<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 11-K
(X) Annual Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1998
Commission File No. 1-12338
----------------------
J. GORDON GAINES, INC.
RETIREMENT SAVINGS PLAN
(Full Title of the Plan)
VESTA INSURANCE GROUP, INC.
3760 River Run Drive
Birmingham, Alabama 35243
(Name of Issuer of the Securities Held
Pursuant to the Plan and the Address
of its Principal Executive Office)
<PAGE>
REQUIRED INFORMATION
(a) Financial Statements for the J. Gordon Gaines, Inc. Retirement Savings Plan
<TABLE>
<CAPTION>
Page
------------
<S> <C>
(i) Report of Independent Auditors F-1
(ii) Audited statements of net assets available for
plan benefits as of December 31, 1998 and 1997 F-2
(iii) Audited statements of changes in net assets
available for plan benefits for the years
ended December 31, 1998, 1997 and 1996 F-3
</TABLE>
(b) Exhibits
The following exhibit is filed herewith as a part of this annual report:
Exhibit Number Description of Exhibit
----------------------- ------------------------------
23.1 Consent of Independent
Certified Public Accountants
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act
of 1934, the Administrator of the J. Gordon Gaines, Inc. Retirement Savings
Plan has duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
J. GORDON GAINES, INC.
RETIREMENT SAVINGS PLAN
By: J. Gordon Gaines, Inc.,
Administrator of the Plan
By: /s/ DONALD W. THORNTON
-----------------------------------
Donald W. Thornton
Its: Senior Vice President, General
Counsel and Secretary
Date: June 30, 1999
2
<PAGE>
J. Gordon Gaines, Inc. Retirement Savings Plan
Financial Statements and Supplemental Schedules
as of December 31, 1998 and 1997
and for the year ending December 31, 1998
<PAGE>
Report of Independent Accountants
To the Administrative Committee
J. Gordon Gaines, Inc. Retirement Savings Plan
In our opinion, the accompanying statements of net assets available for plan
benefits of the J. Gordon Gaines, Inc. Retirement Savings Plan (the Plan) as of
December 31, 1998, and the related statements of changes in net assets available
for plan benefits for the year ended December 31, 1998, present fairly, in all
material respects, the net assets available for plan benefits of the Plan as of
December 31, 1998, and the changes in net assets available for plan benefits for
the year ended December 31, 1998, in conformity with generally accepted
accounting principles. 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 audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information included herein is
presented for purposes of additional analysis and is not a required part of the
basic financial statements but is 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 supplemental
schedules are the responsibility of the Plan's management. Such information has
been subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
PricewaterhouseCoopers LLP
June 11, 1999
Birmingham, Alabama
1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Administrative Committee
J. Gordon Gaines, Inc. Retirement Savings Plan:
We have audited the accompanying statement of net assets available for plan
benefits of the J. Gordon Gaines, Inc. Retirement Savings Plan (Plan) as of
December 31, 1997. 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 audit.
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 test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 1997 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
July 7, 1998
Birmingham, Alabama
<PAGE>
J. Gordon Gaines, Inc. Retirement Savings Plan
Statements of Net Assets Available for Plan Benefits
December 31, 1998 and 1997
1998 1997
ASSETS
Investments at fair value:
Vesta Insurance Group, Inc. (Vesta) common stock $ 374,846 $1,704,775
Mutual funds and trusts 2,945,096 1,765,321
---------- ----------
Total investments 3,319,942 3,470,096
Cash 2,163
Employee contributions receivable 117,714 40,657
Employer contributions receivable 48,614 279,932
Loans to participants 27,114
---------- ----------
Total assets 3,515,547 3,790,685
LIABILITIES
Cash overdraft 0 10,105
---------- ----------
Net assets available for plan benefits $3,515,547 $3,780,580
========== ==========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
J. Gordon Gaines, Inc. Retirement Savings Plan
Statement of Changes in Net Assets Available for Plan Benefits
for the year ended December 31, 1998
Additions:
Dividends income (includes dividends from Vesta's stock
of $3,926 in 1998 and $3,987, in 1997) $ 163,149
Net depreciation in market value of investments (1,633,053)
Employee contributions 1,445,926
Employer contributions 495,148
Rollover contributions 217,717
-----------
Total additions 688,887
Deductions:
Distributions to participants 953,621
Administrative fee 299
-----------
Total deductions 953,920
-----------
Net decrease (265,033)
Net assets available for plan benefits:
Beginning of year 3,780,580
-----------
End of year $ 3,515,547
===========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
J. Gordon Gaines, Inc. Retirement Savings Plan
Notes to Financial Statements
1. Summary of Significant Accounting Policies
Organization - The J. Gordon Gaines, Inc. Retirement Savings Plan (the "Plan")
was adopted on November 15, 1993. The Plan includes a salary reduction feature
which permits employees who participate (participants) in the Plan to defer and
save part of their compensation, as provided for under Section 401(k) of the
Internal Revenue Code. The Plan is subject to the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended (ERISA).
