SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
DECEMBER 31, 1996 0-23178
EQUISURE, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1309882
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 FOURTH AVENUE SOUTH, MINNEAPOLIS, MN 55415
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(612) 337-9507
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Common Stock, $.001 par value - American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes _X_ No___
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained herein, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [__].
Registrant's revenues for fiscal year ended December 31, 1996: $13,265,274
Aggregate market value of voting stock held by non-affiliates of
registrant as of April 10, 1997: Approximately $62,000,000.
Number of shares outstanding as of March 1, 1997: 11,151,666 shares of
Common Stock, $.001 par value.
Documents incorporated by reference: Portions of the registrant's
definitive Proxy Statement, for the 1997 Annual Meeting of Shareholders to be
filed with the Commission, are incorporated by reference in Part III of this
Form 10-KSB.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
The Company, through its wholly owned subsidiary, formed under the laws of
Belgium, Equihot Herverzekering N.V. ("EH"), is engaged in the business of
providing reinsurance to insurance companies and to the reinsurance departments
of major corporations. EH has been underwriting reinsurance since January 1,
1994, and specializes in financial risk and political risk reinsurance, as well
as underwriting a general reinsurance account.
BACKGROUND
On May 10, 1996, the Company (formerly Aloe Naturel, Inc.) acquired EH
from Equihot Delfstoffen N.V. ("ED") pursuant to an exchange of 100% of the
shares of EH for 10,594,082 shares (adjusted to reflect a 2-for-1 stock split in
November 1996) of the Company's common stock, representing approximately 95% of
the Company's then outstanding shares of common stock. On July 23, 1996, a group
of investors, including management of the Company, purchased 8,094,676 shares
(adjusted for the November 1996 stock split) of the Company's common stock from
ED. Following this purchase, ED's ownership of the Company's common stock was
reduced to 22% of the then outstanding shares.
For accounting purposes, the exchange was treated as a reverse purchase
acquisition. As a result, the consolidated financial statements included in this
report present the operations of EH prior to May 10, 1996, and include the
Company's operations only from the date of acquisition.
The "Company" or "Equisure" when used herein refers to Equisure, Inc., and
its predecessors, including EH, unless otherwise indicated. In May 1996,
immediately prior to the exchange of the Company's common stock for the
outstanding shares of EH, the shareholders of the Company approved a 1-for-20
split of the common stock. In November 1996, as a requirement of being listed on
the American Stock Exchange, the Company approved a 2-for-1 forward split of the
common stock. Except as otherwise indicated, all information in this report has
been adjusted to reflect both of the stock splits. On December 3 1996 the
Company's Common Stock began trading on the American Stock Exchange (see Part
III, Item 5).
UNDERWRITING OPERATIONS
The Company's reinsurance activities are carried out by EH, its wholly
owned Belgium reinsurance subsidiary. EH has historically conducted business out
of Antwerp, the main commercial Flemish city of Belgium. The word
"Herverzekering" is Dutch-Flemish for reinsurance.
EH has been underwriting reinsurance since January 1, 1994. EH was formed
for the purpose of providing reinsurance emanating from the trading activities
of ED, its former parent. Substantially all political and financial risk
reinsurance written to date pertains to these activities. While the Company
believes that the percentage of its business connected with the former parents'
activities will decrease as the Company's business expands, it expects that such
business will continue to represent a significant portion of the Company's
business. Equihot Verzekering N.V. ("EV"), an insurance company which is owned
100% by ED, fronts for the insurance which the Company provides with respect to
ED's trading activities. Since a reinsurer does not directly insure the
underlying risk, a reinsurer must enter into fronting arrangements with other
insurance companies. Fronting arrangements are defined as reinsurance in which
the ceding (reinsuring) insurance company issues a policy and reinsures all or
substantially all of the insurance risk with the reinsurer. EV provides this
fronting service for a fee (2.5% on net ceded reinsurance premiums written for
EV for periods prior to December 31, 1996 and 5% on such premiums from January
1, 1997 to December 31, 2005). The Company believes this fronting fee is normal
commercial practice and believes 5% to be competitive with market rates.
Historically, EH has underwritten international trading risks associated
with the delivery of metals and metal products and the failure of parties to
honor their contracts due to political upheaval and financial instability.
Beginning in 1995, EH initiated efforts to expand its reinsurance activity to
include a general book of business. EH writes reinsurance for established
international insurance companies with proven risk management experience and
acceptable levels of loss ratio. In addition to earning revenue directly from
reinsurance premiums, EH generates income by investing its reserve funds.
Historically, EH's reinsurance risks have been primarily located in African
countries. In 1996, EH began expanding into the North American, European and
South American reinsurance markets.
In percentage terms, political and financial risk accounted for
approximately 100%, 95% and 84% of the Company's reinsurance business in the
12-month periods ended December 31, 1994, 1995 and 1996, respectively. EH's
target portfolio balance is 50% political and financial reinsurance and 50%
general reinsurance, which it expects to achieve during the fiscal year ending
December 31, 1997. The reinsurance portfolio is derived specifically from the
following classes:
Type of Reinsurance 1994 1995 1996
- ------------------- ---- ---- ----
Political 60% 57% 50%
Financial 40% 38% 34%
Marine 0% 4% 11%
Aviation 0% 1% 2%
Accident & Health 0% 0% 1%
Casualty 0% 0% 2%
The majority of financial risk business is at present obtained from
African historic sources and is renewable. The Company believes that there is
potential for growth in this sector from new sources and new accounts have been
written, emanating from Europe and North America.
The majority of other general business written in 1996 was marine, both
hull and cargo. This business, together with that of aviation, accident and
health, and casualty is located in North America, South America and Europe.
