<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
---------------------------------------
OR
_ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
--------------- ---------------
Commission file number 1-9640
MERCHANTS GROUP, INC.
- ---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 16-1280763
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 Main Street, Buffalo, New York 14202
- ----------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
(716) 849-3333
- ---------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 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.
x Yes No
--- ---
As of May 1, 1996, 3,214,519 shares of Common Stock, $.01 par value per
share, were outstanding.
1
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MERCHANTS GROUP, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(in thousands)
December 31, March 31,
Assets 1995 1996
------ ------------- -------------
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity at amortized cost
(fair value $20,348 in 1995 and
$19,554 in 1996) $ 19,477 $ 19,502
Available for sale at fair value
(amortized cost $163,249 in 1995
and $159,652 in 1996) 163,778 157,445
Other long-term investments at
fair value (amortized cost
$6,053 in 1995 and $8,135 in 1996) 4,493 7,250
Short-term investments 4,470 9,285
------------ -------------
Total investments 192,218 193,482
Cash 39 4
Interest due and accrued 1,886 1,883
Premiums receivable, net of allow-
ance for doubtful accounts of
$416 in 1995 and $388 in 1996 20,360 19,014
Deferred policy acquisition costs 12,165 11,639
Ceded reinsurance balances receivable 7,014 6,932
Prepaid reinsurance premiums 2,866 2,772
Receivable from affiliate 1,091 -
Federal income tax receivable 3,143 2,484
Deferred federal income tax benefit 5,491 6,084
Other assets 6,535 6,537
------------ ------------
Total assets $252,808 $250,831
============ ============
</TABLE>
See Notes to the Consolidated Financial Statements.
2
<PAGE> 3
MERCHANTS GROUP, INC.
CONSOLIDATED BALANCE SHEET
(in thousands except share amounts)
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
-------------- ------------
<S> <C> <C>
Liabilities and Stockholders' Equity
----------- --- ------------- ------
Liabilities:
Reserve for losses and loss
adjustment expenses $119,722 $123,212
Unearned premiums 48,773 46,694
Other liabilities 14,343 11,508
Payable to affiliate - 593
-------- --------
Total liabilities 182,838 182,007
-------- --------
Stockholders' equity:
Common stock, issued and outstanding
3,213,894 shares December 31, 1995
and 3,214,519 shares at March 31, 1996 32 32
Additional paid in capital 35,302 35,311
Unrealized investment losses,
net of tax (357) (1,090)
Accumulated earnings 34,993 34,571
-------- --------
Total stockholders' equity 69,970 68,824
-------- --------
Commitments and contingent liabilities - -
Total liabilities and stock-
holders' equity $252,808 $250,831
======== ========
</TABLE>
See Notes to the Consolidated Financial Statements.
3
<PAGE> 4
MERCHANTS GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------
1995 1996
----- ----
<S> <C> <C>
Revenues:
Net premiums earned $22,710 $23,441
Net investment income 2,523 2,800
Net realized investment gains - 7
Other revenues 273 126
------- -------
Total revenues 25,506 26,374
------- -------
Expenses:
Net losses and loss adjustment
expenses 15,842 18,817
Amortization of deferred policy
acquisition costs 6,279 6,212
Other underwriting expenses 1,860 1,673
------- -------
Total expenses 23,981 26,702
------- -------
Income (loss) before income taxes 1,525 (328)
Provision (benefit) for income taxes 414 (67)
------- -------
Net income (loss) $ 1,111 $ (261)
======= =======
Primary and fully diluted earnings
(loss) per share $ .35 $ (.08)
======= =======
Weighted average shares outstanding:
Primary and fully diluted 3,176 3,222
</TABLE>
See Notes to the Consolidated Financial Statements.