During the plan year ended December 31, 1998, the Company amended the Plan by
naming Merrill Lynch Trust Company as successor trustee and recordkeeper
effective July 1, 1998, and by adopting the 401(k) Plan Adoption Agreement for
the Merrill Lynch Special Prototype Defined Contribution Plan.
Basis of Presentation - The accompanying financial statements of J. Gordon
Gaines, Inc. Retirement Savings Plan (the Plan) have been prepared on an accrual
basis in accordance with generally accepted accounting principles. J. Gordon
Gaines, Inc. (the Company or Sponsor) is a wholly owned subsidiary of Vesta
Insurance Group, Inc. (Vesta).
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of additions and deductions during the
reporting periods. Actual results could differ from these estimates.
Investments Valuation - Investments in mutual funds and in Vesta common stock
are stated at fair value, based on quotations obtained from national securities
exchanges. The Merrill Lynch Retirement Preservation Trust is valued at cost
plus interest earned, which approximates market. Purchase and sales of
securities are recorded on a trade-date basis. Realized gains and losses are
calculated using the average cost method.
For cash, receivables, and payables, the carrying amounts approximate fair value
because of the short-term nature of these instruments.
Plan Expenses - Wachovia Services, Inc. (the former Trustee) served as trustee
for the Plan for the period from January 1, 1998 to June 30, 1998. Merrill Lynch
Trust Company (the present Trustee) became trustee of the Plan as of July 1,
1998. Administration fees paid to the former Trustee and present Trustee and all
other administrative expenses are paid by the Sponsor.
Net Appreciation (Depreciation) - The Plan presents in the statement of changes
in net assets available for benefits the net appreciation (depreciation) in the
fair value of its investments which consists of the realized gains or losses and
the unrealized appreciation (depreciation) on those investments.
5
<PAGE>
Notes to Financial Statements, Continued
2. Description of Plan
The following description of the Plan provides only general information of the
Plan. Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
Participant Contributions - For the periods prior to June 30, 1998, employees
became eligible to participate in the Plan on the first day of January, April,
July, or October following completion of one year of service. Participants could
elect to have from 1% to 10% of their compensation deferred and contributed to
the Plan. Effective July 1, 1998, all employees are eligible to participate in
the Plan upon employment and may elect to have from 1% to 15% of their
compensation deferred and contributed to the Plan. There were 500 participants
and 415 participants as of December 31, 1998 and 1997, respectively.
Participants allocated their contributions, in multiples of 1%, to the following
investments through the periods ending June 30, 1998:
Money Market Fund - invested primarily in the Wachovia Prime Cash Management
Fund which invests in commercial paper and other money market instruments
maturing in one year or less;
Bond Fund- invested primarily in the Wachovia Fixed Income Fund which invests
in direct obligations of the United States Government or its agencies;
Balanced Fund - invested primarily in the Fidelity Balanced Fund which
invests in common or preferred stock, and securities convertible into common
stock, direct obligations of the United States Government and its agencies,
corporate bonds, debentures, notes, and certificates of indebtedness;
Equity Fund - invested primarily in the Vanguard Index Trust which invests in
common or capital stock and convertible bonds, convertible notes, debentures
or preferred stocks which are convertible into common or capital stocks;
Company Stock Fund - invested in Vesta Insurance Group, Inc. common stock.