The Company is currently focusing on broadening its portfolio of mixed
commercial reinsurance business in specific areas that fall within the Company's
established criteria of risk management. This will also contribute to
establishing a balanced book of business to minimize dependence upon any one
particular area or class.
In the normal course of business and as part of the Company's policy, it
seeks to lessen the aggregated risk exposure that may arise from substantial
events that cause unfavorable underwriting results, by reinsuring certain levels
of risks in various areas of exposure with other reinsurance enterprises. The
Company's exposure is continually monitored and decisions made in respect of
either individual risks or classes of risk.
In order to reduce its operating expenses, on February 14, 1997 the
Company purchased from an investment company, a 65% interest in J.H. Minet
Monaco S.A.M., an insurance and reinsurance broker incorporated in Monaco, that
has been a dormant shell for the past several years. A name change was effected
on February 14, 1997 to Aviation Maritime Transportation (Insurance Brokers)
S.A.M. Equisure will utilize the reinsurance brokering service of AMT to replace
the Company's existing outsourced underwriting administration services. As a
result, underwriting administration costs are expected to be less in 1997 as a
percentage of total operating costs.
MARKETING AND DISTRIBUTION
The Company has developed niche areas of reinsurance business. Business is
developed based on long standing relationships worldwide within the insurance
and reinsurance community rather than by conventional marketing techniques.
Utilizing the experience and network of contacts of management, the Company is
able to identify and work with producing brokers and insurers to develop new
business opportunities. In the United States in particular, the Company is
working closely with insurers in conjunction with well established general
agents, who are responsible for the administration of individual accounts. This
enables the Company to conduct its business without the need for, and
restrictions of, a substantial workforce, while maintaining the necessary
management and underwriting controls.
LOSSES AND LOSS RESERVES
The Company maintains reserves for the payment of losses and loss
adjustment expenses for all lines of business. The determination of reserves for
losses and loss adjustment expenses is dependent on receipt of information
regarding claims and historical loss experiences. Generally, there is a lag
between the time losses are incurred and the time they are reported to the
Company.
The reserves for losses are based on an estimate of the ultimate unpaid
net cost of all losses incurred through December 31 of each year for its
short-term reinsurance business, and are based on written premiums for its
long-term political and financial risk reinsurance business, which is accounted
for under the open year method. See Notes 3 and 5 of the Notes to the
Consolidated Financial Statements. Since the provision is necessarily based on
actual known losses together with estimates, the ultimate liability may be more
or less than such provision. The reserves are regularly evaluated and adjusted
when circumstances indicate an adjustment is required.
INVESTMENT POLICY
A major source of income to a reinsurance company is income earned on the
investment of amounts not currently required to meet losses or expenses. The
principal funds available for investment by the Company come from accumulated
capital, and the cumulative excess of premiums collected over losses and
operating expenses paid.
The Company's investments are managed in a manner consistent with
investment guidelines that are established by the Board of Directors. The
Company invests in equity securities traded on major stock exchanges in Europe
and the United States. The Company also has a small commodity portfolio
comprised of certificates of gold deposits. See Note 4 of the Notes to the
Consolidated Financial Statements.
Short term and medium term dollar and multicurrency deposits are made for
30 days, 90 days and 180 days. Where possible the Company operates interest
bearing current accounts. The Company does not invest in real estate securities,
"high yield" or "junk" bonds or derivatives. The Company's philosophy is to
deploy assets and reinvest when market conditions dictate.
COMPETITION
The reinsurance industry is highly competitive. The Company faces
competition from numerous reinsurance companies. These reinsurers may vary in
terms of size, quality, operating histories and financial, marketing and
management resources. Many of these competitors have substantially greater
financial resources than the Company. The Company does not attempt to compete on
the basis of volume or large market share, but seeks to identify market niches
where it believes it can achieve a higher profit.
REGULATION
The Company's business as currently conducted is not subject to direct
regulation by any national or state insurance authority. However, the ability of
insurance companies which are subject to such regulation to do business with the
Company, may be affected by such regulations. For example, in the United States
the Company has, where appropriate, established trust funds in the United States
to allow the cedant companies to take credit for ceded reinsurance within their
financial statements.
EMPLOYEES
The administrative structure of the Company at present permits it to
operate efficiently without the need for a large number of employees. The
Company relies on outsourcing for substantially all of its routine
administrative tasks. At March 31, 1997, the Company had 32 people employed via
outsourcing and the Company's own staff, including its four executive officers.
The executive officers of the Company are as follows:
Name Position
- ------------------------------ -------------------------------------
Peter G. Uttley Chairman of the Board of Directors
Barrie Harding President and Chief Executive Officer
David J. Sachman Chief Financial Officer
Professor Gerda Elsen Technical Officer and Actuary
ITEM 2. DESCRIPTION OF PROPERTY.
Equisure's corporate headquarters in the United States are located in
leased offices at 701 Fourth Avenue South, Minneapolis, Minnesota 55415.
Equihot Herverzekering N.V., the operating subsidiary, rents offices in
Antwerp, Belgium and has office facilities available to it in Monaco, Europe and
in Cape Town and Johannesburg, South Africa.
ITEM 3. LEGAL PROCEEDINGS.
