ASSOCIATED BUSINESS & COMMERCE INSURANCE CORP, S-1/A, 1996-06-10

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORP
S-1/A, 1996-06-10
FIRE, MARINE & CASUALTY INSURANCE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 1996:
REGISTRATION STATEMENT NO. 333-4566
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------
ASSOCIATED BUSINESS & COMMERCE
INSURANCE CORPORATION
(EXACT NAME AS SPECIFIED IN ITS CHARTER)

<TABLE>
<CAPTION>
<S> <C> <C>
FLORIDA 6331 65-0496132
(STATE OF INCORPORATION) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification Number)

</TABLE>

4700 N.W. BOCA RATON BOULEVARD LAWRENCE J. MARCHBANKS, ESQ.
SUITE 400 4700 N.W. BOCA RATON BOULEVARD
BOCA RATON, FLORIDA 33431 SUITE 400
(561) 997-0708 BOCA RATON, FLORIDA 33431
(ADDRESS, INCLUDING ZIP CODE AND (561) 997-0708
TELEPHONE NUMBER, (ADDRESS, INCLUDING ZIP CODE, AND
INCLUDING AREA CODE, OF REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE,
PRINCIPAL EXECUTIVE OFFICES) OF AGENT FOR SERVICE)
---------
COPY TO:
JOHN S. FLETCHER, ESQ.
MORGAN, LEWIS & BOCKIUS LLP
5300 FIRST UNION FINANCIAL CENTER
200 SOUTH BISCAYNE BOULEVARD
MIAMI, FLORIDA 33131-2339
(305) 579-0432
---------
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box: [x]

---------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVENESS DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION

CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION HEADING OF LOCATION IN PROSPECTUS
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<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus ..................... Front Cover Page

2. Inside Front and Outside Back Cover
Pages of Prospectus ................................. Inside Front and Back Cover Pages

3. Summary Information, Investment Considerations
and Ratio of Earnings to Fixed Changes............... Prospectus Summary; Risk Factors

4. Use of Proceeds........................................ Prospectus Summary; Use of Proceeds

5. Determination of Offering Price ....................... Plan of Distribution

6. Dilution .............................................. Not Applicable

7. Selling Security Holders............................... Not Applicable

8. Plan of Distribution .................................. Front Cover Page; Prospectus Summary; Plan
of Distribution

9. Description of Securities to be Registered ............ Description of Capital Stock; Shares
Eligible for Future Sale

10. Interests of Named Experts and Counsel................. Not Applicable

11. Information with Respect to the Registrant ............ Outside Front Cover Page of Prospectus;
Prospectus Summary; The Company; Risk
Factors; Use of Proceeds; Dividend
Policy; Capitalization; Selected
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions;
Principal Shareholders; Description of
Capital Stock; Shares Eligible for Future
Sale; Plan of Distribution; Financial
Statements

12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities ...... Not Applicable
</TABLE>

<PAGE>

PROSPECTUS
1,000,000 SHARES
ASSOCIATED BUSINESS & COMMERCE
INSURANCE CORPORATION

[LOGO]

6% CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A
---------
Associated Business & Commerce Insurance Corporation, a Florida
corporation (the "Company"), is hereby offering up to 1,000,000 shares of its
6% Cumulative Convertible Preferred Stock, Series A, par value $1.00 per
share (the "Series A Preferred"), at a price of $10.00 per share. The Company
is an underwriter of workers' compensation insurance policies, with
approximately 1,200 policy holders and $27.5 million in annual written
premiums as of May 1, 1996.

The Company is a wholly owned subsidiary of Associated Business & Commerce
Holdings, Inc. ("Holdings"). The Company received its Certificate of
Authority from the State of Florida in December 1995. The Company commenced
business as an insurance company upon the acquisition on December 7, 1995 of
substantially all of the assets and liabilities of Associated Business and
Commerce Workers' Compensation Self-Insurance Fund (the "Fund"), a
self-insurance fund.

Investors may purchase shares either for cash or, if an insured of the
Company, by assignment to the Company of deposits held by the Company as
security for the insured's obligations to the Company. This offering is being
made on a continuous basis.
---------
AN INVESTMENT IN THE PREFERRED STOCK OFFERED HEREBY
IS AN ILLIQUID INVESTMENT. SEE "RISK FACTORS--LACK OF PUBLIC TRADING MARKET"
AND "DESCRIPTION OF CAPITAL STOCK--SERIES A PREFERRED."
---------
THE SERIES A PREFERRED OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" ON PAGE 8.
---------

THE SECURITIES OFFERED BY THIS PROSPECTUS SHOULD ONLY BE PURCHASED BY
INVESTORS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
---------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
<S> <C> <C>
PRICE TO PROCEEDS TO
PUBLIC COMPANY
Per Share ............ $10.00 $10.00(1)
Total Maximum......... $10,000,000 $9,925,000(2)
<FN>
(1) No underwriting discounts or commissions are payable in connection with
this offering.

(2) After deducting expenses of the offering estimated at $75,000.
</FN>
</TABLE>

THE DATE OF THIS PROSPECTUS IS , 1996.

<PAGE>
This offer is being made only to current and prospective customers of
Company insurance products as well as Company agents and vendors and their
employees. Company customers or agents are not required to purchase shares of
Series A Preferred as a condition of doing business with the Company.

The only persons authorized to make this offer on behalf of the Company
are Errol Bader, Ronald Rupp, Timothy Spear, John Kennedy and Marsha Duffy.
Each of these persons is a full time officer or employee of the Company and
does not represent a broker or dealer firm. No other person or firm is
authorized to represent the Company in any capacity in connection with the
offering, to provide any information, to answer any inquiries or otherwise
participate in the offering for the Company. See "Plan of Distribution."

Subscriptions received for shares of Series A Preferred offered hereby are
irrevocable. There are no minimum purchase requirements for the Series A
Preferred. In the event the offering is oversubscribed, the Company reserves
the right to pro rate subscriptions.

Each share of Series A Preferred, unless previously redeemed, will be
convertible at any time after December 31, 2000, at the option of the holder,
into shares of the Company's Common Stock, $1.00 par value per share (the
"Common Stock"), at a conversion rate of one share of Common Stock for each
$5.00 of stated value of the Series A Preferred. The stated value of the
Series A Preferred is $10.00 per share. At the discretion of the Board of
Directors, dividends on the Series A Preferred are payable semi-annually on
April 1 and October 1 of each year. Dividends not paid on a date payable will
accumulate and be added to the redemption price or paid at a future date. The
Company is permitted to pay dividends, at the discretion of the Board of
Directors, only out of surplus derived from net income and is otherwise
restricted from paying dividends in excess of a statutory formula without
prior approval of the Department of Insurance. In general, the formula
permits the payment of dividends in amounts not exceeding the larger of net
income (excluding capital gains) or 10% of accumulated surplus, provided
that, after payment of the dividend, surplus will equal at least 115% of the
minimum required statutory surplus. No dividends may be paid on the Common
Stock, all of which is currently held by Holdings, until all of the
accumulated and unpaid dividends on the Series A Preferred have been paid in
full. THE COMPANY'S ABILITY TO PAY DIVIDENDS WILL BE SUBJECT TO THE TERMS OF
THE CONSENT ORDER BY THE FLORIDA DEPARTMENT OF INSURANCE AND THE TERM LOAN
AGREEMENT BETWEEN HOLDINGS AND UNDERWRITERS REINSURANCE COMPANY. ALTHOUGH THE
DEPARTMENT OF INSURANCE AND UNDERWRITERS PERMITTED THE COMPANY TO PAY THE
APRIL 1996 DIVIDEND, THERE IS NO ASSURANCE THAT EITHER WILL PERMIT PAYMENT OF
FUTURE DIVIDENDS. DIVIDENDS THAT ARE NOT ABLE TO BE PAID PURSUANT TO SUCH
RESTRICTIONS WILL ACCUMULATE. SEE "PROSPECTUS SUMMARY--INVESTMENT BY HOLDINGS
AND UNDERWRITERS LOAN," "DIVIDEND POLICY" AND "BUSINESS--PERMIT AND CONSENT
ORDER."

The Series A Preferred may be redeemed by the Company at any time after
December 31, 1998, upon 30 days' notice, at a price per share equal to $10.00
plus accumulated and unpaid dividends. In the event of a liquidation of the
Company, holders of the Series A Preferred will be entitled to receive $10.00
per share, plus accrued and unpaid dividends. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Results of
Operations and Dividends to Shareholders" and "Description of Capital Stock."

PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE SERIES A
PREFERRED AND IT IS UNLIKELY THAT A PUBLIC MARKET FOR THE SERIES A PREFERRED
WILL DEVELOP. THE COMPANY WILL NOT BE MAKING ANY APPLICATION TO LIST OR QUOTE
THE SERIES A PREFERRED ON ANY STOCK EXCHANGE OR THE NASDAQ.

HOLDINGS MAINTAINS, AND SUBSEQUENT TO THE OFFERING WILL CONTINUE TO
MAINTAIN, 100% CONTROL OF THE COMPANY BY VIRTUE OF OWNERSHIP OF ALL OF THE
COMPANY'S OUTSTANDING COMMON STOCK. SEE "RISK FACTORS--CONTROL BY HOLDINGS."

THE SECURITIES OFFERED BY THIS PROSPECTUS MAY BE OFFERED AND SOLD ONLY TO
RESIDENTS OF THE STATE OF FLORIDA.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.

THE COMPANY

Associated Business & Commerce Insurance Corporation (the "Company")
commenced business as a stock insurance company in December 1995 upon receipt
from the Florida Department of Insurance (the "Department of Insurance") of a
Certificate of Authority. Concurrently with the commencement of business, the
Company assumed substantially all of the assets and liabilities of the
Associated Business and Commerce Workers' Compensation Self-Insurance Fund
(the "Fund"), a certified assessable workers' compensation group
self-insurance fund that began operations in late 1991. The Fund's officers
and employees have continued in similar positions with the Company, and the
Trustees and Administrator of the Fund act as directors and officers of the
Company. Further, the Company has continued the Fund's relationship with the
network of independent agents in Florida. See "Business." As of May 1, 1996,
the Company had approximately 1,200 policyholders and $27.5 million in annual
written premiums. The Company offers a full range of workers' compensation
coverage, including a managed care plan. See "Business--Products" and
"Business--Managed Care."

The Company's business is regulated by the Department of Insurance. The
Company is subject to assessments by the Florida guarantee association for
traditional insurance carriers. Policies issued by the Company to its
insureds, however, are non-assessable, in contrast to the assessable policies
issued by self-insurance funds. A stock insurance company cannot assess its
policyholders for losses of the company and is required to satisfy statutory
capital and surplus requirements. Therefore, stock insurance companies afford
their policyholders greater financial certainty and security.

It is the goal of the Company to provide superior service and minimize the
cost of workers' compensation insurance for its insureds. This focus on a
single line of business is expected to give the Company a unique opportunity
to position itself as a focused company in a service-intensive line of
insurance. The Company's primary marketing strategy is to preserve existing
business relationships and establish new relationships with agents, thus
creating a network of high-quality, high-volume producers for the Company. In
addition to the current agency network, the Company's marketing
representatives will continue to contact other independent agents. See
"Business--Strategy."

Upon acquisition of the Fund's assets and liabilities by the Company, the
Company assumed claims liabilities and assessable provisions of existing
insurance coverage of past members of the Fund who chose to be insured by the
Company. Financial information will be available to shareholders upon
request.

INVESTMENT BY HOLDINGS AND UNDERWRITERS LOAN

The Company is a wholly owned subsidiary of Associated Business & Commerce
Holdings, Inc. ("Holdings"). Holdings was organized solely for the purpose of
providing financing for the Company and performing certain management
services for the Company under a Management Agreement between the Company and
Holdings (the "Management Agreement"). Holdings does not carry on any other
business activities. The officers and employees of Holdings devote their full
business time to the business and affairs of the Company pursuant to the
terms of the Management Agreement. See "Business--Management Agreement."

Holdings has invested $3,200,000 in the Company through the purchase of
3,200,000 shares of the Company's Convertible Preferred Stock, Series B (the
"Series B Preferred"). Holdings entered into a term loan agreement (the "Loan
Agreement") with Underwriters Reinsurance Company ("Underwriters") pursuant
to which Underwriters loaned Holdings $3,200,000 for use by Holdings to
purchase Series B Preferred from the Company. The loan bears interest at
12.75% per annum. If not

3
<PAGE>
earlier prepaid, the loan is due on September 30, 2000. Holdings has pledged
as collateral for the loan, among other things, all of the Common Stock of
the Company held by Holdings and all of the Series B Preferred purchased by
Holdings with the loan proceeds.

The Series B Preferred does not carry any voting or dividend rights. It is
convertible into shares of Common Stock at a price of $1.00 per share. In the
event of a liquidation of the Company, holders of the Series B Preferred have
equal priority to the net assets of the Company up to the Series B
liquidation value of $1.00 per share. In the event the Series B Preferred is
converted to Common Stock, the ownership interest of the holders of the
Series A Preferred will be substantially diluted.

In addition, Holdings granted Underwriters options to purchase shares of
Holdings common stock in an amount, after issuance, up to a maximum of 49% of
the number of shares and options held by the founders, shareholders,
officers, directors and employees ("Insiders") of Holdings. The number of
shares subject to the option is based upon the date on which the final
payment to Underwriters pursuant to the loan is made. If the final payment is
made during the first year that the loan is outstanding, Underwriters may
purchase shares of Holdings common stock equal to 10% of the stock held by
Insiders; in the second year, shares equal to 20%; in the third year, shares
equal to 30%; in the fourth year, shares equal to 40%; and after the fourth
year, shares equal to the maximum of 49%. All of the shares subject to the
option described above may be purchased by Underwriters for the book value of
such shares. The options remain exercisable until five years after the loan
is repaid. If the loan is repaid on its due date of September 30, 2000, the
options would remain outstanding until September 30, 2005. If Underwriters
exercises all such options, it will be the largest shareholder of Holdings
and, as a result, will be able to control the business and affairs of the
Company.

Holdings has agreed not to permit the Company to pay any dividends or
repurchase any of its stock without the prior consent of Underwriters. The
Company does not expect Underwriters to permit the Company to pay dividends
until the loan to Holdings is repaid.

Until the loan to Holdings is repaid in full, Holdings and its
shareholders have agreed to cause one designee of Underwriters to be elected
to the board of directors of Holdings. The current designee to the board of
Holdings is Mr. Lawrence G. Frank, Vice President, Pegasus Advisors, Inc.
(Underwriters agent). Mr. Frank does not have any prior relationship with
Holdings or the Company and is not a director of the Company.

Holdings has also granted Underwriters options to purchase Holdings common
stock, exercisable in an amount based on the amount of the loan which becomes
past due. The amount of exercise price paid by Underwriters upon exercise of
the options will be credited against the past due amount. The other
shareholders of Holdings have the right to purchase any shares of Holdings
acquired by Underwriters pursuant to such options.

Holdings expects to repay Underwriters through fees received by it
pursuant to the Management Agreement, which may include distributions from
the sale of shares of Series A Preferred pursuant to this Offering. See
"Business--Management Agreement." In the event Holdings is unable to repay
the loan in accordance with its terms, it is expected that Underwriters would
foreclose its lien on the shares of Common Stock pledged to it by Holdings,
and thereby become the sole holder of the Company's Common Stock. As sole
common shareholder, Underwriters would be able to elect all of the directors
of the Company and thereby control the Company's business and affairs.
Underwriters may also foreclose its lien on the pledged shares of the
Company's Common Stock in the event that the Loan Agreement is breached. In
addition to customary loan agreement events of default, the Loan Agreement
will be in breach if (i) the Company fails to maintain statutory surplus of
at least $4,000,000, (ii) the Company fails to maintain risk based capital at
120% of amounts adopted by the Florida Department of Insurance, (iii) the
Company fails to maintain a ratio of net premiums written during each
calendar quarter, annualized, of not greater than 320% of statutory surplus,
or (iv) Errol Bader ceases to be the President of Holdings, other than as a
result of his death, Mr. Bader ceases to own or

4
<PAGE>

control at least 30% of the outstanding stock of Holdings or Holdings fails
to maintain a key man life insurance policy on Mr. Bader's life. Based on the
March 31, 1996 financial statements of the Company, the Company believes it
is in compliance with such financial covenants.

The Loan Agreement also provides that, to the extent permitted by law, the
proceeds of future sales of securities by the Company, excluding the shares
offered hereby, and Holdings be used to repay the loan. Before any proceeds
of sales of securities by the Company could be permitted to be paid to
Holdings to repay the loan, all accrued dividends on the Company's preferred
stock would have to be paid and the permission of the Department of Insurance
would have to be obtained.

In connection with the loan, Holdings has also agreed to cause
Underwriters to provide the Company with proportional quota share reinsurance
until the loan is repaid. If the rate of profit made by Underwriters on the
reinsurance agreement exceeds an agreed upon amount, the excess will reduce
the loan balance, on a dollar for dollar basis. If the loan is repaid prior
to its due date, Holdings has agreed to cause the Company to give
Underwriters a right of first refusal on the Company's quota share
reinsurance through September 30, 2000. The quota share reinsurance
obligations were a material inducement to Underwriters to agree to make the
loan to Holdings to finance Holdings' purchase of the Series B Preferred. The
Series B Preferred does not have voting rights, does not bear a dividend and
is convertible into shares of Company Common Stock. Holdings has also pledged
to Underwriters as additional collateral all of Holdings' rights in the
Management Agreement. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"
"Principal Shareholders--Investment by Holdings and Underwriters Loan" and
"Description of Capital Stock--Series B Preferred."

THE OFFERING

The Company is hereby offering for sale up to 1,000,000 shares of its 6%
Cumulative Convertible Preferred Stock, Series A (the "Series A Preferred"),
to current and prospective customers of Company insurance products as well as
Company agents and vendors and their employees. Customers or agents are not
required to purchase shares of Series A Preferred as a condition of doing
business with the Company. The offering is being made only to residents of
Florida.

In the future, the Company intends to offer and sell additional shares of
the Series A Preferred, or shares of different series of preferred stock, in
order to provide capital to meet statutory requirements for future growth of
the Company's business. Different series of preferred stock may have
different dividend, redemption and conversion rates and may rank equal with
the Series A Preferred offered hereby with respect to priority in the payment
of dividends and upon liquidation. See "Description of Capital Stock."

6% CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A

The Series A Preferred ranks senior to the Common Stock with respect to
dividend rights and rights upon liquidation, dissolution or winding up of the
Company. The Company has the right, without the consent of the holders of the
Series A Preferred, to issue further series of preferred stock as well as
additional shares of the Series A Preferred. As of March 31, 1996, there were
251,536 shares of Series A Preferred outstanding.

5
<PAGE>
At the discretion of the Board of Directors, dividends are payable
semi-annually on April 1 and October 1 at the rate of 6% per year ($.60 per
share). Dividends not paid will accrue and become payable upon the next
dividend payment with respect to the Series A Preferred, or upon liquidation,
dissolution or winding up of the Company. Upon liquidation of the Company,
holders of the Series A Preferred will be entitled to receive $10.00 per
share, plus accrued and unpaid dividends, prior to holders of the Common
Stock receiving any amount.

Each share of the Series A Preferred will be convertible, at the option of
the holder, at any time after December 31, 2000, at a conversion ratio of one
share of Common Stock for each $5.00 of stated value of Series A Preferred.
The stated value of the Series A Preferred is $10.00 per share. In addition,
the Company may, at its option at any time after December 31, 1998, redeem
the outstanding shares of Series A Preferred at a price per share equal to
$10.00 plus accumulated and unpaid dividends. In order to redeem the shares,
the Company is obligated to give holders of the Series A Preferred 30 days'
advance notice. During such 30 day period, holders may, at their option,
convert their shares of Series A Preferred into shares of Common Stock in
lieu of redemption. See "Dividend Policy" and "Description of Capital Stock."

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the Series
A Preferred offered hereby will be used first to fund statutory surplus
levels for the growth and expansion of the Company's business. After
necessary minimum statutory surplus levels are obtained, additional net
proceeds received, if any, may be used to redeem shares of the Series B
Preferred pledged as collateral for Holdings' loan from Underwriters.
Additional proceeds, if any, will be used for general working capital
purposes.

PLAN OF DISTRIBUTION

The Company expects to direct this offer to current and prospective
customers of Company insurance products, as well as to Company agents and
vendors and their employees, through direct contact by persons authorized to
make this offer on behalf of the Company. Company customers or agents are not
required to purchase shares of Series A Preferred as a condition of doing
business with the Company. The offering is only being made to residents of
Florida.

No person or firm, including the five authorized Company personnel, will
receive any additional compensation or commissions for their activities in
connection with sales of the Series A Preferred.

The offering price of the Series A Preferred was arbitrarily determined by
the Company. Prior to this offering, there has been no public market for the
Series A Preferred and it is unlikely that a public market for the Series A
Preferred will develop.

6
<PAGE>
SUMMARY FINANCIAL DATA

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<CAPTION>
MARCH 31, 1996
-------------------------------------------------
AS CURRENTLY APPLICATION OF PRO FORMA
REPORTED(1) NET PROCEEDS AS ADJUSTED(2)
--------------- --------------- ---------------
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BALANCE SHEET DATA:
Cash and invested assets ..................... $15,266,443 $ 9,925,000 $25,191,443
Premium receivable ........................... 3,881,855 -- 3,881,855
Reinsurance recoveries ....................... 15,642,408 -- 15,642,408
Other assets ................................. 4,057,798 75,000 4,132,798
--------------- --------------- ---------------
Total assets ............................... $38,848,504 $10,000,000 $48,848,504
=============== =============== ===============
Reserve for claims ........................... $27,825,314 -- $27,825,314
Other liabilities ............................ 5,149,385 -- 5,149,385
Stockholders' equity:
Common Stock ................................ 102,501 -- 102,501
Preferred Stock, Series A ................... 251,536 1,000,000 1,251,536
Preferred Stock, Series B ................... 3,200,000 -- 3,200,000
Additional paid-in capital .................. 2,263,824 9,000,000 11,263,824
Retained earnings ........................... 55,944 -- 55,944
--------------- --------------- ---------------
Total stockholders' equity .................. 5,873,805 10,000,000 15,873,805
--------------- --------------- ---------------
Total liabilities and stockholders' equity $38,848,504 $10,000,000 $48,848,504
=============== =============== ===============
<FN>
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(1) As reported by the Company in unaudited, GAAP-basis financial statements
included elsewhere in this prospectus.

(2) Adjusted to reflect receipt of the net proceeds from the sale of
1,000,000 shares of Series A Preferred hereby and the application of the
proceeds therefrom. See "Use of Proceeds" and "Capitalization."
</FN>
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS YEAR ENDED YEAR ENDED YEAR ENDED
ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31,
MARCH 31, 1996 MARCH 31, 1995 1995 1994 1993
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
REVENUES:
Standard premium earned,
net discounts ....................... $6,917,029 $6,602,724 $27,919,055 $24,703,624 $21,821,033
Less premium ceded for reinsurance ... 4,979,331 553,640 6,978,865 2,186,254 1,969,437
--------------- --------------- --------------- --------------- ---------------
Net premium earned .................. 1,937,698 6,049,084 20,940,190 22,517,370 19,852,496
Less claims incurred and reserved, net
of estimated reinsurance and related
recoveries .......................... 1,382,313 4,392,132 14,886,606 13,724,001 14,722,513
--------------- --------------- --------------- --------------- ---------------
Premiums available
for operations .................... 555,385 1,656,952 6,053,584 8,793,369 5,129,983
Investment and other income ........... 410,798 365,213 960,494 574,990 285,648
--------------- --------------- --------------- --------------- ---------------
966,183 2,022,165 7,014,078 9,368,359 5,415,631
--------------- --------------- --------------- --------------- ---------------
UNDERWRITING EXPENSES .................. 848,359 2,006,220 7,586,522 7,319,850 5,702,616
--------------- --------------- --------------- --------------- ---------------
Income (loss) before provision
for taxes ........................... 117,824 15,945 (572,444) 2,048,509 (286,985)
INCOME TAXES (BENEFITS) ................ 40,000 5,400 (322,207) 619,997 (40,605)
--------------- --------------- --------------- --------------- ---------------
Net income (loss) ..................... 77,824 10,545 (250,237) 1,428,512 (246,380)
TOTAL EQUITY (DEFICIT), BEGINNING
OF PERIOD .............................. 5,498,671 1,074,550 1,074,550 (353,962) (107,582)
Proceeds of sales of Preferred Stock
and other additions and adjustments . 297,310 -- 4,674,358 -- --
--------------- --------------- --------------- --------------- ---------------
TOTAL EQUITY (DEFICIT), END OF PERIOD . $5,873,805 $1,085,095 $ 5,498,671 $ 1,074,550 $ (353,962)
=============== =============== =============== =============== ===============
<FN>
- ----------------
(1) The audited financial data for the years ended December 31, 1994 and 1993
was derived from the GAAP-basis financial statements of the Fund included
elsewhere in this Prospectus. The audited financial data for the year ended
December 31, 1995 combines the results of operations of the Fund for the
eleven months ended November 30, 1995 with the operations of the Company for
the one month ended December 31, 1995 and was derived from GAAP-based
financial statements included elsewhere in this Prospectus. Transactions
between the entities have been eliminated for this presentation. The
financial data for the three months ended March 31, 1996 was derived from
the unaudited financial statements of the Company included elsewhere in this
Prospectus. The financial data for the three months ended March 31, 1995 was
derived from the unaudited financial statements of the Fund included
elsewhere in this Prospectus.
</FN>
</TABLE>

7
<PAGE>
RISK FACTORS

AN INVESTMENT IN SHARES OF SERIES A PREFERRED INVOLVES A HIGH DEGREE OF
RISK. IN EVALUATING THE COMPANY AND ITS BUSINESS, PROSPECTIVE INVESTORS
SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO THE OTHER
INFORMATION INCLUDED HEREIN.

UNDERWRITING AND LOSS CONTROL. The financial condition and results of
operations for the Company will be dependent in large part on its ability to
effectively underwrite applications submitted. Failure to assess the risks
associated with the applicants could impact the Company's loss experience,
increase the need for claims management and adversely affect the Company's
financial performance. The Company has and will continue to use certain
underwriting procedures thought to be effective in assessing the risks
associated with applicants for insurance coverage. The Company generally has
not and will not provide workers' compensation insurance coverage to
companies or industries that have higher than average claim incidence, such
as explosives, nuclear or hazardous waste, asbestos removal and crop dusting,
among others. In addition to such limitations on companies and industries,
favorable underwriting procedures include examinations of claims history and
credit worthiness, requirements of minimum premium levels and number of
employees and regular inspections by loss control engineers. Although the
Company will not target particular insureds directly, each of these criteria
will be applied to prospective insureds submitted to the Company by its
independent agents. In addition to these underwriting procedures, the Company
can manage its risks through loss control efforts. Loss control efforts
include working directly with the insureds at their workplace to design
safety programs and make recommendations that will decrease the frequency of
injury. Implementation by the Company of these underwriting and loss control
procedures is believed to have resulted in loss ratios below industry
averages. Failure of the Company to effectively implement underwriting and
loss control procedures may cause increased incidence of claims among the
Company's insureds. See "Business--Underwriting" and "Business--Claims
Management."

INABILITY TO SETTLE CLAIMS. The Company is directly liable to its
policyholders for payment of all legitimate claims submitted to the Company.
Therefore, the Company must maintain adequate reserves for the payment of
claims and must rely on its reinsurance treaties and contracts to support
such payments. Should the Company become unable to settle claims, the Company
could be subject to regulatory intervention, rehabilitation or liquidation
proceedings.

The Company's financial success will depend upon its level of success in
managing claims and setting reserves. The Company employs a methodology for
case reserving by posting settlement value reserves at actual costs expected
to the conclusion of claims on an aggregate basis. An evaluation of the
claims history of the Company and accuracy of its claims reserving practices,
however, may not enable adequate assessment due to the fact that the Company
has been in operation for a relatively short period of time. The degree of
adequate and competent claims handling and reserve accuracy achieved by the
Company will have a significant impact on the Company's results of
operations.

LACK OF OPERATING HISTORY. Although the Fund operated from October 1991 to
December 1995, the Company recently commenced operations and there can be no
assurance that the Company will achieve the level of success anticipated. The
Company, however, has continued many of the prior operating procedures of the
Fund, including the retention of management and loss control, underwriting
and claims adjusting personnel. Unanticipated changes in personnel or failure
of personnel to adapt to the changes associated with becoming a stock
insurance company may have an adverse effect on the Company's performance or
results of operations.

DEPENDENCE ON INDEPENDENT INSURANCE AGENTS AND THIRD PARTY CONTRACTORS.
The Company markets its workers' compensation insurance products and services
through independent insurance agencies. As of May 1, 1996, there were
approximately 167 such agencies under separate non-exclusive contracts with
the Company. The Company's business depends in part on the marketing effort
of these agencies and on the Company's ability to continue to offer workers'
compensation insurance products and services that meet the requirements of
these agencies and their customers. Failure of these

8
<PAGE>
independent insurance agencies to market the Company's products and services
successfully could have a material adverse effect on the Company's business,
financial condition or results of operations. The Company's reliance on
independent agents may lead to higher costs for the Company, as compared to
employing agents writing directly for the Company.

Further, the Company depends on third-party contractors for claims
administration functions. Delegation of such functions to third parties may
expose the Company to adverse business conditions or adverse experience
beyond the control of the Company. Although the Company has not experienced
adverse results from such outside reliance, there can be no assurance that
the Company's experience will not vary from the past experience of the Fund.

COMPETITION. The property and casualty insurance industry and, more
specifically, the workers' compensation insurance industry, is highly
competitive. Principal competitive factors include the types and amounts of
coverage, price, service, commission structure and financial strength. The
Company competes with large, well-established insurance companies doing
business in Florida, as well as other specialty insurers in the Company's
field and self-insurance funds who may convert to stock insurance carriers in
the future. Certain of these competitors have greater financial resources,
larger agency networks and greater name recognition than the Company.
Although the Company believes that it is able to effectively compete in the
marketplace, there can be no assurance that competitive pressures coupled
with market conditions will not affect the Company's rate of premium growth
and financial results. See "Business--Competition."

DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a
significant extent upon the performance of its key executive officers, the
loss of one or more of whom could have a material adverse effect on the
Company. As of May 1, 1996, the Company has employment agreements with its
key personnel and maintains life insurance on one of such persons. The
Company believes that its future success will also depend in large part upon
its ability to attract and retain qualified managerial, marketing and
technical personnel. There can be no assurance that the Company will be
successful in attracting and retaining such personnel. See
"Business--Employees."

MANAGED CARE AND PREMIUM DISCOUNTS. The Company offers a managed care
program to its insureds which is coupled with a premium discount approved by
the Florida Department of Insurance. The Company believes that its managed
care programs offer a competitive advantage over other insurers who do not
offer such a program. However, managed care programs must be approved by the
Florida Department of Insurance and are subject to regulation by such
department. Failure to obtain annual approval for the Company's program or
discontinuation of the program at some time in the future could have an
adverse effect on the Company's business and could place it in a disadvantage
with respect to other insurers able to offer such coverage. See
"Business--Managed Care."