4
<PAGE> 5
MERCHANTS GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------
1995 1996
---- ----
<S> <C>
Common stock, beginning and end $ 32 $ 32
------- -------
Additional paid in capital:
Beginning of period 34,678 35,302
Exercise of common stock options - 9
------- -------
End of period 34,678 35,311
------- -------
Unrealized investment losses,
net of tax:
Beginning of period (6,878) (357)
Appreciation (depreciation) 1,542 (733)
------- -------
End of period (5,336) (1,090)
------- -------
Accumulated earnings:
Beginning of period 39,447 34,993
Net income (loss) 1,111 (261)
Cash dividend on common stock (158) (161)
------- -------
End of period 40,400 34,571
------- -------
Total stockholders' equity $69,774 $68,824
</TABLE> ======= =======
See Notes to the Consolidated Financial Statements.
5
<PAGE> 6
MERCHANTS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(in thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-----------------
1995 1996
---- ----
<S> <C> <C>
Cash flows from operations:
Collection of premiums $20,921 $24,874
Payment of losses and loss
adjustment expenses (16,268) (15,614)
Payment of other underwriting
expenses (7,961) (10,180)
Investment income received 3,097 2,780
Investment expenses paid (38) (36)
Income taxes recovered - 509
Other cash receipts 273 126
-------- -------
Net cash provided by operations 24 2,459
-------- -------
Cash flows from investing activities:
Proceeds from fixed maturities
sold or matured 1,773 8,541
Purchase of fixed maturities (4,254) (3,891)
Net (increase) decrease in other
long-term investments 10 (2,142)
Net (increase) decrease in
short-term investments 2,625 (4,815)
Purchase of equipment, net (30) (35)
-------- -------
Net cash provided by (used in)
investing activities 124 (2,342)
-------- -------
Cash flows from financing activities:
Exercise of common stock options - 9
Cash dividend on common stock (158) (161)
-------- -------
Net cash used in
financing activities (158) (152)
-------- -------
Decrease in cash
and cash equivalents (10) (35)
Cash:
Beginning of period 18 39
-------- -------
End of period $ 8 $ 4
</TABLE> ======== =======
See Notes to the Consolidated Financial Statements.
6
<PAGE> 7
MERCHANTS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
----------------
1995 1996
---- ----
<S> <C> <C>
Net income (loss) $ 1,111 $ (261)
Adjustments:
Depreciation and amortization 87 (12)
Realized investment gains - (7)
(Increase) decrease in assets:
Interest due and accrued 495 3
Premiums receivable (1,268) 1,346
Deferred policy acquisition costs 22 526
Ceded reinsurance balances receivable 434 82
Prepaid reinsurance premiums (128) 94
Receivable from affiliate - 1,091
Federal income taxes receivable 514 659
Deferred federal income tax benefit (100) (217)
Other assets 23 (14)
Increase (decrease) in liabilities:
Reserve for losses and loss
adjustment expenses (1,382) 3,490
Unearned premiums 64 (2,079)
Other liabilities 86 (2,835)
Payable to affiliate 66 593
------- -------
Net cash provided by operations $ 24 $ 2,459
</TABLE> ======== =======
See Notes to the Consolidated Financial Statements.
7
<PAGE> 8
MERCHANTS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Principles of Consolidation and Basis of Presentation
-----------------------------------------------------
The consolidated balance sheet as of March 31, 1996 and the related
consolidated statements of income, of changes in stockholders' equity and of
cash flows for the three months ended March 31, 1995 and 1996 are unaudited.
In the opinion of management, the interim financial statements reflect all
adjustments necessary for a fair presentation of financial position and results
of operations. Such adjustments consist only of normal recurring items.
Interim results are not necessarily indicative of results for a full year.
The consolidated financial statements include the accounts of Merchants Group,
Inc. (the "Company"), its wholly-owned subsidiary, Merchants Insurance Company
of New Hampshire, Inc. ("MNH"), and M.F.C. of New York, Inc., an inactive
premium finance company which is a wholly-owned subsidiary of MNH.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") which differ in some respects
from those followed in reports to insurance regulatory authorities. All
significant intercompany balances and transactions have been eliminated.