Effective July 1, 1998 participants may allocate their contributions, in
multiples of 5%, to the following investments:
Merrill Lynch Retirement Preservation Trust Fund - a common collective trust
that seeks to provide preservation of capital, liquidity, and current income
at levels that are higher than those provided by money market funds by
investing primarily in a broadly diversified portfolio of Guaranteed
Investment Contracts (GICs) and in obligations of U.S. government and
government agency securities.
Merrill Lynch Corporate Bond Fund, Inc. (High Income Portfolio) - seeks a
high level of current income consistent with the investment policies of the
portfolio and with prudent investment management. As a secondary objective
the portfolio seeks capital appreciation, when consistent with its primary
objective;
6
<PAGE>
Notes to Financial Statements, Continued
Merrill Lynch Corporate Bond Fund, Inc. (Intermediate Term Portfolio) - seeks
a high level of current income consistent with the investment policies of the
Fund and prudent management. As a secondary objective, the Fund seeks capital
appreciation when consistent with its primary objective;
Merrill Lynch Basic Value Fund, Inc. - seeks capital appreciation, and
secondarily, income, by investing primarily in equities that appear to be
undervalued;
Merrill Lynch Global Allocation Fund, Inc. - seeks high total investment
return consistent with prudent risk;
Davis New York Venture Fund, Inc. - seeks to achieve superior long-term
growth through specific, long term trends that provide consistent growth over
time;
GAM International Fund - seeks capital appreciation through investing in
equity markets worldwide, excluding that of the U.S.A.;
Merrill Lynch S&P 500 Index Fund - seeks to provide investment results that,
before expenses, replicate the total return of the Standard & Poor's 500
Composite Stock Price Index (S&P 500). In seeking to replicate the total
return of the S&P 500, management generally will allocate investments among
common stocks in approximately the same weighting as the index;
PIMCO Small Cap Value Fund - seeks long-term growth of capital and income
through investment in smaller capitalization stocks that appear to be
undervalued;
Vesta Insurance Group, Inc. Common Stock - seeks investment in the common
stock of Vesta Insurance Group, Inc.
In addition to the above ten core funds, participants have the option, as of
July 1, 1998, to direct their investments into a mutual fund window. This allows
participants to direct their investments into additional funds beyond the ten
core funds mentioned above. These options are available to all participants. The
options are intended to provide investment flexibility for employees who desire
a wider range of investment options. The mutual fund window options are AIM
Constellation Fund, AIM Global Telecommunications Fund, Alger MidCap Growth
Portfolio, Alliance New Europe Fund, Alliance Worldwide privatization Fund,
Davis Convertible Securities Fund, Davis Real Estate Fund, GAM Global Fund, GAM
Pacific Basin Fund, John Hancock Financial Industries Fund, Merrill Lynch
Pacific Fund, Inc., MFS Government Mortgage Fund, MFS Total Return Fund, Morgan
Stanley Aggressive Equity Fund, Morgan Stanley Latin American Fund, Morgan
Stanley U.S. Real Estate Fund, Nicholas Applegate Emerging Countries Fund,
Nicholas Applegate SmallCap Growth Fund, Oppenheimer Development Markets Fund,
Oppenheimer International Bond Fund, PIMCO Precious Metals Fund, Seligman
Communications and Information Fund, Inc., Seligman Henderson Global Technology
Fund, and State Street Research Managed Assets Fund.
7
<PAGE>
Notes to Financial Statements, Continued
As of July 1, 1998, in addition to the core funds and the mutual fund window,
the Plan participant may select from three investment models, which are
comprised of a combination of the core funds. The investment models are as
follows:
Conservative to Moderate Investment Model - this model invests 35% of its
assets in the stable value option, 35% in the bond funds, and 30% in stock
funds.
Moderate Model - this model invests 20% of its assets in the stable value
option, 55% in stock funds, and 25% in the bond funds.
Aggressive Model - this model invests 80% of its assets in the stock funds,
15% in bond funds, and 5% in the stable value fund.
Employer Matching Contributions - The Employer, at its sole discretion, may make
matching contributions in an amount determined by the board of directors of the
Company. For 1998, the matching contributions was 50% of employee contributions
up to a maximum of 6% of the employee's compensation.