CONTROL BY HOLDINGS. Holdings owns 100% of the outstanding shares of
Common Stock. Holdings is owned by management of the Company. As a result,
management, through Holdings, is in a position to elect all of the Company's
directors and to control the outcome of all actions requiring shareholder
approval. Such control position will be substantially diminished in the event
that all shares of the Series A Preferred are converted to shares of Common
Stock, however, a conversion of the Series B Preferred would dilute the
control by former holders of Series A Preferred. In the event that Holdings
is unable to repay its loan from Underwriters, Underwriters will gain control
of the Company. See "Prospectus Summary--Investment by Holdings and
Underwriters Loan," "Principal Shareholders" and "Description of Capital
Stock."

LACK OF PUBLIC TRADING MARKET. Prior to this offering, there has been no
public market for the Series A Preferred, and it is unlikely that a public
market will develop after this offering. The Company does not intend to list
the shares of Series A Preferred on any stock exchange or quotation system.
There is also no public market for the Common Stock and it is unlikely that a
public market will develop. Consequently, the conversion price of the Series
A Preferred is not indicative of the market price of the Common Stock.

9
<PAGE>
DURATION OF CLAIMS AND SETTING OF RESERVES. Claims for workers'
compensation benefits have a long duration and the practice of setting
reserves for such losses can be difficult. The medical portion of workers'
compensation claims is not capped under existing regulations in the State of
Florida and can, in fact, run for the lifetime of a claimant if the ongoing
medical claims are related to the original claim, although such claims are
generally limited to catastrophic claims. The significant portion of claims
with medical benefits can be administered to keep costs at a predictable
medical level. Florida law does, however, provide that both the indemnity and
medical portion of claims may be settled, therefore providing a method to
administer and curtail the costs of a particular claim. There can be no
assurance, however, that the existing law in Florida will not be changed with
respect to the Company's ability to settle any lengthy medical claims or that
the Company will be able to effectively manage claims of long duration. The
Company will utilize reinsurance as a method of limiting the Company's
exposure. See "Business--Reinsurance."

The Company expects to continue the practice of reserving for the retained
portion of claims liabilities, for both short and long duration cases at
settlement value. Bulk reserves are posted to the financial statements, to
recognize reserves which have been determined by an actuary for adverse loss
development on known claims and incurred but not reported claims. Should the
methodology used for setting reserves prove incorrect, it could adversely
impact the financial position of the Company.

GOVERNMENT REGULATION OF INSURERS. As a provider of workers' compensation
insurance and as an operator within the property and casualty insurance
industry, the Company is subject to the rules and regulations of the
Department of Insurance of the State of Florida. Further, should the Company
do business in the future in any other state, it will also be subject to the
rules and regulations of that state. Significant aspects of the Company's
business, including, but not limited to, licensing, reserves, setting of
rates, capitalization, solvency and changes in control are all subject to
state law. Such laws are generally designed and administrated to protect the
interest of policyholders, and there can be no assurance that such laws and
regulations would not adversely affect the ability of the Company to earn a
profit on its underwriting operations or to provide additional income to its
shareholders. In addition, many states have proposed revisions to their laws
governing property and casualty insurers. There can be no assurance that
subsequent changes to the laws in the State of Florida, if any, would not
adversely affect the financial condition or results of operations of the
Company. See "Business--Government Regulation."

INSURANCE INDUSTRY. The workers' compensation insurance industry is part
of and is affected by conditions in the property and casualty insurance
industry. Financial performance in this industry has historically fluctuated
in cyclical patterns. Although the Company's financial performance is
dependent in large part on its own business characteristics, the
profitability of most property and casualty insurance companies tends to
follow the cyclical market pattern. In addition, the property and casualty
insurance industry is affected by factors which are beyond the control of the
Company and could cause fluctuations in the Company's financial condition or
results of operations. Such factors include rise in medical costs, state
regulation, interest rates, general business conditions, changing legal
interpretations defining the extent of coverage and amounts of compensation
due, and new classes of losses. Adverse changes in economic conditions can
lead to reduced premium levels due to shrinking payrolls, as well as
increased claims as laid-off workers tend to assert a greater number of
workers' compensation claims. Accordingly, the Company may experience
significant year-to-year fluctuations in underwriting results and financial
performance.

Florida law does not permit companies to compete on the basis of price in
workers' compensation insurance, although it does permit companies to give or
withhold certain prescribed credits. If Florida were to adopt an open rating
system in which premium rates would be established with little or no
regulatory intervention, the Company's financial condition and business could
be adversely and materially affected.

DEPENDENCE ON REINSURANCE. The Company's practice is to limit its net
retention of risks on specific policies through the purchase of reinsurance
contracts. The amount of reinsurance available and

10
<PAGE>
the cost of such reinsurance policies may fluctuate according to market
conditions. Any significant reduction in the availability of reinsurance
could adversely affect the Company's ability to insure risks at the levels
desired by the Company. In addition, there can be no assurance that
reinsurance contracts currently in place will be available to the Company in
the future to the same extent and on the same terms as they are currently
available. The Company will select its reinsurance carriers on the basis of
their ratings, qualifications and ability to settle claims. The Company
believes that such selection process helps insure that the reinsurance
contracts are maintained with financially stable companies. The existence of
a reinsurance contract does not, however, absolve the Company from primary
liability to pay benefits in the event of a default by a reinsurance company.
The solvency of the reinsurer and its ability to make payments under the
terms of the reinsurance treaty or contract could have a material adverse
effect on the Company, who is ultimately liable to its policyholders for the
entire limits of the workers' compensation policy. Holdings has agreed to
cause the Company to secure its quota-share reinsurance needs with
Underwriters so long as the loan with Underwriters remains outstanding. See
"Prospectus Summary--Investment by Holdings and Underwriters Loan" and
"Business--Reinsurance."

The Company has a quota-share agreement in effect with Underwriters
Reinsurance Company ("Underwriters") under which the Company cedes to
Underwriters a percentage (currently 70%) of all written workers'
compensation premiums and Underwriters assumes that same percentage of all
risks ("Quota Share Reinsurance"). This Quota Share Reinsurance allows the
Company to write, within regulatory guidelines, a larger number of policies
than it otherwise could without such arrangement. In the event that the Quota
Share Reinsurance agreement with Underwriters is terminated, the Company
could be required to increase its capital substantially or reduce its level
of workers' compensation premiums written, unless it is able to establish
another quota share reinsurance arrangement. Loss of the Quota Share
Reinsurance could cause material adverse consequences to the Company's
business and growth prospects. There is no assurance that Quota-Share
Reinsurance will continue to be available to the Company for its workers'
compensation business. The Quota Share Reinsurance agreement is with a
reinsurer rated "A" or better by A.M. Best. If Underwriters is unable to meet
any of its obligations to the Company under the reinsurance agreement, the
Company would be responsible for the payment of all claims and claim
settlement expenses which the Company has ceded to such reinsurer. Any such
failure on the part of the Company's reinsurer could have a material adverse
effect on the Company's business, financial condition or results of
operations.

SPECIAL DISABILITY TRUST FUND. Florida maintains a trust fund for the
purpose of reimbursing insurers and employers for claims of employed workers
who have previously existing illnesses or conditions. The SDTF is managed by
the State of Florida and its sole source of revenue is through assessment of
insurers who provide workers' compensation insurance in Florida. As of
December 31, 1995, the Company's and the Fund's consolidated estimated
recoveries from the Special Disability Trust Fund (the "SDTF") were
$3,881,000, and the actual recoveries received from the SDTF through 1995
were $857,594. To date, the assessments have been sufficient to provide
annual reimbursement under the SDTF, however, the SDTF has not established
reserves for its claims and there can be no assurance that sufficient funds
will be available in the future. Under Florida sunset laws, the SDTF will
expire on November 4, 2000, unless the Florida legislature acts to continue
the SDTF in existence. No assurance can be made that the legislature will
maintain the SDTF's existence. If the SDTF is terminated, the liabilities of
the SDTF may become general obligations of the State of Florida, although
there is no assurance that the state will assume such obligations. No
prediction can be made as to the possible legislative actions or the
potential for increased assessments to pay the claims liabilities of the
SDTF. The termination of the SDTF or changes in its operations which decrease
the recoveries due to the Company could have a material adverse effect on the
Company's business, financial condition or operations.

CAPITAL REQUIREMENTS. The Company is required to maintain a certain level
of minimum statutory surplus to meet Florida regulatory requirements.
Although the Company currently has surplus in excess of the minimum required
levels, it will be required to increase its capital surplus as business
increases. The Company intends to use the proceeds of this offering, in part,
for that purpose. If the

11
<PAGE>
Company is unable to generate sufficient capital, it could be required to
reduce its growth or curtail its operations. Although the Company has met all
required capital surplus in the past, there can be no assurance that capital
will continue to be available when needed. The failure to raise sufficient
capital would have a material adverse effect on the Company's business and
financial condition.

SINGLE STATE CARRIER. All of the Company's revenues are derived from
products and services offered to customers located in the State of Florida.
Accordingly, the Company could be adversely affected by economic downturns,
significant unemployment and other conditions that may occur from time to
time in Florida.

12
<PAGE>
THE COMPANY

The Company was incorporated in the State of Florida on May 13, 1994. The
Company's principal executive offices are located at Suite 400, 4700 N.W.
Boca Raton Boulevard, Boca Raton, Florida 33431, and its telephone number is
(561) 997-0708. As of May 1, 1996, the Company had approximately 1,200
policyholders and $27.5 million in annual written premiums.

The Company commenced business as an insurance company in December 1995
upon its receipt from the Florida Department of Insurance of a Certificate of
Authority and authorization to acquire substantially all of the assets and
liabilities of the Fund. The Fund began operations in late 1991 and had
approximately 1,300 members and $28 million in annual written premium at the
time of such acquisition by the Company. The Fund's officers and employees
continued in similar positions with the Company, and the Trustees and
Administrator of the Fund act as directors and/or officers of the Company.
Further, the Company has continued the Fund's relationship with the network
of independent agents in Florida.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
1,000,000 shares of Series A Preferred offered by the Company are estimated
to be $9,925,000, at the offering price of $10.00 per share and after
deducting the estimated offering expenses payable by the Company.

The Company intends to use the net proceeds first to fund statutory
surplus levels necessary for growth and expansion of the Company's business.
Once such surplus levels are obtained, additional net proceeds received, if
any, may be used to redeem shares of the Series B Preferred pledged as
collateral for Holdings' loan from Underwriters. Additional proceeds, if any,
will be used for general working capital purposes.

DIVIDEND POLICY AND HISTORY

Holders of the Series A Preferred are entitled to receive a 6% cumulative
dividend on each share of Series A Preferred held ($.60 per share). Dividends
are calculated based upon the $10.00 per share stated value of the shares. At
the discretion of the Board of Directors, dividends are payable on April 1
and October 1 of each year. Dividends not paid semi-annually will accrue and
become payable upon the next dividend payment date, or upon the redemption,
liquidation or conversion of the shares.

Pursuant to the terms of the Consent Order, the Company may not pay
dividends on any class of stock for a period of five years without prior
written approval of the Department of Insurance. Further, Holdings has agreed
with its lender, Underwriters, not to permit the Company to pay any dividends
without Underwriters' consent.

The Company has not declared or paid any dividends on its Common Stock
since inception. The Company received approval from the Department of
Insurance and Underwriters to pay the first dividend due to holders of the
Series A Preferred. Such dividend was paid on April 29, 1996 to holders of
record on March 31, 1996. Although the Department of Insurance and
Underwriters permitted the Company to pay the April 1996 dividend, there can
be no assurance that either will permit payment of future dividends.
Dividends that are not able to be paid pursuant to such restrictions will
accumulate.

13
<PAGE>
CAPITALIZATION

The following table sets forth the actual short-term debt and
capitalization of the Company at March 31, 1996 and as adjusted to reflect
the issuance and sale by the Company of shares of Series A Preferred offered
hereby at an assumed initial offering price of $10.00 per share and the
application of the estimated net proceeds therefrom.

<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------
PRO FORMA
ACTUAL(1) AS ADJUSTED
-------------- --------------

<S> <C> <C>
Liabilities .................................................... $32,974,699 $32,974,699

============== ==============

Shareholders' equity:

Preferred Stock $1.00 par value, 10,000,000 shares authorized:

Series A, 251,536 shares outstanding ........................ 251,536 1,251,536

Series B, 3,200,000 shares outstanding ...................... 3,200,000 3,200,000

Common Stock, $1.00 par value, 15,000,000 shares authorized
and 102,501 outstanding ..................................... 102,501 102,501

Additional paid-in capital .................................. 2,263,824 11,263,824

Retained earnings ............................................. 55,944 55,944
-------------- --------------

Total shareholders' equity .................................... 5,873,805 15,873,805
-------------- --------------

Total capitalization .......................................... $ 5,873,805 $15,873,805
============== ==============
<FN>
- ----------------
(1) The data was derived from the Company's GAAP-based unaudited financial
statements at March 31, 1996 included elsewhere in this Prospectus.
</FN>
</TABLE>

14
<PAGE>

SELECTED FINANCIAL DATA

Set forth below is financial information covering the period from the
October 1991 inception of the Fund through March 31, 1996. The data includes
operations of the Fund through November 30, 1995 and for the Company from
December 1, 1995 through the quarter ended March 31, 1996. The operations of
the Fund for 1995 have been combined with the Company's operations for
December 1995 for comparative purposes. Annual GAAP information was derived
from audited financial statements of the Company and the Fund. Quarterly
information was obtained from unaudited financial statements. The statutory
data has been derived from statutory financial statements prepared in
accordance with statutory accounting principles, which differ from GAAP. For
additional information, see the Financial Statements of the Company, the
Financial Statements of the Fund and the related notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
COMPANY FUND COMBINED THE FUND
------------ ------------ ------------ -------------------------------------------------------
QUARTER QUARTER YEAR
ENDED ENDED ENDED
MARCH 31, MARCH 31, DECEMBER 31,
1996 1995 1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating data (gaap):
Gross premium earned ....... $ 6,917,029 $ 6,602,724 $ 27,919,055 $ 24,703,624 $ 21,821,933 $ 8,765,678 $ 99,640
Net premium earned ......... 1,937,698 6,049,084 20,940,190 22,517,370 19,852,496 7,713,200 67,683
Losses and lae ............. 1,382,313 4,392,132 14,886,606 13,724,001 14,722,513 6,299,378 78,716
Underwriting expenses ...... 848,359 2,006,220 7,586,522 7,319,850 5,702,616 1,854,312 12,836
Underwriting gain (loss) ... (292,974) (349,268) (1,532,938) 1,473,519 (572,633) (440,490) (23,869)
Net investment income ...... 410,798 365,213 845,879 605,901 283,535 133,431 841
Net realized capital gains
(losses) ................. -- -- 114,615 (30,911) 2,113 10,563 0
Income (loss) before income
taxes .................... 117,824 15,945 (572,444) 2,048,509 (286,985) (296,496) (23,028)
Income taxes (benefits) .... 40,000 5,400 (322,207) 619,997 (40,605) (211,942) 0
Net income (loss) .......... $ 77,824 $ 10,545 $ (250,237) $ 1,428,512 $ (246,380) $ (84,554) $(23,028)

Primary earnings per
share (loss): ............. 0.76 N/A

Other gaap operating data:
losses and lae ratio ..... 71.3% 70.4% 71.1% 61.0% 74.2% 81.7% 116.3%
Underwriting expense ratio . 43.8% 33.2% 36.2% 32.5% 28.7% 24.0% 19.0%
------------ ------------ ------------ ------------ ------------ ------------ --------
Combined ratio ............. 115.1% 103.6% 107.3% 93.5% 102.9% 105.7% 135.3%

Balance sheet data--gaap
(at end of period):
total investments and cash $ 15,266,443 $ 13,480,381 $ 16,681,476 $ 12,979,319 $ 12,111,100 $ 4,591,967
Total assets ............... 38,848,504 26,809,717 40,700,617 25,091,756 20,120,012 7,663,311
Losses and lae reserves .... 27,825,314 20,339,973 28,306,416 19,184,520 16,652,741 6,171,604
Total equity (deficit) ..... $ 5,873,805 $ 1,085,095 $ 5,498,671 $ 1,074,550 $ (353,962) $ (107,582)

Statutory data:
policyholders' surplus
(deficit) ................... $ 4,767,045 $ (870,000) $ 4,669,000 $ (552,000) $ (1,995,000) $ (269,000)
Losses and lae ............. 71.3% 70.4% 71.1% 61.0% 74.2% 82.0%
Underwriting expense ratio . 35.3% 33.2% 36.8% 32.5% 30.0% 26.1%
------------ ------------ ------------ ------------ ------------ ------------
Combined ratio ............. 106.6% 103.6% 107.9% 93.5% 104.2% 108.1%
</TABLE>

15
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with the information
contained in the Financial Statements and notes thereto elsewhere in this
Prospectus.

ORGANIZATION

In the early part of 1994, management of the Fund, responding to the
changes made by the Florida legislature in the workers' compensation laws,
embarked upon the development of a business plan calling for, initially, the
creation, capitalization, and licensing of a stock insurance company. The
Company would insure the workers compensation risks of employers then insured
by the Fund, and offer non-assessable policies of insurance to replace the
assessable policies issued by the Fund. Management believed that while the
legislative changes enacted to Florida's Workers Compensation Law in November
of 1993 would have a positive impact on the profitability of this line of
property and casualty insurance, it would also lead to an increasing demand
and availability of conventional, non-assessable products not then offered by
the Fund and which could not be offered by the Fund. The plan contemplated
positioning the Company within the conventional market, at the appropriate
time, with initial marketing of non-assessable policies to the members of the
Fund.

The primary components of the organization and licensing phases of the
plan and their respective completion dates were as follows:

<TABLE>
<CAPTION>
<S> <C>
Obtain a permit to proceed with the formation and
licensing as an insurer ........................................................ May 1994

File Form S-1 Registration Statement under the
Securities Act of 1933 with the SEC to offer for sale 900,000 shares of Series
A Preferred stock at a price of $10.00 per share ............................... September 1994

Commence offer with "red herring" prospectus ................................... November 1994

Create a holding company for the receipt of debt proceeds to be used for the
balance of minimum capitalization requirements ................................. January 1995

Hire insurance industry experienced executives for the positions
of President, Vice-President of Finance, and Vice-President
of Marketing ................................................................... August 1995

Obtain proportional quota-share reinsurance sufficient to reduce initial
required capitalization ........................................................ September 1995

Obtain financing in the holding company to fund the balance of required initial
capitalization of the Company .................................................. October 1995

Obtain consent order from the Department of Insurance preliminary to the
issuance of a certificate of authority, and authorizing a loss portfolio
transfer transaction between the Fund and the Company .......................... October 1995

Close on all financing transactions ............................................ December 1995

Commencement of planned operations ............................................. December 1995
</TABLE>

16
<PAGE>

The effects upon the Company's balance sheet of the closings of the
Company's sale of its Series A Preferred, the sale of its Series B Preferred
to Holdings and the loss portfolio transfer between the Fund and the Company
are summarized below.

<TABLE>
<CAPTION>
BALANCE SALE OF SALE OF BALANCE
SHEET SERIES A SERIES B LOSS SHEET
PRIOR TO PREFERRED PREFERRED PORTFOLIO AFTER
CLOSINGS STOCK(1) STOCK(2) TRANSFER(3) CLOSINGS(4)
----------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and invested assets ................ $ 44,847 $2,218,050 $3,200,000 $11,916,048 $17,378,945
Premiums receivable, net ................ 4,551,007 4,551,007
Reinsurance and related recoverables ... 7,792,246 7,792,246
Deferred income taxes ................... 1,064,000 1,064,000
Equipment, less accumulated depreciation 294,707 294,707
Other assets ............................ 42,293 2,627,543 2,669,836
----------- ------------- ------------- -------------- --------------
Total assets ......................... $ 87,140 $2,218,050 $3,200,000 $28,245,551 $33,750,741
=========== ============= ============= ============== ==============
LIABILITIES
Reserves for losses and loss
adjustment expenses ................... $ $ $ $22,248,848 $22,248,848
Unearned premiums and deposits .......... 1,477,589 1,477,589
Deferred gain on loss portfolio transfer 835,949 835,949
Accrued income taxes .................... 1,064,000 1,064,000
Other liabilities ....................... 2,619,165 2,619,165
----------- ------------- ------------- -------------- --------------
Total reserves and liabilities ...... $ 0 $ 0 $ 0 $28,245,551 $28,245,551
=========== ============= ============= ============== ==============
STOCKHOLDERS' EQUITY
Preferred Stock, Series B ............... 3,200,000 3,200,000
Preferred Stock, Series A ............... 221,805 221,805
Contributed capital in excess of par--
preferred Stock ....................... 1,996,245 1,996,245
Common Stock ............................ 102,501 102,501
Accumulated surplus (deficit) ........... (15,361) (15,361)
----------- ------------- ------------- -------------- --------------
Total stockholders' equity .............. 87,140 2,218,050 3,200,000 0 5,505,190
=========== ============= ============= ============== ==============
Total liabilities and
stockholders' equity ............... $ 87,140 $2,218,050 $3,200,000 $28,245,551 $33,750,741
=========== ============= ============= ============== ==============
<FN>
- ----------------
(1) The Company first sold shares of Series A Preferred in December 1995 when
it issued 221,805 shares for $2,218,050. Of these shares, 201,755 shares
were sold to insured employers of the Fund, with the balance sold to
vendors of the Company and their employees.

(2) The Company closed on the sale of Series B Preferred to Holdings in
December 1995 and issued 3,200,000 shares for $3,200,000.

(3) The premium paid to the Company by the Fund included all of the Fund's
net insurance assets (assets less liabilities, excluding loss reserves)
in exchange for the assumption, by the Company, of the Fund's claims
liabilities. As a result of the transaction, the Fund recognized
recoverable income taxes totaling $1.9 million which will be paid to the
Company as the balance of reinsurance premium due upon receipt by the
Fund. Correspondingly, the transaction created a tax liability to the
Company totaling $1.1 million attributable to the difference between the
premium received and to be received by the Company and liabilities
assumed, discounted in accordance with provisions of the Internal Revenue
Code applicable to property and casualty insurers. For financial
reporting purposes, the GAAP gain on the transaction of $835,000 has been
deferred for recognition over the period during which claims are paid.

(4) This table presents the effects upon the Company's balance sheet of the
closings of the financing transactions. The components of the
transactions and their recordings under GAAP are reported in the
financial statements of the Company and the Fund included elsewhere in
this Prospectus.
</FN>
</TABLE>

17
<PAGE>
RESULTS OF OPERATIONS

The Company commenced insurance operations effective December 7, 1995
(although by agreement between the Fund and the Company the transaction was
booked December 1, 1995 for ease of accounting) and reported an after-tax net
loss of $11,635 for that month. Premiums written and reported during the
period included $14.4 million of the loss portfolio reinsurance premium paid
by the Fund in consideration of the assumption by the Company of the Fund's
claims. The GAAP gain on this transaction of $835,000 has been deferred and
will be recognized during later periods as claims are settled giving effect
to development in these reserves as such information becomes available.

The tables included in the Summary Financial Data section of this
Prospectus set forth the operating results of the Fund since its inception
through November 30, 1995, the effective date of the loss portfolio transfer
and assumption of the business by the Company. The data in these tables has
been adjusted to eliminate the loss portfolio transaction, and the operations
of the Fund during 1995 have been combined with the Company's operations for
the month of December in order to allow comparison of 1995 operating results
with that of the prior years. The data for the Fund and the Company gives
effect to the 70% proportional quota-share arrangements with Underwriters
which became effective October 1, 1995.

Combined gross earned premium for 1995 amounted to $27.9 million compared
to $24.7 million for 1994 and $21.8 million for 1993. Combined net earned
premium amounted to $20.9 million for 1995 compared to $22.5 million for 1994
and $19.8 million for 1993. Quota-share premium ceded (which was effective
October 1, 1995) for 1995 amounted to approximately $4.5 million. Net losses
and loss adjustment expenses increased by $1.1 million over 1994 and the loss
ratio (losses over net earned premium) increased from 61.0% in 1994 to 71.1%
in 1995.

Losses recorded in 1994 give effect to $1.4 million of reductions in loss
provisions for prior years while losses in 1995 recognize $325,000 of
increases in loss provisions for prior years. Without such reductions in
1994, the loss ratio for that year would have been 67.1%. With such reduction
applied to 1993 and prior years affected, the loss ratio for these years
(cumulative) would have been 71.3%.

Underwriting expenses increased by $267,000 over 1994, net of expense
reimbursements and ceding commissions of approximately $1.4 million. The
combination of the decrease in net earned premium, increase in net losses,
and underwriting expenses resulted in an underwriting loss for 1995 of $1.5
million compared to an underwriting gain of $1.5 million in 1994 and an
underwriting loss of $573,000 in 1993. The GAAP combined ratio for 1995 was
107.3% compared to 93.5% for 1994, and 102.9% for 1993.

The underwriting expense ratio increased from 32.5% to 36.2% in 1995 due
primarily to personnel additions and costs associated with the Company's
offering of its Series A Preferred and sale of its Series B Preferred.
Although the Company intends to continue to offer for sale issues of its
preferred stock, management does not anticipate that these costs will be
significant in future periods. With the additions to personnel combined with
ongoing enhancements to data processing systems, management believes that the
Company can increase its premium writings without a corresponding increase in
the fixed component of underwriting expenses which would have the effect of
decreasing the expense ratio in future periods. As discussed under liquidity
and capital resources, the Company can double its net writings without an
increase in capital. Management believes the Company is appropriately staffed
for this potential currently and, if realized, the Company's operating ratios
should improve.

Investment incomes, including realized capital gains and losses, amounted
to $960,000 for 1995 compared to $575,000 for 1994 and $285,000 for 1993.
Depending on premium growth, management anticipates that investment income
will be less for 1996 than 1995 due to anticipated negative cash flows
attributable to the quota share treaty, as discussed under liquidity and
capital resources.

The Fund concluded more than four years of operations in December with
annualized writings of $28 million. Of this amount, $23.5 million of
insurance was renewed by the Company with the issuance of non-assessable
policies during December of 1995 and January of 1996. See "--Prospective
Financial Information."

18
<PAGE>
Over the four year period, the Fund (which commenced business with only
its trustees as insureds) wrote more than $80 million of premium and realized
GAAP after-tax profits of $835,000. Of the total 6,900 claims reported as of
November 30, 1995, 5,800 had been settled and closed. In dollar terms, of the
$49.1 million total of net losses and LAE incurred and reserved, $34.6
million had been paid as of November 30 with an ending reserve of $14.5
million (net of recoverables).

In a study conducted by the Fund in 1995 which was based upon an analysis
of the statutory financial filings of all Florida funds by the Bureau of
Self-Insurance, Florida Department of Insurance, the Fund ranked #1 in the
settling and payment of claims, confirming the Fund's philosophy of fair and
prompt settlement of claims incurred by the employees of insureds. Management
of the Fund (and the Company) believe that this philosophy limits the
possibility of reserve deficiency development and reduces the overall cost of
claims.

During the period of its existence, the Fund incurred extraordinary costs
associated with its own start-up, legal fees in defense of its claims against
a former service company, and fees and costs related to research and
evaluation of methods proposed to limit the exposure of members to
assessments including the use of retrospective loss portfolio transfer
reinsurance, annuitizing of claims liabilities, reorganization as a mutual
assessable fund and, finally, a loss portfolio transfer transaction with an
approved stock insurance carrier.

Under statutory accounting practices ("SAP") applicable to stock insurance
companies, the Fund concluded its operations with a deficit of $445,000. SAP
differ from Generally Accepted Accounting Principles ("GAAP") by reducing net
assets to those that can be used to pay claims. For instance, GAAP assets
such as prepaid expenses and deferred income taxes are not recognized as
assets under SAP. The table below reconciles the Fund's and the Company's
ending GAAP surplus with the deficit accounted for under SAP.

<TABLE>
<CAPTION>
THE COMPANY THE FUND(1)
--------------- ------------------------------------------------------------------
DECEMBER 31, NOVEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1994 1993 1992
--------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Total equity (deficit) under
GAAP ........................... $ 5,498,671 $ 835,948 $ 1,074,550 $ (353,962) $(107,582)
Non-admitted assets:
Deferred policy
acquisition costs ............ (389,737) (541,213) (330,693) (303,955) (105,947)
Prepaid expenses ............... (101,202) (22,075) (37,336) (64,922) (10,843)
Deferred income taxes .......... (1,084,000) (701,000) (1,227,000) (1,227,000)
Property and equipment ......... (15,500) (16,500) (32,000) (45,000) (45,000)
Other adjustments:
Deferred gain on
LPT transactions ............. 760,878 -0- -0- -0- -0-
--------------- --------------- --------------- --------------- ---------------
Total equity (deficit) under SAP $ 4,669,110 $(444,840) $ (552,479) $(1,994,839) $(269,372)
=============== =============== =============== =============== ===============
<FN>
- ----------------
(1) Calculated on a pro-forma basis for the Fund through November 30, 1995.
</FN>
</TABLE>

By agreement with the Department of Insurance, the Company will maintain
separate financial records for the reserves of the Fund which were
transferred to the Company as a part of the loss portfolio transfer. Such
accounting will facilitate the Department's later review (projected to occur
in 1999) of the Company's possible request to refund premium to certain
former members of the Fund participating in the Fund's merit plan program. In
making such a request, the Company will consider the financial position of
the Company, the development of the Fund's loss reserves and the likelihood
of collection of Fund recoverables still due.

19
<PAGE>
PROSPECTIVE FINANCIAL INFORMATION

The historical operations of the Fund cannot be used to predict the future
results of operations of the Company. The factors affecting future operations
and their probable favorable and unfavorable impacts upon the Company's
operations include the following:

/bullet/ The Company's quota-share arrangements with Underwriters will
have the effect of ceding 70% of the Company's underwriting
income to Underwriters and investment earnings will be reduced
attributable to reserves held by Underwriters.

/bullet/ The Company has entered into the Management Agreement. The fees
payable to Holdings under this arrangement include amounts
necessary to service the debt related to Holdings term loan
agreement with Underwriters, the proceeds of which were used by
Holdings to purchase the Company's Series B Preferred, which
completed the minimum capitalization requirements of the Company.
The portion of fees reserved for this debt service equates to
approximately 2.3% of the Company's written premium. This is an
expense to the Company, not previously incurred or reported by
the Fund.

/bullet/ The capitalization of the Company, through the sale of its Series
A Preferred and Series B Preferred increases the investment base
of the Company, mitigating to some extent the cost of the
management agreement described above and the loss of investment
income on premium ceded to Underwriters through the quota-share
agreement.

/bullet/ As a result of its capitalization, the Company is no longer
required by the Department of Insurance to purchase aggregate
reinsurance, an expense approximating 1.5% of written premium
which was incurred and reported by the Fund. Although this
reinsurance is still carried by the Company, its full cost is
being reimbursed by Underwriters, to whom the Company has
assigned future recoveries, if any.

The cost of other reinsurance (per occurrence layers up to the maximum of
statutory benefits, in excess of the Company's retention of $350,000) has
been reduced from a cost approximating 8.3% of written premium to 6.7%,
primarily the result of the Fund's loss history with its reinsurers. Although
Underwriters shares in these savings by virtue of the expense reimbursement
provisions of the quota share agreement, the Company's cost of such
reinsurance on its retained premium will be less than that incurred and
reported by the Fund.