2. Related Party Transactions
--------------------------
The Company and MNH do not have any paid employees. Under a management
agreement, Merchants Mutual Insurance Company ("Mutual"), which owns 7.9% of
the Company's common stock at March 31, 1996, provides the Company and MNH with
the facilities, management and personnel required to manage their day-to-day
business. All underwriting, administrative, claims and investment expenses
incurred on behalf of Mutual and MNH are shared on an allocated cost basis,
determined as follows: for underwriting and administrative expenses, the
respective share of total direct premiums written for Mutual and MNH serves as
the basis of allocation; for claims expenses, the average number of outstanding
claims is used; investment expenses are shared based on each company's share of
total invested assets.
8
<PAGE> 9
3. Earnings Per Share
------------------
Primary and fully diluted earnings per share were computed by dividing net
income by the weighted average number of shares of common stock outstanding
during each period, increased by the assumed exercise of 25,915 and 72,434
shares of common stock options in 1996 and 1995, respectively, which would have
resulted in 7,770 and 17,406 additional shares outstanding, respectively,
assuming the proceeds to the Company from exercise were used to purchase shares
of the Company's common stock at its average market value per share during the
quarter.
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations for the Three Months Ended March 31,
- ---------------------------------------------------------
1996 As Compared to the Three Months Ended March 31, 1995
- ---------------------------------------------------------
Total revenues increased by 3% from $25,506,000 for the three months ended
March 31, 1995 to $26,374,000 for the three months ended March 31, 1996.
Net premiums earned increased $731,000, or 3%, from $22,710,000 for the three
months ended March 31, 1995 to $23,441,000 for the three months ended March 31,
1996. The increase in net premiums earned resulted from a higher contribution
to 1996 first quarter earnings from unearned premiums at December 31, 1995
compared to the contribution to 1995 first quarter earnings from unearned
premiums at December 31, 1994.
Net premiums written decreased by 5% from $22,647,000 for the three months
ended March 31, 1995 to $21,456,000 for the three months ended March 31, 1996
primarily as a result of a $943,000 decrease in written premiums assumed from
Mutual under the quota share reinsurance agreement between MNH and Mutual. In
December 1995, Mutual informed MNH that it was not terminating the agreement
but was exercising its right under the agreement to eliminate all cessions of
its voluntary direct written premiums to MNH for calendar year 1996, while
retaining the right to resume such cessions, up to the 10% level, for
subsequent years. As a result, MNH assumed no written premiums from Mutual
during the three months ended March 31, 1996.
Direct premiums written increased 2% from $22,537,000 for the three months
ended March 31, 1995 to $23,043,000 for the three months ended March 31, 1996.
Voluntary commercial lines direct premiums written decreased by 5% from
$13,418,000 for the three months ended March 31, 1995 to $12,808,000 for the
three months ended March 31, 1996. This decrease resulted primarily from a 4%
decrease in commercial lines policies in force. Policies in force at March 31,
1996 declined as compared to March 31, 1995 in each of the Company's commercial
lines of business except commercial automobile.
Voluntary personal lines direct premiums written increased by 7% from
$7,688,000 for the three months ended March 31, 1995 to $8,246,000 for the
three months ended March 31, 1996, primarily due to private passenger
automobile ("PPA") direct premiums written, which increased 6% from the year
earlier period. This increase in PPA business resulted primarily from a 6%
increase in average premiums per policy.
10
<PAGE> 11
Involuntary direct premiums written, primarily involuntary personal automobile
insurance, which comprised 6% and 9% of all direct premiums written during the
three months ended March 31, 1995 and 1996 respectively, increased by 39% from
$1,431,000 in the three months ended March 31, 1995 to $1,989,000 in the three
months ended March 31, 1996. The amount of the Company's involuntary direct
personal automobile premiums written varies depending upon the Company's share
of the voluntary personal automobile market in prior years and upon the size of
the involuntary market.
Net investment income increased by 11% from $2,523,000 for the three months
ended March 31, 1995 to $2,800,000 for the three months ended March 31, 1996,
due to an 8% increase in average invested assets. On a taxable equivalent
basis, net investment income increased by 8%.