Participant Accounts - Each participant's account is credited with an allocation
of the Company's contribution and an allocable share of investments earnings or
loss. Allocations are based on contribution rates specified in the Plan and the
time-weighted value of account balances. Participants are entitled to the
benefits that can be provided from the distributable value of their participant
accounts.
Vesting - Participants have a fully-vested and non-forfeitable interest in the
portion of their account balances attributable to their contributions. A
participant acquires a vested interest in the portion of their accounts
attributable to Employer matching and additional discretionary contributions
based on length of employment, as follows:
Years of Service Vesting
---------------- -------
Less than 3 0%
3 20%
4 40%
5 60%
6 80%
7 100%
Forfeitures - If a participant incurs a "break in service," as defined in the
Plan, for any reason other than permanent disability, death or normal
retirement, and is not 100% vested in the employer discretionary contributions,
the nonvested portion is forfeited. Forfeited amounts are applied to reduce the
Company's contributions.
Loans - Effective July 1, 1998, participants are able to borrow up to the lesser
of one half of their account balances or $50,000 minus the highest outstanding
loan balance from the Plan during the past year in accordance with the plan
provisions. Only one loan outstanding is allowed. Repayment periods do not
exceed five years unless the loan proceeds are used to
8
<PAGE>
Notes to Financial Statements, Continued
purchase a home. The interest rates on the loans are at least equal to the prime
rate as published in the Wall Street Journal at the time of application or some
higher rate that reflects current commercial lending rates as determined by the
plan administrator. Repayments are made in equal weekly installments collected
through payroll deductions. Loans are valued at cost, which approximates fair
value.
Withdrawal Provisions - Participants may request that all or part of their
accounts attributable to elective contributions be paid to them to meet an
immediate and heavy financial hardship for which funds are not reasonably
available to them from other sources. The amount paid to a participant in this
fashion will be taxable and may not be repaid to the Plan.
Effective July 1, 1998, such a withdrawal would require the participant to cease
making contributions to the Plan for a period of at least twelve months
following the receipt of the hardship withdrawal.
Benefit Payments - Effective July 1, 1998, under terms of the Plan, participants
are eligible for benefit payments upon reaching age sixty-five (65). The Plan
also provides for distributions to participants, or their beneficiaries, upon
death, disability, early retirement at or after age fifty-five with seven years
of service, and termination of employment. Participants may choose to have
benefits paid directly to them or to another qualified retirement plan or
individual retirement arrangement on their behalf. Benefits are recorded when
paid.
Priorities Upon Termination - Upon termination of the Plan, all participants'
funds shall become fully vested. The trust will continue until the plan benefits
of each participant has been distributed.
3. Income Tax Status
The Plan is exempt from federal income taxes under Section 501(a) of the
Internal Revenue Code. The Plan obtained its latest determination letter on June
29, 1993, in which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the Internal
Revenue Code. The Plan has been amended since receiving the determination
letter. However, the Plan administrator and the Plan's tax counsel believe that
the Plan is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore, no provision
for income taxes has been included in the Plan's financial statements.
9
<PAGE>
Notes to Financial Statements, Continued
4. Investments
The investments of the Plan as of December 31, 1998 and 1997 are summarized as
follows:
<TABLE>
<CAPTION>
1998 1997
----------------------- ----------------------
Investment Name Market Cost Market Cost
--------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Vesta Insurance Group, Inc. Common Stock $ 374,846 $ 830,865 $1,704,775 $ 917,361
Davis Convertible Securities Fund 274 274
Davis New York Venture Fund, Inc. 1,517,656 1,508,962
Balanced Fund 395,697 376,592
GAM Global Fund 158 146
GAM International Fund 29,316 27,934
Merrill Lynch Global Allocation Fund, Inc. 521,040 602,024
Merrill Lynch Basic Value Fund, Inc. 53,578 51,764
Merrill Lynch Corporate Bond Fund, Inc.
(High Income Portfolio) 21,416 21,945
Merrill Lynch Corporate Bond Fund, Inc.