As of the date of this Prospectus, the Company has experienced a reduction
in annualized writings of approximately 2%. This reduction is significant and
will have an adverse impact upon the Company's ability to meet the goals of
its business plan, both short and long range. Management has adjusted
budgeted expenditures to account for the premium reduction. Management
believes that the net decrease in writings is due, in part, to increased
competition generated by the favorable 1993 legislative changes and also to
the timing of the Company's announcement of the availability of a
non-assessable product at a late date in 1995.

Research conducted by the Company in the first part of 1996 has confirmed
that insureds are moving away from assessable funds. Furthermore, insurance
carriers are offering more competitively priced policies and greater name
recognition. The Company has responded by adjusting its pricing and
availability factors underlying policies in order to induce a greater portion
of submissions (requested quotes for insurance) to be accepted by potential
customers.

The Company's statutory capital (policyholders' surplus) as of December
31, 1995, was $4.7 million or $700,000 in excess of the statutory minimum of
$4,000,000. Although the Company may remain solvent under GAAP and SAP during
the soft market, its continuation as a going concern will be dependent upon
maintaining statutory surplus above the minimum level.

RESERVES FOR LOSS AND LOSS ADJUSTMENT EXPENSES

Loss reserves constituted 80% of the Company's liabilities as of December
31, 1995. The Company establishes reserves that reflect management's
estimates of the total losses and loss adjustment expenses

20
<PAGE>

("LAE") the Company will ultimately have to pay under insurance policies.
These include losses that have been reported but not settled and losses than
have been incurred but not yet reported to the Company ("IBNR"). Loss
reserves are established on an undiscounted basis after reductions for
deductibles, estimates of salvage and subrogation, and reinsurance
recoverables. These reductions totaled $14.5 million, $6.8 million, and $4.2
million at the end of 1995, 1994, and 1993, respectively.

For reported losses, the Company establishes reserves on a "case" basis
within the parameters of coverage provided in the related policy. For IBNR
losses, the Company estimates reserves using established actuarial methods,
which are reviewed and reported upon by the Company's independent actuaries.
The case and IBNR loss reserve estimates reflect such variables as past loss
experience, social trends in damage awards, changes in judicial
interpretation of legal liability and policy provisions.

Due to the nature of worker's compensation insurance, which may involve
claims that may not be settled for many years after they are incurred,
subjective judgments as to the Company's ultimate exposure to losses are an
integral and necessary component of the loss reserving process. Management
continually reviews the Company's reserves, using a variety of statistical
and actuarial techniques to analyze current claim costs, frequency and
severity data, and prevailing economic, social and legal factors. The Company
adjusts reserves established in prior years as loss experience develops and
new information becomes available. Adjustments to previously estimated
reserves are reflected in the Company's financial results in the periods in
which they are made. The following table presents a reconciliation of
beginning and ending loss reserves for the last three years.

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995(1) 1994 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
Loss and LAE reserves at beginning of year, as reported .. $19,184,520 $16,652,741 $ 6,171,604
Less reinsurance and other recoverables on unpaid losses
at beginning of year ...................................... 6,824,573 4,242,237 1,544,657
--------------- --------------- ---------------
Net loss and LAE reserves at beginning of year ........ 12,359,947 12,410,504 4,626,947
Provision for losses and LAE for claims incurred:
Current year ............................................. 14,340,611 15,106,909 14,852,630
Prior years .............................................. 324,451 (1,382,908) (130,117)
--------------- --------------- ---------------
Total incurred ......................................... 14,665,062 13,724,001 14,722,513
=============== =============== ===============
Losses and LAE payments for claims incurred:
Current year ............................................. 2,209,120 5,870,496 4,448,744
Prior years .............................................. 10,980,584 7,904,062 2,490,212
--------------- --------------- ---------------
Total paid ............................................. 13,189,704 13,774,558 6,938,956
=============== =============== ===============
Net loss and LAE reserves at end of year .................. 13,835,305 12,359,947 12,410,504
Plus reinsurance and other recoverables on unpaid losses
at end of year ......................................... 14,471,111 6,824,573 4,242,237
--------------- --------------- ---------------
Loss and LAE reserves at end of year, as reported ........ $28,306,416 $19,184,520 $16,652,741
=============== =============== ===============
<FN>
- ----------------
(1) Includes reserve transactions of the Fund through November 30, 1995.
</FN>
</TABLE>

In 1993 and 1994, the Fund recorded reductions in the loss provision for
claims incurred in prior years. These reductions resulted primarily from
reevaluation of claims reserves established during the two years following
the Fund's inception where the lack of a reserving history and experience
suggested reserving at industry norms. As claims were reported and settled,
the Company's independent actuaries were able to develop a history for the
Company which led to significant reductions in reserved losses for 1992 and
1993.

In 1995, the Company recorded increases in the provisions for losses and
LAE in prior years related primarily to reduced anticipated recoveries from
the Special Disabilities Trust Fund ("SDTF").

21
<PAGE>
For statutory purposes, the Company reported its loss reserves at $12.0
million for the year ended December 31, 1995. The difference between this
amount and the gross reserve of $28.3 million appearing above is attributable
to the reporting of recoveries due from reinsurance and the SDTF as
reductions to gross reserves with $1.8 million of prepaid fees for managed
care also classified as reductions to net reserves for statutory purposes.

EXCESS OF LOSS REINSURANCE

The Company retains the first $350,000 of liability on each claim.
Reinsurance contracts attach thereafter, with Allstate RE providing coverage
for up to $2,000,000 and Continental Casualty Company providing coverage for
up to the maximum statutory benefits. The Company has also entered into a
reinsurance treaty with Allstate RE for "aggregate" reinsurance for coverage
of 70% of 15% excess 75% of Earned Standard Premium subject to a $4,500,000
maximum limit. The Company has assigned any recoveries on the aggregate
reinsurance treaty to Underwriters which is reimbursing all of the cost of
this reinsurance to the Company (see Proportional Quota-share Reinsurance
below).

The Company pays premiums to its excess of loss reinsurers on a quarterly
basis and invoices reinsurers for recoveries as claim payments in excess of
the Company's retention are paid. These amounts are classified as "paid
recoverables" in the Company's financial statements and amounted to $95,000,
$204,000, and $30,000 for 1995, 1994, and 1993, respectively.

PROPORTIONAL QUOTA-SHARE REINSURANCE

Effective October 1, 1995, the Fund entered into a 70% proportional
quota-share reinsurance treaty with Underwriters, which was assigned to the
Company effective November 30, 1995. Under the terms of the agreement, the
Company cedes 70% of its net written premium to Underwriters with
Underwriters assuming 70% of the Company's retained losses and loss
adjustment expenses. To cover the costs of underwriting, Underwriters
reimburses the Company for certain direct expenses incurred and pays the
Company a ceding commission to cover other general expenses. Premium ceded
for the three months ended December 31, 1995, amounted to approximately $4.5
million. Expense reimbursements and commissions amounted to $1.4 million.

The effect of these arrangements is a transfer of 70% of the net results
of underwriting operations to Underwriters, which reduces the Company's net
writings reported to the Department. This allows the Company to increase its
direct writings through leveraging of its capital resources (see "Liquidity
and Capital Resources" in this section). Premium ceded to Underwriters
creates recoverables for Underwriters' share of unpaid losses and loss
adjustment expenses. As claims are paid, the Company reduces amounts remitted
to Underwriters proportional to Underwriters liability. In addition,
Underwriters' share of reimbursable expenses and amounts due the Company for
the ceding commission are deducted from ceded premium amounts otherwise due
Underwriters.

22
<PAGE>
SPECIAL DISABILITIES TRUST FUND

The SDTF of the Bureau of Workers Compensation makes assessments upon all
Florida workers compensation insurers at a current rate of 4.52% of premium
collected and distributes such sums among insurers whose policy holders have
employed individuals with previously determined workers' compensation related
disabilities, and such individuals have filed a claim. The Fund and the
Company have included, as recoverables against losses and LAE, amounts
submitted and to be submitted to the Bureau. The following table summarizes
the history of the Fund's and the Company's recordings of SDTF recoverables.

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Submissions filed with SDTF ...... $ 0 $ 13,706 $1,006,639 $ 808,631
Recoveries received through
December 31, 1995 ................ $ 0 $ 0 $ 422,414 $ 435,180
--------------- --------------- --------------- ---------------
Submissions due .................. 0 13,706 584,225 373,451
Actuarially determined
revisions(1) ..................... 1,164,200 299,972 (942,625) (619,451)
Submissions pending(2) ............ 40,800 680,322 1,760,400 526,000
--------------- --------------- --------------- ---------------
STDF Recoverables ................. $1,205,000 $994,000 $1,402,000 $ 280,000
=============== =============== =============== ===============
<FN>
- ----------------
(1) Includes estimated amounts receivable on claims incurred but not reported
(IBNR).

(2) Includes processed claims not yet submitted, and identified as qualifying
in process, discounted for probability of rejection, and net of
contingent fees.
</FN>
</TABLE>

The table below summarizes remaining recoverables due from reinsurers and
the SDTF by loss year.

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Reimbursements due from and estimated
additional recoveries from excess of loss
reinsurers by loss year:
1992 .............................. $ 1,155,316 $ 747,118 $ 652,279 $ 950,000
1993 .............................. 1,828,000 1,013,203 1,450,000
1994 .............................. 2,420,000 150,000
1995 .............................. 2,766,000
Reimbursements due from and estimated
additional recoveries from quota-share
reinsurer
1995 .............................. 2,420,795
Estimated recoveries from claims
submitted and to be submitted to SDTE
1992 .............................. 280,000 909,209 629,233 594,657
1993 .............................. 1,402,000 1,746,233 1,540,878
1994 .............................. 994,000 2,258,810
1995 .............................. 1,205,000
---------------
Total reinsurance and related receivables $14,471,111 $6,824,573 $4,272,390 $1,544,657
=============== =============== =============== ===============
</TABLE>

MANAGED CARE

In August 1994, the Fund entered into a managed care arrangement with
Humana to provide medical services to injured workers whose employers were
participating in the voluntary managed care arrangement. The terms of the
agreement with Humana, which was assigned to the Company effective

23
<PAGE>
November 30, 1995, provide for the payment of a capitated fee in exchange for
which Humana covers all the medical cost associated with a claim for a period
of three years after the date the claim is reported.

The Company records amounts paid to Humana as a prepaid expense with
adjustments recorded as medical services are rendered. The recorded prepaid
expense at December 31, 1995 of $1.8 million equals the amount of covered
medical losses recorded as unpaid and included in reserves.

As of December 31, 1995, approximately 39% of the Company's customers were
covered by the Humana managed care program. Participation in a managed care
program is mandatory under Florida law effective January 1, 1997. In March,
1996, the Company complimented its managed care alternatives by entering into
an agreement with Vincam/HIP to provide case management services for covered
medical claims for a fee under a preferred provider arrangement. These
arrangements do not transfer risk to Vincam/HIP and the Company will continue
to pay the costs of covered claims. However, the arrangement does qualify as
a managed care arrangement under Florida law. See "Business--Managed Care."

INVESTMENTS

The Company follows a conservative investment strategy that emphasizes
maintaining a high-quality investment portfolio and maximizing after-tax
current income. Investments since the inception of the Fund have consisted
solely of fixed maturity U.S. Treasury Notes, Treasury Strips, U.S.
Government agency notes and mortgage backed securities and certificates of
deposit, all with ratings of AA or better.

As of December 31, 1995, total financial statement investments and cash
under GAAP (pursuant to which certain assets are stated at amortized cost)
increased to $16.7 million, an increase of 28% over the year ended December
31, 1994 total of S13.0 million. The 1995 amount includes $10.2 million of
fixed maturity investments carried at amortized cost as held to maturity
securities and $4.2 million carried at fair value as available for sale
securities. The net increase in financial statement investments and cash
reflects the net proceeds (total proceeds less assigned security deposits) of
the Company's sale of its Series A Preferred and the sale of its Series B
Preferred to Holdings, underwriting results including net premium ceded to
reinsurers, and fair value adjustments on investments classified as available
for sale.

The following table reflects investment results for the three year period
ended December 31, 1995.

INVESTMENT RESULTS

<TABLE>
<CAPTION>
PRE-TAX
NET PRE-TAX REALIZED NET
AVERAGE INVESTMENT EFFECTIVE CAPITAL GAINS
INVESTMENTS(1) INCOME(2) YIELD(3) (LOSSES)
--------------- -------------- ------------ ----------------
<S> <C> <C> <C> <C>
THE COMPANY
One-month period ended December 31, 1995 .. $15,316,161 $ 73,455 5.8% $ (404)
THE FUND
Eleven-month period ended November 30, 1995 $13,456,000 $772,424 6.3% $115,000
Year ended
December 31, 1994 ......................... $11,772,000 $605,000 5.2% $(31,000)
December 31, 1993 ......................... $ 7,270,000 $284,000 3.9% $ 2,000
<FN>
- ----------------
(1) Simple average of beginning-of-period and end-of-period financial
statement investments and cash for applicable periods.

(2) After investment expenses, excluding net realized capital gains (losses).

(3) Net pre-tax investment income for the period divided by average
investments for the same period. In calculating effective yield, the net
pre-tax investment income for the eleven-month period ended November 30,
1995, and for the one-month period ended December 31, 1995, has been
annualized.
</FN>
</TABLE>

24
<PAGE>
The increase in effective yield for 1995 and 1994 was primarily due to
higher yielding securities in the Company's investment portfolio, which
included purchases of U.S. Government agency bonds and mortgage backed
securities in 1994, pursuant to a planned restructuring of the portfolio
brought about by the changes in rules of the Department of Insurance
governing allowed investments which became effective July 1, 1994.

The average maturity of all investments is approximately 3.5 years. The
Company continues to seek opportunities to enhance investment yield through a
conservative, primarily fixed maturity investment strategy. Its current
investment strategy does not contemplate material investments in
non-investment grade securities, real estate, commercial mortgages, or equity
securities.

More information concerning the Company's investments is contained in Note
2 to the Company's financial statements included in this Prospectus.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity refers to the Company's ability to generate sufficient cash
flows to meet the short-and long-term cash requirements of business
operations. The short-term cash needs of underwriting primarily consist of
funding insurance loss and loss adjustment expense payments and day-to-day
operating expenses. Those needs are met through cash receipts from
operations, which consist primarily of insurance premiums collected and
investment income. The Company's investment portfolio is also a source of
liquidity, in the form of readily marketable fixed maturities and short-term
investments. Underwriting's net positive cash flows from operations are used
to build the investment portfolio and thereby increase future investment
income.

As security for an insured's contractual premium obligation, the Company
usually requires that each insured pay an advanced deposit premium, generally
equal to 20% of the insureds estimated annual premium. The annual premium is
invoiced by the Company over a period of 12 months. Under these typical
arrangements, the Company does not extend credit to any insured for premium
which has been earned by the Company, and, in the event an insured is past
due in installment payments, the underlying policy can be canceled for
non-payment prior to the Company incurring bad debt losses on premium earned
but not collected. The advanced deposit premiums provide an additional source
of liquidity to operations and such funds are also used to build the
Company's investment portfolio.

Because of the nature of an insurance company's underwriting operations,
where premiums are generally collected and invested before related losses are
paid, liquidity requirements are customarily funded by operational cash
flows. Cash flows from the combined operations of the Fund and the Company
for 1995 totaled a negative $1,527,000, compared with the Fund's operating
cash flows of $1,064,000 in 1994 and $7,667,000 in 1993. Operating cash flows
for 1996 are expected to be negative because of the Company's quota-share
arrangements with Underwriters (see "Results of Operations" above) and the
reduction in annualized premium discussed under "Prospective Financial
Information". The payment of claims on reserves assumed by the Company from
the Fund will require the liquidation of investments held for this purpose.
It is anticipated that such liquidations (and maturities) will exceed
investment purchases funded by cash flows from the Company's retained
underwriting operations.

Invested assets and cash as of December 31, 1995 amounted to $16.7 million
with approximately $3.9 million of such amount consisting of investments with
maturities of less than one year or cash. The reduction in annualized
writings and the impact of quota-share arrangements and the related negative
operating cash flows may require liquidations of investments in advance of
their fixed maturities.

25
<PAGE>
The Company's capital resources represent funds deployed or available to
be deployed to support business operations and consist of common and
preferred shareholders' equity. The table below summarizes the Company's GAAP
capitalization as of December 31, 1995 compared to the Fund's GAAP surplus as
of the end of the two previous years.

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
--------------- -------------- ---------------
<S> <C> <C> <C>
THE COMPANY
Common shareholders' equity:
Common Stock, 102,501 shares issued, $1 par value .... $ 102,501 $ 102,501 $ -0-
Retained earnings (deficit) ........................... (21,880) (10,245) -0-
--------------- -------------- ---------------
Total common shareholders' equity ................... 80,621 92,256 -0-
--------------- -------------- ---------------
Preferred Stock, Series A:
Preferred shares, 221,805 shares issued, $1 par value 221,805 -0- -0-
Additional paid-in capital, preferred stock .......... 1,996,245 -0- -0-
--------------- -------------- ---------------
Total Preferred Stock, Series A ..................... 2,218,050 -0- -0-
--------------- -------------- ---------------
Preferred Stock, Series B:
Preferred shares, 3,200,000 shares issued, $1 par value 3,200,000 -0- -0-
--------------- -------------- ---------------
Total Preferred Stock, Series B ..................... 3,200,000 -0- -0-
--------------- -------------- ---------------
Total capitalization ................................ $5,498,671 $ 92,256 $ -0-
--------------- -------------- ---------------
THE FUND(1)
Undistributed surplus .................................. $ -0- $1,074,550 $(353,962)
--------------- -------------- ---------------
Total capitalization ................................ $ -0- $1,074,550 $(353,962)
<FN>
- ----------------
(1) The Fund's GAAP surplus as of November 30, 1995, the effective date of
the loss portfolio transfer, was $835,000. The Company has deferred the
recognition of any gain on the transaction to later periods as the loss
reserves of the Fund are reduced through claim payments.
</FN>
</TABLE>

The Company's Series A Preferred was sold to former members of the Fund
and sales agents and vendors. The Series B Preferred was sold to Holdings
which also owns all of the Company's common stock. The Company's capital is
regulated by the Department of Insurance with certain minimum levels of
capital required depending upon net writings of the Company. For purposes of
these calculations, capital (surplus as to policy holders) is calculated
under "SAP" which, generally, reduces capital to liquidation amounts.

The insurance code of Florida requires a stock insurance carrier to
maintain capital of no less than $4 million. In addition, companies writing
worker's compensation insurance cannot have annualized net writings in excess
of 3.2 times their statutory surplus, calculated and reviewed on a quarterly
basis. As of December 31, 1995, the Company's statutory surplus was $4.7
million which will support net writings of $15 million under this formula. As
of that same date, the Company's annualized net writings (which gives effect
to the proportional quota-share arrangements with Underwriters) was
approximately $6.7 million. The difference between these two figures
represents additional net writing capacity for the Company without a
requirement for additional capitalization. The Company's business plan (see
"Prospective Financial Information") contemplates the continuing sale of
capital stock to insureds, agents and vendors to provide a cushion to surplus
and to facilitate its growth in writings.

All of the Company's Common Stock and the Series B Preferred is owned by
Holdings. Holdings has pledged all of its stock in the Company, among other
things, as collateral for a loan from Underwriters, the proceeds of which
were used by Holdings to purchase the Company's Series B Preferred. The
Company has entered into the Management Agreement with Holdings wherein
Holdings shall be responsible for managing the day to day operations of the
Company, including, but not limited to, marketing, loss control, safety
engineering and continuing service, billing and premium collection,

26
<PAGE>
claims administration, maintenance of books and records, and underwriting.
The fees payable by the Company to Holdings pursuant to the Management
Agreement are currently 14.1% of written premium, of which Holdings has
committed to pay Underwriters 16.32% of the fees (the equivalent of 2.3% of
written premium) toward debt service. At the current level of writings, this
would retire Holdings' indebtedness in 10 years. The note is otherwise due on
September 30, 2000.

In connection with these financing arrangements, the Company and Holdings
have provided these and additional covenants and entered into other
agreements with Underwriters and the Department of Insurance. The nature of
these arrangements, their possible effects upon the Company, and management's
opinion related thereto are summarized below.

<TABLE>
<CAPTION>
DESCRIPTION POSSIBLE EFFECTS UPON THE COMPANY
- ----------------------------------------------------- ------------------------------------------------------
<S> <C>
Holdings has pledged all of the Company's common If Holdings defaults on the loan, and fails to cure
stock and Series B Preferred as collateral for the the default, then Underwriters would own and control
Underwriters loan. the operations of the Company.

The Company expects to continue to offer for sale its
Holdings and the Company have agreed not to declare capital stock in order to expand its premium writing
or pay any dividends on any class of stock without capacity. The inability to pay a dividend, even
the approval of Underwriters for so long as Holdings though dividends accumulate, may nevertheless
is indebted to Underwriters. adversely affect these plans.

As a condition to the acquisition of the Fund's The Department of Insurance's determination of the
assets, the Company has agreed to not pay a dividend Company's capacity to pay a dividend may be biased in
on any class of stock without the written approval favor of policyholders, with a possible further
of the Department of Insurance for a period of five adverse effect upon the Company's continuing sale of
years. its preferred stock.

The Company has agreed to not pay any form of The Company's continued retention of former Fund
premium refund to the Fund's former insureds without insureds as customers of the Company may be
the approval of the Department of Insurance. jeopardized if refunds are not paid.

The Company has entered into a 70% proportional The quota-share arrangements serve to reduce the
quota share reinsurance contract with Underwriters Company's required capital thus increasing the
and has granted Underwriters a continuing interest Company's writing capacity. However, underwriting and
in such arrangements for so long as Holding's debt investment incomes related to ceded premium are
is unpaid. eliminated.

Holdings has granted Underwriters options to Even though the loan by Underwriters to Holdings may
purchase the equivalent of up to a 49% interest in be paid, Underwriters may still exercise significant
Holdings common stock, dependent upon the final influence over operations of the Company in the
payment date of Underwriters' loan. future.

Holdings and the Company have agreed to use the Opportunities for expansion in writing capacity or
proceeds of any sale of securities or financing acquisitions of other business could be adversely
(other than the sale of Series A Preferred) to affected in favor of this requirement.
retire Holdings indebtedness to Underwriters.
</TABLE>

Management of the Company and Holdings considers the relationship with
Underwriters a mutually beneficial alliance. Through its loan to Holdings,
Underwriters provided the financing necessary to complete the capitalization
of the Company; and, through the quota-share arrangements, Underwriters
assisted the Company in reducing the amount of required initial capital.
Underwriters is a

27
<PAGE>
major reinsurer with $458 million of surplus and an AM Best rating of A+.
Management is of the opinion that its alignment with Underwriters is
significant to the Company and its plans for the future.

The quota-share arrangements with Underwriters are a necessary feature in
the Company's business plan with a continuing need for such arrangements
forecasted in the Company's five year financial plan. In order for the
Company to write new business, the Company must satisfy the writing ratio
requirements of the Florida Insurance Code. The quota-share arrangement with
Underwriters facilitates growth in the Company by maintaining these ratios
above statutory minimums.

The Company considers its relationship with the Department of Insurance to
be good. In January of 1996, the Company was advised by the Department of
Insurance that its audit of the Fund's financial statements covering the
three year period ended December 31, 1994 resulted in no changes. The
Department has worked with the Company's management since inception of the
Company's business plan, providing interpretations of rules relating to
capitalization and operations. Management understands that the Department of
Insurance has recognized the potential for adverse development of the Fund's
loss reserves (assumed by the Company) and, therefore, has restricted the
Company's payment of premium refunds (if any such refunds may be payable and
approved) pending an ultimate accounting of the actual losses sustained by
the Fund. Management considers these restrictions to be reasonable and in the
best interests of policyholders.

Management considers the Company's indemnification of the former members
of the Fund (who transferred coverage to the Company) against assessment for
possible deficiencies in losses to be significant to the Fund's former
members and that such indemnification will mitigate the consequences of the
required delay in the payment of any refunds.

The Company's Series A Preferred accumulates dividends at a rate of 6% of
stated value. Any dividends not paid at each semi-annual payment date are
accrued. The Company cannot pay a dividend on its Common Stock until all
accrued dividends on the Series A Preferred are paid in full. If the
underwriting operations of the Company are profitable, excess earnings may
accumulate sufficient to pay dividends, including a dividend on the Common
Stock. Inasmuch as any dividends paid on the common stock must be used to
retire any then remaining indebtedness by Holdings to Underwriters,
management is of the opinion that Underwriters would approve such payments.

QUARTER ENDED MARCH 31, 1996 COMPARED TO MARCH 31, 1995

RESULTS OF OPERATIONS

The Company is reporting income before taxes for the first quarter of 1996
of $118,000 based on premium volume of $6.9 million. Annualized premium as of
March 31, 1996 amounts to approximately $27.7 million or a slight reduction
from the calendar year 1995 amount of $27.9 million. Certain insureds elected
not to renew their coverage with the Company effective January 1, 1996, which
management perceived as being the result of increased competition generated
by favorable 1993 legislative changes and also the late date in 1995 that the
Company completed its plan to announce the availability of non-assessable
insurance coverage. Since March 31, 1996, the Company has written new
business which has resulted in a restoration to 1995 writing levels.
Adjustments to premium pricing and availability factors have resulted in a
greater portion of submissions being accepted by potential customers.
Although writings have been restored to 1995 levels, the adjustments to
budgeted expenditures made by management in response to the reduction of
January 1, 1996 renewals remain in place, to be modified only to the extent
required by increasing premium volume.

As a result of the full absorption of the Company's 70% quota-share
arrangements, earned premiums ceded for reinsurance (including excess loss
re-insurance) amounts to 72% of earned premium. Loss and operating expense
ratios are affected somewhat by the ceding of premium in comparision to
1995's first quarter ratios during which no quota-share treaty was in effect.

For the first quarter of 1996, the loss and loss expense ratio is 71.3%
and the expense ratio is 43.8% or a combined ratio of 115.1%. The investment
ratio (interest and investment earnings divided by net

28
<PAGE>
earned premium) amounted to 12.8% for the first quarter resulting in an
overall operating ratio of 102.3%. Included within the statement of
operations is recognition of deferred gain on the loss portfolio transfer
transaction between the Company and the Fund of approximately $163,000.
Without the recognition of this gain, the Company would have recorded an
operating loss before income taxes of approximately $45,000.

For the three months ended March 31, 1995, the Fund reported earned
premium of approximately $6.6 million and income before taxes of
approximately $16,000 in its unaudited financial statements. The Fund was not
a party to any quota-share reinsurance treaty during that period nor was any
management agreement in effect as is the case with the Company for the first
quarter of 1996. Policy acquisition and other underwriting expenses for the
Company for the first quarter include approximately $144,000 of amounts paid
to Holdings which was utilized by Holdings for debt service on its loan from
Underwriters.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operating activities for the first quarter were a negative
$1.4 million, resulting from the Company's quota-share arrangements with
Underwriters. Such negative cash flows from operations were offset from
proceeds from investment maturities and other investment activities realizing
cash flows of approximately $1.6 million and from proceeds from the issuance
of additional Series A Preferred of approximately $300,000 resulting in an
overall increase in cash and cash equivalents for the three months ended
March 31, 1996 of $476,000. Invested assets decreased from $14.4 million at
the end of 1995 to $12.5 million as of March 31, 1996. Negative cash flows
from operations are expected to continue throughout 1996 as funding of the
quota-share recoverables continues by virtue of the transfer of premium to
the quota-share reinsurer pursuant to the quota-share treaty. As claims are
settled and paid in the future, management anticipates that such negative
flows will eventually reverse or stabilize as reimbursements due from the
reinsurer for claims paid and other reimbursements for operating expenses
equal or exceed premiums due pursuant to the treaty.

On a statutory basis, the Company had statutory surplus of approximately
$4.8 million as of the quarter ended March 31, 1996. The difference between
the Company's stockholders' equity calculated under GAAP at March 31, 1996 of
approximately $5.9 million and the statutory surplus of approximately $4.8
million is composed of deferred costs and expenses of approximately $1.7
million not recognized for statutory purposes and the deferred gain on the
loss portfolio transfer transaction of approximately $600,000 which is
recognizable for statutory purposes but which has been deferred for GAAP. The
net difference of these adjustments is $1.1 million.

Also on a statutory basis, the Company is reporting statutory net income
of $21,500 for the quarter ended March 31, 1996. Based upon the Company's
current writings, required statutory surplus is the minimum of $4 million,
pursuant to Florida's Insurance Code.

OTHER FINANCIAL STATISTICS

During the quarter ended March 31, 1996, the Company made no revisions to
its estimates for ultimate loss and for recoveries from reinsurance as
appears in management's discussion and analysis of the annual results of
operations through December 31, 1995. Losses recorded for the first quarter
of 1996 have been based upon the Company's (and the Fund's) cumulative,
historical loss ratio which will be reviewed and evaluated by the Company's
independent actuaries at the end of 1996. There have been no unusual losses,
loss portfolio transfers, or changes to usual reserving practices made during
the first quarter. Accordingly, the tabular analyses appearing in the
previous sections of this discussion would not be materially different at
March 31, 1996.

The Company's investment results for the first quarter of 1996 include
interest earnings of approximately $248,000 on average investments of
approximately $13.5 million for an effective, annualized yield of
approximately 7.3%. This compares favorably to the effective yield on
investments

<PAGE>
for all of 1995 of approximately 6.2%. The Company did not change any aspect
of its investment mix during the first quarter of 1996 but has increased its
position in cash and cash equivalents by approximately $500,000 to $2.7
million in anticipation of continuing negative operating cash flows. As
discussed in Note 9 to the Company's financial statements as of December 31,
1995, premiums receivable as of that date and as of March 31, 1996 included
approximately $1.9 million due from the Fund in connection with the loss
portfolio transaction. Of this amount, approximately $1.7 million was
received by the Company in April 1996 as a result of the receipt by the Fund
of a portion of its expected income tax refund. The balance of amounts due
are expected to be received during the quarter ending June 30, 1996.

30
<PAGE>
BUSINESS

BACKGROUND

In a November 1993 Special Session of the Florida Legislature, certain
changes were instituted that required management of the Fund to reevaluate
the workers compensation regulatory landscape. The Legislature provided for
the establishment of a Self Insurance Fund Guarantee Association. This new
guarantee association exposed the assets of self insurance funds to
assessments to support other financially impaired self insurance funds.
Guarantee fund assessments could potentially diminish surplus funds otherwise
intended for the purpose of dividends to members of self insurance funds.
Another legislative change was the creation of a joint underwriting
association (the "JUA") for workers compensation. Although stock insurance
companies are subject to assessment by the Florida Insurance Guaranty
Association to support financially impaired insurance companies, they are no
longer required to subsidize the assigned risk pool. The Company believes
that the failure rate and the likelihood of assessment is lower for stock
insurance companies than self insurance funds due to greater regulation of
capital, surplus and premium volume. In addition, under Florida statutes any
such assessments are limited in any one year to no more than two percent of
direct written premium. Further, according to the authors of the relevant
legislation, the substantive impact of other legislative reforms instituted
include significant cost savings to the system and a return to the system's
original design of establishing a self-executing, return-to-work system.

The Company is a property and casualty insurance company specializing in
the underwriting of workers' compensation insurance policies. The Company was
organized on May 13, 1994 and commenced operations in December 1995. As of
May 1, 1996, the Company had approximately 1,200 policyholders and $27.5
million in annual written premium. The Fund was a certified assessable
workers' compensation group self-insurance fund that began operations in late
1991. On November 30, 1995, the Fund had approximately $28 million in annual
written premium and approximately 1,300 members.