Other revenues decreased $147,000 or 54% as other revenues during the three
months ended March 31, 1995 were unusually high due to certain one-time income
received from state administered reinsurance facilities.
Loss and loss adjustment expenses ("LAE") increased by 19% from $15,842,000 in
the three months ended March 31, 1995, to $18,817,000 in the three months ended
March 31, 1996. The loss and LAE ratio increased from 69.8% in the three
months ended March 31, 1995 to 80.3% in the three months ended March 31, 1996.
Losses and LAE in the three months ended March 31, 1996 included $2,200,000 of
losses related to unusually severe winter weather that affected the
northeastern United States during that period. These higher than normal
weather related losses increased the loss and LAE ratio in the three months
ended March 31, 1996 by 9.4 percentage points. If the effect of these storms
were excluded from losses and LAE, the loss and LAE ratio would have increased
1.1 percentage points from the three months ended March 31, 1995 to the three
months ended March 31, 1996.
The ratio of amortized policy acquisition costs and other underwriting expenses
to net premiums earned decreased from 35.8% for the three months ended March
31, 1995 to 33.6% for the three months ended March 31, 1996. Commissions,
premium taxes and other state assessments that vary directly with the Company's
premium volume represented 19.8% of net premiums earned in the three months
ended March 31, 1996 compared to 21.0% of net premiums earned in the three
months ended March 31, 1995.
11
<PAGE> 12
During the three months ended March 31, 1996, the Company recorded an income
tax benefit which resulted from its pre-tax loss. The effective federal income
tax rate used to compute this benefit was based upon the Company's estimate of
its effective federal income tax rate for all of 1996. The benefit recorded
was smaller than that computed using the statutory federal income tax rate due
to tax exempt income.
Liquidity and Capital Resources
- -------------------------------
In developing its investment strategy, the Company determines a level of cash
and short-term investments which, when combined with expected cash flow, is
estimated to be adequate to meet expected cash obligations. Historically, the
excess of premiums collected over payments on claims, combined with cash flow
from investments, has provided the Company with short-term funds in excess of
normal operating demands for cash.
Net cash provided by operations increased by $2,435,000 from $24,000 in the
three months ended March 31, 1995 to $2,459,000 in the three months ended March
31, 1996. This increase was primarily due to a $3,953,000 increase in cash
collected from premiums. This increase in premiums collected resulted from a
12% increase in direct written premiums during the last three months of 1995 as
compared to the last three months of 1994. Approximately 75% of the Company's
insureds pay their premiums on an installment basis, thereby deferring payment
of their premiums into periods subsequent to the period in which the premium
was written. This increase in cash provided by premium collections was
somewhat offset by a $2,219,000 increase in the payment of other underwriting
expenses which resulted from Mutual's decision to reduce it ceded written
premiums to the Company under the quota share reinsurance agreement between the
Company and Mutual to zero in 1996.
Net cash used in investing activities increased $2,466,000 from a $124,000
source of cash in the three months ended March 31, 1995 to a $2,342,000 use of
cash in the three months ended March 31, 1996. This increase in net cash used
in investing activities resulted from a $7,440,000 increase in net cash used to
acquire short-term investments and a $2,152,000 increase in net cash used to
acquire long-term investments, which were partly offset by a $6,768,000
increase in proceeds from fixed maturities.
Net cash used in financing activities was substantially unchanged from $158,000
in the three months ended March 31, 1995 to $152,000 in the three months ended
March 31, 1996.
12
<PAGE> 13
The Company has several objectives with respect to its investment portfolio,
which include maximizing total return while protecting policyholders' surplus,
maintaining flexibility and liquidity, and maintaining a reasonable duration
match between assets and liabilities. Like other property and casualty
insurers, the Company relies on premiums as a major source of cash, and
therefore liquidity. Cash flows from the Company's investment portfolio, either
in the form of interest or principal payments, are an additional source of
liquidity. Because the duration of the Company's investment portfolio and
liabilities are relatively matched, substantial increases or decreases in
market interest rates are not expected to have a material effect on the
Company's liquidity, or its results of operations.