There are no pending material legal proceedings to which Equisure is a
party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A special meeting of the Company's stockholders was held on October 29,
1996. The purpose of the meeting was to (i) ratify and approve all actions taken
at the May 10, 1996 Special Meeting of Stockholders of the Company, including
the adoption of the Plan of Exchange with Equihot Herverzekering N.V. and (ii)
to approve an amendment to the Company's Articles of Incorporation in order to
increase the number of authorized shares of Common Stock from 10,000,000 to
50,000,000 shares. Each item was approved by the stockholders, the votes (based
on numbers before the November 2 for 1 stock split) for, against and abstaining
with respect to each matter being as follows: (i) for 4,002,139, against 52 and
abstentions none; and (ii) for 4,002,105, against 86 and abstentions none.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The number of record holders of the Company's Common Stock ("Common
Stock") on April 14, 1997 was 648. Prior to October 30, 1996 there was no active
public trading market for the Common Stock. On October 29, 1996, the Company's
Common Stock began trading on the Nasdaq Bulletin Board, and on December 3,
1996, the Common Stock began trading on the American Stock Exchange under the
symbol EQE. During the period from October 30 to December 3, 1996, the highest
closing asked and lowest closing bid prices for the Company's Common Stock were
$6.50 and $2.50, respectively, as reported by the National Quotation Bureau,
Inc. These quotations represent prices between dealers, and do not include
retail markups, markdowns or commissions and may not represent actual
transactions.
During the period between December 3 and December 31, 1996, sale prices
as reported by the American Stock Exchange were as follows:
December 3-31, 1996
-------------------
Opening Sales Price December 3, 1996 $ 6.25
Highest Sales Price $ 10.25
Lowest Sales Price $ 6.25
Closing Sales Price December 31, 1996 $ 7.5625
The Company has never paid a cash dividend on its Common Stock. The
payment by the Company of dividends in the future rests within the discretion of
its Board of Directors and will depend, among other things, upon the Company's
earnings, capital requirements and financial condition.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
GENERAL
On May 10, 1996, Equisure entered into an exchange agreement with ED,
pursuant to which ED exchanged all outstanding common stock of EH for shares of
Equisure's Common Stock. Immediately following the exchange, ED held 95% of the
Company's outstanding shares of Common Stock (subsequently reduced to 22%). For
accounting purposes, the exchange was treated as a reverse purchase acquisition.
As a result, the consolidated financial statements included in this report
present the operations of EH prior to May 10, 1996 and include the Company's
operations only from the date of acquisition.
Premium income on short-duration reinsurance contracts is accounted for
using the periodic method. Under the periodic method, premiums that commence
within the current underwriting year are taken into revenues as earned.
Reinsurance premiums ceded and acquisition costs together with claims incurred
are matched against premiums. Calculations are made to determine the unearned
premiums and deferred acquisition costs as necessary. Long-duration foreign
reinsurance contracts are accounted for using the open year method. Under the
open year method, premiums, reinsurance premiums ceded and acquisition costs
together with claims incurred are allocated to the loss reserves on the balance
sheet. The loss reserves, relating to the open year method, will be
disaggregated and reported on the statement of operations as premiums, claims
and expenses only when earned premiums become reasonably determinable, generally
at the end of the policy term. If at any time an underwriting year or class of
business within an underwriting year shows a deficiency, this loss will be
recognized immediately.
Commissions and other costs of acquiring insurance that vary with and
are primarily related to the production of new and renewal business are
deferred, and amortized over the terms of the policies or reinsurance treaties
to which they relate.
The liability for losses and loss adjustment expenses includes amounts
determined from loss reports and individual cases and amounts, based on past
experience, for losses incurred but not reported. Such liabilities are
necessarily based on estimates and, while management believes that the amount is
adequate, the ultimate liability may be in excess of or less than the amounts
provided. The methods for making such estimates and for establishing the
resulting liability are continually reviewed, and any adjustments are reflected
in earnings currently.
RESULTS OF OPERATION - TWELVE MONTHS ENDED DECEMBER 31, 1996 AND 1995
Income before taxes was $7,117,036 in 1996 compared to $3,030,260 in
1995, an increase of 135%. The income tax provision in 1996 was $2,500,000
compared to 0 in 1995, as a result of the Company becoming subject to taxation
in the United States during 1996. Net income was $4,617,036 for 1996 compared
with $3,030,260 for 1995, an increase of 52% for the year. Net income per share
as a result has risen from $0.29 to $0.42, an increase of 45%. The variance in
these two percentage rates is due to the small difference in the weighted
average number of common shares outstanding between 1996 and 1995.
Total revenues for 1996 of $13,265,274 compared to $6,918,497 for 1995,
an increase of 92%. This reflects the Company's concerted effort to maximize
investment income and achieve growth in the reinsurance business.
Earned premiums assumed on short-term business for 1996 of $10,657,469
compares with $5,645,950 for 1995, an increase of 89%, and reflects the build up
of the general commercial reinsurance developed during the year. A substantial
portion of this business was written in the final quarter of 1996, principally
December. The revenue from this business will continue to be reflected during
1997.
Ceded premiums in 1996 of $1,324,930, relate to short-term reinsurance
business and is a deduction from earned premiums. This reflects the Company's
risk reduction policy. The Company did not reinsure any of its short-term
business in 1995. Net premiums show an increase from $5,645,950 in 1995 to
$9,332,539 in 1996, an increase of 65%.
Losses incurred includes losses paid, known outstanding losses reported
by insurers and management's estimates of future loss requirements for the
underwriting year in question. These losses, $1,758,622 for 1996 compared to 0
for 1995, relate to the general reinsurance business comprising 16% of written
premiums in 1996 compared to 5% in 1995. No losses were incurred in 1995 as all
short-term reinsurance contracts for 1995 closed without a loss.
Net acquisition costs increase or decrease from year to year according
to the level of premiums written; however, the change is not necessarily a
proportionate change as the percentage rates of acquisition costs vary with the
type of business and the producer concerned. Additionally, in respect of the
political and financial risk business, the Company for 1996 dealt direct with
its main insurer rather than through a broker.
Administrative expenses have increased by 11% from $2,962,238 for 1995
to $3,302,730 for 1996, due primarily to cost incurred in connection with the
reorganization described above and the listing of the Company's Common Stock on
the American Stock Exchange.