(Intermediate Term Portfolio) 231,548 230,896
Merrill Lynch Retirement Preservation Trust Fund 361,183 361,183
Merrill Lynch S&P 500 Index Fund 167,410 160,486
MFS Total Return Fund 5,997 6,537
Morgan Stanley U.S. Real Estate Fund 141 140
PIMCO Small Cap Value Fund 35,379 34,906
Equity Fund 962,225 793,290
Bond Fund 127,062 124,263
Money Market Fund 280,337 280,337
---------- ---------- ---------- ----------
$3,319,942 $3,838,062 $3,470,096 $2,491,843
========== ========== ========== ==========
</TABLE>
The following is a summary of assets held in excess of 5% of the Plan's net
assets at December 31:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Vesta Insurance Group, Inc. $ 374,846 $1,704,775
Merrill Lynch Retirement Preservation Trust 361,183
Merrill Lynch Corporate Bond Fund, Inc. Intermediate Term Portfolio, Inc. 239,756
Davis New York Venture Fund 1,517,656
Merrill Lynch Global Allocation Fund, Inc. 521,040
Vanguard Index Trust $ 962,225
Fidelity Balanced Fund 395,697
Wachovia Fixed Income Fund 127,062
Wachovia Prime Cash Management 280,337
</TABLE>
10
<PAGE>
Notes to Financial Statements, Continued
The allocation of net assets available for plan benefits to the Plan's separate
investment programs for the years ended December 31, 1998 and 1997 and the
allocation of changes in net assets available for plan benefits to the Plan's
separate investment programs for the year ended December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
Vesta Davis
Insurance Davis New York Davis
Group Convertible Venture Real GAM GAM
Inc. Common Securities Fund, Estate Global Interna-
1998 Stock Fund Inc. Fund Fund tional Fund
---- ----------- ----------- ----------- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash
Investments at fair value $374,846 $274 $1,517,656 $158 $29,316
Employer contributions receivable 13,429 155 15,952 $16 11 891
Employee contributions receivable 28,696 184 43,269 34 22 1,852
Other receivable
-------- ---- ---------- --- ---- -------
Net assets available
for plan benefits $416,971 $613 $1,576,877 $50 $191 $32,059
======== ==== ========== === ==== =======
</TABLE>
<TABLE>
<CAPTION>
Merrill
Lynch Merrill
Corporate Lynch
Bond Corporate Merrill
Merrill Merrill Fund, Inc. Bond Lynch
Lynch Lynch (High Fund, Inc. Retirement
Global Basic Income (Intermed- Preservation
Allocation Value Portfolio) iate Term Trust
1998 Fund, Inc. Fund, Inc. Fund Portfolio) Fund
---- ----------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Cash
Investments at fair value $521,040 $53,578 $21,416 $231,548 $361,183
Employer contributions receivable 5,031 1,279 607 2,352 3,591
Employee contributions receivable 14,142 3,182 1,361 5,856 9,407
Other receivable
-------- ------- ------- -------- --------
Net assets available
for plan benefits $540,213 $58,039 $23,384 $239,756 $374,181
======== ======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Merrill Morgan Nicholas
Lynch MFS Stanley Applegate PIMCO
S&P 500 Total US Real Emerging Small-Cap
Index Return Estate Countries Value
1998, Continued Fund Fund Fund Fund Fund
--------------- -------- ------ ------- -------- --------
<S> <C> <C> <C> <C> <C>
Cash
Investments at fair value $167,410 $5,997 $141 $35,379
Employer contributions receivable 4,034 $ 48 16 $ 1,153
Employee contributions receivable 7,271 34 2,246
Other receivable
-------- ------ ---- --- -------
Net assets available
for plan benefits $178,715 $5,997 $189 $50 $38,778
======== ====== ==== === =======
</TABLE>
<TABLE>
<CAPTION>
Seligman
Seligman Communi-
Henderson cations and
Global Information
Technology Fund, Participant
1998, Continued Fund Inc. Cash Loans Total
--------------- ---------- ----------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Cash $2,163 $ 2,163
Investments at fair value 3,319,942