The Company generally designates newly acquired fixed maturity investments as
available for sale and carries these investments at fair value. The Company's
investment in Signet Group PLC. ("Signet") cumulative auction rate preference
shares included in other long-term investments is carried at fair value. At
March 31, 1996, the Company had recorded unrealized losses of $1,090,000, net
of tax, associated with its investment portfolio. On April 16, 1996, after the
close of the first quarter, the Company sold all of its Signet shares for
$2,460,000, and will record an after tax gain of $630,000 and an increase in
stockholders' equity reported as of March 31, 1996 of $240,000.
At March 31, 1996, the Company's portfolio of fixed maturities represented
91.5% of invested assets. Management believes that this level of bond holdings
will not adversely affect the Company's liquidity because it expects that cash
receipts from net premiums written and investment income will be sufficient to
enable the Company to satisfy its cash obligations in 1996. Furthermore, a
substantial portion of the Company's bond portfolio is invested in
mortgage-backed and other asset-backed securities, which, in addition to
interest income, provide monthly paydowns of bond principal.
At March 31, 1996, $81,344,000 or 42.0% of the Company's investment portfolio
was invested in mortgage-backed and other asset backed securities, primarily
planned amortization class ("PAC") and sequential pay collateralized mortgage
obligations ("CMO"). A PAC-CMO has an amortization schedule that is protected
against prepayment risk under a wide range of interest rate scenarios and is
therefore less susceptible to prepayment risk than other mortgage backed
securities. The Company has not invested in the more volatile types of CMO
products such as interest only, principal only or inverse floating rate
securities. All of the Company's CMO investments have an active secondary
market and their effect on the Company's liquidity does not differ from that of
other fixed maturity investments. The Company does not own any other
derivative financial instruments such as futures or
13
<PAGE> 14
options.
At March 31, 1996, $3,099,000, or 1.6%, of the Company's investment portfolio
was invested in non-investment grade securities. This amount includes the
Company's investment in Signet which had a carrying value of $2,100,000 as of
March 31, 1996. Excluding the Signet investment which was sold on April 16,
1996, $999,000 or .5% of the Company's investment portfolio was invested in
non-investment grade securities as of March 31, 1996.
As a holding company, the Company is dependent on cash dividends from MNH to
meet its obligations and pay any cash dividends. MNH is subject to New
Hampshire insurance laws which place certain restrictions on its ability to pay
dividends without the prior approval of state regulatory authorities. These
restrictions limit dividends to those that, when added to all other dividends
paid within the preceding twelve months, would not exceed 10% of the insurer's
statutory policyholders' surplus as of the preceding December 31. The maximum
amount of dividends that MNH could pay during any twelve month period ending in
1996 without the prior approval of the New Hampshire Insurance Commissioner is
$4,661,000. MNH did not pay any dividends to the Company during the three
months ended March 31, 1996.
Under a management agreement, Mutual provides employees, services and
facilities for MNH to conduct its insurance business on a cost reimbursed
basis. The balance in the payable to affiliate account represents the amount
owed to Mutual by the Company for the difference between premiums collected and
payments made for losses, employees, services and facilities by Mutual on
behalf of MNH.
On November 1, 1994, Mutual filed an application with the New York Insurance
Department to convert from a mutual to a stock corporation under the New York
law that permits a mutual insurance company to demutualize. In such a
demutualization a mutual insurance company's policyholders and surplus note
holders are entitled to receive their equitable share of that company's
appraised fair market value in cash or securities or a combination thereof.
Mutual's application is currently pending with the Department, and must
ultimately be approved by the Department and Mutual's policyholders after the
Department has determined Mutual's fair market value based upon an independent
appraisal. The Company has advised Mutual and the New York Insurance
Department of its interest in sponsoring Mutual's demutualization, and Mutual
has granted the Company a right of first refusal in that regard. The Company
would consider acquiring Mutual if it determines that the appraised value is
acceptable and it has sufficient capital to fund the acquisition. In the event
the Company is not able to acquire Mutual at a price, on terms or in a time
frame acceptable to the Company, the Company may elect to
14
<PAGE> 15
develop its own management structure and might, therefore, terminate the
management agreement with Mutual, subject to its required five year notice
provision, or request that Mutual and the New York Insurance Department agree
to amend the management agreement. Such an amendment might include, but not
be limited to, a shortening of the termination period.