The Company is regulated by the Florida Department of Insurance and is
subject to laws and related rules of the Florida Insurance Code (the
"Insurance Code"). In a transaction approved by the Department of Insurance
and effective as of November 30, 1995, the Company assumed the insurance
related assets and liabilities of the Fund by virtue of a loss portfolio
reinsurance treaty. As a condition precedent to the issuance of the Company's
Certificate of Authority and the approval of the loss portfolio reinsurance
treaty with the Fund, the Company was required to have initial minimum
capital of $5.3 million. The Company satisfied this condition through (1) the
sale of 221,805 shares of its Series A Preferred at a price of $10.00 per
share to members of the Fund and to Fund agents and vendors and (2) the sale
of 3,200,000 shares of its Series B Preferred at a price of $1.00 per share
to Holdings. Holdings obtained the funds for the purchase of the Series B
Preferred by entering into a term loan agreement with Underwriters. See
"Principal Shareholders--Investment by Holdings and Underwriters Loan."

Only those members of the Fund who elected to be insured by the Company
were retained by the Company. The Company did not assume any contingent
assessment liabilities for members who left the Fund or who choose not to be
insured by the Company. As of March 31, 1996, former members of the Fund
representing approximately $23.5 million of premium have renewed their
insurance coverage with the Company. The Fund will maintain its legal
existence until such time as the Florida Department of Insurance permits
otherwise; however, the Fund no longer offers workers' compensation insurance
coverage.

The transactions and arrangements described above were contemplated by the
Company in its long-term business plan with the primary objective of offering
non-assessable policies of insurance to members of the Fund and to the
general public. Employers insuring their workers compensation risks with the
Fund were assessable for any losses and related expenses not ultimately paid
by the Fund. Such assessability created a contingent liability to the
employers, which management of the Fund considered

31
<PAGE>
detrimental to the continuing growth of the business. As a part of the loss
portfolio reinsurance transaction with the Fund, the Company has indemnified
the members of the Fund who elected to be insured by the Company against such
assessments. Policies of insurance written by the Company, including renewals
of coverage to former members of the Fund are non-assessable, and will allow
the Company to compete within the conventional market for workers
compensation insurance. Under the terms of the loss portfolio transfer
reinsurance treaty, the premium paid by the Fund to the Company consisted of
all of the net assets of the Fund (assets less liabilities, excluding loss
reserves) in exchange for the assumption, by the Company, of the Fund's
unpaid claims liabilities (loss reserves). The total consideration paid by
the Fund amounted to $15.3 million on a GAAP basis, and $14.0 million on a
statutory basis. Unpaid claims liabilities assumed by the Company amounted to
$14.4 million, on both a GAAP and statutory basis.

The Company is pursuing its goal of providing superior service with the
use of managed care plans, loss control analysis, aggressive claims adjusting
and premium credits, among other things. The Company believes that insureds
benefit from managed care through premium discounts and more effective
monitoring of claims and services. Cost savings are being offered to insureds
through allowed premium credits for a drug-free workplace and retrospective
rating plans based on claims experience in the prior year. Further, loss
control engineers are working with insureds to decrease the incidence of
injury in the workplace and claims adjusters are seeking efficient and
effective settlements of claims for those who are injured. In addition, the
Company believes that its focus on a single, specialized area of insurance
coverage increases its effectiveness, efficiency and service to its insureds.

STRATEGY

The Company is marketing its products to the general public through
Florida's independent agent network as an insurance company specializing in
workers' compensation. It is the goal of the Company to provide superior
service and minimize the cost of workers' compensation insurance for its
insureds. This focus on a single line of business is expected to give the
Company the opportunity to position itself as a focused company in a
service-intensive line of insurance.

As of May 1, 1996, there are approximately 167 agencies representing the
Company throughout the state of Florida, spanning from Key West to Pensacola.
The Company seeks to increase the number of agencies by which it is
represented to at least 175 by the end of 1996. Prospective new agencies are
being contacted by a marketing representative of the Company who completes a
profile for such agency. The Vice President, Marketing, reviews the profiles
for all agencies in a geographic area in which the Company desires additional
representation. No agency is accepted by the Company unless it has errors and
omissions insurance coverage and a valid State of Florida insurance agent's
license. All agencies are required to commit to the Company for a certain
minimum volume of new business.

The Company is committed to assisting its agents by, among other things,
providing current information, advertising, public relations, competitive
commission structures, responsive account underwriting, careful management of
claims and training seminars. All agents operate as independent contractors
and are required to execute an agency agreement with the Company.

The Company's primary marketing strategy is to preserve existing business
relationships and establish new relationships with agents, thus creating a
network of high-quality, high-volume producers for the Company. The Company
employs field marketing representatives, all of whom are experienced in
workers' compensation insurance and marketing. The Company anticipates adding
additional marketing personnel if needed to balance the Company's growth. The
Company also employs loss control personnel who work in the field to help
control and prevent losses, suggest and sometimes require safety improvements
and assist claims adjusters.

PRODUCTS

Policies of workers' compensation insurance protect the insured against
the costs of medical care, rehabilitation and wage loss for workers who are
injured in the course of their employment duties. The

32
<PAGE>
Company offers a number of workers' compensation insurance products. Standard
coverage, which includes employer's liability, typically offers the following
discounts: (i) stock premium volume discount of .1% to 14.4%; (ii) drug free
workplace credits of 5%; (iii) managed care discounts of up to 10%; and (iv)
Florida Construction Classification Premium Adjustment Program ("FCCPAP")
credits of 1% to 25%.

The Company also offers various loss sensitive, sliding scale and
retrospectively rated programs for the larger insureds who qualify. These
programs allow for a return of premium based on paid or incurred claims and
the ratio of these claims to earned premium. These particular products are
typically restricted to insureds generating certain levels of standard
premium annually.

MANAGEMENT AGREEMENT

The Company has entered into the Management Agreement with Holdings
pursuant to which Holdings is responsible for the day to day operations of
the Company, including, but not limited to, marketing, loss control, safety
engineering and continuing service, billing and premium collection, claims
administration, books and records and underwriting. The Management Agreement
has an initial term of five years and provides for the payment by the Company
to Holdings of fees equal to 14.1% of gross written premiums up to $50
million, less allowed discounts, collected by the Company. Fees paid for
gross written premiums in excess of $50 million are paid according to gross
written premium levels and range from 14.5% to 13.1% of gross written
premium. The Management Agreement was reviewed and approved by the Department
of Insurance, which regulates and oversees transactions between the Company
and Holdings. In addition to paying for such day to day operations of the
Company, approximately 16% of the fees received by Holdings under the
Management Agreement will be used to repay the loan from Underwriters.
Holdings has pledged its rights under the Management Agreement to
Underwriters as additional collateral for the loan. See "Prospectus
Summary--Investment by Holdings and Underwriters Loan and "Principal
Shareholders--Investment by Holdings and Underwriters Loan."

SALES AND MARKETING

The Company's sales are conducted by approximately 167 sales agencies. The
agencies each have a non-exclusive contract with the Company for the
brokerage of the Company's products and are compensated monthly with
commissions for premiums written. Each agency is required to commit to a
minimum of $250,000 in annualized premium production for the first year.
Agents are encouraged to direct their marketing efforts on accounts between
$25,000 and $250,000 in annual premium, although the Company does write
accounts starting from $1,500 in annual premiums. The Company has special
programs for accounts in excess of $250,000 but is selective in its
underwriting standards with regard to coverage. The marketing department
manages the commission structure and may, depending on production levels,
arrange special commission agreements with certain agents. The Company also
conducts a sales incentive contest periodically for the benefit of its agents
to provide greater incentive for increased sales production. Periodic
production reviews of each agency will be conducted to determine whether the
Company should continue the relationship with the agency or replace the
agency.

The Company's marketing efforts are managed by the Vice President,
Marketing and Field Marketing Representatives. Each of the Company's
marketing executives are experienced in workers' compensation insurance and
marketing. The marketing executives are expected to call on their agencies
approximately once every six weeks and will assist agents on their sales
calls, hold agency seminars and conduct normal company business. Loss control
seminars for insureds and agents are conducted periodically, the primary
focus of which is determined by loss control and claims experts and will be
directed by the needs of the Company's insureds.

33
<PAGE>
MANAGED CARE

In the November 1993 Special Session of the Florida Legislature, an
amendment to Chapter 440 was adopted which created Section 440.134-Workers'
Compensation Managed Care Arrangement. The essence of this legislation
contemplates that an insurer in Florida may transfer a portion of the medical
risk assumed by that insurer under a policy of workers' compensation
insurance by virtue of a "capitated" contract to a health care provider, a
health care facility, a health maintenance organization ("HMO"), a health
insurer, or such similar arrangement with a preferred provider organization
("PPO"). This arrangement contemplates that injured workers of a covered
employer will have their injuries treated and receive medical care by virtue
of a network of providers, such as an HMO or PPO. The goal is to provide more
professional, efficient and cost-effective administration of health care to
injured employees.

The Fund entered into an agreement in 1994 with Humana to provide a
managed care arrangement on behalf of the Fund. The agreement was assigned to
the Company and contemplates that the Company transfers to Humana the risk of
providing medical services to injured workers on the basis of a three year
contract which is renewable at the option of both parties. The agreement
further contemplates that Humana provides these services for a premium
determined by actuarial calculations discounted based upon the time value of
money. Humana is expected to have networks in place in substantially all of
the populated areas of the State of Florida. A policyholder of the Company
may voluntarily participate in the managed care program and direct its
injured employees to a provider of medical services within the Humana
network. The Company remains the primary insurer, although Humana applies its
managed care experience to the management of the medical component of the
Company's claims. A policyholder choosing to participate in the managed care
arrangement is able to receive up to a 10% premium discount. The amount of
the premium discount is subject to approval by the Company and the Department
of Insurance annually.

In addition, in March 1996, the Company entered into a managed care
arrangement with Vincam/ HIP. Vincam/HIP offers a PPO network arrangement. In
response to some market resistance by potential policyholders to an HMO
provider, the Company sought this additional arrangement to provide
policyholders with an alternative to the HMO arrangement. The Vincam/HIP
agreement does not contemplate a "capitated" contract but is a fee for
services arrangement. Vincam/HIP has been approved to offer managed care
services in all 67 counties of Florida. The discount application has been
approved by the Department of Insurance effective April 1, 1996.

The Company believes that its ability to offer managed care programs to
its insureds creates a competitive advantage for the Company over other
insurers who are not offering similar programs.

UNDERWRITING

The Company utilizes a network of independent insurance agents to solicit
workers' compensation coverage for prospective insureds. The agent submits
the insured's application to the Company for consideration to provide
workers' compensation coverage and employer's liability. The Company employs
various experienced and qualified underwriters to review these submissions to
determine proper classifications, rule compliance, and overall acceptability.
The financial solvency of the proposed insured may be examined depending upon
the nature and size of the risk. The underwriting department of the Company
either quotes coverage to the agent or refers the application to higher
management for approval. In a significant number of submissions, the
underwriting department requests the Company's loss control and safety
engineering representatives to visit on-site with the prospective insured to
evaluate the risk and ascertain their ability to comply with the Company's
established safety and claims procedure guidelines. This evaluation
determines if the applicant falls within the Company's pre-established
underwriting guidelines. In the event that management requires additional
information in order to determine if the risk should be accepted, management
may refer the application to the underwriting executive committee. The
underwriting executive committee is composed of department heads, including
claims services. The committee seeks to reach a consensus on acceptability
and

34
<PAGE>
premium pricing of the individual risk submitted for consideration. If the
underwriting executive committee is unable to reach a consensus as to a
particular risk, the application for coverage is submitted to the Board of
Directors, whose decision is final. Underwriting standards are strictly
enforced to avoid adverse loss experiences. For the year ended December 31,
1995, the Fund and the Company received a total of 1,995 new applications
with premium of $77.5 million. Of such applications, 513 were bound for a
total premium of $9.4 million.

Once an application is approved for coverage, a quote is issued by the
Company. If the quote is accepted by the proposed insured, the underwriting
department binds coverage conditional upon receipt of Company requirements
and a signed application for coverage by the insured. Periodically, the
underwriting department reviews the insured's loss history to determine the
continued acceptability of the risk. Additionally, each policy is evaluated
annually for continued acceptability of the coverage or for competitive
pricing review.

During the period that the policy is in force, the loss control
representative, or safety engineer periodically visits with the insured to
inspect its operations and provide assistance with its employees' safety
efforts. Such visits are aimed at reducing claims costs and frequency of
injury. The underwriting department is updated periodically with the results
of these loss control visits. Failure of the insured to comply with safety
recommendations or factors that otherwise cause the insured to become an
undesirable risk may cause the Company to cancel the coverage.

The Company has retained the services of Milliman & Robertson, Inc., a
qualified actuarial firm with offices in Minneapolis, Minnesota. One of the
services rendered by the actuarial firm is to provide the Company's
management with annual results of the Company's underwriting operations. The
actuaries evaluate claims and classes of business, as well as earned
insurance premiums, to determine ultimate claims expense for each year. The
actuary report contains a range which assists management in determining the
Company's loss ratio for the year and ultimately the overall underwriting
profit or loss for the year.

LOSS CONTROL

The Company's loss control efforts are managed by the Vice President of
Loss Control and performed by Loss Control Field Counselors employed by the
Company. The Loss Control Field Counselors are safety professionals and work
directly with the insured to develop safe workplaces and reduce the expenses
resulting from work related injuries. The Loss Control Department also acts
as an arm of the Underwriting Department. The Underwriting Department
requests a Loss Control Evaluation on prospective members who have marginal
loss history or come from industries of higher than normal loss problems. The
Loss Control Department is also expected to alert the Underwriting Department
when an insured undergoes a major change in the nature of its operations.

REINSURANCE

Through ceded reinsurance, other insurers and reinsurers agree to share
certain risks that the Company has underwritten. The purpose of reinsurance
is to limit the Company's maximum net loss arising from large risks or
catastrophes. Reinsurance also serves to increase the direct writing capacity
of the Company which may otherwise be restricted by regulatory rules which
limit writings to a multiple of statutory surplus.

The Company strives to achieve the following objectives with respect to
ceded reinsurance:

/bullet/ Protect its assets from large individual risk and occurrence
losses by purchasing reinsurance from financially secure
reinsurance companies at a reasonable cost.

/bullet/ Provide underwriting operations with the capacity necessary to
write large limits on accounts by purchasing reinsurance from
financially secure reinsurance companies at a reasonable cost.

35
<PAGE>
/bullet/ Provide the Company the opportunity for growth in total writings
by purchasing proportional quota share reinsurance from
financially secure reinsurance companies under reasonable terms,
such that the Company's ratio of net written premium to surplus
is below regulatory maximums.

The collectibility of reinsurance is subject to the solvency of
reinsurers. Neither the Company nor the Fund has had any uncollected
reinsurance recoverables since their respective dates of inception. However,
there can be no assurance that all reinsurance recoverables will be collected
in the future.

Commencing January 1, 1996, the Company entered into a reinsurance treaty
with Allstate RE for "aggregate" reinsurance for coverage of up to 70% of 15%
excess 75% of earned standard premium subject to a $4,500,000 maximum limit.
This aggregate cover was a condition precedent to the Underwriters' loan. The
proceeds of the aggregate cover (if any) has been assigned to Underwriters'
and Underwriters' reimburses the Company for 100% of the premium due for the
aggregate cover.

The Company pays premiums to its reinsurers on a quarterly basis and
expects to continue such coverage with these reinsurance companies. The
Company expects to also enter proportional reinsurance treaties or loss
portfolio transfers, or a combination of both, as premium growth and reserves
may require. Effective October 1, 1995, the Fund entered into a 70%
proportional quota-share agreement with Underwriters, which agreement was
assigned to the Company simultaneous with the loss portfolio transfer.

The Company has also entered into an agreement with Humana which transfers
the risk of providing medical services to injured workers on the basis of a
three year contract in exchange for a prepaid premium. Amounts recoverable
from Humana (medical services yet to be rendered) are secured by an
irrevocable letter of credit issued in favor of the Company. See
"Business--Managed Care."

CLAIMS MANAGEMENT

Claims administration, management and adjusting is administered on behalf
of the Company by Claims Capabilities, Inc., whose principal headquarters are
in Orlando, Florida. Claims Capabilities Inc. was formed in 1989 by a group
of experienced workers' compensation insurance claims professionals. Claims
Capabilities, Inc. currently handles claims for three insurers in Florida,
including the Company, representing over $45,000,000 of workers' compensation
premium, and processes over 5,500 claims annually. Claims Capabilities, Inc.
has developed state-wide claims representation with field adjusters located
in all populated regions in the state of Florida. Its expertise lies in
handling of claims, employee/ employer incentives for early return to work
and the recovery of monies on behalf of the insurers from the Florida Special
Disability Fund and third party subrogation claims. Clients serviced by
Claims Capabilities, Inc. have experienced more special disability fund
recoveries than from any other individual or organization within the State of
Florida. Claims Capabilities Inc. employs various key individuals with many
years of workers' compensation claims handling experience. Claims
Capabilities Inc. administers claims for the Company under a five year
contract with fees for services negotiated annually.

COMPETITION

As a provider of workers' compensation insurance, the Company operates
within the property and casualty insurance industry. This industry is highly
competitive on a regional and national level. The principal competitive
factors in offering workers' compensation insurance are the types and amounts
of coverage, price, service, name recognition and financial strength. The
Company competes with large, well-established insurance companies doing
business in the Florida workers' compensation insurance

36
<PAGE>
market, including ITT Hartford, CNA, Riscorp, FCCI and Liberty Mutual. Such
competitors generally have greater financial resources, larger agency
networks and greater name recognition than the Company. Larger carriers,
however, tend to focus on larger risks than those targeted by the Company and
spread their resources over a broader range of products. In addition, the
Company competes with other specialty insurers in its field.

The Company believes that its focus on one distinct line of insurance
creates an ability to service its customers in an efficient manner, and
allows the Company to continue to compete in the workers' compensation
market, as the Fund has in prior years. In addition, the Company believes
that its management is well-known to the independent agency network and is
recognized by such network for possessing the knowledge and experience of the
larger competitors. The Company anticipates that the property and casualty
insurance industry will continue to be highly competitive as providers look
to introduce new and innovative products to the market.

GOVERNMENT REGULATION

The principal regulations governing the Company are Florida laws and
regulations of the Florida Department of Insurance. As of the date of this
Prospectus, the Company expects to do business only in the State of Florida.
However, should the Company decide to do business in other states at some
time in the future, the Company also is subject to regulation of those
states. Laws and regulations govern significant aspects of the Company's
business, including, but not limited to, licensing, reserve adequacy,
solvency, premium rates and changes in control. Generally, such laws and
regulations are designed and administered to protect the interests of
policyholders rather than an insurance company's shareholders. There can be
no assurance that these laws would not adversely affect the ability of the
Company to earn a profit on its underwriting operations.

As a provider of workers' compensation insurance, the Company is affected
by workers' compensation laws governing such insurance in Florida. The
Company may be required by the appropriate State of Florida agency, under
solvency or guaranty laws, to pay assessments for policyholder losses or
liabilities of other Florida insurance companies if they become insolvent.
These assessments may be deferred or forgiven if they would threaten the
Company's financial strength and, in certain instances, may be offset against
future premium taxes. The Company cannot determine the likelihood or amount
of any future assessments, and such assessments are beyond the control of the
Company and its management. The Company is not subject to assessments by the
Self-Insurance Fund Guaranty Association.

A number of states have proposed workers' compensation reform initiatives.
Such initiatives, if adopted in the state of Florida, or another state in
which the Company operates in the future, could have an affect on the
financial condition or results of operations of the Company. The Company does
not expect, however, to begin doing business in any state if management
believes that its regulatory environment is not conducive to the operations
of the Company.

RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES

When claims are made by or against policyholders, any amounts that the
Company pays or expects to pay to the claimant are referred to as losses. The
costs of investigating, resolving and processing these claims are referred to
as loss adjustment expenses ("LAE"). Reserves are established that reflect
the estimated unpaid total cost of these two items. The reserves for unpaid
losses and LAE cover claims that have already been reported but not yet
settled, and those that have been incurred but not yet reported. Loss
reserves are established on an undiscounted basis, and are reduced for
deductibles recoverable from customers and estimates of salvage and
subrogation and recoveries from reinsurers. Provisions for increased costs
due to inflation are implicit in the reserving assumption.

Management continually reviews loss reserves, using a variety of
statistical and actuarial techniques to analyze claim costs, frequency and
severity data, and social and economic factors. Based upon these

37
<PAGE>
reviews and the reports of the Company's independent actuaries, management
believes that the reserves currently established for losses and LAE are
adequate to cover their eventual costs. However, final claim payments may
differ from these reserves, particularly when these payments may not take
place for several years. Adjustments to previously estimated reserves are
reflected in results in the year in which they are made.

The table below presents a development of net loss and LAE reserve
liabilities and payments since the inception of the Fund through 1995,
prepared in accordance with GAAP. The top line of the table shows the
estimated reserves for unpaid claim and claim settlement expenses recorded at
each year end date. Each amount in the top line represents the estimated
amount of claim and claim settlement expenses for the claims occurring in
that year as well as future payments on claims occurring in prior years. The
upper (cumulative amount paid) portion of the table presents the amounts paid
as of subsequent years on those claims for which reserves were carried as of
each specific year. The lower (liability re-estimated) portion shows the
re-estimated amounts of the previously recorded reserves based on experience
as of the end of each succeeding year. The estimate changes as more
information becomes known about the actual claims for which the initial
reserves were carried. An adjustment to the carrying value of unpaid claims
for a prior year will also be reflected in the adjustments for each
subsequent year. For example, an adjustment made in 1995 for 1992 loss
reserves will be reflected in the re-estimated ultimate net loss for each of
the years 1992 through 1994. The cumulative (deficiency) redundancy line
represents the cumulative change in estimates since the initial reserve was
established. It is equal to the difference between the initial reserve and
the latest liability re-estimated amount.

This table presents calendar year data. The anniversary date of all
policies written by the Fund through November 1995 was December 31. The
Company's policies written subsequent to that date will have staggered
anniversary dates depending upon the inception date of the policy. Other than
the loss portfolio transfer between the Fund and the Company, there have been
no reserve swaps or transfers since the inception of the Fund and no
significant changes in reserving assumptions. In addition, there have been no
changes in the mix of business, changes in anticipated payout patterns, or
unusually large gains or losses.

ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE (LAE) DEVELOPMENT

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1992 1993 1994 1995
- ---------------------------------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net liability for unpaid losses and LAE $4,626,948 $12,410,504 $12,359,947 $13,835,305
============= ============== ============== ==============
Cumulative amount of net liability
paid through:
One year later ......................... 2,507,479 7,873,910 8,658,970
Two years later ........................ 4,137,883 10,018,168
Three years later ...................... 4,315,239
Liability re-estimated as of:
One year later ......................... 4,496,831 11,027,596 12,684,398
Two years later ........................ 4,137,883 11,035,596
Three years later ...................... 4,463,883
Cumulative redundancy (deficiency) .... $ 163,065 $ 1,374,908 $ (324,451)
============= ============== ==============
</TABLE>

INVESTMENTS

Investments since inception have consisted solely of fixed maturity U.S.
Treasury Notes, Treasury Strips, U.S. Government agency notes and
mortgage-backed securities and certificates of deposit. The Company's board
of directors approves the annual investment plan which includes investments
of funds reserved for loss and loss adjustment expenses and investment of
capital resources in support of statutory surplus. The primary objectives of
those plans are as follows:

/bullet/ To maintain a diversified fixed maturities portfolio structured
to maximize investment income while minimizing credit risk
through investments in high-quality instruments.

38
<PAGE>
/bullet/ To manage the mix of portfolio maturities to complement
anticipated insurance loss pay-out patterns.

The fixed maturity portfolio is managed conservatively to provide
reasonable return while limiting exposure to risks. All investments carry
ratings of AA or better. See Note 2 to the Company's financial statements and
"Management's Discussion and Analysis of Financial Position and Results of
Operations."

The following table presents information about the fixed maturities
portfolio for the last five years.

<TABLE>
<CAPTION>
AMORTIZED MARKET PRETAX NET
COST AT VALUE AT INVESTMENT PRETAX AFTER-TAX
YEAR YEAR-END YEAR-END INCOME YIELD YIELD
- ------- -------------- -------------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C>
1995 . $14,439,231 $14,411,459 $858,194 6.3% 4.2%
1994 . $12,630,996 $12,015,682 $574,990 5.0% 3.3%
1993 . $10,565,643 $10,566,695 $285,648 3.9% 2.6%
1992 . $ 3,975,425 $ 3,941,045 $143,994 4.6% 3.0%
</TABLE>

LEGAL PROCEEDINGS

From time to time, the Company may be involved in litigation relating to
workers' compensation proceedings and claims arising out of the Company's
operations in the normal course of business. As of the date of this
Prospectus, the Company is not a party to any legal proceedings, other than
those initiated by the Company relating to the recovery of accounts
receivable.

In July 1992, the Fund filed a lawsuit in the State Circuit Court of Palm
Beach County, Florida, for breach of contract against Advanced Risk
Management Incorporated ("ARMI") claiming damages for excess fees and
advances collected by ARMI, the former service company of the Fund. A
counterclaim was filed by ARMI alleging breach of contract, breach of
fiduciary duty and fraud. On January 2, 1994, the court granted summary
judgment in favor of the Fund with respect to all of the counterclaims made
by ARMI. The summary judgment was appealed by ARMI and reversed by the Fourth
District Court of Appeal, which remanded the matter back to the trial court
to resolve specific issues. On December 15, 1995 the trial court granted the
Fund's renewed motion for summary judgment. ARMI has filed an appeal as to
this judgment as well. The Fund intends to continue to pursue and defend this
claim on its own behalf. There can be no assurance however, that, in the
event of an unfavorable ruling against the Fund, recovery would not be sought
from the Company. In the event there is an unfavorable outcome, which
management believes to be unlikely, the Fund's liability is estimated at less
than $1,000,000.

EMPLOYEES

Holdings employs all personnel required to service the policyholders,
except for claims adjusting which is handled by Claims Capabilities, Inc.,
Orlando, Florida. Through the Management Agreement with Holdings, the Company
has approximately 38 employees, none of which are represented by a union. The
Company considers its relations with its employees to be good.

FACILITIES

The Company maintains offices in leased premises in Boca Raton, Florida.
Such lease covers 7,500 square feet of office space and is on a
month-to-month basis for a monthly rental of $9,973. The Company may enter
into a lease for larger office space within the South Florida area as growth
may require.

39
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------- ------ -------------------------------------
<S> <C> <C>
Errol Bader(l)(2) ......... 48 Executive Vice President and Director
Lawrence J. Marchbanks(2) 49 Chairman of the Board and Director
Clifford G. Merritt ....... 40 Vice President, Finance
James R. Nau .............. 44 President
Frederick R. Prout(l)(2) . 47 Secretary and Director
Walter J. Sciamonte ....... 53 Vice President, Marketing
Daniel J. Webber(2) ....... 55 Director
James L. Wilson(l) ........ 50 Director
<FN>
- ----------------
(1) Member of Audit Committee.

(2) Member of Compensation Committee.
</FN>
</TABLE>

Errol Bader has been Executive Vice President and a director of the
Company since March 1994. He was the President of Bader Management &
Consulting, Inc., the Administrator of the Fund, from 1991 through 1994. From
1979 to 1991, Mr. Bader was Executive Vice President of the Associated
Builders & Contractors Trade Association of South Florida. At various times
between 1989 and 1990, Mr. Bader served as the Vice Chairman and the Chairman
of the Florida Workers' Compensation Oversight Board. He was a contributor to
the 1990 Workers' Compensation Reform Legislation and served on the
Governor's Workers' Compensation Task Force in 1989. In 1983, Mr. Bader
founded the Preferred Builders Warranty Corp., a company which engages in the
homeowners' warranty business. Mr. Bader attended Temple University.

Lawrence J. Marchbanks, since 1974, has been the majority shareholder and
President of Marchbanks, Daiello & Leider, P.A., a law firm with offices in
Boca Raton, Florida. Mr. Marchbanks has served as Chairman of the Board of
Trustees of the Fund since its inception in 1991 and has been Chairman of the
Board of Directors and a Director of the Company since March 1994. Mr.
Marchbanks holds a Juris Doctor degree from Florida State University College
of Law and is a member of the Florida and Palm Beach County Bar Associations.

Clifford G. Merritt has been Vice President of Finance of the Fund since
August 1995 and of Holdings since December, 1995. From June 1978 to August
1995, Mr. Merritt held various financial positions with the National Council
on Compensation Insurance ("NCCI"), including Director of Residual Market
Financial Operations from 1985 to 1995, with responsibility for financial
management and reporting for workers compensation assigned risk plans
operating in 32 states. Mr. Merritt holds a Bachelor degree in Accounting
from William Paterson College.

James R. Nau has been President of the Fund and of the Company since June
1995. From May, 1974 to June 1995, Mr. Nau held various positions with the
National Council on Compensation Insurance ("NCCI"), including Senior Vice
President from 1992 to 1995. Mr. Nau holds a Bachelor of Science Degree in
Business Administration from Butler University. He also holds designations of
Chartered Property Casualty Underwriter and Associate in Risk Management.

Frederick R. Prout is the President of Prout Realty, Inc. He attended Palm
Beach Community College, and has been a state licensed general contractor
since 1972 and a state licensed real estate broker since 1980. Mr. Prout has
served as an executive officer of numerous construction, development and real
estate companies over the last twenty years. He served on the Board of
Directors of the Gold

40
<PAGE>
Coast Chapter of Associated Builders and Contractors from 1981 through 1988,
the State Board of Directors from 1984 through 1988, and the National Board
of Directors from 1985 through 1987. Mr. Prout has served as a Trustee of the
Fund since its inception in 1991 and has been Secretary and a Director of the
Company since March 1994.

Walter J. Sciamonte has been Vice President, Marketing, of the Fund since
May 1995 and of Holdings since December, 1995. Prior to that time, Mr.
Sciamonte served as Marketing Manager for Gulf Atlantic Management Group,
Inc. from September 1993 to October 1994. From June 1991 to September 1993,
he was responsible for special projects for Executive Risk Consultants, and
from April 1988 to June 1991 he was Director of Sales and Marketing of
Consolidated Administrators. Mr. Sciamonte holds a Bachelor of Science Degree
in mathematics from University of Manitoba. He also holds designations of
Life Underwriting Training Council Fellow, Registered Health Underwriter,
Chartered Life Underwriter and Chartered Financial Consultant and is
registered as an NASD Representative.

Daniel J. Webber has been President of Webber, Scollon & Paris &
Associates, Inc., an insurance brokerage agency, since 1980. Mr. Webber has
served as a Trustee of the Fund since its inception in 1991 and as a Director
of the Company since March 1994. He is licensed as a life and health
insurance agent and as a securities broker in the state of Florida. Mr.
Webber attended Hardin-Simmons University and Oklahoma University.