Employer contributions receivable $16 $ 33 48,614
Employee contributions receivable 34 124 117,714
Other receivable $27,114 $ 27,114
--- ---- ------ ------- ----------
Net assets available
for plan benefits $50 $157 $2,163 $27,114 $3,515,547
=== ==== ====== ======= ==========
</TABLE>
11
<PAGE>
Notes to Financial Statements, Continued
<TABLE>
<CAPTION>
Money Company
Market Bond Balanced Equity Stock
1997 Fund Fund Fund Fund Fund Total
-------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments at fair value $280,337 $127,062 $395,697 $ 962,225 $1,704,775 $3,470,096
Employee contributions receivable 3,622 2,274 5,975 18,486 10,300 40,657
Employer contributions
receivable 31,300 14,818 34,927 107,166 91,721 279,932
-------- -------- -------- ---------- ---------- ----------
Total assets 315,259 144,154 436,599 1,087,877 1,806,796 3,790,685
LIABILITIES
Cash overdraft 1,298 3 (11,406) (10,105)
-------- -------- -------- ---------- ---------- ----------
Net assets available
for plan benefits $316,557 $144,154 $436,602 $1,087,877 $1,795,390 $3,780,580
======== ======== ======== ========== ========== ==========
</TABLE>
12
<PAGE>
Notes to Financial Statements, Continued
Allocation of changes in net assets available for plan benefits to investment
programs for the year ended December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Vesta Merrill
Insurance Lynch
Money Group, Inc. Retirement
Market Bond Balanced Equity Common Preservation
Fund Fund Fund Fund Stock Trust Fund
---------- --------- --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest and dividend
income $ 9,441 $ 4,823 $ 9,616 $ 11,754 $ 2,032 $ 9,285
Net appreciation
(depreciation) of investments 1,557 48,073 207,546 (1,805,420)
Employee contributions 43,847 38,658 77,322 224,783 417,998 61,457
Employer contributions 20,795 2,032 37,099 102,818 155,370 18,224
Rollovers 13,348 14,380 40,425 17,603 131,961
Distribution to
participants (99,238) (16,291) (80,442) (231,697) (216,632) (18,917)
Administrative fee (17) (53)
Net transfers (304,750) (189,313) (568,695) (1,420,684) (63,711) 304,185
--------- --------- --------- ----------- ----------- --------
Net increase (316,557) (144,154) (436,602 ) (1,087,877) (1,378,419 ) 374,181
Net assets available for
plan benefits:
Beginning of year 316,557 144,154 436,602 1,087,877 1,795,390
--------- --------- --------- ----------- ----------- --------
End of year $ 0 $ 0 $ 0 $ 0 $ 416,971 $374,181
========= ========= ========= =========== =========== ========
</TABLE>
<TABLE>
<CAPTION>
Merrill Merrill
Merrill Lynch Lynch
Merrill Lynch Corporate Corporate
Lynch PIMCO Basic Bond Fund, Bond Fund,
S&P 500 Small-Cap Value GAM Inc. (High Inc. (Intermed-
Index Value Fund, International Income iate Term
Fund Fund Inc. Fund Portfolio) Portfolio)
--------- --------- --------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest and dividend
income $ 3,108 $ 1,393 $ 955 $ 739 $ 6,221
Net appreciation
(depreciation) of investments 6,932 491 1,817 $ 1,553 (549) 675
Employee contributions 126,037 8,113 26,821 5,223 10,032 50,046
Employer contributions 15,498 2,694 2,958 1,845 1,713 12,879
Rollovers
Distribution to
participants (12,798)
Administrative fee (11)
Net transfers 27,140 26,087 25,488 23,438 11,449 182,744
-------- ------- ------- ------- ------- --------
Net increase 178,715 38,778 58,039 32,059 23,384 239,756
Net assets available for
plan benefits:
Beginning of year
-------- ------- ------- ------- ------- --------
End of year $178,715 $38,778 $58,039 $32,059 $23,384 $239,756
======== ======= ======= ======= ======= ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Morgan
Davis Global Davis MFS Stanley
New York Allocation GAM Convertible Total US Real Davis
Venture Fund, Global Securities Return Estate Real Estate