MNH, like many other property-casualty insurance companies, is subject to
environmental damage claims asserted by or against its insureds. Management of
the Company is of the opinion that based on various court decisions throughout
the country, such claims should not be recoverable under the terms of MNH's
insurance policies because of either specific or general coverage exclusions
contained in the policies. However, there is no assurance that the courts will
agree with MNH's position in every case, nor can there be assurance that
material claims will not be asserted under policies which a court will find do
not explicitly or implicitly exclude claims for environmental damages.
Management, however, is not aware of any pending claim or group of claims which
would result in a liability that would have a material adverse effect on the
financial condition of the Company or MNH.
Industry and regulatory guidelines suggest that the ratio of a
property-casualty insurer's annual net premiums written to its statutory
surplus should not exceed 3 to 1. The Company has consistently followed a
business strategy that would allow it to meet this 3 to 1 regulatory guideline.
For the first three months of 1996 MNH's ratio of net premiums written to
statutory surplus, annualized for a full year, was 1.8 to 1.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
(11) Statement re computation of per share earnings
(filed herewith).
(27) Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the
period for which this report is filed.
15
<PAGE> 16
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.
MERCHANTS GROUP, INC.
(Registrant)
Date: May 8, 1996 By:/s/ Robert M. Zak
------------------------------
Robert M. Zak
Chief Operating Officer
Secretary and Treasurer (duly
authorized officer
of the registrant and
chief accounting
officer)
16
<PAGE> 1
Exhibit II
MERCHANTS GROUP, INC.
Computation of Income Per Share
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31,
---------
1995 1996
---- ----
<S> <C> <C>
Net income (loss) for computing earnings
per common share - without dilution
and fully diluted $1,111 $ (261)
====== ======
Weighted average number of common
shares outstanding - without
dilution 3,158 3,214
Addition from assumed exercise as of
the beginning of the period, of
common stock options outstanding
as of the end of the period, reduced
by the number of shares assumed to
have been repurchased by the company
with the proceeds from exercise, at
the average market value per share
during the period 18 8
----- -----
Weighted average number of common
shares and common share equivalents
outstanding, primary and fully diluted 3,176 3,222
====== ======
Primary and fully diluted earnings
(loss) per share $ .35 $ (.08)
</TABLE> ====== ======
17
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 157,445,000
<DEBT-CARRYING-VALUE> 19,502,000
<DEBT-MARKET-VALUE> 19,554,000
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 193,482,000
<CASH> 4,000
<RECOVER-REINSURE> 6,932,000
<DEFERRED-ACQUISITION> 11,639,000
<TOTAL-ASSETS> 250,831,000
<POLICY-LOSSES> 123,212,000
<UNEARNED-PREMIUMS> 46,694,000
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 32,000
0
0
<OTHER-SE> 68,792,000
<TOTAL-LIABILITY-AND-EQUITY> 250,831,000
23,441,000
<INVESTMENT-INCOME> 2,800,000
<INVESTMENT-GAINS> 7,000
<OTHER-INCOME> 126,000
<BENEFITS> 18,817,000
<UNDERWRITING-AMORTIZATION> 6,212,000
<UNDERWRITING-OTHER> 1,673,000
<INCOME-PRETAX> (328,000)
<INCOME-TAX> (67,000)
<INCOME-CONTINUING> (261,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (261,000)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
<RESERVE-OPEN> 113,708,000
<PROVISION-CURRENT> 16,709,000
<PROVISION-PRIOR> 2,109,000
<PAYMENTS-CURRENT> 4,251,000
<PAYMENTS-PRIOR> 11,356,000
<RESERVE-CLOSE> 116,919,000
<CUMULATIVE-DEFICIENCY> 2,109,000
</TABLE>