James L. Wilson has been President, Chief Operating Officer and a Director
of Southern Security Bank Corp. since 1992 and serves on the Executive
Committee of its Board of Directors. He has been Chairman of the Audit
Committee of the Board of Trustees of the Fund since 1993 and a Director of
the Company since March 1994. From 1990 to 1992, Mr. Wilson was Executive
Vice President and Senior Lending Officer of Boca Bank, a commercial bank.
From 1984 to 1990, he was a principal in Bayshore Investments, a company
engaged in the management of income producing real estate. Mr. Wilson holds a
Bachelor of Arts and Sciences degree from Union College.

The Board of Directors of Holdings is identical to the Board of the
Company with the exception that by agreement with Underwriters, Mr. Lawrence
G. Franks was added to the Board of Directors of Holdings in January, 1996.
Mr. Frank is Senior Vice President of Pegasus Advisors, Inc.

There are no family relationships among any of the directors or executive
officers of the Company.

The Board of Directors is classified into three classes, each with a three
year term. One class of directors are eligible for election each year. The
term of the Class A director, Lawrence J. Marchbanks, will expire in July
1998. The terms of the Class B directors, Errol Bader and James L. Wilson,
will expire in July 1996. The terms of the Class C directors, Frederick R.
Prout and Daniel J. Webber, will expire in July 1997. Officers are elected
annually by the Board of Directors and serve at the discretion of the
directors. The Company is not currently a party to any employment agreements.

The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee reviews the scope and results of
the audit and other services performed by the Company's independent
accountants. The Compensation Committee sets compensation to be paid to
executive officers and other key employees and is charged with the
administration of the Company's Equity Compensation Plan.

COMPENSATION OF DIRECTORS

The Company does not pay any director's compensation. All directors'
compensation is paid by Holdings. Outside directors of Holdings receive an
annual retainer of $24,000, plus $500 per board meeting attended, up to a
maximum of $30,000 per year.

41
<PAGE>
EXECUTIVE COMPENSATION

Commencing December 1, 1995, all of the Company's executive officers are
paid by Holdings, from fees received by Holdings under the Management
Agreement. Prior to that time, no compensation had been paid to the officers
by the Company or Holdings.

James R. Nau, the Company's President is paid a base salary of $220,000;
an annual performance bonus of up to $30,000; an automobile allowance; health
insurance and is reimbursed for expenses incurred on Company business.

Errol Bader, the Company's Executive Vice President and a director who
also serves as President of Holdings, is paid a salary of $250,000; an
automobile allowance; health insurance and is reimbursed for expenses
incurred on Company business. In addition, through December 31, 1995, Mr.
Bader has been granted options to purchase 114,000 shares of Holding's common
stock.

The following table sets forth the cash and non-cash compensation for 1995
awarded to or earned by Messrs. Nau and Bader. No other officers of the
Company received salaries and bonuses totaling $100,000 or more, on an
annualized basis.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------------- ------------------------------------------------
AWARDS PAYOUTS
------------------------------ ---------------
(G)
(F) SECURITIES (H)
(E) RESTRICTED UNDERLYING LONG-TERM (I)
(A) (C) (D) OTHER ANNUAL STOCK OPTIONS/ INCENTIVE ALL OTHER
NAME AND (B) SALARY BONUS COMPENSATION AWARDS SARS PLAN PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($) ($) ($) (#)(2) ($) ($)
- ------------------- ------- --------- -------- --------------- ------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jim Nau 1995 18,300
President
Errol Bader 1995 20,800
Executive
Vice-President
<FN>
- ----------------
(1) Represents the month of December 1995, the initial month of the Company's
operations.

(2) As discussed above, Mr. Bader has been granted options to purchase shares
of Holdings common stock. As any exercise of those options would not
impact the Company's common shareholders' equities, they are not included
in the summary compensation table.
</FN>
</TABLE>

EQUITY COMPENSATION PLAN

The Company's Equity Compensation Plan (the "Equity Plan") was approved by
the Board of Directors on July 6, 1994, and adopted by the shareholders of
the Company on the same date. The Equity Plan permits the granting to
officers, key employees, eligible directors and eligible independent
contractors of certain of the following types of awards: (i) stock options,
including incentive stock options and non-qualified stock options; (ii) stock
appreciation rights; and/or (iii) restricted stock. The Equity Plan is
currently administered by a Committee of the Board of Directors (the
"Committee") appointed by the Board. The Board has reserved 2,000,000 shares
of Common Stock for issuance under the Equity Plan. No stock or options have
been issued under the plan.

Generally, awards under the Equity Plan are granted for no consideration
other than prior or future services. Awards granted under the Equity Plan
may, in the discretion of the Committee, be granted alone or in addition to,
in tandem with or in substitution for any other award under the Equity Plan
or other Plan of the Company. The exercise price for options granted under
the Equity Plan may not be less than 100% of the fair market value of the
Common Stock on the date of grant and the term of such options may not be
greater than ten years. However, incentive stock options granted to an
optionee who owns more than 10% of the voting power of the Company or its
subsidiaries shall have an

42
<PAGE>
exercise price of not less than 110% of the fair market value of the Common
Stock on the date of grant and shall have a term not greater than five years.
Stock appreciation rights may be granted under the Equity Plan to officers,
key employees and eligible independent contractors only in conjunction with a
related option (with an exercise price at least equal to the related option).
Stock appreciation rights generally provide for the payment of cash or Common
Stock (subject to Committee approval of the form of payment) equal in value
to the excess of the fair market value of one share of Common Stock over the
exercise price multiplied by the number of shares for which the stock
appreciation right shall have been exercised (the "Spread"). Restricted stock
may only be awarded to officers and key employees. The shares of Common Stock
subject to a restricted stock award may be released to the award recipient
upon the lapse of applicable restrictions concerning such award without the
payment of any cash consideration.

The Committee is authorized to determine, from time to time, the persons
to whom awards are granted and types of awards. The Committee has the power
to establish and waive, in its discretion, vesting provisions for awards;
permit optionees to exercise options through the delivery of Common Stock
with a fair market value equal to the exercise price of such options ("Stock
Delivery"); and amend the terms of an outstanding award with the consent of
the Equity Plan participant. At the time of grant, the Committee may
authorize the grant of replacement options covering shares of Common Stock
equal to the number of shares that the optionee may tender in any future
exercise of options through Stock Delivery ("Replacement Options").
Replacement Options shall have a per share exercise price equal to the fair
market value of one remaining term of the original options. At the time of
grant, the Committee may reserve the right to cashout an option (as of the
date the optionee delivers a notice of exercise) by paying an amount of cash
or Common Stock equal to the Spread. No options have been granted with the
cash-out or Replacement Option feature.

In the event of a Change in Control, unless otherwise determined by the
Committee or the Board, or Potential Change in Control, if determined by the
Committee or the Board, any stock appreciation rights outstanding for at
least six months and all outstanding options would become fully vested and
immediately exercisable, and the restrictions on any restricted stock awards
would lapse with such awards becoming fully vested, and the value of all
outstanding awards may be cashed out by the Company on the basis of the
highest price paid for Common Stock during the 60 days preceding the actual
or potential Change in Control. A Potential Change of Control is defined in
the Equity Plan as the execution by the Company of an agreement that would
result in a Change in Control or certain acquisitions of 5% or more of the
voting power of the Company's outstanding securities, as determined by the
Committee or the Board.

The Board may amend, alter or discontinue the Equity Plan at any time and
from time to time, subject to the terms and conditions of the Equity Plan.
The right to grant awards under the Equity Plan terminates on the tenth
anniversary of the approval of the Equity Plan by the shareholders, unless
otherwise terminated sooner or extended with the approval of the
shareholders.

HOLDINGS STOCK OPTION PLAN

Under grants dated March 1994 and September 1995, the founding
shareholders were issued options totaling 540,000 shares of common stock of
Holdings. The issued Holdings' options have been granted in varying amounts
and can be exercised at a purchase price of $1 per share during the first
three years of the Company's existence and $1.50 per share during years four
and five of the Company's existence. These options vest in equal annual
proportions during the first five years of the Company's existence and must
be exercised within five years of vesting.

43
<PAGE>
CERTAIN TRANSACTIONS

Marchbanks, Daiello & Leider, P.A., a law firm of which Lawrence J.
Marchbanks is a majority shareholder, President and Director, has provided
legal services in the past to the Fund and the Company. Fees paid by the Fund
and the Company for the year ended December 31, 1995 were $503,000. The fees
for such services exceed 5% of that law firm's consolidated gross revenues.

The Company has entered into the Management Agreement with Holdings,
pursuant to which Holdings is responsible for the day to day operations of
the Company, including, but not limited to, marketing, loss control, safety
engineering and continuing service, billing and premium collection, claims
administration, books and records and underwriting. The Management Agreement
has an initial term of five years and provides for the payment by the Company
to Holdings of fees equal to 14.1% of gross written premiums up to $50
million, less allowed discounts, collected by the Company. Fees paid for
gross written premiums in excess of $50 million are to be paid according to
gross written premium levels and range from 14.5% to 13.1% of gross written
premium. Fees paid during 1995 (for the month of December) were $344,000.

44
<PAGE>
PRINCIPAL SHAREHOLDERS

Associated Business & Commerce Holdings, Inc. ("Holdings") owns all of the
issued and outstanding shares of Common Stock and Series B Preferred of the
Company. Holdings' address is Suite 400, 4700 N.W. Boca Raton Boulevard, Boca
Raton, Florida 33431. There is no shareholder known by the Company to be the
beneficial owner of more than 5% of the Series A Preferred. None of the
directors or executive officers of the Company own shares of the Series A
Preferred.

The following table sets forth, at March 31, 1996, certain information
with respect to beneficial ownership of the Common Stock of Holdings by (i)
each shareholder known by the Company to be the beneficial owner of more than
5% of the Common Stock of Holdings, (ii) each director of the Company, (iii)
each executive officer of the Company, and (iv) all directors and executive
officers of the Company as a group. Except as otherwise indicated, each of
the persons listed above has sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property laws,
where applicable.

<TABLE>
<CAPTION>
HOLDINGS SHARES
NAME BENEFICIALLY OWNED
- ------------------------------------- ------------------------------
NUMBER PERCENT
---------------- ----------
<S> <C> <C>
Errol Bader(1) ...................... 110,900(2)(3) 64.89%

Lawrence J. Marchbanks(1) ........... 105,567(2) 59.01%

Clifford G. Merritt ................. -- --

James R. Nau ........................ -- --

Frederick R. Prout(1) ............... 82,567(2) 48.31%

Walter J. Sciamonte ................. -- --

Daniel J. Webber(1) ................. 82,567(2) 48.31%

James L. Wilson ..................... 44,900(2) 30.99%

All directors and executive officers
as a group (8 persons) ............ 426,501(2) 100%
<FN>
- ----------------
(1) Such person's address is c/o the Company, 4700 N.W. Boca Raton Boulevard,
Suite 400, Boca Raton, Florida 33431.

(2) Under Holdings Stock Option Plan, the following persons have the right to
acquire the following number of shares upon the exercise of currently
exercisable options: Errol Bader--68,400; Lawrence J. Marchbanks--76,400;
Frederick R. Prout--68,400; Daniel J. Webber--68,400; James L.
Wilson--42,400.

(3) Under the terms of the loan agreement with Underwriters, Mr. Baders'
ownership of the voting common stock of Holdings cannot be less than 30%
as long as there remains a balance outstanding under the loan.
</FN>
</TABLE>

SHAREHOLDERS AGREEMENT

Each of the current holders of the Holdings' Common Stock (the "Founding
Shareholders") is a party to an Exchange and Shareholders Agreement (the
"Shareholders Agreement"), dated March 23, 1995, among the Founding
Shareholders and the Company. The Shareholders Agreement provides, among
other things, for certain rights of first refusal with respect to sales or
transfers of the shares of Common Stock, transfers of the shares upon the
death of a Founding Shareholder and certain voting agreements with respect to
the shares.

The Shareholders Agreement provides that in the event a Founding
Shareholder proposes to sell any of his shares, the Company has the right and
option to purchase all, but not less than all, of the shares proposed to be
sold at a price equal to the proposed sale price. The Company may exercise
its right to purchase the shares at any time within 14 days of the date the
Company is given notice of the shareholder's proposed sale. In the event the
Company does not exercise this option, or waives its option, then the
remaining Founding Shareholders have the right and option, within 21 days
thereof, to

45
<PAGE>
purchase the shares on the same terms. Should more than one Founding
Shareholder exercise this right, then the shares are to be purchased pro rata
by the electing Founding Shareholders. All shares so purchased by Founding
Shareholders remain subject to the Shareholders Agreement. If neither the
Company nor any of the other Founding Shareholders exercise their option,
then the selling shareholder may, within 90 days, sell those shares to the
proposed purchaser at the stated purchase price.

In the event of the death of a Founding Shareholder, his shares may be
transferred by will or intestate succession. However, the transferees of such
shares must continue to be bound by the terms of the Shareholders Agreement.

The Shareholders Agreement also provides that the Founding Shareholders
will vote all shares of Common Stock held by them in favor of the election to
the Board of Directors of the current Board of Directors.

The Shareholders Agreement will terminate on the earlier of (i) the
written consent of the holders of at least 80% of the shares of Common Stock
subject to the Shareholders Agreement, (ii) a public offering of the Common
Stock for which a registration statement under the Securities Act of 1933 is
filed, or (iii) June 30, 2001.

INVESTMENT BY HOLDINGS AND UNDERWRITERS LOAN

The Company is a wholly owned subsidiary of Holdings. Holdings was
organized solely for the purpose of providing financing for the Company and
performing certain management services for the Company under the Management
Agreement. Holdings does not carry on any other business activities. The
officers and employees of Holdings intend to devote their full business time
to the business and affairs of the Company pursuant to the terms of the
Management Agreement. See "Business--Management Agreement."

Holdings has invested $3,200,000 in the Company through the purchase of
3,200,000 shares of Company Series B Preferred. Holdings has entered into a
term loan agreement (the "Loan Agreement") with Underwriters Reinsurance
Company ("Underwriters") pursuant to which Underwriters has loaned Holdings
$3,200,000 for use by Holdings to purchase Series B Preferred from the
Company. The loan bears interest at 12.75% per annum. If not earlier prepaid,
the loan is due on September 30, 2000. Holdings has agreed to pledge as
collateral for the loan, among other things, all of the Common Stock of the
Company held by Holdings and all of the Series B Preferred to be purchased by
Holdings with the loan proceeds. Holdings expects to repay the loan from fees
it receives under the Management Agreement.

In addition, Holdings has granted Underwriters options to purchase shares
of Holdings common stock in an amount, after issuance, up to a maximum of 49%
of the number of shares and options held by the founders, shareholders,
officers, directors and employees ("Insiders") of Holdings. The number of
shares subject to the option is based upon the date on which the final
payment to Underwriters pursuant to the loan is made. If the final payment is
made during the first year that the loan is outstanding, Underwriters may
purchase shares of Holdings common stock equal to 10% of the stock held by
Insiders; in the second year, shares equal to 20%; in the third year, shares
equal to 30%; in the fourth year, shares equal to 40%; and after the fourth
year, shares equal to the maximum of 49%. All of the shares subject to the
option described above may be purchased by Underwriters for the book value of
such shares. The options remain exercisable until five years after the loan
is repaid. If the loan is repaid on its due date of September 30, 2000, the
options would remain outstanding until September 30, 2005. If Underwriters
exercises all such options, it will be the largest shareholder of Holdings
and, as a result, will be able to control the business and affairs of the
Company.

46
<PAGE>
Until the loan to Underwriters is repaid in full, Holdings and its
shareholders have agreed to cause one designee of Underwriters to be elected
to the board of directors of Holdings. As of the date hereof, Holdings has
been advised that such designee is Mr. Lawrence G. Frank, Vice President,
Pegasus Advisors, Inc. (Underwriters agent). Mr. Frank does not have any
prior relationship with Holdings or the Company and will not be a director of
the Company.

Holdings has also granted Underwriters options to purchase Holdings common
stock, exercisable in an amount based on any amount of the loan which becomes
past due. The amount of exercise price paid by Underwriters upon exercise of
the options will be credited against the past due amount. The other
shareholders of Holdings have the right to purchase any shares of Holdings
acquired by Underwriters pursuant to such options.

Holdings expects to repay Underwriters through fees received by it
pursuant to the Management Agreement. See "Business--Management Agreement."
In the event Holdings is unable to repay the loan in accordance with its
terms, it is expected that Underwriters would foreclose its lien on the
shares of Common Stock pledged to it by Holdings, and thereby become the sole
holder of the Company's Common Stock. As sole common shareholder,
Underwriters would be able to elect all of the directors of the Company and
thereby control the Company's business and affairs. Underwriters may also
foreclose its lien on the pledged shares of the Company's Common Stock in the
event that the Loan Agreement is breached. In addition to customary loan
agreement events of default, the Loan Agreement will be in breach if (i) the
Company fails to maintain statutory surplus of at least $4,000,000, (ii) the
Company fails to maintain risk based capital at 120% of amounts adopted by
the Florida Department of Insurance, (iii) the Company fails to maintain a
ratio of net premiums written during each calendar quarter, annualized, of
not greater than 320% of statutory surplus, or (iv) Errol Bader ceases to be
the President of Holdings, other than as a result of his death, Mr. Bader
ceases to own or control at least 30% of the outstanding stock of Holdings or
Holdings fails to maintain a key man life insurance policy on Mr. Bader's
life. Based on the December 31, 1995 financial statements of the Company, the
Company is in compliance with such financial covenants as follows: the
Company had statutory surplus of $4,700,000 and annualized premiums written
at approximately 220% of the Company's statutory surplus. Although Florida
has not yet adopted risked based capital standards, on such December 31, 1995
basis, the Company would have risk based capital of approximately 150% of
National Association of Insurance Commission standards.

The Loan Agreement also provides that, to the extent permitted by law, the
proceeds of future sales of securities by the Company and Holdings be used to
repay the loan, other than proceeds of sales of the Series A Preferred.
Before any proceeds of sales of securities by the Company could be permitted
to be paid to Holdings to repay the loan, all accrued dividends on the Series
A Preferred would have to be paid and the permission of the Florida
Department of Insurance would have to be obtained.

In connection with the loan, Holdings has also agreed to cause
Underwriters to provide the Company with proportional quota share reinsurance
until the loan is repaid. If the rate of profit made by Underwriters on the
reinsurance agreement exceeds an agreed upon amount, the excess will reduce
the loan balance, on a dollar for dollar basis. If the loan is repaid prior
to its due date, Holdings has agreed to cause the Company to give
Underwriters a right of first refusal on the Company's reinsurance through
September 30, 2000. These quota share reinsurance obligations were a material
inducement to Underwriters to agree to make the loan to Holdings to finance
Holdings purchase of the Series B Preferred Stock. The Series B Preferred
Stock does not have voting rights, does not bear a dividend and is
convertible into shares of Company Common Stock. Holdings has also pledged to
Underwriters as additional collateral all of Holdings' rights in the
Management Agreement. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Recent Events" and "Description of
Capital Stock--Series B Preferred."

47
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 15,000,000 shares
of Common Stock, $1.00 par value per share, and 10,000,000 shares of
Preferred Stock, $1.00 par value per share. At March 31, 1996, there were
outstanding 102,501 shares of Common Stock, 251,536 shares of Series A
Preferred and 3,200,000 shares of Series B Preferred.

COMMON STOCK

Holders of Common Stock are entitled to one vote on each matter submitted
to a vote at a meeting of shareholders. The Common Stock does not have
cumulative voting rights, which means that the holders of a majority of
voting shares voting for the election of directors can elect all of the
members of the Board of Directors. The Common Stock has no preemptive rights
and no redemption or conversion privileges. The holders of the outstanding
shares of Common Stock are entitled to receive dividends out of assets
legally available at such times and in such amounts as the Board of Directors
may, from time to time, determine, and upon liquidation and dissolution are
entitled to receive all assets available for distribution to the
shareholders. A majority vote of shares represented at a meeting at which a
quorum is present is sufficient for all actions that require the vote of
shareholders. All of the outstanding shares of the Common Stock are, and the
shares to be sold by the Company in the offering made hereby will be, when
issued and paid for, fully paid and nonassessable.

PREFERRED STOCK

SERIES A PREFERRED. Holders of the Series A Preferred do not have voting
rights. The Series A Preferred is entitled to dividends at the rate of 6% per
year, payable semi-annually on April 1 and October 1 of each year. Dividends
not paid accumulate and become due and payable on the next date that a
dividend payment is made. On liquidation of the Company, holders of the
Series A Preferred are entitled to payment of the stated value of $10.00 per
share, plus accrued and unpaid dividends. The Series A Preferred is subject
to voluntary redemption by the Company at any time after December 31, 1998,
at a price equal to the stated value per share, plus accrued and unpaid
dividends. Redemption may be made upon 30 days' advance written notice to
holders of the Series A Preferred. Holders of the Series A Preferred may, at
their option, convert their shares during such 30 day period in lieu of being
redeemed. The stated value is subject to adjustment for any stock split,
recapitalization, reclassification, stock dividend, combination or exchange,
or merger, reorganization or consolidation of the Company, or other such
event, with respect to the Series A Preferred. Holders of the Series A
Preferred may convert their shares to shares of the Common Stock at any time
after December 31, 2000, at a price of one share of Common Stock for each
$5.00 of stated value of the Series A Preferred.

SERIES B PREFERRED. Holders of the Series B Preferred will not have voting
or dividend rights. On liquidation of the Company holders of the Series B
Preferred have equal priority to the net assets of the Company with holders
of the Series A Preferred up to payment per share of the stated value of
$1.00 per share. The Series B Preferred may be converted into shares of the
Common Stock at any time at a price of one share of Common Stock for each
$1.00 of stated value of the Series B Preferred.

OTHER PREFERRED STOCK. In addition to the Series A Preferred and Series B
Preferred described above, the Company's Board of Directors may, without
further action by the Company's shareholders, from time to time, issue shares
of preferred stock in other series and may, at the time of issuance,
determine the rights, preferences and limitations of each series. Any
dividend preference of issued preferred stock would reduce the amount of
funds available for the payment of dividends on Common Stock. Also, holders
of preferred stock would normally be entitled to receive a preference payment
in the event of any liquidation, dissolution or winding-up of the Company
before any payment is made to the holders of Common Stock. Under certain
circumstances, the issuance of such preferred stock may render more difficult
or tend to discourage a merger, tender offer or proxy contest, the assumption
of control by a holder of a large block of the Company's securities or the
removal of incumbent management. Although the Company presently has no plans
to issue any of its shares of preferred

48
<PAGE>
stock, the Board of Directors of the Company, without shareholder approval,
may issue preferred stock with voting and conversion rights which could
adversely affect the holders of other classes of stock.

LIMITATION OF DIRECTOR LIABILITY

Section 607.0831 of the Florida Business Corporation Act limits the
personal liability of directors to corporations and their shareholders for
monetary damages for breach of directors' fiduciary duty of care.
Specifically, directors of the Company will not be personally liable for
monetary damages for breach of a director's fiduciary duty as a director,
except for liability for any breach or failure to perform the director's
duties which constitutes (i) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (ii) unlawful
payments of distributions to shareholders as provided in Section 607.0834 of
the Florida Business Corporation Act; (iii) any transaction from which the
director derived an improper personal benefit; (iv) conscious disregard for
the best interest of the corporation, or willful misconduct, in a proceeding
by or in the right of the corporation to procure a judgment in its favor or
by or in the right of a shareholder; or (v) recklessness, bad faith,
malicious purpose or with wanton and willful disregard of human rights,
safety or property in a proceeding by or in the right of someone other than
the corporation or a shareholder.

INDEMNIFICATION

To the maximum extent permitted by law, the Articles of Incorporation and
Bylaws of the Company provide for mandatory indemnification of directors, and
permit indemnification of officers, employees and agents of the Company
against all expense, liability and loss to which they may become subject or
which they may incur as a result of being or having been a director, officer,
employee or agent of the Company. In addition, the Company must advance or
reimburse directors, and may advance or reimburse officers, employees and
agents for expenses incurred by them in connection with indemnifiable claims.
The Bylaws expressly authorize the use of indemnity agreements and the
Company intends to enter into such agreements with each of its directors and
officers. The Company also maintains an insurance policy which covers
officers and directors for certain liabilities arising out of their actions
in such capacity.

FLORIDA ANTI-TAKEOVER LAW

Section 607.0902 of the Florida Business Corporation Act ("Section
607.0902") subjects the Company to certain "Control Share" and "Fair Price"
provisions. The Control Share provisions prohibit a shareholder voting shares
of Common Stock acquired in excess of 20% (and 33% and 50%) of the
outstanding voting shares unless the remaining uninterested shareholders
approve voting rights for such shares by majority vote at a special meeting
called for that purpose. The Fair Price provisions require that, in any
merger of the Company with a corporation affiliated with a 10% or greater
shareholder (the "Interested Shareholder"), shareholders receive the higher
of the highest price paid by the Interested Shareholder for shares of Common
Stock during the preceding two years or the fair market value of the Common
Stock, unless the merger is approved by a majority of the directors not
affiliated with the Interested Shareholder or holders of two-thirds of the
Common Stock not affiliated with the Interested Shareholder.

The provisions of Section 607.0902, together with the ability of the
Company's Board of Directors to issue preferred stock without further
shareholder action, could delay or frustrate the removal of incumbent
directors or a change in control of the Company. The provisions also could
discourage, impede or prevent a merger, tender offer or proxy contest, even
if such event would be favorable to the interests of shareholders. The
Company's shareholders, by adopting an amendment to the Company's Articles of
Incorporation or Bylaws, may elect not be governed by Section 607.0902.
Neither the Company's Articles of Incorporation nor its Bylaws currently
exclude the Company from the restrictions imposed by Section 607.0902.

49
<PAGE>
TRANSFER AGENT AND REGISTRAR

The Company will act as transfer agent and registrar for the Series A
Preferred.

PLAN OF DISTRIBUTION

The Company is directing this offer to current and prospective insureds of
the Company and to Company agents and vendors and their employees. Such
persons will be contacted by direct mail, with all contact regarding the
offering being made by one of five persons authorized by the Company. The
offering is only being made to residents of Florida.

There is no requirement that Company customers or agents purchase shares
of Series A Preferred as a condition of doing business with the Company.

No person or firm, including the five authorized Company personnel, will
receive any additional compensation or commissions for their activities in
connection with sales of Series A Preferred.

The offering price of the Series A Preferred was arbitrarily determined by
the Company. Prior to this Offering, there has been no public market for the
Series A Preferred and it is unlikely that a public market for the Series A
Preferred will develop.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for the Series A
Preferred. Future sales of substantial amounts of Series A Preferred in the
public market could adversely affect the market price of the Series A
Preferred. Upon completion of this offering, the Company will have
outstanding up to 1,251,536 shares of Series A Preferred, all of which will
be freely tradeable without restriction under the Securities Act, except for
any shares purchased by an "affiliate" of the Company, which will be subject
to the resale limitations of Rule 144 adopted under the Securities Act.

The Company has an aggregate of 10,000,000 shares of preferred stock
authorized for issuance. In addition to the Series A Preferred, 3,200,000
shares of Series B Preferred are outstanding. Therefore, subsequent to this
offering, at least 5,548,464 shares of preferred stock will be available to
be issued and sold by the Company at one time or from time to time. Such
shares may be issued and sold in the same series or in another series as the
Series A Preferred offered hereby.

The 102,501 shares of Common Stock and 3,200,000 shares of Series B
Preferred outstanding are held by Holdings and have not been registered. In
addition, the Company sold to Holdings 3,200,000 shares of Series B
Preferred. Such shares are "restricted" securities within the meaning of Rule
144.

50
<PAGE>
None of these shares will be eligible for sale in the public market as of the
date of this Prospectus in reliance on Rule 144(k). Beginning in 1997, all
such shares will be available for sale in the public market, subject to the
volume of limitations and other restrictions of Rule 144 that are imposed on
shares held by "affiliates" of the Company.

LEGAL MATTERS

The validity of the Series A Preferred offered hereby will be passed upon
for the Company by Morgan, Lewis & Bockius LLP, Miami, Florida.

EXPERTS

Certain financial statements included herein have been audited by Schmidt,
Raines, Trieste, Dickenson & Adams, P.L., as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of
said firm as experts in giving said reports.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form S-1 under the
Securities Act of 1933 with respect to the Series A Preferred offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all the information set forth in the Registration Statement and
the exhibits and financial statement schedules thereto. For further
information with respect to the Company and the Series A Preferred offered
hereby, reference is made to the Registration Statement and the exhibits and
financial statement schedules filed as a part hereof. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete; with respect to each such contract,
agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description
of the matter involved and each such statement shall be deemed qualified in
its entirety by such reference. All of these documents may be inspected
without charge at the office of the Securities and Exchange Commission,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies
may be obtained therefrom at prescribed rates.