Foreign currency exchange losses and gains occur due to the
fluctuations in the rate of exchange between the Company's functional currency,
the U.S. Dollar, and other major currencies in which transactions occur and
balances are held.
During 1996, the Company realized gains on the sale of selected quoted
investments held for sale. This produced a profit of $2,199,546.
Net investment income for 1996 was $1,733,189 compared to $1,272,547
for 1995, an increase of 36%. This is reflective of a 25% increase in cash and
investment balances and achieving higher returns on such balances.
For 1996, the written premiums on the long-term reinsurance business
were $25,678,342, compared to $26,113,761 for 1995, a decrease of 1.7%. Losses
incurred for this business for both 1996 and 1995 are shown as 100% of premiums
minus ceded premiums and acquisition costs because this business is accounted
for under the open year method as described above. See Notes 3 and 5 of the
Notes to the Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The capacity of a reinsurance company to write reinsurance is based
upon maintaining liquidity and capital resources sufficient to pay claims and
expenses as they become due. The Company has historically generated adequate
capital resources to support its current operations and believes it will
continue to do so for the foreseeable future. The primary sources of the
Company's liquidity are funds generated from reinsurance premiums and investment
income. The principal application of such funds are payments of losses and loss
adjustment expenses, acquisition of investments and operating expenses.
Cash flow from operating activities were $12,626,625 and $27,847,786 in
1996 and 1995, respectively. The comparatively high 1995 cash flow is primarily
due to the movement in related party balances between 1994 and 1995 of
$14,172,894, a substantial portion of which related to reinsurance written
during the latter part of 1994.
FORWARD LOOKING INFORMATION
Information contained in this report, other than historical
information, should be considered forward looking and reflects management's
current view of future events and financial performance that involve a number of
risks and uncertainties. The factors that could cause actual results to differ
materially include, but are not limited to, the following: general economic
conditions; loss experience; investment results; and competition and pricing
pressures.
ITEM 7. FINANCIAL STATEMENTS.
EQUISURE, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
Page
Independent Auditors' Report
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
STIRTZ
BERNARDS
BOYDEN
SURDEL &
LARTER
Professional
Association
Certified Public
Accountants
& Management
Consultants
Financial Plaza
7200 Metro Boulevard
Edina, Minnesota 55439
612/831-6499
Fax 831-1219
To The Stockholders
EQUISURE, INC. AND SUBSIDIARY
Minneapolis, Minnesota
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets
of Equisure, Inc. and Subsidiary as of December 31, 1996 and
1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years then
ended. These consolidated financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free
of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the consolidated financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statements presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of Equisure, Inc. and Subsidiary as
of December 31, 1996 and 1995, and the results of their
operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Stirtz Bernards Boyden Surdel & Larter, P.A.
Edina, Minnesota
April 4, 1997
A member of
MOORES
ROWLAND
INTERNATIONAL
A worldwide
association of
independent
accounting firms
<TABLE>
<CAPTION>
EQUISURE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
------------------------------
1996 1995
------------ ------------
ASSETS
Assets:
<S> <C> <C>
Investments, available for sale $ 39,743,785 $ 15,790,358
Cash and cash equivalents 20,489,623 32,216,805
Accrued interest and dividends 158,162 80,680
Premiums receivable 2,246,581 1,392,981
Prepaid reinsurance 765,834 --
Due from related parties 12,972,037 10,751,973
Deferred acquisition costs 292,870 --
Other assets 22,878 --
------------ ------------
Total assets $ 76,691,770 $ 60,232,797
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Loss reserves $ 30,033,795 $ 18,227,498
Unearned premiums 2,209,994 --
Reinsurance premiums payable -- 1,202,190
Due to related parties 5,169,092 6,238,277
Income taxes payable 200,000 --
Accounts payable and accrued expenses 837,943 823,459
Deferred income taxes 1,210,000 --
------------ ------------
Total liabilities 39,660,824 26,491,424
------------ ------------
Contingencies -- --
Stockholders' equity:
Common stock, par value $.001, authorized
50,000,000 shares, issued and outstanding
11,151,666 shares for 1996 and 50,000 shares of no
par value common stock outstanding at December 31,
1995 11,152 1,594,896
Additional paid-in capital 35,635,084 34,051,340
Retained earnings (deficit) 2,953,153 (1,663,883)
Net unrealized depreciation on investments,
available for sale, net of deferred taxes (1,568,443) (240,980)
------------ ------------
Total stockholders' equity 37,030,946 33,741,373
------------ ------------
Total liabilities and stockholders' equity $ 76,691,770 $ 60,232,797
============ ============
See Notes to Consolidated Financial Statements.