Fund Inc. Fund Fund Fund Fund Fund
---------- ------------ ------ ----------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest and dividend
income $ 39,482 $ 61,452 $ 5 $ 750 $ 1
Net appreciation
(depreciation) of investments 1,964 (97,165) $ 12 1 (541) 1
Employee contributions 269,793 84,916 119 363 101 $34
Employer contributions 89,512 31,188 60 244 52 86 16
Rollovers
Distribution to
participants (141,298) (136,308)
Administrative fee (176) (42)
Net transfers 1,317,600 596,172 5,736
---------- --------- ---- ---- ------ ---- ---
Net increase 1,576,877 540,213 191 613 5,997 189 50
Net assets available for
plan benefits:
Beginning of year
---------- --------- ---- ---- ------ ---- ---
End of year $1,576,877 $ 540,213 $191 $613 $5,997 $189 $50
========== ========= ==== ==== ====== ==== ===
</TABLE>
<TABLE>
<CAPTION>
Seligman
Henderson
Global Seligman Nicholas
Technology Communi- Applegate Participant
Fund cations Emerging Cash Loans Total
----------- -------- --------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest and dividend
income $2,092 $ 163,149
Net appreciation
(depreciation) of investments (1,633,053)
Employee contributions $34 $124 $34 71 1,445,926
Employer contributions 16 33 16 495,148
Rollovers 217,717
Distribution to
participants (953,621)
Administrative fee (299)
Net transfers $27,114
--- ---- --- ------ ------- ----------
Net increase 50 157 50 2,163 27,114 (265,033)
Net assets available for
plan benefits:
Beginning of year 3,780,580
--- ---- --- ------ ------- ----------
End of year $50 $157 $50 $2,163 $27,114 $3,515,547
=== ==== === ====== ======= ==========
</TABLE>
13
<PAGE>
Notes to Financial Statements, Continued
5. Related Party Transactions
The Sponsor pays administrative expenses on behalf of the Plan, including legal,
trust, administrative, and accounting fees. During 1998, the Plan acquired and
sold Vesta Insurance Group, Inc. common stock as follows:
Selling
Price/
Shares Cost Fair Value
------ ---------- ----------
Acquired 80,817 $1,534,207 $1,534,207
Sold 47,055 1,620,704 963,585
------ ---------- ----------
33,762 $ (86,497) $ 570,622
====== ========== ==========
14
<PAGE>
Supplemental Schedules
<PAGE>
J. Gordon Gaines, Inc. Retirement Savings Plan
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
c. Description of Investment Including
b. Identity of Issue, Borrower, Maturity Date, Rate of Interest, e. Current
a. Lessor or Similar Party Collateral, Par, or Maturity Value d. Cost Value
- --- ------------------------------- -------------------------------------- ---------- ----------
<C> <S> <C> <C> <C>
* Vesta Insurance Group Common Stock $ 830,865 $ 374,846
* Merrill Lynch Retirement
Preservation Fund Collective Trust 361,183 361,183
MFS Total Return Fund Mutual Fund 6,537 5,997
Morgan Stanley US Real Estate
Fund Mutual Fund 141 141
* Merrill Lynch Basic Value Fund Mutual Fund 51,764 53,578
* Merrill Lynch Global
Allocation Fund Mutual Fund 602,024 521,040
* Merrill Lynch Corporate Bond Fund, Inc.
High Income Portfolio Fund Mutual Fund 21,945 21,416
* Merrill Lynch Bond Fund, Inc.
Intermediate Term Portfolio Mutual Fund 230,896 231,548
* Merrill Lynch S&P 500 Index
Fund Mutual Fund 160,486 167,410
Davis Convertible Securities
Fund Mutual Fund 274 274
Davis New York Fund, Inc. Mutual Fund 1,508,962 1,517,656
GAM Global Fund Mutual Fund 146 158
GAM International Fund Mutual Fund 27,934 29,316
PIMCO Small-Cap Value Fund Mutual Fund 34,906 35,379
---------- ----------
$3,838,063 $3,319,942
========== ==========
</TABLE>
* Party-in-interest to the Plan.
15
<PAGE>
J. Gordon Gaines, Inc. Retirement Savings Plan
Item 27d - Schedule of Reportable Transactions
for the year ended December 31, 1998
I. Single transactions exceeding 5% of assets.
See attached schedule.