51
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
THE COMPANY

Balance Sheet (Unaudited) March 31, 1996 .............................................. F-2

Statement of Operations (Unaudited) period ended March 31, 1996 ....................... F-3

Statement of Changes in Stockholders' Equity for the period ended March 31, 1996 ..... F-4

Statements of Cash Flows (Unaudited) March 31, 1996 ................................... F-5

Notes to Financial Statements (Unaudited) March 31, 1996 .............................. F-6

Independent Accountants' Report ....................................................... F-8

Balance Sheets at December 31, 1995 and 1994 .......................................... F-9

Statements of Operations for the Year Ended December 31, 1995 and for
the period May 13, 1994 through December 31, 1994 ................................... F-10

Statements of Changes in Stockholders' Equity for the Year Ended December 31, 1995
and for the Period May 13, 1994 through December 31, 1994 ........................... F-11

Statements of Cash Flows for the Year Ended December 31, 1995 and for
the period May 13, 1994 through December 31, 1994 ................................... F-12

Notes to Financial Statements ......................................................... F-14

THE FUND

Balance Sheets (Unaudited) March 31, 1995 and 1994 .................................... F-25

Statements of Operations (Unaudited) for the periods ended March 31, 1995 and 1994 ... F-26

Statements of Changes in Surplus for the Periods Ended March 31, 1995 and 1994 ....... F-27

Statements of Cash Flows (Unaudited) for the periods ended March 31, 1995 and 1994 ... F-28

Notes to Financial Statements (Unaudited) March 31, 1995 and 1994 ..................... F-30

Independent Accounts' Report .......................................................... F-37

Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993 ........ F-38

Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 ........ F-39

Notes to Financial Statements ......................................................... F-41
</TABLE>

F-1
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments with fixed maturities ........................ $12,548,087
Cash and cash equivalents ................................ 2,718,356
Premiums receivable, less allowance for doubtful
accounts 1996 $744,246; 1995 $613,125 .................. 3,881,855
Reinsurance and related recoverables:
Paid loss recoverable ................................... 169,842
Loss and loss adjustment expenses ....................... 15,642,408
Prepaid reinsurance premiums ............................ 98,161
Advances receivable ...................................... 319,582
Accrued investment income ................................ 145,389
Prepaid expenses ......................................... 1,204,050
Deferred income taxes .................................... 1,028,700
Deferred policy acquisition costs ........................ 563,474
Equipment, less accumulated depreciation
1996 $19,749; 1995 $4,837 .............................. 316,661
Other assets, net ........................................ 211,939
--------------
$38,848,504
==============
RESERVES, LIABILITIES AND STOCKHOLDERS' EQUITY
Reserves for losses and loss adjustment expenses ........ $27,825,314
Liabilities:
Accounts payable and accrued expenses ................... 2,094,654
Unearned and return premium payable ..................... 2,443,710
Deferred gain on loss portfolio transfer ................ 598,121
Accrued income taxes and special tax deposits .......... 12,900
--------------
5,149,385
Commitments and contingencies
Total reserves and liabilities .......................... 32,974,699

Stockholders' equity:
Convertible preferred stock series A, 6% cumulative,
$1 par value, authorized shares 900,000; issued and
outstanding 251,536 shares (aggregate liquidation
preference of $2,515,360 at March 31, 1996) ........... 251,536
Additional paid-in capital, preferred series A ......... 2,263,824
Convertible preferred stock series B, $1 par value,
authorized, issued and outstanding 3,200,000 shares ... 3,200,000
Common stock, $1 par value, authorized 15,000,000
shares;
102,501 shares issued and outstanding ................. 102,501
Retained earnings (deficit) .............................. 55,944
--------------
5,873,805
--------------
$38,848,504
==============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-2
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)

Revenues:
Standard premium earned, net of discounts ....... $6,917,029
Less premium ceded for reinsurance ............... 4,979,331
-------------
Net premium earned .............................. 1,937,698
-------------
Less loss and loss adjustment expenses .......... 1,382,313
-------------
Premiums available for operations ............... 555,385
-------------
Earned premium LPT transaction ................... 162,757
-------------
Interest earnings ................................ 248,041
-------------
966,183
Policy acquisition and other underwriting expenses 848,359
-------------
Income before income taxes ..................... 117,824
-------------
Income tax expense ................................ 40,000
-------------
Net income ...................................... $ 77,824
=============
Earnings per common share and common
share equivalent .............................. $ 0.76
=============

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
PREFERRED STOCK
--------------------------
ADDITIONAL
PAID-IN
CAPITAL RETAINED
PREFERRED COMMON EARNINGS
SERIES A SERIES B SERIES A STOCK (DEFICIT)
----------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 .......... $221,805 $3,200,000 $1,996,845 $10,251 $(21,880)

Preferred stock issued for cash 29,731 267,579

Net income ...................... 77,824

----------- ------------- ------------- ---------- ------------

Balance March 31, 1996 ............ $251,536 $3,200,000 $2,264,424 $10,251 $ 55,944

=========== ============= ============= ========== ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)

OPERATING ACTIVITIES
Net income .................................... $ 77,824
Adjustments:
Change in net insurance reserves ............. (1,727,643)
Change in premiums receivable ................ 967,701
Accrued income taxes ......................... (1,065,300)
Other ........................................ 345,806
--------------
Net cash and cash equivalents (used in)
operating activities ...................... (1,401,612)
--------------
INVESTING ACTIVITIES
Proceeds from investment maturities ........... 1,875,806
Payments for other assets ..................... (112,251)
Purchase of equipment ......................... (39,392)
Payments of advances, net ..................... (143,750)
--------------
Net cash and cash equivalents provided by
investing activities ...................... 1,580,413
--------------
FINANCING ACTIVITIES
Proceeds from issuance of preferred stock .... 297,310
--------------
Net cash and cash equivalents provided by
financing activities ...................... 297,310
--------------
Net increase in cash and cash equivalents ..... 476,111
Cash and cash equivalents, beginning of period 2,242,245
--------------
Cash and cash equivalents, end of period ...... $ 2,718,356
==============

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
UNAUDITED

NOTE 1--BASIS OF PRESENTATION

The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles.

These financial statements rely, in part, on estimates. In the opinion of
management, all necessary adjustments have been reflected for a fair
presentation of the results of operations, financial position and cash flows
in the accompanying unaudited financial statements. The results for the
period are not necessarily indicative of the results to be expected for the
entire year.

Reference should be made to the "Notes to Financial Statements" on pages
F-8 through F-22 of the registrants form 10-K for the year ended December 31,
1995. The amounts in those notes have not changed except as a result of
transactions in the ordinary course of business or as otherwise disclosed in
these notes.

Some figures in the 1995 financial statements have been reclassified to
conform with the 1996 presentation. These reclassifications have no effect on
net income or stockholders' equity, as previously reported.

Comparative results of operations and cash flow information is not
presented because the registrant did not begin insurance operations until
December, 1995. Activity until that time was limited to organizational
activities.

NOTE 2--EARNINGS PER SHARE

Earnings per common share were calculated by dividing net income by the
adjusted average number of common shares outstanding. There was no adjustment
of net income required because there were no preferred stock dividends
declared during the period. There was no change in the average number of
outstanding common shares from December 31, 1995, and there was no dilution
of common stock because the preferred stock is not convertible to common
stock before January 1, 2000.

NOTE 3--INVESTMENTS

Investment activity for the period ending March 31, 1996 consisted
entirely of the collection of maturities and early call proceeds of fixed
maturity securities, which totalled $1,875,806. Market value of the Company's
available for sale fixed maturity securities continued to approximate
amortized cost, accordingly no provision for appreciation (depreciation) in
investments is recorded in stockholder's equity.

NOTE 4--INCOME TAXES

The provision for income taxes for the period ended March 31, 1996 is as
follows:

Federal income taxes currently payable (refundable) $(15,300)
Deferred federal income taxes ...................... 55,300
------------
$ 40,000
============
NOTE 5--REINSURANCE

The Company's financial statements reflect the effects of ceded
reinsurance transactions. The Company does not assume reinsurance in the
ordinary course of business. However, effective

F-6
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1996
UNAUDITED

NOTE 5--REINSURANCE--(CONTINUED)

November 30, 1995, the Company, in a transaction approved by the Florida
Department of Insurance, assumed the insurance assets and liabilities of
Associated Business & Commerce Workers' Compensation Self-Insurance Fund by
virtue of a loss portfolio transaction. The excess of premium received over
losses assumed was treated as deferred LPT premium on the balance sheet.

The deferred LPT premium is earned in the ratio of assume losses paid to
total assumed losses. Deferred LPT premium earned for the period ended March
31, 1996 totalled $162,757.

Ceded reinsurance involves transferring certain risks the Company has
underwritten to other insurance companies who agree to share these risks. The
primary purpose of ceded reinsurance is to protect the company from potential
losses in excess of the amount it is prepared to accept.

The Company expects those with whom it has ceded reinsurance to honor
their obligations. In the event these companies are unable to honor their
obligations, the Company will pay the shortfall.

The following table summarizes the effect of reinsurance on premiums
earned and insurance losses and loss adjustment expenses for the period ended
March 31, 1996:

Premiums earned:
Direct ...................................... $ 6,917,029
Ceded ....................................... (4,979,331)
--------------
Net premiums earned ........................ $ 1,937,698
==============
Insurance losses and loss adjustment
expenses:
Direct ...................................... $ 4,190,627
Ceded ....................................... (2,808,314)
Net insurance losses ....................... $ 1,382,313
==============

NOTE 6--LEGAL PROCEEDINGS

From time to time, the Company may be involved in workers' compensation
proceedings relating to claims arising out of its operations in the normal
course of business. As of the date of the accountants' report, the Company is
not party to any legal proceedings outside of its ordinary workers
compensation settlement business which management believes would materially
affect the financial position or operations of the Company with the exception
of the matter described below.

In July, 1992, the Fund filed a lawsuit in the State Circuit Court of Palm
Beach County, Florida, for breach of contract against Advanced Risk
Management Incorporated ("ARMI") claiming damages for excess fees and
advances collected by ARMI, the former service company of the Fund. A
counterclaim was filed by ARMI alleging breach of contact, breach of
fiduciary duty and fraud. On January 2, 1994, the court granted summary
judgment in favor of the Fund with respect to all of the counterclaims made
by ARMI. The summary judgment was appealed by ARMI and reversed by the Fourth
District Court of Appeal, which remanded the matter back to the trial court
to resolve specific issues. On December 15, 1995 the trial court granted the
Fund's renewed motion for summary judgment. ARMI has filed an appeal as to
this judgment as well. The Fund intends to continue to pursue and defend this
claim on its own behalf. There can be no assurance however, that, in the
event of an unfavorable ruling against the Fund, recovery would not be sought
from the Company. In the event there is an unfavorable outcome, which
management believes to be unlikely, the Fund's liability is estimated at less
than $1,000,000.

F-7
<PAGE>

INDEPENDENT ACCOUNTANTS' REPORT

To the Directors
Associated Business & Commerce Insurance Corporation
Boca Raton, Florida

We have audited the accompanying balance sheets of Associated Business &
Commerce Insurance Corporation as of December 31, 1995 and 1994 and the
related statements of operations, changes in stockholders' equity and cash
flows for the year ended December 31, 1995 and the period May 13, 1994
(inception) through December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these 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 audits 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 audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Associated Business &
Commerce Insurance Corporation as of December 31, 1995 and 1994 and the
results of its operations, and its cash flows for the year ended December 31,
1995 and the period May 31, 1994 (inception) through December 31, 1994 in
conformity with generally accepted accounting principles.

SCHMIDT, RAINES, TRIESTE,
DICKENSON & ADAMS, P.L.

Boca Raton, Florida
March 20, 1996

F-8
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
BALANCE SHEET
DECEMBER 31, 1995 AND 1994

<TABLE>
<CAPTION>
1995 1994
-------------- -----------
<S> <C> <C>
ASSETS

Investments with fixed maturities (Note 2) ............... $14,439,231 $ --
Cash and cash equivalents (Notes 2 and 13) ............... 2,242,245 50,361
Premiums receivable, less allowance for
doubtful accounts 1995 $613,125; 1994 none ............. 4,849,556
Reinsurance and related recoverables (Note 4):
Paid loss recoverable ................................... 94,598
Loss and loss adjustment expenses ....................... 14,471,111
Prepaid reinsurance premiums ............................ 530,957
Advances receivable (Note 9) ............................. 175,832
Accrued investment income ................................ 211,277
Prepaid expenses (Note 5) ................................ 1,821,000
Deferred income taxes (Note 6) ........................... 1,084,000
Deferred policy acquisition costs ........................ 389,737
Equipment, less accumulated depreciation
1995 $47,465; 1994 none ................................ 289,871
Other assets, net ........................................ 101,202 41,895
-------------- -----------
$40,700,617 $ 92,256
============== ===========
RESERVES, LIABILITIES AND STOCKHOLDERS' EQUITY

Reserves for losses and loss adjustment expenses ........ $28,306,416 $ --
Liabilities:
Accounts payable (Note 9) ............................... 459,929
Accrued expenses and other liabilities .................. 2,249,540
Unearned premium ........................................ 2,346,983
Deferred gain on loss portfolio transfer (Note 4) ...... 760,878
Accrued income taxes and special tax deposits (Note 6) . 1,078,200
-------------- -----------
6,895,530 --
-------------- -----------
Commitments and contingencies (Notes 4, 7, 11 and 13)
Total reserves and liabilities .......................... 35,201,946 --

Stockholders' equity (Notes 8 and 9):
Convertible preferred stock series A, 6% cumulative,
$1 par value, authorized shares 900,000; issued and
outstanding 221,805 shares (aggregate liquidation
preference of $2,218,050 at December 31, 1995) ........ 221,805
Additional paid-in capital, preferred series A ......... 1,996,245
Convertible preferred stock series B, $1 par value,
authorized, issued and outstanding 3,200,000 shares ... 3,200,000
Common stock, $1 par value, authorized 15,000,000
shares; 102,501 shares issued and outstanding ........ 102,501 102,501
Retained earnings (deficit) .............................. (21,880) (10,245)
-------------- -----------
5,498,671 92,256
-------------- -----------
$40,700,617 $ 92,256
============== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-9
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
THE PERIOD MAY 13, 1994 (INCEPTION) THROUGH DECEMBER 31, 1994

<TABLE>
<CAPTION>
1995 1994
-------------- ------------
<S> <C> <C>
Revenues:
$
Standard premium earned, net of discounts ......... $16,877,344 --
Less premium ceded for reinsurance ................. 1,741,757
-------------- ------------
Net premium earned ................................ 15,135,587 --
-------------- ------------
Less loss and loss adjustment expenses ............. 14,886,606
-------------- ------------
Premiums available for operations ................. 248,981 --
-------------- ------------
Interest earnings .................................. 73,455
-------------- ------------
Net realized (losses) on investment transactions .. (404)
-------------- ------------
322,032 --
-------------- ------------
Expenses:
Policy acquisition and other underwriting expenses 333,315
Other expenses ..................................... 6,152 10,245
-------------- ------------
339,467 10,245
-------------- ------------
Income (loss) before income taxes ................ (17,435) (10,245)
-------------- ------------
Income taxes (Note 6) ............................... (5,800) --
-------------- ------------
Net income (loss) ................................. $ (11,635) $(10,245)
============== ============
Earnings (loss) per common share and common
share equivalent ................................ $ (0.11) $ (0.10)
============== ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-10
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
FOR THE PERIOD MAY 13, 1994 (INCEPTION) THROUGH DECEMBER 31, 1994

<S> <C> <C> <C> <C> <C>
Balance, beginning of period .... $ -- $ -- $ -- $ -- $ --

Common stock issued for cash ... 102,501

Net income (loss) ............... (10,245)

----------- ------------- ------------- ----------- -----------

Balance December 31, 1994 ........ -- -- -- 102,501 (10,245)

Preferred stock issued for cash 221,805 3,200,000 1,996,245

Net income ...................... (11,635)

----------- ------------- ------------- ----------- -----------

Balance, December 31, 1995 ...... $221,805 $3,200,000 $1,996,245 $102,501 $(21,880)

=========== ============= ============= =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-11
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
THE PERIOD MAY 13, 1994 (INCEPTION) THROUGH DECEMBER 31, 1994

<TABLE>
<CAPTION>
1995 1994
-------------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
$
Cash received for premiums .................... $ 1,341,812 --
Cash received from reinsurers ................. 298,994
Cash paid to reinsurers ....................... (2,213,424)
Cash paid for claims .......................... (1,380,808)
Cash (paid) reimbursed for operating expenses 227,355 (10,245)
Investment income collected ................... 61,961
-------------- -----------
Net cash and cash equivalents (used in)
operating activities ....................... (1,664,110) (10,245)
-------------- -----------
INVESTING ACTIVITIES
Purchase of investments ....................... (3,921,036)
Sale of investments ........................... 2,538,365
Proceeds from investment maturities ........... 28,237
Payments for other assets ..................... (31,790) (41,895)
Payments of advances, net ..................... (175,832)
-------------- -----------
Net cash and cash equivalents (used in)
investing activities ....................... (1,562,056) (41,895)
-------------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of preferred stock .... 5,418,050
Proceeds from issuance of common stock ....... 102,501
-------------- -----------
Net cash and cash equivalents provided by
financing activities ....................... 5,418,050 102,501
-------------- -----------
Net increase in cash and cash equivalents ..... 2,191,884 50,361
Cash and cash equivalents, beginning of period 50,361 --
-------------- -----------
Cash and cash equivalents, end of period ...... $ 2,242,245 $ 50,361
============== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-12
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
THE PERIOD MAY 13, 1994 (INCEPTION) THROUGH DECEMBER 31, 1994

<TABLE>
<CAPTION>
1995 1994
--------------- ------------
<S> <C> <C>
RECONCILIATION OF NET INCOME (LOSS) TO
NET CASH AND CASH EQUIVALENTS (USED IN)
OPERATING ACTIVITIES
Net income (loss) ................................... $ (11,635) $(10,245)
Adjustments to reconcile net income (loss) to net cash
and cash equivalents (used in) operating activities:
Depreciation ...................................... 4,837
Amortization ......................................... 1,315
Loss on sale of investments .......................... 404
Net amortization of bond discounts/premiums ......... 4,230
Amortization of deferred gain ........................ (75,070)
(Increase) decrease, netted for effects of assets
assumed, in:
Premiums receivable ............................. 197,712
Reinsurance and related recoverables ................ (6,981,217)
Accrued interest receivables ........................ (15,724)
Prepaid expenses .................................... (122,342)
Deferred income taxes ............................... (1,084,000)
Deferred policy acquisition costs ................... 86,921
Increase (decrease), netted for effects of
liabilities assumed, in:
Reserves for claims ............................. 6,057,569
Accounts payable and accrued expenses ............... 342,846
Advance premiums .................................... (1,148,156)
Accrued income tax and special tax deposits ........ 1,078,200
--------------- ------------
Net cash and cash equivalents (used in)
operating activities ............................. $(1,664,110) $(10,245)
=============== ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-13
<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994

NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Associated Business & Commerce Insurance Corporation (the Company) was
incorporated on May 13, 1994 under the provisions of Florida law. The
Company's activities through November 29, 1995 were limited to organization,
licensing and other activities to enable it to become an insurance company
specializing in workers' compensation insurance regulated by the Florida
Department of Insurance (the "Department"). On December 7, 1995, the
Department issued a certificate of authority after the Company successfully
completed a plan of capitalization. Activity and operations then immediately
commenced.

In a transaction approved by the Florida Department of Insurance, the
Company assumed the assets and liabilities of Associated Business & Commerce
Workers' Compensation Self-Insurance Fund (the Fund) by virtue of a loss
portfolio reinsurance transaction. By agreement with the Fund, the effective
date of the transaction was November 30, 1995. Accordingly, premiums earned
on the Fund's policies then in effect, and losses and underwriting expenses
incurred subsequent to that date are reported by the Company. However, the
Fund did not transfer liabilities not related to insurance.

The transaction described above together with other transactions and
contractual arrangements between the Fund, the Company and other parties were
contemplated by the Company in its long-term business plan with the primary
objective of offering non-assessable policies of insurance to members of the
Fund and to the general public. Employers insuring their worker's
compensation risks with the Fund were assessable for any losses and related
expenses not ultimately paid by the Fund. Such assessability created a
contingent liability to the employers, which management considered
detrimental to the continuing growth of the business. As part of the loss
portfolio transfer, the Company indemnified the members of the Fund who
elected to be insured by the Company against such assessments. Policies of
insurance written by the Company, including renewals of coverage to former
members of the Fund are non-assessable.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles (GAAP). The preparation of
financial statements in accordance with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date
of the financial statements and the reported revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH EQUIVALENTS

For purposes of the statements of cash flows, the Company considers all
highly-liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.

RECOGNITION OF PREMIUM REVENUES AND UNEARNED PREMIUM

Workers compensation and employers liability insurance premiums are
recognized evenly over the life of the related policies (generally one year),
including estimates of retrospectively-rated premiums

F-14
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

based upon experience incurred under those contracts to date, with a
liability for unearned premiums established for the premiums collected on the
unexpired portion of those policies. It is the general policy of the Company
to bill an amount approximating two months of annual premium in advance of
the effective date of insurance coverage which is held by the Company to
insure performance of each insureds' annual premium obligation.

Unearned premium also includes any return premium due the insured as a
result of premium audits. Standard premium is computed on payroll and
modified by an experience factor approved by the State of Florida via the
National Council on Compensation Insurance (NCCI). Payroll and payroll
classifications are subject to verification and revision after year end.
Additional premiums based on payroll audits are recognized as revenue in the
loss year for which coverage is provided.

DEFERRED POLICY 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 to which they relate. It is the
Company's policy to calculate and record deferred policy acquisition costs on
a quarterly basis. There was no amortization for the year ended December 31,
1995.

INVESTMENTS

Investments consist of U.S. Treasury notes, federal government sponsored
mortgage pools, and other U.S. government agency notes and are carried at
cost plus or minus the unamortized portion of premiums or discounts paid to
acquire such investments. The Financial Accounting Standards Board has issued
SFAS 115 "Accounting for Certain Investments in Debt and Equity Securities",
which became effective with the fiscal year which began January 1, 1994, and
has been implemented in the accompanying financial statements. This SFAS
addresses the accounting and reporting for investments in equity securities
that have readily determinable market values and for all investments in debt
securities. Debt securities are to be classified as trading securities
(reported at market value) and available-for-sale securities (reported at
fair value with unrealized market gains and losses reported as a separate
component of stockholders' equity).

Fixed maturity investments are securities that mature at a specified
future date more than one year after being issued. Fixed maturity securities
that the Company intends to hold until maturity are classified as "fixed
maturities held to maturity" and are carried at amortized cost. Amortized
cost is based upon the purchase price and is adjusted periodically in order
that the carrying value will equal the face or par value at maturity. Fixed
maturity securities that may be sold prior to maturity due to changes in
interest rates, prepayment risks, liquidity needs, tax planning purposes or
other similar factors, have been classified as "available for sale", and are
carried at fair value. The difference between aggregate carrying value for
fixed maturities available for sale and the aggregate amortized cost of such
securities is reported, net of related deferred income taxes, as a separate
component of stockholders' equity. At December 31, 1995, however, aggregate
carrying value approximated market; therefore, there is no balance carried as
a separate component of stockholders' equity.

Realized gains and losses on sales of investments are recognized on the
specific identification basis.

EQUIPMENT

Equipment is recorded at cost and is depreciated using accelerated and
straight-line methods over the respective assets' estimated useful lives
which range from five to seven years.

F-15
<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

DIVIDEND PAYMENT RESTRICTIONS

The Company is restricted from paying dividends in excess of a statutory
formula on either common or preferred stock. No dividends on common stock may
be paid until all of the accumulated and unpaid dividends, if any, on the
Company's registered Series A Preferred stock have been paid in full.

INSURANCE LIABILITIES

The liability for losses and loss adjustment expenses includes an amount
determined from loss reports and individual cases and an amount, based on
past and industry experience, for losses incurred but not reported and future
development of existing cases. In establishing its liability for losses and
loss adjustment expenses, the Company utilizes the findings of an independent
actuary. 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. Although
the Company believes that the estimate of the reserve for losses and loss
adjustment expenses is reasonable in the circumstances, the Company's absence
of a substantial period of loss experience to support the assumptions
inherent in establishing the estimated reserves results in uncertainty as to
the ultimate amount that will be required for the settlement of losses and
claims.

Accordingly, the ultimate settlement of losses and the related loss
adjustment expenses may vary, perhaps significantly, from the estimated
amounts included in the accompanying financial statements.

ORGANIZATION COSTS

Included in other assets are organization costs consisting of certain
costs associated with initial incorporation, registration and licensing
activities. These costs are amortized by the straight-line method over five
years. Amortization expense totaled $1,315 for the year ended December 31,
1995.

REINSURANCE

Reinsurance premiums, commissions, and expense reimbursements related to
reinsured business are accounted for on bases consistent with those used in
accounting for the original policies issued and the terms of the reinsurance
contracts. Premiums ceded to other companies have been reported as a
reduction of premium income. The Company maintains specific excess loss
reinsurance with unaffiliated insurance companies. For 1995 the Company
retained the first $350,000 of each loss.

With the exception of the assumption of insurance liabilities and assets
from the Fund in a one time only transaction, the Company does not assume
reinsurance from other insurance funds or companies in the ordinary course of
business. The Company has entered into a 70% proportional quota-share
agreement with Underwriters Reinsurance Company ("Underwriters") (Note 4).

INCOME TAXES

The Company accounts for income taxes in accordance with Financial
Accounting Standards Board Statement of Financial Standards No. 109,
"Accounting for Income Taxes" (SFAS109). Income taxes

F-16
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

INCOME TAXES (CONTINUED)

are provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes related
primarily to differences between the basis of premiums receivable,
reinsurance and related receivables and insurance liabilities for financial
and income tax reporting. The deferred tax assets and liabilities represent
the future tax return consequences of those differences, which will be either
taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses that are
available to offset future taxable income and tax credits that may be
available to offset future federal income taxes.

EARNINGS PER SHARE

Earnings per common share and common share equivalent were computed by
dividing net income by the weighted average number of shares of common stock
and common stock equivalents outstanding during the year. Also, no dilution
of earnings per share is calculated because the preferred stock is not
convertible to common shares before January 1, 2000.

ALLOWANCE FOR BAD DEBTS

The bad debt allowance is based upon the Company's and the Fund's
experience with uncollectible accounts receivable and represents the
Company's estimate of the uncollectible amounts incurred through each year
end. The following table summarizes the activity in the bad debt allowance
for the year ended December 31, 1995 and the period ended December 31, 1994:

<TABLE>
<CAPTION>
1995 1994
----------- -------
<S> <C> <C>
Balance, beginning of period .... $ -- $ --
Allowance assumed from the Fund . 560,094
Additions to the allowance ...... 53,031
Write-offs against the allowance
----------- ---------
Balance, end of period ........... $613,125 $ --
=========== =========
</TABLE>

NOTE 2--INVESTMENTS IN SECURITIES

Gross investment income for the periods ended December 31, 1995 and 1994
totaled $73,455 and none, respectively. There were no investment expenses for
the same periods.

During December 1995, the Company sold U.S. Treasury securities classified
as available for sale with a carrying value of $2,539,173 for gross realized
gains (losses) of $2,615 and $(3,019), respectively, for a net loss of $404.

F-17
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 2--INVESTMENTS IN SECURITIES--(CONTINUED)

Investments included in the accompanying balance sheet at December 31,
1995 are summarized as follows (there were no investments in securities at
December 31, 1994):

<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST APPRECIATION DEPRECIATION MARKET VALUE
-------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Held to maturity:
Fixed maturities:
$
U.S. Treasury notes ........ $ 500,224 $ 711 -- $ 500,935
U.S. Government agency
notes, various maturities and
interest rates ........... 1,996,310 13,190 -- 2,009,500
GNMA and FNMA Mortgage
pools various maturities
and interest rates ....... 7,712,198 16,192 (57,865) 7,670,525
-------------- --------------- --------------- ---------------
Total held to maturity .. 10,208,732 30,093 (57,865) 10,180,960
-------------- --------------- --------------- ---------------
Available for sale:
Fixed maturities:
U.S. Treasury notes ........ 4,230,499 -- -- 4,230,499
-------------- --------------- --------------- ---------------
Total investments ........ $14,439,231 $30,093 $(57,865) $14,411,459
============== =============== =============== ===============
</TABLE>

The fair value of investments at December 31, 1995 was determined using
outside pricing services.

The carrying value and estimated market value of debt securities at
December 31, 1995 by contractual maturity, are shown below. Actual maturities
may differ from contractual maturities because certain borrowers have the
right to call or prepay obligations without call or prepayment penalties.

ESTIMATED
CARRYING MARKET
VALUE VALUE
-------------- --------------
Due in one year or less ................ $ 1,692,927 $ 1,691,807
Due after one year through five years . 4,226,805 4,247,705
Due after five years through ten years 807,301 801,422
-------------- --------------
6,727,033 6,740,934
GNMA and FNMA Mortgage pools ........... 7,712,198 7,670,525
-------------- --------------
$14,439,231 $14,411,459
============== ==============

The Company does not have any material concentrations of credit risk in
its portfolio as it consists entirely of U.S. Treasury and other federal
government agency notes, GNMA's and FNMA's.

The carrying value of securities on deposit with various governmental
agencies at December 31, 1995 was $2,260,904 and is included in fixed
maturities available for sale.

As of February 29, 1996, the most recent date for which information is
available, the estimated market values of the Company's investments which
were held at December 31, 1995 approximates $14,296,000.

F-18
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 3--STATE OF FLORIDA SPECIAL DISABILITY TRUST FUND

The State of Florida operates and manages the Special Disabilities Trust
Fund (SDTF) and reimburses employers and insurers for certain workers
compensation benefits paid to employees when the employee is injured on the
job and the resulting disability is as a result of or was related to a prior
work related injury. The SDTF is funded through assessments upon all Florida
workers' compensation insurers at a current level of 4.52% of premium written
and distributes such sums among insurers whose policy holders have employed
individuals with previously determined worker's compensation-related
disabilities, and such individuals have filed a claim. The Company has
included, as recoverables against losses and loss adjustment expenses,
amounts submitted and to be submitted to SDTF. See also Note 4.

NOTE 4--REINSURANCE AND RELATED RECOVERABLES

Reinsurance contracts do not relieve the Company from its obligation to
pay claims. However, the Company limits the maximum net loss that can arise
from risks in its concentrated area of exposure by reinsuring (ceding)
certain levels of risks with other insurers or reinsurers, on an automatic
basis under general reinsurance contracts known as "treaties" or by
negotiation on large individual risks. Ceded reinsurance is treated as the
risk and liability of the assuming companies.

Effective October 1, 1995, the Fund entered into a 70% proportional
quota-share reinsurance treaty with Underwriters Reinsurance Company
(Underwriters), which was assigned to the Company effective November 30,
1995. Under the terms of the agreement, the Company cedes 70% of its net
written premium to Underwriters with Underwriters assuming 70% of the
Company's retained losses and loss adjustment expenses. To cover the costs of
underwriting, Underwriters reimbursed the Company for certain direct
expenses, including other reinsurance and managed care fees incurred, and
paid the Company a ceding commission ultimately based on the Company's loss
ratio, subject to certain adjustments and limits. Ceding commissions earned
for the periods ended December 31, 1995 and 1994 totaled $415,680 and none,
respectively.

The following table summarizes the effect of reinsurance on premiums
earned and written for the periods ended December 31, 1995 and 1994:

1995 1994
-------------- -------
Premiums earned:
Direct ................ $ 2,420,743 $ --
Assumed ............... 14,456,601
Ceded ................. (1,741,757)
-------------- -------
Net premiums earned $15,135,587 $ --
============== =======

The assumed premium is comprised entirely of the premium assumed from the
Fund as a result of the loss portfolio transfer described in Note 1. The
losses assumed by the Company of $14,456,601 were less than total premium on
this transaction, which totaled $15,292,549. A deferred gain has therefore
been recorded in the amount of $835,948. This gain is being amortized in
proportion to the reduction in reserve for assumed losses.

Because of the common anniversary date of December 31, 1995 of
substantially all policies in force during 1995, earned and written premiums
are not materially different.

At December 31, 1995 and 1994, reinsurance and related recoverables
consisted of $94,598 and none of recoverables on paid claim and claim
settlement expenses and $14,471,111 and none of recoverables on unpaid claim
and claim settlement expenses.

F-19
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 4--REINSURANCE AND RELATED RECOVERABLES--(CONTINUED)

Approximately $8,169,000 of the reinsurance and related recoverables at
December 31, 1995 are from Allstate Insurance Company. Also, included in
reinsurance and related recoverables at December 31, 1995 is approximately
$2,421,000 related to the Company's quota share agreement with Underwriters.
In addition, estimated undiscounted recoveries from the SDTF approximated
$3,881,000 at December 31, 1995.

In the event that all or any of the reinsuring companies or the SDTF might
be unable to meet their obligations under existing reinsurance agreements or
law, the Company would be liable for such defaulted amounts. The Company's
management believes that all reinsurers are in sound financial condition, and
include Allstate Insurance Company, Continental Casualty Company, and
Underwriters Reinsurance Company, all "A" rated by A.M. Best.

NOTE 5--MANAGED CARE

During 1994, the Fund entered into a managed care arrangement with Humana
under which Humana is to provide medical services to workers whose employers
were participating in the voluntary managed care arrangement. The terms of
the agreement with Humana, which was assigned to the Company effective
November 30, 1995, provide for the payment of a capitation fee in exchange
for which Humana covers all the medical cost associated with a claim for a
period of three years after the date the claim is reported. Fees paid to
Humana are recognized as prepaid expenses and unpaid claim and claim
settlement expenses to the extent that unpaid claims and claim settlement
expenses exist for managed care covered claims. Prepaid expenses at December
31, 1995 consists of $1,821,000 of fees paid to Humana under this agreement,
including amounts assumed from the Fund in the loss portfolio transfer.

