,297
Avondate Mills Inc 70,000 - 10.25% Mat-5/1/2006-01 69,037 72,100
California Energy Co Inc 70,000 - 9.875% Mat-6/30/2003-00 72,100 73,325
Comcast Co 105,000 - 9.125% Mat-10/15/2006-00 109,463 107,625
Commercial Federal Corp 25,000 - 7.95% Mat-12/1/2006-01 50,000 50,000
Corporate Express Inc 35,000 - 9.125% Mat-3/15/2004-99 35,079 35,760
Coty Inc 28,000 - 10.25% Mat-5/1/2005-00 29,916 30,467
Dynacare Inc 40,000 - 10.75% Mat-1/15/2006-01 41,025 40,500
Forest Oil Corporation 15,000 - 11.25% Mat-9/1/2003-98 15,694 16,200
Genesis Health 30,000 - 9.75% Mat-6/15/2005-00 30,075 31,425
Hayes Wheels Int Co 70,000 - 11% Mat-7/15/2006-01 76,125 76,125
Host Marriott Travel Plaza 60,000 - 9.5% Mat-5/15/2005-00 60,450 62,700
Integrated Device Tech Inc 40,000 - 5.5% Mat 6/1/2002-98 33,900 33,800
McKesson Corp 40,000 - 4.5% Mat-3/1/2004-99 34,950 34,950
MacNeal-Schwendler Corp 40,000 - 7.875% Mat-8/18/2004-97 33,500 39,992
Moog Inc 55,000 - 10% Mat-5/1/2006-01 55,605 57,888
Nabi Inc 40,000 - 6.5% Mat-2/1/2003-99 39,000 42,680
Novacare Inc 35,000 - 5.5% Mat-1/15/2000-96 30,625 31,434
Nuevo Energy Co 65,000 - 9.5% Mat-4/15/2006-01 65,675 69,063
Ornda Healthcorp 55,000 - 11.375% Mat-8/15/2004-99 61,119 63,387
Outdoor Systems Inc 70,000 - 9.325% Mat-10/15/2006/01 71,750 72,275
Owens & Minor Inc 70,000 - 10.875% Mat-6/1/2006-01 72,956 75,250
Owens Ill Inc 70,000 - 9.75% Mat-8/15/2004-97 72,887 73,500
Quantum Health Res Inc 50,000 - 4.75% Mat-10/1/2000-95 46,125 44,155
Quorum Health 35,000 - 8.75% Mat-11/1/2005-00 35,569 36,008
Stater Brothers 50,000 - 11% Mat-3/1/2001 50,312 54,000
Tenet Healthcare Corporation 45,000 - 10.125% Mat-3/1/2005-00 46,237 49,783
Texas Bottling Group Inc 60,000 - 9% Mat-11/15/2003-98 59,925 60,786
Tultex Corp 65,000 - 10.625% Mat-3/15/2005-00 68,331 70,934
Westpoint Stevens Inc 75,000 - 9.375% Mat-12/15/2001-98 77,138 77,250
---------- --------
Total Corporate Bonds 1,719,211 1,763,200
Guaranteed Interest Contracts:
Principal Financial Group GIC, 5.49%, matures 12/31/97 88,946 88,946
Principal Financial Group GIC, 6.06%, matures 12/31/98 42,495 42,495
---------- -------
Total Guaranteed Interest Contracts 131,441 131,441
Certificate of Deposit: 6.75%, matures 12/31/98 172,141 172,141
Money Market Fund: 738,553 units 738,553 738,553
Loans to Participants: Participant loans bearing various
dates and interest rates 319,113 319,113
---------- ---------
Total Investments $9,127,926 $10,800,286
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Acceptance Insurance Companies Inc.
Employee Stock Ownership and Tax Deferred Savings Plan
Annual Report Schedules
Item 27d - Schedule of Reportable Transactions
For the Year Ended December 31, 1996
- ---------------------------------------------------------------------------------------------------
Series Transactions, When Aggregated, Involving an Amount
in Excess of 5 Percent of the Current Value of Plan Assets
Column A Column B Column C Column D Column E Column F Column G
Total Total
Identity of Number of Number of Dollar Value Dollar Value Net
Party Involved Description of Assets Purchases Sales of Purchases of Sales Change
- -------------- --------------------- --------- --------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
First National
Bank of Omaha Money Market Funds 551 305 7,652,098 7,868,358 (216,260)
</TABLE>
EXHIBIT 23
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the registration
statement on Form S-8 of Acceptance Insurance Companies Inc.
relating to the Acceptance Insurance Companies Inc. Employee
Stock Ownership and Tax Deferred Savings Plan of our report dated
June 5, 1997, appearing in this Annual Report on Form 11-K of the
Acceptance Insurance Companies Inc. Employee Stock Ownership and
Tax Deferred Savings Plan for the year ended December 31, 1996.
/s/ Pfeister & Associates
PFEISTER & BLACKMAN, LLP
Omaha, Nebraska
June 27, 1997