NOTE - Information required in Columns e, f, and h is inapplicable.
II. Series of transactions involving property other than securities.
NONE
III. Series of transactions of same issue exceeding 5% of assets.
See attached schedule.
NOTE - Information required in Columns e, f, and h is inapplicable.
IV. Transactions in conjunction with same person involved in reportable single
transactions.
NONE
16
<PAGE>
J. Gordon Gaines, Inc. Retirement Savings Plan
Item 27d(I) - Schedule of Reportable Transactions
for the year ended December 31, 1998
<TABLE>
<CAPTION>
c. Purchase d. Sales g. Cost of i. Net Gain
a. Identity of Party Involved b. Description Price Price Asset (Loss)
- ----------------------------- -------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Fidelity Balanced Mutual Fund $ 643,469 $ 584,633 $ 58,836
Fidelity Balanced Mutual Fund $ 643,469 $ 584,633 $ 58,836
Fidelity Balanced Mutual Fund $ 643,469 $ 584,633 $ 58,836
Vanguard Index Trust Fund $1,427,066 $1,100,064 $ 327,002
*Vesta Insurance Group, Inc. Common Stock $ 708,614 $1,232,826 $(524,212)
*Wachovia Prime Cash Management Fund $ 327,137
*Wachovia Prime Cash Management Fund $ 318,039
*Wachovia Prime Cash Management Fund $ 643,608
*Wachovia Prime Cash Management Fund $1,427,423
</TABLE>
Party-in-interest to the Plan.
17
<PAGE>
J. Gordon Gaines, Inc. Retirement Savings Plan
Item 27d(III) - Schedule of Reportable Transactions
for the year ended December 31, 1998
<TABLE>
<CAPTION>
c. Purchases d. Sales
------------------- ------------------- g. Cost of i. Net Gain
a. Identity of Party Involved b. Description Price Number Price Number Asset (Loss)
- --- -------------------------- -------------------- ---------- ------ ---------- ------ ---------- -----------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
Fidelity Balanced Mutual Fund $ 388,543 22 $2,064,396 11 $ 707,124 $1,357,272
Vanguard Index Trust Fund $ 492,688 18 $1,662,462 5 $1,285,981 $ 376,481
* Vesta Insurance Group, Inc. Common Stock $ 580,136 51 $ 997,019 33 $1,620,703 $ (623,684)
* Wachovia Prime Cash Management
Fund $ 369,362 26 $1,555,173 11 $1,494,334 $ 60,839
* Wachovia Bond Fund $ 76,942 18 $ 205,561 26 $ 201,205 $ 4,356
* Merrill Lynch Retirement
Presentation Trust $ 393,212 68 $ 32,028 17 $ 32,028 $ 0
Davis New York Venture Fund $1,709,105 54 $ 193,413 31 $ 200,143 $ (6,730)
* Merrill Lynch Corporate Bond Fund $ 241,893 31 $ 18,345 15 $ 18,327 $ 18
* Merrill Lynch S&P 500 Index $ 160,746 21 $ 268 1 $ 260 $ 8
</TABLE>
* Party-in-interest to the Plan.
18
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description of Exhibit Number
- ------- --------------------------------------------------- ------
<S> <C> <C>
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of PricewaterhouseCoopers LLP
</TABLE>
3
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Administrative Committee
J. Gordon Gaines, Inc. Retirement Savings Plan
We consent to incorporation by reference in the registration statement of Form
S-8 of J. Gordon Gaines, Inc. Retirement Savings Plan of our report dated July
7, 1998, relating to the statements of net assets available for plan benefits
of J. Gordon Gaines, Inc. Retirement Savings Plan as of December 31, 1997, which
report appears in the December 31, 1998, Annual Report on Form 11-K of J. Gordon
Gaines, Inc. Retirement Savings Plan.
KPMG Peat Marwick LLP
Birmingham, Alabama
June 24, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of Vesta Insurance Group, Inc. of our report dated June
11, 1999 related to the financial statements and supplemental schedules of J.
Gordon Gaines, Inc. Retirement Savings Plan, which report is included in this
Annual Report on Form 11-K.
PricewaterhouseCoopers LLP
Birmingham, Alabama
June 29, 1999