</TABLE>
EQUISURE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
------------------------------
1996 1995
------------ ------------
Revenues:
Earned premiums assumed $ 10,657,469 $ 5,645,950
Ceded premiums (1,324,930) --
------------ ------------
Net premiums 9,332,539 5,645,950
Realized gains on investments 2,199,546 --
Net investment income 1,733,189 1,272,547
------------ ------------
Total revenues 13,265,274 6,918,497
------------ ------------
Expenses:
Losses incurred 1,758,622 --
Net acquisition costs 927,301 691,629
Administrative expenses 3,302,730 2,962,238
Foreign currency exchange loss 159,585 234,370
------------ ------------
Total expenses 6,148,238 3,888,237
------------ ------------
Income before income taxes 7,117,036 3,030,260
Income taxes (2,500,000) --
------------ ------------
Net income $ 4,617,036 $ 3,030,260
============ ============
Net income per share $ .42 $ .29
============ ============
Weighted average number of common
shares outstanding 10,953,074 10,594,082
============ ============
See Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
EQUISURE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock Additional Unrealized Retained
--------------------- Paid-In Depreciation Earnings
Shares Amount Capital On Investments (Deficit) Total
------ ------ ------- -------------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1995 50,000 $ 1,594,896 $ 34,051,340 $ 215,811 $ (2,744,143) $ 33,117,904
Distributions -- -- -- -- (1,950,000) (1,950,000)
Change in unrealized
depreciation on investments -- -- -- (456,791) -- (456,791)
Net income -- -- -- -- 3,030,260 3,030,260
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1995 50,000 1,594,896 34,051,340 (240,980) (1,663,883) 33,741,373
Effects of reverse
purchase acquisition:
Recapitalization 10,544,082 (1,584,302) 1,584,302 -- -- --
Issuance of additional
common stock to
effect merger 557,584 558 (558) -- -- --
Change in unrealized
depreciation on investments -- -- -- (1,327,463) -- (1,327,463)
Net income -- -- -- -- 4,617,036 4,617,036
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1996 11,151,666 $ 11,152 $ 35,635,084 $ (1,568,443) $ 2,953,153 $ 37,030,946
============ ============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
EQUISURE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,617,036 $ 3,030,260
Adjustments to reconcile net income to net cash
flows from operating activities:
Foreign currency exchange loss 159,585 234,370
Realized (gains) on investments (2,199,546) --
Change in:
Deferred income taxes 2,300,000 --
Unearned premiums 2,209,994 --
Premiums receivable (853,600) (1,392,981)
Prepaid reinsurance (765,834) --
Loss reserves 11,806,297 9,903,801
Payables/receivables - related parties (3,289,249) 14,172,894
Reinsurance premiums payable (1,202,190) 1,202,190
Accrued expenses, accounts and
income taxes payable 214,484 777,472
Accrued interest receivable (77,482) (80,220)
Deferred acquisition costs (292,870) --
------------ ------------
Net cash flows from operating activities 12,626,625 27,847,786
------------ ------------
Cash flows from investing activities:
Purchase of investments (32,189,452) (12,762,872)
Sale of investments 8,018,108 --
Other assets (22,878) --
------------ ------------
Net cash flows from investing activities (24,194,222) (12,762,872)
------------ ------------
Cash flows from financing activities:
Distributions -- (1,950,000)
------------ ------------
Effect of exchange rate changes on cash (159,585) (234,370)
------------ ------------
Net change in cash and cash equivalents (11,727,182) 12,900,544
Cash and cash equivalents, beginning of period 32,216,805 19,316,261
------------ ------------
Cash and cash equivalents, end of period $ 20,489,623 $ 32,216,805
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
EQUISURE, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1. BACKGROUND, ACQUISITION AND MERGER
Aloe Vera, Inc. (the Company) was incorporated on August 12, 1977, and for
several years prior to December 31, 1995, was not engaged in any business
activity. Effective, May 10, 1996, the stockholders of the Company approved
amendments to its Articles of Incorporation changing the corporate name to
Equisure, Inc.
On May 10, 1996, the Company acquired, as a wholly-owned subsidiary,
Equihot Herverzekering N.V. (EH), which operates under the laws of Belgium
and whose principal activity is the assumption of risks arising from
reinsurance policies ceded by Equihot Verzekering N.V., a wholly owned
subsidiary of Equihot Delfstoffen N.V.
On May 10 1996, the Company entered into an exchange agreement with Equihot
Herverzekering N.V. in which the former stockholder of EH exchanged all
50,000 shares of outstanding common stock of EH for 10,594,082 shares of
authorized but unissued common stock of Equisure.
Immediately prior to entering into the exchange agreement the Company
approved a 1 for 20 stock split, which reduced the number of outstanding
shares of common stock from 11,151,666 shares to 557,584 shares (both share
numbers are adjusted to reflect the two-for-one stock split described
below).
Following the exchange, the former stockholder of EH, Equihot Delfstoffen
N.V., held 95% of the Company's common stock outstanding. For accounting
purposes, this exchange/acquisition was treated as a recapitalization of
the Company with EH as the acquirer (a reverse purchase acquisition).
Equihot Delfstoffen N.V. subsequently sold 73% of the Company's outstanding
common stock and retained a 22% interest.
The historical financial statements prior to May 10, 1996, are those of EH.
The consolidated financial statements include Aloe Vera, Inc. only from the
date of acquisition. Proforma information for EH and Aloe Vera for periods
prior to the exchange/acquisition is not presented because such information
is not material to an understanding of the current or future operations and
Aloe Vera had not had any business activity for several years.
On October 29, 1996, the stockholders approved an increase in the
authorized common stock from 10,000,000 shares to 50,000,000 shares and on
November 13, 1996, the directors effected a two-for-one common stock split.
All references to per share amounts in the financial statements reflect the
stock split.
2. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The business of the Company is that of reinsurance, the assumption of risks
arising from reinsurance policies ceded by insurance companies.
The Company at present limits its business to the following classes of
risk:
Political
Financial
Marine
Aviation
Accident & health
Casualty
Political and financial risks are primarily located in African countries
with new accounts in the financial risk sector emanating from North America
and Europe.
Other classes of risk are located in North America, South America and
Europe.
Basis of Presentation
The consolidated financial statements are stated in United States dollars
and are prepared in conformity with accounting principles generally
accepted in the United States of America.
The preparation of consolidated 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 date
of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Equihot Herverzekering N.V. All material
intercompany transactions have been eliminated.