To the extent that Humana is unable to meet their contractual obligation
under the agreement, the Company is liable for unpaid claim and claim
settlement expenses. However, as part of the agreement, Humana has issued an
"evergreen" letter of credit to the benefit of the Company in the amount of
$2,000,000.

NOTE 6--INCOME TAXES

Temporary differences giving rise to deferred tax assets consist primarily
of a discount on the reserve for loss and loss adjustment expenses for tax
purposes and on reinsurance and related receivables, accounting for earned
premiums differently for tax purposes than for financial reporting purposes,
expensing for tax purposes internal underwriting costs attributable to policy
acquisitions, accounting for other policy acquisition costs differently for
tax purposes than for financial reporting purposes, and the recording of an
allowance for uncollectible premiums receivable for financial reporting
purposes but not for tax purposes.

The provision for income taxes are as follows for the periods ended
December 31, 1995 and 1994:

1995 1994
-------------- -------
Current .... $ 1,078,200 $ --
Deferred .. (1,084,000)
-------------- -------
$ (5,800) $ --
============== =======

F-20
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 6--INCOMES TAXES--(CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1995 and
1994 are as follows:

1995 1994
------------- -------
Deferred tax assets:
Discount on net loss reserves $ 706,000 $ --
Deferred charge ............... 259,000
Unearned premium .............. 159,000
Other ......................... 12,000
------------- -------
Total deferred tax assets ... 1,136,000 --
Deferred tax liabilities:
Policy acquisition costs ..... (52,000)
------------- -------
$1,084,000 $ --
============= =======

Management believes it is more likely than not that the deferred tax
assets will be realized due to the Company's tax planning strategies and
future taxable income. Accordingly, no valuation allowance has been
established.

NOTE 7--LEASE, OTHER COMMITMENTS AND TOTAL RENTAL EXPENSE

At December 31, 1995 the Company leases its office space on a
month-to-month basis for $9,408 per month, plus sales tax, its pro rata share
of the property taxes, utilities, normal maintenance, insurance and specified
percentages of common-area expenses and special assessments.

The total rental expense included in the statements of operations for the
periods ended December 31, 1995 and 1994 totaled $9,973 and none,
respectively.

To process claims on behalf of the Company, a servicing agreement has been
executed with an unrelated company for a five year term which began January
1, 1995. For the claims management services, the Company pays the claims
processor 2.5% of earned premium plus 25% of recoveries collected from the
SDTF.

NOTE 8--STOCKHOLDERS' EQUITY

The Company has authorized a total of 10,000,000 shares of preferred
stock, available to be issued in any series as determined by the board of
directors. As of December 31, 1995, the board has authorized up to 900,000 of
6% cumulative Convertible Preferred Series A shares, of which 221,805 have
been issued at December 31, 1995 and are registered, and 3,200,000 authorized
and issued shares of Convertible Preferred Series B, which are unregistered.
Accordingly, a total of 6,578,195 shares of preferred stock are authorized
and unissued.

Each share of the 6% Cumulative Convertible Series A Preferred Stock is
convertible to 2 shares of common stock after December 31, 2000. The Company
may, after December 31, 1998, and upon thirty days written notice, redeem the
Series A preferred shares at $10 per share plus unpaid and accrued dividends.
The Series A preferred shares also carry a liquidation value of $10 per
share. Accordingly, at December 31, 1995 the aggregate liquidation preference
is $2,218,050.

The Company's originally filed articles of incorporation provided for
5,000,000 shares of authorized common stock. During November, 1994, the
articles of incorporation were amended to allow for an additional 10,000,000
shares of common stock to bring the total authorized common stock to
15,000,000 shares.

F-21
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 8--STOCKHOLDERS' EQUITY--(CONTINUED)

During March 1995, the founding stockholders of the Company entered into a
stock exchange agreement with Associated Business & Commerce Holdings, Inc.
(Holdings) hereby they exchanged all outstanding common stock of the Company
for an equal number of shares of Holdings, in direct proportion to the
existing stock ownership of common stock in the Company. As a result, the
Company became a wholly owned subsidiary of Holdings. All common stock and
preferred series B stock have been pledged as collateral against a note
payable issued by Holdings.

The note payable of Holdings was issued to the Company's quota share
reinsurer, Underwriters. The loan bears interest at 12.75% per annum, and, if
not prepaid, is due on September 30, 2000. Holdings expects to repay the loan
from fees paid by the Company under a management agreement. Holdings has also
granted Underwriters options to purchase common stock of Holdings in an
amount, after issuance, up to a maximum of 49% of the number of outstanding
common shares of Holdings. The number of shares subject to option is based
upon the date of the repayment in full of the Note.

Unaudited statutory policyholders' surplus as of December 31, 1995 and
unaudited statutory net income (loss) for the period ended December 31, 1995
are $4,830,507 and $(375,426), respectively.

In order to enhance the regulation of insurer solvency, the National
Association of Insurance Commissioners (NAIC) issued a model law to implement
risk-based capital (RBC) requirements for property and casualty insurers,
which are designed to assess capital adequacy and raise the level of
protection that statutory surplus provides for policyholder obligations.
Under the model law, insurers who have less statutory surplus than is
required by the RBC calculations will be subject to varying degrees of
regulatory action, depending on the level of capital inadequacy. Since the
Company is domiciled and issues policies exclusively in the state of Florida,
and Florida has not yet adopted the model RBC law, the Company has not
calculated the RBC statutory surplus. However, management believes that it
has statutory surplus in excess of the RBC amounts.

NOTE 9--RELATED PARTY TRANSACTIONS

The Company receives legal services from a firm which employs a director.
Fees paid to this firm for the periods ended December 31, 1995 and 1994
totaled $21,271 and none, respectively. At December 31, 1995 accounts payable
includes the $21,271 of legal fees payable.

The Company is affiliated with the Fund through common management and some
common directors. During 1995 and 1994, the Fund paid $58,000 and $76,000 of
organization costs of the Company of which $12,000 was reimbursed during
1994. Included in premiums receivable is approximately $1,900,000 due from
the Fund in connection with the loss portfolio transaction. The Fund is
therefore not seeking reimbursement from the Company for the organizational
costs incurred by the Fund on behalf of the Company.

The Fund will repay the Company the balance of the $1,900,000 immediately
upon its receipt of an expected income tax refund.

All of the Company's outstanding common stock as well as all of the
outstanding Series B preferred QQ providing financing and performing certain
management services for the Company under a management agreement. The
management agreement calls for the Company to pay 14.1% of written premium to
Holdings in return for Holdings performing certain administrative functions
and paying certain costs on behalf of the Company. Management fee expense
incurred by the Company under the

F-22
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 9--RELATED PARTY TRANSACTIONS--(CONTINUED)

terms of this agreement totaled $344,706 for the year ended December 31,
1995. The advances receivable at December 31, 1995 of $175,832 represents
working capital advances to Holdings which are non-interest bearing and will
be repaid as cash flow of Holdings permits.

NOTE 10--STOCK OPTION PLAN

The Company has established a compensatory stock option plan called the
Equity Compensation Plan (the Plan). The Plan allows for the granting to
officers, key employees, eligible directors and independent contractors the
incentive stock options, non-qualified stock options, stock appreciation
rights, and restricted stock. The exercise price of the stock options may not
be less than 100% of the fair market value of the common stock on the date of
the grant of the stock option. The term of the option may not be greater than
ten years. Incentive stock options granted to a greater than 10% owner shall
have an option exercise price of not less than 110% of the fair market value
of the stock on the date of the grant and the exercise period will not be
greater than five years. Stock appreciation rights may only be granted in
conjunction with a related stock option. Stock appreciation rights call for
the payment of cash or common stock equal in value to the excess of the fair
market value of the common stock over the stock option exercise price.

The Board has reserved 2,000,000 shares of common stock for issuance under
the Plan. There are no outstanding options at December 31, 1995.

NOTE 11--LEGAL PROCEEDINGS

F-23
<PAGE>
ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994

NOTE 12--NON-CASH INVESTING ACTIVITIES

Effective November 30, 1995, the Company received all of the insurance
related assets and assumed all of the insurance related liabilities from the
Fund by virtue of a loss portfolio reinsurance arrangement. Non-cash
investing activities associated with this transaction are as follows:

Investments received . $13,089,432
==============
Equipment received ... $ 294,707
==============
Other assets received $ 28,834
==============

NOTE 13--CONCENTRATIONS AND CASH RESTRICTION

The Company routinely maintains cash balances in excess of the federally
insured limit of $100,000 at its financial institutions. Uninsured balances
at December 31, 1995 approximated $1,692,000. In addition, the Company had
$250,000 cash on deposit with a governmental agency.

All of the Company's revenues are derived from within the state of
Florida. Accordingly, the Company could be adversely affected by economic
downturns, significant unemployment, and other conditions that may occur from
time to time in Florida, which may not have as much of an impact on more
geographically diversified competitors.

F-24
<PAGE>

ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

BALANCE SHEETS

MARCH 31, 1995 AND 1994
UNAUDITED

<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
ASSETS
Investments with fixed maturities (Note 3) ......... $12,745,193 $11,299,738
Cash and cash equivalents (Note 10) ................. 735,188 1,526,358
Premiums receivable, less allowance for doubtful
accounts 1994 $848,517; 1995 $754,580 ............. 2,683,186 2,844,019
Reinsurance and related recoverables (Note 4):
Paid loss recoverable .............................. 10,546 57,490
Loss and loss adjustment expenses .................. 6,738,752 4,359,747
Prepaid reinsurance premiums ....................... 535,892 248,421
Advances receivable, less allowance for
uncollectible amounts 1993 and 1994
$106,790 (Note 9) ................................. 4,455 -0-
Accrued investment income ........................... 131,052 102,687
Prepaid expenses .................................... 8,727 132,895
Deferred income taxes ............................... 1,227,000 1,216,323
Estimated income tax payments ....................... 385,600 -0-
Deferred policy acquisition costs ................... 700,744 524,437
Equipment, less accumulated depreciation
1994 $56,963; 1995 $125,518 ....................... 176,400 112,563
Other assets ........................................ 726,982 36,543
-------------- --------------
$26,809,717 $22,461,221
============== ==============
RESERVES, LIABILITIES AND SURPLUS
Reserves for losses and loss adjustment expenses ... $20,339,973 $17,620,634
Liabilities:
Accounts payable ................................... 885,325 332,390
Accrued expenses and other liabilities ............. 440,225 816,106
Member premium deposits ............................ 3,957,599 3,491,849
Accrued income taxes ............................... 101,500 -0-
-------------- --------------
5,384,649 4,640,345
-------------- --------------
Commitments and contingencies (Notes 6, 7, 9 and 10)
Total reserves and liabilities ..................... 25,724,622 22,260,979
Surplus (deficit) ................................... 1,085,095 200,242
-------------- --------------
$26,809,717 $22,461,221
============== ==============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-25
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
UNAUDITED

<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Revenues:
Standard premium earned, net of discounts ....... $6,602,724 $6,175,906
Less premium ceded for reinsurance ............... 553,640 546,564
------------- -------------
Net premium earned .............................. 6,049,084 5,629,342
------------- -------------
Less claims incurred:
Claims paid ..................................... 279,100 272,943
Claims reserved ................................. 3,814,589 2,974,582
Less self-insurer's assessment ................... 298,443 279,151
------------- -------------
4,392,132 3,526,676
------------- -------------
Premiums available for operations ............... 1,656,952 2,102,666
------------- -------------
Interest earnings ................................ 203,988 130,177
------------- -------------
Other ............................................ 161,225 139,987
------------- -------------
2,022,165 2,372,830
------------- -------------
Expenses:
Claims services .................................. 165,068 185,278
Marketing and member services .................... 587,247 502,967
Loss control and underwriting .................... 170,135 165,110
Premium taxes and department of labor assessments 212,607 198,864
General and administrative ....................... 693,346 466,285
Facilities and utilities ......................... 53,237 42,527
Bad debts (Note 9) ............................... 124,580 102,595
------------- -------------
2,006,220 1,663,626
------------- -------------
Income before income taxes ...................... 15,945 709,204
------------- -------------
Income taxes ...................................... 5,400 155,000
------------- -------------
Net income ...................................... $ 10,545 $ 554,204
============= =============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-26
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

STATEMENTS OF CHANGES IN SURPLUS (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1995
UNAUDITED

1995 1994
------------- -------------
Surplus (deficit), beginning of period $1,074,550 $(353,962)
Net income ............................ 10,545 554,204
------------- -------------
Surplus, end of period ................. $1,085,095 $ 200,242
============= =============

The accompanying notes are an integral part of these financial statements.

F-27
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
UNAUDITED

<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Cash received for premiums and other income ...... $ 7,164,751 $ 5,828,935
Cash received from reinsurers and SDTF ............ 278,810 30,153
Cash paid for claims .............................. (2,938,236) (2,454,632)
Cash paid for operating expenses .................. (3,565,166) (2,126,526)
Investment income collected ....................... 237,762 173,550
Income taxes paid ................................. (665,500) (700,000)
-------------- --------------
Net cash and cash equivalents provided by
operating activities ........................... 512,421 751,480
-------------- --------------
INVESTING ACTIVITIES
Purchase of investments ........................... (476,250) (1,071,092)
Proceeds from investment maturities ............... 382,737 330,000
Purchase of equipment ............................. (38,692) (28,148)
Receipts of (payments for) other assets .......... 6,649 (1,339)
-------------- --------------
Net cash and cash equivalents (used in)
investing activities ........................... (125,556) (770,579)
-------------- --------------
Net increase (decrease) in cash and cash
equivalents ........................................ 386,865 (19,099)
-------------- --------------
Cash and cash equivalents, beginning of period .... 348,323 1,545,457
-------------- --------------
Cash and cash equivalents, end of period .......... $ 735,188 $ 1,526,358
============== ==============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-28
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
UNAUDITED

<TABLE>
<CAPTION>
1995 1994
------------ --------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH AND CASH
EQUIVALENTS PROVIDED BY OPERATING ACTIVITIES
Net income (loss) ..................................... $ 10,545 $ 554,204
Adjustments to reconcile net income to net cash and cash
equivalents provided by operating activities:
Depreciation ........................................ 17,238 9,497
Amortization ........................................... 1,514 1,514
Net amortization (accretion) of bond discounts/premiums (20,684) 6,997
(Increase) decrease in:
Premiums receivable ................................... (158,808) (1,198,550)
Reinsurance and related recoverables .................. 25,588 (162,750)
Accrued investment income ............................. 54,458 36,376
Prepaid expenses ...................................... 28,609 (68,296)
Deferred income taxes ................................. -0- 11,000
Estimated income taxes ................................ (385,600) -0-
Deferred policy acquisition costs ..................... (370,051) (220,482)
Other assets .......................................... (416,804) (5,035)
Increase (decrease) in:
Reserves for claims ................................... 1,155,453 967,893
Accounts payable and accrued expenses ................. 161,273 560,925
Advance premiums ...................................... 684,190 814,187
Accrued income tax and special tax deposits .......... (274,500) (556,000)
------------ --------------
Net cash and cash equivalents provided by
operating activities ............................... $ 512,421 $ 751,480
============ ==============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-29
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1995 AND 1994
UNAUDITED

NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Associated Business and Commerce Worker's Compensation Self-Insurance Fund
(the Fund) was created in 1991 under the provisions of Florida law. The Fund
is regulated by the Florida Department of Labor and Employment Security
(DLES) and provides worker's compensation insurance to its members. Through
June 30, 1994, the Fund was regulated by the DLES. Effective July 1, 1994,
monitoring of regulatory matters was transferred to the Florida Department of
Insurance (DOI). However, the Fund is still subject to rules and regulations
promulgated by DLES.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles (GAAP). All adjustments, which
are normal and recurring in nature, necessary to a fair result of the interim
periods are reflected in the accompanying financial statements.

CASH EQUIVALENTS

For purposes of the statement of cash flows, the Fund considers all
highly-liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.

DEFERRED POLICY 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 to which they relate. It is the
Fund's policy to calculate and record deferred policy acquisition costs on a
quarterly basis.

Amortization expense for the periods ended March 31, 1994 and 1995
approximated $182,000 and $281,000, respectively.

RECOGNITION OF PREMIUM REVENUES AND MEMBER PREMIUM DEPOSITS

Insurance premiums are recognized evenly over the life of the related
policies (generally one year) with a liability for unearned premiums
established for the premiums collected on the unexpired portion of those
policies. It is the policy of the Fund to bill a deposit equal to two months
of annual premium in advance of the effective date of insurance coverage
which is held by the Fund to insure performance of each member's annual
premium obligation. Member premium deposits also include any return premium
due the insured as a result of premium audits. Standard premium is computed
on payroll and modified by an experience factor provided by the State of
Florida via the National Council on Compensation Insurance (NCCI). Payroll
and payroll classifications are subject to verification and revision after
year end. Deferred expenses for self-insurer's assessments, administrator
fees and commissions to agents have been accrued, based upon premium
collected. Additional premiums based on payroll audits are recognized as
revenue in the Fund year for which coverage is provided.

INVESTMENTS

Investments consist of U.S. Treasury notes, U. S. Treasury Strips, GNMA
mortgage pools, and other U.S. government notes and are carried at cost plus
or minus the unamortized portion of premiums

F-30
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

MARCH 31, 1995 AND 1994
UNAUDITED

NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

or discounts paid to acquire such investments. The Financial Accounting
Standards Board has issued SFAS 115 "Accounting for Certain Investments in
Debt and Equity Securities", which became effective with the fiscal year
which began January 1, 1994, and has been implemented in the accompanying
financial statements. This SFAS addresses the accounting and reporting for
investments in equity securities that have readily determinable market values
and for all investments in debt securities. Debt securities are to be
classified as trading securities (reported at market value),
available-for-sale securities (reported at fair value with unrealized market
gains and losses reported as a separate component of surplus) and held to
maturity (reported at amortized cost).

Realized gains and losses on sales of investments are recognized on the
specific identification basis.

EQUIPMENT

Equipment is recorded at cost and is depreciated using accelerated methods
over the respective assets' estimated useful lives which range from five to
seven years.

DIVIDEND PAYMENT RESTRICTIONS

The Fund must obtain approval from DLES prior to the declaration and
payment of dividends to members.

INSURANCE LIABILITIES

The liability for losses and loss adjustment expenses includes an amount
determined from loss reports and individual cases and an amount, based on
past and industry experience, for losses incurred but not reported and future
development of existing cases. In establishing its liability for losses and
loss adjustment expenses, the Fund utilizes the findings of an independent
actuary. 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. Although
the Fund believes that the estimate of the reserve for losses and loss
adjustment expenses is reasonable in the circumstances, the fund's absence of
a substantial period of loss experience to support the assumptions inherent
in establishing the estimated reserves results in uncertainty as to the
ultimate amount that will be required for the settlement of losses and
claims. Accordingly, the ultimate settlement of losses and the related loss
adjustment expenses may vary, perhaps significantly, from the estimated
amounts included in the accompanying financial statement.

The Fund has accounted for loss and loss adjustment expenses on an
undiscounted basis in the accompanying financial statements. For all prior
years, including its annual report for the year ended December 31, 1993
issued to its members and others, the Fund discounted its insurance
liabilities to give effect to the anticipated investment income on loss and
loss adjustment expenses. The Fund has made this accounting change in
anticipation of the accounting treatment to be adopted by an affiliate

F-31
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

MARCH 31, 1995 AND 1994
UNAUDITED

NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

for accounting for loss and loss adjustment expenses in the affiliates
financial statements to be filed with the Securities and Exchange Commission.

REINSURANCE

Reinsurance premiums, commissions, and expense reimbursements related to
reinsured business are accounted for on bases consistent with those used in
accounting for the original policies issued and the terms of the reinsurance
contracts. Premiums ceded to other companies have been reported as a
reduction of premium income. The Fund maintains specific excess loss
reinsurance with unaffiliated insurance companies. For the 1992 fund year,
the Fund retained $250,000 of each loss. For the 1993, 1994 and 1995 fund
years, the Fund retained the first $350,000 of each loss.

The Fund does not assume reinsurance from other insurance funds or
companies nor does it currently receive reinsurance commission income.

INCOME TAXES

Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the basis of premiums
receivable, reinsurance and related receivables and insurance liabilities for
financial and income tax reporting. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
be either taxable or deductible when the assets and liabilities are recovered
or settled. Deferred taxes also are recognized for operating losses that are
available to offset future taxable income and tax credits that may be
available to offset future federal income taxes. Effective January 1, 1992,
the Company adopted Statement of Financial Accounting Standards Number 109,
Accounting for Income Taxes.

ALLOWANCE FOR BAD DEBTS

The bad debt allowance is based upon the Fund's experience with
uncollectable accounts receivable and represent the Fund's estimate of the
uncollectable amounts incurred through each fund year end. The activity in
the bad debt allowance for periods ended March 31, 1994 and 1995 is as
follows:

1994 1995
----------- -----------
Balance, beginning of year ........... $802,252 $630,000
Additions ............................ 102,595 124,580
Accounts written off as uncollectible (56,330) -0-
----------- -----------
Balance, end of year ................. $848,517 $754,580
=========== ===========

The allowance for bad debts is netted against premiums receivable in the
accompanying balance sheets.

NOTE 2--MEMBER INDEMNIFICATION

As is required of every fund regulated by DLES, the members of the Fund
have jointly and severally agreed to assume and discharge the obligations of
the Fund in the event any claims or

F-32
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

MARCH 31, 1995 AND 1994
UNAUDITED

NOTE 2--MEMBER INDEMNIFICATION --(CONTINUED)

expenses may remain unpaid after available reserves and reinsurance have been
exhausted. Given the nature of the Fund's reinsurance arrangements, the Board
of Trustees believes the likelihood of additional assessments upon members
relating to this indemnity to be remote.

NOTE 3--INVESTMENTS IN SECURITIES

All of the funds investments at March 31, 1994 and 1995 are classified as
held-to-maturity as the Fund has the ability and intent to hold all
investments to maturity. At March 31, 1994 and 1995, amortized cost, gross
unrealized appreciation and depreciation and estimated market value of
investments in securities are as follows:

<TABLE>
<CAPTION>
1994
---------------------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
COST APPRECIATION DEPRECIATION VALUE
-------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury notes, various
maturities and interest rates ... $ 8,845,208 $ -0- $ (97,862) $ 8,747,346
U.S. Treasury strips, (zero
coupon) $3,000,000 face value
maturing November 15, 1997
through November 15, 1998 ....... 2,454,530 -0- (111,730) 2,342,800
-------------- --------------- --------------- -------------
$11,299,738 $-0- $(209,592) $11,090,146
============== =============== =============== =============
</TABLE>

<TABLE>
<CAPTION>
1995
---------------------------------------------------------------
ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST APPRECIATION DEPRECIATION VALUE
-------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury notes, various
maturities and interest rates ... $ 5,001,333 $ -0- $(117,920) $ 4,833,413
U.S. Treasury strips, (zero
coupon) $3,000,000 face value
maturing November 15, 1997
through November 15, 1998 ....... 2,577,090 -0- (151,650) 2,425,440
U.S. Government agency notes,
various maturities and interest
rates ........................... 2,651,781 15,201 (29,972) 2,637,010
GNMA Mortgage pools various
maturities and interest rates ... 2,514,989 4,579 (8,397) 2,511,171
-------------- --------------- --------------- -------------
$12,745,193 $19,780 $(307,939) $12,457,034
============== =============== =============== =============
</TABLE>

The U.S. Treasury strips are comprised of three $1,000,000 face value zero
coupon treasury notes which were purchased at prices to yield 4.6% to 5.1% to
maturity.

F-33
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

MARCH 31, 1995 AND 1994
UNAUDITED

NOTE 3--INVESTMENTS IN SECURITIES--(CONTINUED)

The carrying value and estimated market value of debt securities at March
31, 1995 by contractual maturity, are shown below:

ESTIMATED
CARRYING MARKET
VALUE VALUE
-------------- -------------
Due in one year or less ............... $ 1,209,812 $ 1,190,700
Due after one year through five years 8,065,073 7,795,288
Due after five years through ten years 955,319 959,875
-------------- -------------
10,230,204 9,945,863
GNMA Mortgage pools ................... 2,514,989 2,511,171
-------------- -------------
$12,745,193 $12,457,034
============== =============

The Fund does not have any material concentrations of credit risk in its
portfolio as it consists entirely of U.S. Treasury notes, strips, and GNMA's.

Gross investment income for the periods ended March 31, 1994 and 1995
totalled $135,477 and $203,988, respectively and investment expenses for the
same periods totalled $5,300 and none, respectively.

At March 31, 1995, U.S, Treasury notes carried at $2,307,151 have been
pledged to the State of Florida as a security deposit under section 38F-5.06
of the Florida Administrative Code.

NOTE 4--REINSURANCE AND RELATED RECOVERABLES

Reinsurance contracts do not relieve the Fund from its obligation to pay
claims. However, the Fund limits the maximum net loss that can arise from
risks in its concentrated area of exposure by reinsuring (ceding) certain
levels of risks with other insurers or reinsurers, on an automatic basis
under general reinsurance contracts known as "treaties" or by negotiation on
large individual risks. Ceded reinsurance is treated as the risk and
liability of the assuming companies.

In the event that all or any of the reinsuring companies might be unable
to meet their obligations under existing reinsurance agreements, the Fund
would be liable for such defaulted amounts. The Fund's Trustees believe that
all reinsurers are in sound financial condition, and include Allstate
Insurance Company and General American Life Insurance Company, both "A" rated
by A.M. Best.

Included in estimated reinsurance and related recoverables are the
undiscounted reinsurance receivables from Allstate Insurance Company, which
totaled $2,247,126 and $1,910,316 at March 31, 1994 and 1995, respectively.
Also included in reinsurance and other receivables is the undiscounted
estimated recoveries from the Special Disability Trust Fund, which totaled
$2,170,111 and $4,838,976 at March 31, 1994 and 1995, respectively.

NOTE 5--INCOME TAXES

Temporary differences giving rise to the deferred tax asset consist
primarily of a discount on the reserve for loss and loss-adjustment expenses
for tax purposes and on reinsurance and related

F-34
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

MARCH 31, 1995 AND 1994
UNAUDITED

NOTE 5--INCOME TAXES--(CONTINUED)

receivables, accounting for earned premiums differently for tax purposes than
for financial reporting purposes, expensing for tax purposes internal
underwriting costs attributable to policy acquisitions, accounting for other
policy acquisition costs differently for tax purposes than for financial
reporting purposes, and the recording of an allowance for uncollectible
premiums receivable for financial reporting purposes but not for tax
purposes.

In addition, certain provisions of the Internal Revenue Code allow the
Fund to deduct from taxable income the difference between the required
discounted reserve for claims and the undiscounted reserve for claims
provided, however, that the Fund pay a special estimated tax deposit. The
special tax deposit payable with the Funds income tax return is accounted for
as current income tax expense. However, the special tax deposit will be
applied to regular income taxes resulting from the inclusion in gross income
of any future reduction of the initial difference between the income tax
basis discounted and undiscounted reserves for claims. Any special tax
deposits not utilized within 15 years will be applied to any regular income
tax liability. The special tax deposit method is subject to an annual
election on the Fund's Federal income tax return. The Fund elected the
special tax method for 1992 and 1993, but has elected to file its 1994
Federal income tax return without the special tax deposit method.

The cumulative special tax deposits totaled $1,105,505 and $626,452 at
March 31, 1994 and 1995, respectively.

NOTE 6--LEASE COMMITMENT AND TOTAL RENTAL EXPENSE

At March 31, 1995 the Fund leases its office space on a month-to-month
basis for $9,973 plus sales tax per month, its pro rata share of the property
taxes, utilities, normal maintenance, insurance and specified percentages of
common-area expenses and special assessments.

The Fund subleased one-twelfth of this office space to its administrator
on a month-to-month basis for one-twelfth of the total cost to the Fund
during 1994. This sublease was terminated effective January 1, 1995.

The total rental expense included in the statement of operations for the
periods ended March 31, 1994 and 1995 totaled $27,374 and $29,918,
respectively.

NOTE 7--OTHER COMMITMENTS

The Fund employs an administrator to manage the day-to-day affairs of the
Fund under a 5-year agreement which became effective October 1, 1991. The
agreement is automatically renewable every five years thereafter but can be
terminated by the trustees in accordance with various provisions in the
agreement. Under a revision to this agreement effective April 1, 1993, as
compensation for these services, the administrator is to receive monthly four
percent of the audited standard premium, less any allowed discounts,
collected by the Fund. From this fee, throughout the entirety of the
agreement, the administrator is required to pay certain expenses of the Fund,
including accounting and actuarial expenses, trustees fees, dues and
convention expenses, incentive fees and bonuses, and other miscellaneous
expenses. Effective January 1, 1995, this agreement was terminated by mutual
agreement and the Administrator became an employee of the Fund.

To process claims on behalf of the Fund, a servicing agreement has been
executed with an unrelated company. For the claims management services, the
Fund pays the claims processor 3% of earned premium plus 20% of recoveries
collected from the SDTF.

F-35
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995 AND 1994
UNAUDITED

NOTE 7--OTHER COMMITMENTS--(CONTINUED)

The Fund has established a "Merit Plan", approved by DLES, under which
qualified insureds will receive preferential dividends in the event the Fund,
if approved by DLES, is able to pay dividends.

NOTE 8--RELATED PARTY TRANSACTIONS THE

Fund receives legal services from a firm which employs a trustee. Fees
paid to this firm for the periods ended March 31, 1994 and 1995 totaled
$56,897 and $118,014, respectively. A significant portion of these fees were
for non-recurring organizational and litigation matters of the Fund.

NOTE 9--ONGOING LITIGATION

The Trustees of the Fund brought suit against the Fund's former service
company during 1992. This suit, among other actions, alleged breach of
contract and breach of a promissory note. The defendant filed counterclaims
alleging, among other actions, the Fund breached its contract. In February,
1994 the Fund obtained a summary judgment in its favor. However, because the
collectibility of the promissory note receivable is in doubt, the $106,790
balance of the note is included in an allowance for uncollectible notes.

On December 6, 1994, management was informed by legal counsel that the
appellate courts had overturned the summary judgment entered in the Funds
favor involving litigation with the former service company, and remanded the
case back to the trial court. Management has appealed that decision to the
Florida Supreme Court. The ultimate outcome of the litigation cannot be
determined at the present time, although management intends to continue its
aggressive defense of the litigation. In the event the Supreme Court rejects
the Funds appeal, and there is an unfavorable outcome at the trial court,
which management believes to be unlikely, the Fund's liability is estimated
at less than one million dollars.

NOTE 10--UNINSURED CASH BALANCES

The Fund routinely holds checking account balances at it commercial banks
in excess of the federally insured limit of $100,000. At March 31, 1995,
uninsured balances totaled $534,588.

NOTE 11--OTHER MATTERS

The Trustees of the Fund adopted a plan during April, 1994 which would
have a newly created company, Associated Business and Commerce Insurance
Corporation (ABCIC), assume the insurance assets and liabilities of the Fund.
ABCIC will have a complex capital structure and its preferred stock, which is
anticipated to be registered with the Securities and Exchange Commission,
will be offered to existing members of the Fund. ABCIC is intended to be a
non-assessable stock insurance company.

The plan shall not become effective until approved by the DOI, the
on-going offering of ABCIC preferred stock is closed and ABCIC or an
affiliate completes an equity or debt financing transaction or transactions
which are adequate to capitalize the non-assessable stock insurance company
in order to meet the requirements of the Florida Insurance Code. In addition,
the plan shall not become effective until all applicable statutory and legal
filings are made and approved by the appropriate governmental regulatory
agencies.