Investments
Investments consist primarily of marketable equity securities available for
sale representing approximately 47% of total assets and a holding of
certificates of gold deposit available for sale representing less than 5%
of total assets (see Note 4). They are carried at fair value based on
quoted market prices. Unrealized appreciation (depreciation) is excluded
from operations and reported as a separate component of stockholders'
equity. Realized gains and losses are determined on the specific
identification method.
Cash and Cash Equivalents
For the purpose of presentation in the Company's statement of cash flows,
cash equivalents are short-term, highly liquid investments that are both
(1) readily converted into known amounts of cash and (2) so near to
maturity that they present insignificant risk of changes in value due to
changing interest rates.
Premiums and Determination of Underwriting Results and Reserves
Premium income on short-duration reinsurance contracts is accounted for
using the periodic method. Premiums that commence within the current
underwriting year are taken into revenues as earned. Retrocession and
acquisition costs together with claims incurred are matched against
premiums. Calculations are made to determine the unearned premiums and
deferred acquisition costs as necessary.
The Company reviews short duration contracts to establish whether premium
deficiencies exists. No account is taken of anticipated investment income
in this review.
Long-duration foreign reinsurance contracts are accounted for using the
open-year method. Premiums, retrocession and acquisition costs together
with claims incurred are allocated to underwriting year accounts according
to the inception of the contracts. The aggregation of the underwriting year
accounts form part of the loss reserves on the balance sheet. The loss
reserves, relating to the open year method, will be disaggregated and
reported on the statement of operations as premiums, claims and expenses
only when earned premiums become reasonably determinable. If at any time an
underwriting year or class of business within an underwriting year shows a
deficiency, this loss will be recognized immediately.
Reinsurance Ceded
In the normal course of business, the Company seeks to reduce the loss that
may arise from events that cause unfavorable underwriting results by
reinsuring (ceding) certain levels of risk in various areas of exposure
with other reinsurance enterprises.
Deferred Acquisition Costs
Commissions and other costs of acquiring insurance that vary with and are
primarily related to the production of new and renewal business are
deferred and amortized over the terms of the policies or reinsurance
treaties to which they relate.
Insurance Liabilities
The liability for losses and loss adjustment expenses includes amounts
determined from loss reports and individual cases and amounts, based on
past experience, for losses incurred but not reported. Such liabilities are
necessarily based on estimates and, while management believes that the
amount is adequate, the ultimate liability may be in excess of or less than
the amounts provided. The methods for making such estimates and for
establishing the resulting liability are continually reviewed, and any
adjustments are reflected in earnings currently.
Income Taxes
Income tax provisions are based on the asset and liability method. Deferred
income taxes have been provided for temporary differences between the tax
basis of assets and liabilities and their reported amounts in the
consolidated financial statements. Such differences relate principally to
the unrealized appreciation (depreciation) on investments available for
sale and differences in the recognition of premiums, losses and acquisition
costs.
3. REINSURANCE RESULTS
<TABLE>
<CAPTION>
Short-Term Long-Term Total
---------- --------- -----
(Periodic (Open Year
Method) Method)
1996
-------------------------------------------------------------
<S> <C> <C> <C>
Written premiums assumed $ 12,867,463 $ 25,678,342 $ 38,545,805
=============== ===============
Unearned premiums (2,209,994)
---------------
Earned premiums assumed 10,657,469
Ceded premiums (1,324,930) $ (12,393,010) $ (13,717,940)
--------------- =============== ===============
Net premiums $ 9,332,539
===============
Net acquisition costs $ (927,301) $ (3,145,597) $ (4,072,898)
=============== =============== ===============
Losses incurred $ (1,758,622) $ (10,139,735) $ (11,898,357)
=============== ================ ================
1995
-------------------------------------------------------------
Written premiums assumed $ 5,645,950 $ 26,113,761 $ 31,759,711
=============== ===============
Unearned premiums -
---------------
Earned premiums assumed 5,645,950
---------------
Ceded premiums - $ (12,603,154) $ (12,603,154)
--------------- =============== ===============
Net premiums $ 5,645,950
===============
Net acquisition costs $ (691,629) $ (3,771,806) $ (4,463,435)
=============== =============== ===============
Losses incurred $ - $ (9,738,801) $ (9,738,801)
=============== ================ ===============
</TABLE>
The open year method used for long-term contracts comprises foreign
reinsurance transactions.
4. INVESTMENTS
Major categories of net investment income are as follows:
1996 1995
------------- -------------
Cash equivalents $ 1,313,825 $ 1,209,300
Marketable equity securities 419,364 63,247
------------- -------------
$ 1,733,189 $ 1,272,547
============= =============
The aggregate fair value, gross unrealized holding gains, gross unrealized
holding losses and cost for investments are as follows:
1996 1995
-------------- -------------
Marketable equity securities:
Cost $ 38,941,200 $ 15,883,230
Gross unrealized holding gains 615,012 737,735
Gross unrealized holding losses (3,137,027) (830,607)
-------------- -------------
Fair value 36,419,185 15,790,358
-------------- -------------
Certificates of gold deposit:
Cost 3,461,028 -
Gross unrealized holding losses (136,428) -
-------------- -------------
Fair value 3,324,600 -
-------------- -------------
Total investments $ 39,743,785 $ 15,790,358
============== =============
Disclosure of investments included in marketable equity securities at fair
value that exceed 10% of total stockholders' equity are as follows:
1996 1995
------------- -------------
Anglo American Coal $ 6,032,223 $ 1,822,310
Anglo American Gold $ 3,763,532 $ 1,609,806
5. LOSS RESERVES
Loss reserves consisted of the following:
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
<S> <C> <C>
Balance at January 1 $ 18,227,498 $ 8,488,697
-------------- -------------
Add - provision for losses incurred:
Current claim years 11,898,357 9,738,801
Prior claim years - -
-------------- -------------
11,898,357 9,738,801
-------------- -------------
Less - paid losses:
Current claim years (92,060) -
Prior claim years - -
-------------- -------------
(92,060) -
-------------- -------------
Balance at December 31 $ 30,033,795 $ 18,227,498
============== =============
Included in loss reserves in respect of transactions under the open year
method are the following:
1996 1995
-------------- -------------
Written premiums assumed $ 70,836,550 $ 45,158,208
Ceded premiums (35,531,807) (23,138,797)
Acquisition costs (6,937,510) (3,791,913)
-------------- -------------
$ 28,367,233 $ 18,227,498
============== =============
</TABLE>
6. INCOME TAXES
At December 31, 1996, the income tax provision comprises the following:
Current:
Foreign $ 200,000
Federal, net of $200,000 foreign
tax credit -
------------
200,000
------------
Deferred:
Federal 2,108,000
State 192,000
------------
2,300,000
------------
$ 2,500,000
============
The Company is subject to corporate income taxes in Belgium. Effective May
10, 1996, the Company became subject to United States federal income taxes.
For 1995, there are no tax liabilities or deferred taxes because of
expenses for tax purposes in Belgium that are considered equity
transactions for financial reporting purposes in the United States.
The federal income tax expense for 1996 differs from the statutory rate of
35% as follows:
Federal income tax statutory rates $ 2,490,000
Increase (decrease) attributable to:
Operations for the period from
January 1, 1996 to May 10, 1996 (182,000)
State income taxes, net of federal benefit 192,000
------------
Total income tax expense $ 2,500,000
============
Amounts for deferred tax assets and liabilities are as follows:
Deferred tax assets:
Unearned premiums $ 5,800,000
Unrealized loss on investments 1,090,000
------------
6,890,000
Less valuation allowance -
------------
Net deferred tax assets 6,890,000
------------
Deferred tax liabilities:
Loss reserves (8,100,000)
------------
Deferred income taxes $ (1,210,000)
============
For financial reporting purposes, earnings from continuing operations
before income taxes comprises the following:
1996 1995
------------- ------------
Pretax income:
United States $ 132,523 $ -
Foreign 6,984,513 3,030,260
------------- ------------
$ 7,117,036 $ 3,030,260
============= ============
7. STATUTORY NET INCOME (LOSS) AND STOCKHOLDERS' EQUITY
Generally accepted accounting principles differ in certain respects from
the accounting practices permitted by Belgian regulatory authorities
(statutory basis). The Company had a statutory net loss of approximately
$172,594 for the year ended December 31, 1996 and $-0- for the year ended
December 31, 1995, and statutory stockholders' equity was approximately
$33,922,302 and $34,198,954 at December 31, 1996 and 1995, respectively.
8. RELATED PARTY TRANSACTIONS
Transactions or balances with related parties included in the consolidated
financial statements are as follows:
Equihot Equihot
Delfstoffen Verzekering
N.V. N.V.
----------- -----------
Statement of Operations
1996:
Reinsurance premiums
assumed $ - $ 7,844,706
Unearned premiums $ - $ 436,277
Acquisition costs $ - $ 760,133
Retrocession premiums $ - $ 734,166
1995:
Reinsurance premiums
assumed $ - $ 5,645,950
Acquisition costs $ - $ 691,629
Balance Sheet
Due from related party
Unsecured, non-interest
bearing:
Due December 31, 1996 $ 1,562,115 $ 11,409,922
Due December 31, 1995 $ 1,550,843 $ 9,201,130
Due to related parties
Unsecured, non-interest
bearing:
Due December 31, 1996 $ 1,022,699 $ 4,146,393
Due December 31, 1995 $ 1,885,123 $ 4,353,154
Equihot Delfstoffen NV provides office accommodations and limited
administrative support to Equihot Herverzekering NV in Antwerp, Belgium.
This is provided at no charge, however, is not considered to be of material
value.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents are carried at their face amount.
Investments are carried at fair value as determined based on quoted market
prices.
10. CONTINGENCIES
Loss reserves are provisions for the future losses based on individual
underwriting years. To the extent that an open underwriting year becomes
fully developed and earned premiums can be ascertained, credit can be taken
to the income statement comprising the loss provision no longer required.
Belgian fiscal authorities have examined the records for the year ended
December 31, 1994, the first year of activity as a reinsurer. By their
letter on May 13, 1996, they contested the basis on which the Company has
compiled its underwriting reserves. Directors believe that the authorities
have misunderstood the nature and the time frame of the risks provided
against. A formal rejection of authorities' assertions was drawn up and
submitted. The authorities have not initiated any further correspondence.
In the unlikely event of the total underwriting reserve for 1994 of
$8,488,697 being deemed to be profit by the tax authorities, a tax charge
of some $4,200,000 would arise. However, if the authorities accept the
Directors' assertions, taxation will in any event become due in 1998 if the
underwriting reserve of 1994 suffers no losses. Based on current tax rates,
the amount payable at that time would be $3,600,000. Similar considerations
apply to the 1995 and 1996 underwriting years.
11. SUBSEQUENT EVENTS
On February 14, 1997, the Company purchased, from an investment company in
Monaco, a 65% interest in J.H. Minet Monaco S.A.M. for approximately
$380,000. J.H. Minet Monaco S.A.M is incorporated in Monaco and has been
inactive for the past several years. Also, on February 14, 1997, J.H. Minet
Monaco S.A.M passed a resolution to change its name to Aviation Maritime
Transportation (Insurance Brokers) S.A.M.