F-36
<PAGE>

INDEPENDENT ACCOUNTANTS' REPORT

To the Trustees
Associated Business and Commerce Workers' Compensation
Self-Insurance Fund
Boca Raton, Florida

We have audited the accompanying statements of operations and cash flows
of Associated Business and Commerce Workers' Compensation Self-Insurance Fund
for the years ended December 31, 1995, 1994 and 1993. These financial
statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
Associated Business and Commerce Workers' Compensation Self-Insurance Fund
for the years ended December 31, 1995, 1994 and 1993 in conformity with
generally accepted accounting principles.

SCHMIDT, RAINES, TRIESTE,
DICKENSON & ADAMS, P.L.

Boca Raton, Florida
March 20, 1996

F-37
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Standard premium earned, net of discounts ............ $25,498,312 $24,703,624 $21,821,933
Less premium ceded for reinsurance ................... 20,529,657 2,186,254 1,969,437
--------------- -------------- --------------
Net premium earned .................................. 4,968,655 22,517,370 19,852,496
--------------- -------------- --------------
Less loss and loss adjustment expenses ............... -- 13,724,001 14,722,513
--------------- -------------- --------------
Premiums available for operations ................... 4,968,655 8,793,369 5,129,983
--------------- -------------- --------------
Interest earnings .................................... 772,424 605,901 283,535
--------------- -------------- --------------
Net realized gains (losses) on investment
transactions ....................................... 115,019 (30,911) 2,113
--------------- -------------- --------------
5,856,098 9,368,359 5,415,631
--------------- -------------- --------------
Expenses:
Policy acquisition and other underwriting expenses .. 7,143,265 7,249,750 5,657,381
Depreciation and amortization ........................ 103,790 70,100 45,235
--------------- -------------- --------------
7,247,055 7,319,850 5,702,616
--------------- -------------- --------------
Income (loss) before income taxes .................. (1,390,957) 2,048,509 (286,985)
--------------- -------------- --------------
Income taxes (Note 7) ................................. (316,407) 619,997 (40,605)
--------------- -------------- --------------
Net income (loss) ................................... $(1,074,550) $ 1,428,512 $ (246,380)
=============== ============== ==============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-38
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
1995 1994 1993
--------------- --------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Cash received for premiums and other income .... $ 26,275,001 $ 24,327,795 $22,119,355
Cash paid to reinsurers ......................... (6,404,993) (2,238,406) (2,471,887)
Cash received from reinsurers ................... 567,590 379,760 297,721
Cash paid for claims ............................ (11,850,932) (13,589,168) (6,738,547)
Cash paid for operating expenses ................ (8,427,586) (7,602,237) (5,510,092)
Investment income collected ..................... 713,418 586,579 341,905
Income taxes and special tax deposits paid ..... (735,500) (800,000) (371,528)
--------------- --------------- --------------
Net cash and cash equivalents provided by
operating activities ......................... 136,998 1,064,323 7,666,927
--------------- --------------- --------------
INVESTING ACTIVITIES
Purchase of investments ......................... (2,647,840) (6,110,754) (8,064,795)
Sale of investments ............................. 1,792,081 2,721,518 1,400,705
Proceeds from investment maturities ............. 561,304 1,265,849 --
Purchase of equipment ........................... (212,956) (125,080) (69,349)
Proceeds from life insurance and annuity deposit 41,296 -- --
Payments for other assets ....................... (19,206) (12,990) (4,573)
--------------- --------------- --------------
Net cash and cash equivalents (used in)
investing activities ......................... (485,321) (2,261,457) (6,738,012)
--------------- --------------- --------------
Net increase (decrease) in cash and
cash equivalents ................................. (348,323) (1,197,134) 928,915
--------------- --------------- --------------
Cash and cash equivalents, beginning of year .... 348,323 1,545,457 616,542
--------------- --------------- --------------
$
Cash and cash equivalents, end of year ........... -- $ 348,323 $ 1,545,457
=============== =============== ==============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-39
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- --------------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH AND CASH
EQUIVALENTS PROVIDED BY OPERATING ACTIVITIES
Net income (loss) .................................. $ (1,074,550) $ 1,428,512 $ (246,380)
Adjustments to reconcile net income (loss) to net
cash and cash equivalents provided by operating
activities:
Depreciation ....................................... 93,196 64,046 39,181
Amortization ........................................ 10,594 6,054 6,054
Loss (gain) on sale of investments .................. (115,019) 30,911 (2,112)
Net amortization of bond discounts/premiums ........ (48,963) 27,123 75,984
Advances repaid through expense recognition ........ -- -- 107,582
(Increase) decrease in:
Premiums receivable ................................ 7,231,708 (878,909) (900,112)
Reinsurance and related recoverables ............... 17,839,221 (2,807,870) (2,958,251)
Accrued investment and other recoverables ......... (10,043) (68,865) (55,263)
Refundable income taxes and prepaid expenses ...... (1,902,907) 27,586 (50,829)
Deferred income taxes .............................. 1,227,000 -- (854,000)
Deferred policy acquisition costs .................. 330,693 (26,738) (198,008)
Prepaid and other assets ........................... 297,614 (260,759) --
Increase (decrease) in:
Reserves for claims ................................ (19,184,520) 2,531,779 10,481,137
Accounts payable and accrued expenses .............. 2,587,522 575,706 (83,978)
Advance premiums ................................... (6,768,548) 595,747 1,863,514
Accrued income tax and special tax deposits ....... (376,000) (180,000) 442,408
--------------- -------------- --------------
Net cash and cash equivalents provided by
operating activities ............................ $ 136,998 $ 1,064,323 $ 7,666,927
=============== ============== ==============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-40
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993

NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

LOSS PORTFOLIO TRANSFER

In a transaction approved by the Florida Department of Insurance, the Fund
entered into a loss portfolio reinsurance treaty with Associated Business &
Commerce Insurance Corporation (ABCIC). Under the terms of the treaty, the
premium paid by the Fund to ABCIC consisted of all of the net assets of the
Fund (assets less liabilities, excluding loss reserves) in exchange for the
assumption, by the ABCIC, of the Fund's unpaid claims liabilities (loss
reserves). By agreement with ABCIC, the effective date of the transaction was
November 30, 1995. Accordingly, premiums earned on the Fund's policies then
in effect, and losses and underwriting expenses incurred subsequent to that
date are reported by ABCIC. However, the Fund did not transfer liabilities
not related to insurance.

The transaction described above together with other transactions and
contractual arrangements between the Fund, ABCIC and other parties were
contemplated by the Fund in its long-term business plan with the primary
objective of offering non-assessable policies of insurance to members of the
Fund and to the general public. Employers insuring their worker's
compensation risks with the Fund were assessable for any losses and related
expenses not ultimately paid by the Fund. Such assessability created a
contingent liability to the employers, which management considered
detrimental to the continuing growth of the business. As part of the loss
portfolio transfer, ABCIC indemnified the members of the Fund who elected to
be insured by the Company against such assessments. Policies of insurance
written by ABCIC, including renewals of coverage to former members of the
Fund are non-assessable.

Only those members of the Fund who elected to be insured by ABCIC were
retained by ABCIC. ABCIC did not assume any contingent assessment liabilities
for members who left the Fund or who chose not to be insured by ABCIC. The
Fund will maintain its legal existence until such time as the Florida
Department of Insurance permits otherwise, however, the Fund no longer offers
workers compensation insurance coverage.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

F-41
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

CASH EQUIVALENTS

For purposes of the statement of cash flows, the Fund considers all
highly-liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.

RECOGNITION OF PREMIUM REVENUES AND MEMBER PREMIUM DEPOSITS

DEFERRED POLICY 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 to which they relate. It is the
Fund's policy to calculate and record deferred policy acquisition costs on a
quarterly basis.

Amortization expense for the years ended December 31, 1995, 1994 and 1993
approximated $1,900,000, $833,000 and $762,000, respectively.

INVESTMENTS

Investments consist of U.S. Treasury notes, U. S. Treasury Strips, GNMA
mortgage pools, and other U.S. government notes and are carried at cost plus
or minus the unamortized portion of premiums or discounts paid to acquire
such investments. The Financial Accounting Standards Board has issued SFAS
115 "Accounting for Certain Investments in Debt and Equity Securities", which
became effective with the fiscal year which began January 1, 1994, and has
been implemented in the accompanying financial statements. This SFAS
addresses the accounting and reporting for investments in equity securities
that have readily determinable market values and for all investments in debt
securities. Debt securities are to be classified as trading securities
(reported at market value), available-for-sale securities (reported at fair
value with unrealized market gains and losses reported as a separate
component of surplus) and held to maturity (reported at amortized cost).

Realized gains and losses on sales of investments are recognized on the
specific identification basis.

EQUIPMENT

Equipment is recorded at cost and is depreciated using accelerated methods
over the respective assets' estimated useful lives which range from five to
seven years.

F-42
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

DIVIDEND PAYMENT RESTRICTIONS

The Fund must obtain approval from DLES prior to the declaration and
payment of dividends to members.

INSURANCE LIABILITIES

Although the Fund believes that the estimate of the reserve for losses and
loss adjustment expenses is reasonable in the circumstances, the Fund's
absence of a substantial period of loss experience to support the assumptions
inherent in establishing the estimated reserves results in uncertainty as to
the ultimate amount that will be required for the settlement of losses and
claims. Accordingly, the ultimate settlement of losses and the related loss
adjustment expenses may vary, perhaps significantly, from the estimated
amounts included in the accompanying financial statements.

The Fund has accounted for loss and loss adjustment expenses on an
undiscounted basis for the years ended December 31, 1995, 1994 and 1993. For
all prior years, including its annual report for the year ended December 31,
1993 issued to its members and others, the Fund discounted its insurance
liabilities to give effect to the anticipated investment income on loss and
loss adjustment expenses. The Fund made this accounting change to be
consistent with the accounting treatment adopted by ABCIC for accounting for
loss and loss adjustment expenses in ABCIC's financial statements filed with
the federal Securities and Exchange Commission.

REINSURANCE

Reinsurance premiums, commissions, and expense reimbursements related to
reinsured business are accounted for on bases consistent with those used in
accounting for the original policies issued and the terms of the reinsurance
contracts. Premiums ceded to other companies have been reported as a
reduction of premium income. The Fund maintains specific excess loss
reinsurance with unaffiliated insurance companies. For the 1995, 1994 and
1993 fund years, the Fund retained the first $350,000 of each loss.

The Fund does not assume reinsurance from other insurance funds or
companies. Effective October 1, 1995, the Fund entered into a 70%
proportional quota-share agreement with Underwriters Reinsurance Company
("Underwriters") (Note 5).

INCOME TAXES

F-43
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

INCOME TAXES--(CONTINUED)

of premiums receivable, reinsurance and related receivables and insurance
liabilities for financial and income tax reporting. The deferred tax assets
and liabilities represent the future tax return consequences of those
differences, which will be either taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes also are recognized for
operating losses that are available to offset future taxable income and tax
credits that may be available to offset future federal income taxes.
Effective January 1, 1992, the Fund adopted Statement of Financial Accounting
Standards Number 109, Accounting for Income Taxes.

ALLOWANCE FOR BAD DEBTS

The bad debt allowance is based upon the Fund's experience with
uncollectible accounts receivable and represent the Fund's estimate of the
uncollectible amounts incurred through each fund year end.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1994 and 1993 financial
statements to conform to the 1995 presentation.

NOTE 2--MEMBER INDEMNIFICATION

As is required of every fund regulated by DLES, the members of the Fund
have jointly and severally agreed to assume and discharge the obligations of
the Fund in the event any claims or expenses may remain unpaid after
available reserves and reinsurance have been exhausted. Given the nature of
the Fund's reinsurance arrangements, the Board of Trustees believes the
likelihood of additional assessments upon members relating to this indemnity
to be remote.

NOTE 3--INVESTMENT EARNINGS

Gross investment income for the years ended December 31, 1995, 1994 and
1993 totaled $772,424, $615,938 and $317,010 respectively. Investment
expenses for the same periods totaled $0, $10,037 and $33,475, respectively.

During September, 1994, the Fund sold U.S. Treasury securities classified
as held-to-maturity with an amortized cost of $2,752,429 for a realized loss
of $30,911. The decision to sell these securities was based upon a change in
statutory requirements significantly modifying permissible investments of the
Fund.

NOTE 4--STATE OF FLORIDA SPECIAL DISABILITY TRUST FUND

The Special Disabilities Trust Fund of the Bureau of Workers Compensation
makes assessments upon all Florida workers compensation insurers at a current
level of 4.52% of premium collected and distributes such sums among insurers
whose policy holders have employed individuals with previously determined
worker's compensation-related disabilities, and such individuals have filed a
claim. The Fund has included, as recoverables against losses and loss
adjustment expenses, amounts submitted and to be submitted to the Bureau.

F-44
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 5--REINSURANCE AND RELATED RECOVERABLES

Effective October 1, 1995, the Fund entered into a 70% proportional
quota-share reinsurance treaty with Underwriters Reinsurance Company
("Underwriters"), which was assigned to ABCIC effective November 30, 1995.
Under the terms of the agreement, the Fund ceded 70% of its net written
premium to Underwriters with Underwriters assuming 70% of the Fund's retained
losses and loss adjustment expenses. To cover the costs of underwriting,
Underwriters reimbursed the Fund for certain direct expenses incurred and
paid the Fund a ceding commission totaling $810,072 during the year ended
December 31, 1995 to cover other general expenses. This amount is reported on
the statement of operations for the year ended December 31, 1995 as a
reduction of policy acquisition and other underwriting expenses. Underwriters
is rated A+ by A.M. Best.

In the event that all or any of the reinsuring companies might be unable
to meet their obligations under existing reinsurance agreements, the Fund
would be liable for such defaulted amounts. The Fund's Trustees believe that
all reinsurers are in sound financial condition, and include (in addition to
Underwriters) Allstate Insurance Company and Continental Casualty Company,
both "A" rated by A.M. Best. In addition, all of the Fund's reinsurers have
been approved by DLES.

NOTE 6--MANAGED CARE

In August, 1994, the Fund entered into a managed care arrangement with
Humana to provide medical services to workers whose employers were
participating in the voluntary managed care arrangement. The terms of the
agreement with Humana, which was assigned to ABCIC effective November 30,
1995, provide for the payment of a capitation fee in exchange for which
Humana covers all the medical cost associated with a claim for a period of
three years after the date the claim is reported.

NOTE 7--INCOME TAXES

Temporary differences giving rise to deferred tax assets consist primarily
of a discount on the reserve for loss and loss-adjustment expenses for tax
purposes and on reinsurance and related receivables, accounting for earned
premiums differently for tax purposes than for financial reporting purposes,
expensing for tax purposes internal underwriting costs attributable to policy
acquisitions, accounting for other policy acquisition costs differently for
tax purposes than for financial reporting purposes, and the recording of an
allowance for uncollectible premiums receivable for financial reporting
purposes but not for tax purposes.

F-45
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 7--INCOMES TAXES--(CONTINUED)

and undiscounted reserves for claims. Any special tax deposits not utilized
within 15 years will be applied to any regular income tax liability. The
special tax deposit method is subject to an annual election on the Fund's
Federal income tax return. The Fund elected the special tax method for 1995,
1994 and 1993.

As a result of the loss portfolio transfer, the reserves for losses which
gave rise to the Fund's special tax deposit requirement were eliminated. The
Fund made application to the Internal Revenue Service for refund of the
special tax deposits in the amount of $1,376,561.

The provision for income taxes are as follows for the years ended December
31, 1995, 1994 and 1993:

1995 1994 1993
--------------- ----------- ------------
Current .. $(1,543,407) $619,997 $ 823,336
Deferred . 1,227,000 -0- (863,941)
--------------- ----------- ------------
$ (316,407) $619,997 $ (40,605)
=============== =========== ============

The differences between taxes at the statutory rate and the recorded
current tax expense (benefit) are as follows for the years ended December 31,
1995, 1994 and 1993:

<TABLE>
<CAPTION>
1995 1994 1993
------------- ----------- ------------
<S> <C> <C> <C>
Tax at statutory rate .......................... $(472,925) $695,263 $(97,575)
Underestimated current income tax of prior year 130,000 -0- 37,095
State taxes under Federal benefit .............. -0- (23,760) -0-
Other .......................................... 26,518 (51,506) 19,875
------------- ----------- ------------
Income tax expense (benefit) .................. $(316,407) $619,997 $(40,605)
============= =========== ============
</TABLE>

NOTE 8--LEASE COMMITMENT AND TOTAL RENTAL EXPENSE

The Fund leased its office space on a month-to-month basis for $9,973 per
month including sales tax, its pro rata share of the property taxes,
utilities, normal maintenance, and specified percentages of common-area
expenses. This lease was assigned to the Company effective December 1, 1995.

During 1994 and 1993, the Fund subleased one-twelfth of this office space
to its administrator on a month-to-month basis for one-twelfth of the total
cost to the Fund. Sublease income totaled $10,174 for each of the years ended
December 31, 1994 and 1993.

The total rental expense included in the statement of operations for the
years ended December 31, 1995, 1994 and 1993 totaled $119,845, $119,671 and
$111,072, respectively. Net rental expense, after deducting sub-lease income
was $119,845, $109,497 and $100,898 for the years ended December 31, 1995,
1994 and 1993, respectively.

NOTE 9--OTHER COMMITMENTS

The Fund employed an administrator to manage the day-to-day affairs of the
Fund under a 5-year agreement which became effective October 1, 1991. The
agreement is automatically renewable every

F-46
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 9--OTHER COMMITMENTS--(CONTINUED)

five years thereafter but can be terminated by the trustees in accordance
with various provisions in the agreement. Under a revision to this agreement
effective April 1, 1993, as compensation for these services, the
administrator is to receive monthly four percent of the audited standard
premium, less any allowed discounts, collected by the Fund. From this fee,
throughout the entirety of the agreement, the administrator is required to
pay certain expenses of the Fund, including accounting and actuarial
expenses, trustees fees, dues and convention expenses, incentive fees and
bonuses, and other miscellaneous expenses. Effective January 1, 1995, this
agreement was terminated by mutual agreement and the Administrator became an
employee of the Fund.

To process claims on behalf of the Fund, a servicing agreement has been
executed with an unrelated company. For the claims management services, the
Fund pays the claims processor 2.5% of earned premium plus 25% of recoveries
collected from the SDTF. As part of the loss portfolio transfer, this
agreement was assigned to ABCIC.

NOTE 10--RELATED-PARTY TRANSACTIONS

The Fund receives legal services from a firm which employs a trustee. Fees
paid to this firm for the years ended December 31, 1995, 1994 and 1993
totaled $481,932, $443,441 and $140,080, respectively. In addition, during
1995 the Fund incurred $12,971 for consulting services provided by a trustee.

Included in the allowance for doubtful accounts at December 31, 1993 was
$204,747 due from a member which has entered bankruptcy proceedings and
formerly employed a trustee.

NOTE 11--LEGAL PROCEEDINGS

In July, 1992, the Fund filed a lawsuit in the State Circuit Court of Palm
Beach County, Florida, for breach of contract against Advanced Risk
Management Incorporated ("ARMI") claiming damages for excess fees and
advances collected by ARMI, the former service company of the Fund. A
counterclaim was filed by ARMI alleging breach of contact, breach of
fiduciary duty and fraud. On January 2, 1994, the court granted summary
judgment in favor of the Fund with respect to all of the counterclaims made
by ARMI. The summary judgment was appealed by ARMI and reversed by the Fourth
District Court of Appeal, which remanded the matter back to the trial court
to resolve specific issues. On December 15, 1995 the trial court granted the
Fund's renewed motion for summary judgment. ARMI has filed an appeal as to
this judgment as well. The Fund intends to continue to pursue and defend this
claim on its own behalf. There can be no assurance however, that, in the
event of an unfavorable ruling against the Fund, recovery would not be sought
from ABCIC. In the event there is an unfavorable outcome, which management
believes to be unlikely, the Fund's liability is estimated at less than
$1,000,000.

F-47
<PAGE>
ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

NOTE 12--NON-CASH INVESTING ACTIVITIES

Effective November 30, 1995, the Fund transferred all of its insurance
related assets and liabilities to ABCIC by virtue of a loss portfolio
reinsurance treaty. Non-cash investing activities associated with this
transaction are as follows:

Investments transferred $13,089,432
==============
Equipment transferred .. $ 294,707
==============
Other assets transferred $ 28,834
==============

NOTE 13--STATUTORY INCOME (LOSS) AND SURPLUS (DEFICIT)

Through December 31, 1993, the Fund's GAAP and statutory accounting
principles (SAP) were the same with the exception of recording future
investment income on the liability for loss and loss adjustment expenses for
SAP. Due to legislative changes effective January 1, 1994, additional
variances between GAAP and SAP include deferred income taxes, deferred
acquisition costs and certain other assets of the Fund.

Net income (loss) of the Fund for the years ended December 31, 1995, 1994
and 1993 under SAP are as follows:

1995 (unaudited) $(1,368,811)
===============
1994 ............ $ 1,090,325
===============
1993 ............ $ (246,380)
===============

F-48
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN
THE SHARES OF PREFERRED STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. EXCEPT WHERE OTHERWISE INDICATED, THIS
PROSPECTUS SPEAKS AS OF THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
-------------------------------
TABLE OF CONTENTS

PAGE
-------
Prospectus Summary ............. 3
Risk Factors ................... 8
The Company .................... 13
Use of Proceeds ................ 13
Dividend Policy and History ... 13
Capitalization ................. 14
Selected Financial Data ........ 15
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ..... 16
Business ....................... 31
Management ..................... 40
Certain Transactions ........... 44
Principal Shareholders ......... 45
Description of Capital Stock .. 48
Plan of Distribution ........... 50
Shares Eligible for Future Sale 50
Legal Matters .................. 51
Experts ........................ 51
Additional Information ......... 51
Index to Financial Statements . F-1

<PAGE>
1,000,000 SHARES
ASSOCIATED BUSINESS &
COMMERCE INSURANCE
CORPORATION
[LOGO]
6% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES A
- -----------------------------------------------------------------------------
PROSPECTUS
- -----------------------------------------------------------------------------

, 1996

<PAGE>
II-

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*

SEC Registration ........................ $ 3,449
Printing and Engraving .................. 45,000
Legal Fees and Expenses ................. 15,000
Accounting Fees and Expenses ............ 5,000
Blue Sky Qualification Fees and Expenses 1,000
Miscellaneous ........................... 5,551
---------
Total ................................. $75,000
=========

- ------------------
* All amounts, other than SEC Registration and Blue Sky Qualification fees, are
estimates.

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

The Company's Bylaws provide that the Company shall, to the full extent
permitted by Section 607.0850 of the Florida Business Corporation Act, as
amended from time to time ("FBCA"), indemnify all persons whom it may
indemnify pursuant thereto. In addition, the Company's Articles of
Incorporation limit the personal liability of its directors to the full
extent permitted by Section 607.0831 of the FBCA, as amended from time to
time. Section 607.0850 of the FBCA permits a corporation, under specified
circumstances, to indemnify any person who was or is a party to any
proceeding brought by third parties by reason of the fact that they were or
are directors, officers, employees or agents of the Company against liability
and expenses actually and reasonably incurred in connection with such
proceeding, including any appeal thereof, if such person acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reason to believe their conduct was unlawful.

Section 607.0831 of the FBCA provides that the personal liability of a
director to the corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director is limited to any breach or failure to
perform the director's duties which constitutes (i) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (ii) unlawful payments of distributions to shareholders as provided in
Section 607.0834 of the Florida Business Corporation Act; (iii) any
transaction from which the director derived an improper personal benefit;
(iv) conscious disregard for the best interest of the corporation, or willful
misconduct, in a proceeding by or in the right of the corporation to procure
a judgment in its favor or by or in the right of a shareholder; or (v)
recklessness, bad faith, malicious purpose or with wanton and willful
disregard of human rights, safety or property in a proceeding by or in the
right of someone other than the corporation or a shareholder. Pursuant to
Florida law, the Company may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such, whether or
not the Company would have the power to indemnify him against such liability
under the applicable provisions of the Bylaws of the Company or applicable
law. The Company has applied for such an insurance policy.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In 1995, the Company sold 3,200,000 shares of Series B Preferred to
Holdings for an aggregate consideration of $3,200,000. Such sale was exempt
from registration under the Securities Act pursuant to Section 4(2) of the
Securities Act as a transaction not involving a public offering.

II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------------------------------------------------------------------------------------------------------
<S> <C>
3.1 Articles of Incorporation*
3.2 Bylaws*
4.1 Series A Preferred certificate*

5.1 Opinion of Morgan, Lewis & Bockius LLP regarding legality

10.1 Associated Business & Commerce Insurance Corporation Equity Compensation Plan*
10.2 Exchange and Shareholders Agreement, dated as of March 23, 1995, among Holdings and its
shareholders*
10.3 Florida Workers' Compensation Managed Care Agreement, effective as of August 4, 1994,
between Associated Business and Commerce Workers' Compensation Self-Insurance Trust Fund
and Humana Medical Plan, Inc.*
10.4 Form of Associated Business & Commerce Insurance Corporation Agency-Company Agreement*
10.7 Management Agreement, dated as of March 23, 1995, by and between Associated Business &
Commerce Insurance Corporation and Associated Business & Commerce Holdings, Inc.*
10.8 Permit, dated May 5, 1994, issued by the Florida Department of Insurance*
10.9 Consent Order, dated October 19, 1995, issued by the Florida Department of Insurance*

10.11 Form of Subscription Agreement*

10.12 Term Loan Agreement dated as of October 13, 1995, by and between Associated Business &
Commerce Holdings, Inc. and Underwriters Reinsurance Company*
10.13 Form of Pledge Agreement by and between Associated Business & Commerce Holdings, Inc. and
Underwriters Reinsurance Company*
10.14 Form of Security Agreement by and between Associated Business & Commerce Holdings, Inc.
and Underwriters Reinsurance Company*
10.15 Form of Agreement as to Reinsurance by and between Associated Business & Commerce
Insurance Corporation and Underwriters Reinsurance Company*
10.16 Form of Option Agreement by and among Associated Business & Commerce Holdings, Inc.,
Underwriters Reinsurance Company, Errol Bader, Lawrence J. Marchbanks, Frederick R. Prout,
Daniel J. Webber and James L. Wilson*
10.17 Workers' Compensation Services Agreement, effective March 1, 1996, between Vincam/Hip
Occupational Health Systems and Associated Business and Commerce Insurance Corporation**
12 Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends

23.1 Consent of Schmidt, Raines, Trieste, Dickenson, Adams & Co.
23.2 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5.1)
24.1 Power of Attorney (contained in Part II of this Registration Statement)***
28 Schedule P from the Statutory Annual Statement for 1995--Analysis of Losses and Loss
Expense (filed in paper format under cover of Form SE)
</TABLE>

- -----------------------------------------------------------------------------
* Incorporated by reference to the Company's Registration Statement on Form
S-1, Commission File No. 33-83116.

** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.

*** Previously filed.

(b) FINANCIAL STATEMENT SCHEDULES

Schedule VIII Changes in Valuation of Assets

II-2
<PAGE>
ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the purchasers
at the closing of this offering certificates in such denominations and
registered in such names as requested for delivery to each purchaser. Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; (iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement;

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering;

(4) That for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Amendment No. 1
to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Boca Raton, Florida, on the 10th day of June,
1996.

ASSOCIATED BUSINESS & COMMERCE
INSURANCE CORPORATION

By: /s/ LAWRENCE J. MARCHBANKS
---------------------------
Lawrence J. Marchbanks
Chairman of the Board and
Director

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed below by the following
persons in the capacities and on the date indicated below.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
*
- --------------------------- Executive Vice President of June 10, 1996
Errol Bader Government Affairs and Director

/s/ LAWRENCE J. MARCHBANKS Chairman of the Board and June 10, 1996
- --------------------------
Lawrence J. Marchbanks Director
*
- -------------------------- Vice President, Finance (Principal June 10, 1996
Clifford G. Merritt Financial and Accounting Officer)
*
- -------------------------- President (Principal Executive Officer) June 10, 1996
James R. Nau
*
- -------------------------- Secretary and Director June 10, 1996
Frederick R. Prout
*
- -------------------------- Treasurer and Director June 10, 1996
Daniel J. Webber

- -------------------------- Director June 10, 1996
James L. Wilson

===============
</TABLE>

*BY: /S/ LAWRENCE J. MARCHBANKS
-----------------------------
Attorney-in-Fact

II-4
<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
CHANGES IN ALLOWANCE ACCOUNTS
SCHEDULE VIII

FOR THE FOR THE
PERIOD ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1996 1995
---- ----
----------- ------------
Balance, beginning of period ... $613,125 $ --

Allowance assumed from the Fund -- 560,094

Additions to the allowance ..... 131,121 53,031

Write-offs against the allowance -- --

Balance, end of period .......... $744,246 $613,125

S-1

June 10, 1996

Associated Business & Commerce
Insurance Corporation
4700 N.W. Boca Raton Boulevard
Suite 400
Boca Raton, Florida 33431

Re: Registration Statement on Form S-1
(Registration No. 333-4566)

Ladies and Gentlemen:

We have acted as counsel to Associated Business & Commerce Insurance
Corporation, a Florida corporation (the "Company"), in connection with the
Registration Statement on Form S-1 (Registration No. 333-4566, the "Registration
Statement") relating to the offering by the Company of 1,000,000 shares of the
Company's 6% Cumulative Cosnvertible Preferred Stock, Series A, $1.00 par value
per share (the "Shares").

In so acting, we have examined the Amended and Restated Articles of
Incorporation of the Company, the Bylaws of the Company and such other
documents, records and certificates as in our judgment are necessary or
appropriate for purposes of this opinion.

Based on the foregoing, we are of the opinion that the Shares have been duly
authorized by the Company and, when issued and paid for as contemplated by the
Registration Statement, will be legally issued, fully paid and nonassessable.

We hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to our name under the caption "Legal Matters" in
the Registration Statement.

Very truly yours,

Morgan, Lewis & Bockius LLP

EXHIBIT 12

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDENDS

<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1996 1995
--------------- ---------------
<S> <C> <C>

Operating income (loss) before provision for income taxes
per statement of operations .................................. $117,824 $(17,435)
=============== ===============
Note: No adjusting items are present

Preferred dividend requirements ................................ $ 37,214 $ 8,751

Ratio of income before provision for income taxes to net income 134% 134%
--------------- ---------------

Preferred dividend factor on a pretax basis .................... $ 49,866 $ 11,726
=============== ===============

Ratio of earnings (loss) to fixed charges ...................... 2.36% (1.49)%
=============== ===============

</TABLE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in the Registration Statement on Form S-1 of our
report dated March 20, 1996 on our audit of the financial statements of
Associated Business & Commerce Insurance Corporation, and our report dated March
20, 1996, on our audits of the financial statements of Associated Business &
Commerce Workers Compensation Self-Insurance Fund. We also consent to the
reference to our firm under the captions "Management's Discussion and Analysis
of Financial Condition and Results of Operations--The Fund--Income Taxes" and
"Experts."

SCHMIDT, RAINES, TRIESTE, DICKENSON & ADAMS, P.L.

Boca Raton, Florida
June 7, 1996