12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is an unaudited summary of the Company's quarterly
performance:
<TABLE>
<CAPTION>
1996
----------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $ 1,585,232 $ 3,664,101 $ 2,877,186 $ 5,138,755
Net income 432,428 1,795,100 1,136,517 1,252,991
Net income
per share 0.04 0.16 0.10 0.12
1995
----------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Revenues $ 1,011,508 $ 1,301,192 $ 2,764,128 $ 1,841,669
Net income 147,626 524,085 1,854,698 503,851
Net income
per share 0.01 0.05 0.18 0.05
</TABLE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
CHANGE IN ACCOUNTANTS
(i) On May 10, 1996, in connection with the reorganization of the Company,
the Company discontinued using McGladrey & Pullen, LLP as its
independent accountants.
(ii) The reports of McGladrey & Pullen, LLP, regarding the Company's
consolidated financial statements through December 31, 1995, contained
no adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles.
(iii) The Company's board of directors approved the decision to change
independent accountants.
(iv) In connection with the Company's audits through December 31, 1995,
there have been no disagreements with McGladrey & Pullen, LLP on any
matter of accounting principles or practice, financial statement
disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of McGladrey & Pullen, LLP would have
caused them to make reference thereto in their reports on the financial
statements for such years.
NEW INDEPENDENT ACCOUNTANTS
(i) On May 10, 1996, the Company engaged Stirtz Bernards Boyden Surdel &
Larter, P.A. (U.S.), a member firm of Moores Rowland International.
(ii) Prior to their engagement, the Company had not engaged or consulted
with Stirtz Bernards Boyden Surdel & Larter, P.A. regarding the matters
described in Regulation S-B, Item 304(a)(2).
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Reference is made to the pertinent information contained in the
Company's definitive proxy statement for its 1997 Annual Meeting of Shareholders
to be filed with the Securities and Exchange Commission, which information is
incorporated herein.
ITEM 10. EXECUTIVE COMPENSATION.
Reference is made to the pertinent information contained in the
Company's definitive proxy statement for its 1997 Annual Meeting of Shareholders
to be filed with the Securities and Exchange Commission, which information is
incorporated herein.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to the pertinent information contained in the
Company's definitive proxy statement for its 1997 Annual Meeting of Shareholders
to be filed with the Securities and Exchange Commission, which information is
incorporated herein.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the pertinent information contained in the
Company's definitive proxy statement for its 1997 Annual Meeting of Shareholders
to be filed with the Securities and Exchange Commission, which information is
incorporated herein.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) For Financial Statements filed as a part of this Report, reference is
made to "Index to Financial Statements" on page F-1 of this Report. For
a list of Exhibits filed as a part of this Report, see the Exhibit
Index page.
(b) The Company did not file a report on Form 8-K during the quarter ended
December 31, 1996.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EQUISURE, INC.
Date: April 14, 1997 By /s/ Barrie Harding
---------------------------------
Barrie Harding, President and Chief
Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
/s/ Barrie Harding April 14, 1997
- --------------------------------------------
Barrie Harding,
(President, Chief Executive Officer and a Director)
/s/ David J. Sachman April 14, 1997
- --------------------------------------------
David J. Sachman
(Chief Financial & Principal Accounting Officer
and a Director)
/s/ Peter G. Uttley April 14, 1997
- --------------------------------------------
Peter G. Uttley
(Director)
/s/ Gerda Elsen April 14, 1997
- --------------------------------------------
Gerda Elsen
(Director)
/s/ Albert Delpy April 14, 1997
- --------------------------------------------
Albert Delpy
(Director)
/s/ Peter Balchin April 14, 1997
- --------------------------------------------
Peter Balchin
(Director)
EQUISURE, INC.
INDEX TO EXHIBITS
FORM 10-KSB (For Fiscal Year Ended December 31, 1996)
(a) Listing of Exhibits:
2.1 Agreement and Plan of Exchange between ED, N.V. and Aloe Vera
Naturel, Inc. dated May 10, 1996(1)
3.1 Articles of Incorporation, as amended, of the Company(2)
3.2 Bylaws of the Company(2)
23.1 Consent of Stirtz Bernards Boyden Surdel & Larter, P.A.*
27 Financial Data Schedule*
- -------------------------
* Filed herewith.
(1) Filed with the Form 8-K Report, dated May 22, 1996, Commission File No.
0-23178.
(2) Incorporated by reference to previous filings under the Securities
Exchange Act of 1934.
The Board of Directors
Equisure, Inc. and Subsidiary
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in Equisure, Inc.'s Form 10-KSB Annual Report for
the fiscal year ended December 31, 1996, of our report dated April 4, 1997,
relating to the consolidated balance sheets of Equisure, Inc. and Subsidiary as
of December 31, 1996 and 1995, and the related statements of operations,
stockholders' equity and cash flows for the years then ended.
/s/ Stirtz Bernards Boyden Surdel & Larter, P.A.
Stirtz Bernards Boyden Surdel & Larter, P.A.
Edina, Minnesota
April 14, 1997
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 36,419,185
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 39,743,785
<CASH> 20,489,623
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 292,870
<TOTAL-ASSETS> 76,691,770
<POLICY-LOSSES> 30,033,795
<UNEARNED-PREMIUMS> 2,209,994
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 11,152
<OTHER-SE> 37,019,794
<TOTAL-LIABILITY-AND-EQUITY> 76,691,770
9,332,539
<INVESTMENT-INCOME> 1,733,189
<INVESTMENT-GAINS> 2,199,546
<OTHER-INCOME> 0
<BENEFITS> 1,758,622
<UNDERWRITING-AMORTIZATION> 927,301
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 7,117,036
<INCOME-TAX> 2,500,000
<INCOME-CONTINUING> 4,617,036
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,617,036
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0
<RESERVE-OPEN> 18,227,498
<PROVISION-CURRENT> 11,898,357
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 92,060
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 30,033,795
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
