ASSOCIATED BUSINESS & COMMERCE INSURANCE CORP, POS AM, 1997-05-09

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORP
POS AM, 1997-05-09
FIRE, MARINE & CASUALTY INSURANCE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 1997:
REGISTRATION STATEMENT NO. 333-4566
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
POST-EFFECTIVE
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>
<S> <C> <C>
FLORIDA 6331 65-0496132
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)

</TABLE>

<TABLE>
<S> <C>
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 TELEPHONE NUMBER, (561) 997-0708
INCLUDING AREA CODE, OF REGISTRANT'S (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>

---------------
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
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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.
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<PAGE>

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 9, 1997

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

[GRAPHIC OMITTED]

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 1,300 policy
holders and $28 million in annual written premiums as of December 31, 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 on December 7, 1995.

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.

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<TABLE>
<CAPTION>
PRICE TO PROCEEDS TO
PUBLIC COMPANY
<S> <C> <C>
Per Share ......... $10.00 $10.00(1)
Total Maximum ...... $10,000,000 $9,900,000(2)
</TABLE>

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(1) No underwriting discounts or commissions are payable in connection with this
offering.

(2) After deducting expenses of the offering estimated at $100,000.

THE DATE OF THIS PROSPECTUS IS MAY , 1997.
<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, Patricia Orrico, John Kennedy and Marsha Duffy. Each of these
persons is a full time 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 TIG
REINSURANCE COMPANY. ALTHOUGH THE COMPANY WAS PERMITTED TO PAY EACH DIVIDEND
THROUGH THE OCTOBER 1996 DIVIDEND, THERE IS NO ASSURANCE THAT EITHER THE
DEPARTMENT OF INSURANCE OR TIG REINSURANCE COMPANY 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 TIG 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.

<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, AMONG OTHER THINGS, THE
INFORMATION SET FORTH UNDER "RISK FACTORS." THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS, WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, THAT ADDRESS, AMONG OTHER THINGS, PROSPECTIVE FINANCIAL
INFORMATION, RESERVES, FINANCING ARRANGEMENTS, UNDERWRITING PROCEDURES, CLAIMS
SETTLEMENT, MANAGED CARE AND THE INSURANCE INDUSTRY. THESE STATEMENTS MAY BE
FOUND UNDER "PROSPECTUS SUMMARY," "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS", AS
WELL AS IN THE PROSPECTUS GENERALLY. ACTUAL EVENTS OR RESULTS MAY DIFFER
MATERIALLY FROM THOSE DISCUSSED IN FORWARD-LOOKING STATEMENTS AS A RESULT OF
VARIOUS FACTORS, INCLUDING WITHOUT LIMITATION THOSE DISCUSSED IN "RISK FACTORS"
AND MATTERS SET FORTH IN THE PROSPECTUS GENERALLY.

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 a majority of the directors and some of the
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 December 31, 1996, the Company had approximately 1,300 policyholders and
$28 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 TIG 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

<PAGE>

between the Company and Holdings (the "Management Agreement"). Holdings does not
carry on any other business activities. The 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 $5,202,501 in the Company through the purchase of
5,100,000 shares of the Company's Convertible Preferred Stock, Series B (the
"Series B Preferred") and 102,501 shares of the Company's Common Stock. In
December 1995, 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 bore interest at 12.75% per annum.
If not earlier prepaid, the loan was due on September 30, 2000. Holdings had
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 was based upon the date on which the final payment to Underwriters
pursuant to the loan was made. If the final payment was made during the first
year that the loan was outstanding, Underwriters may purchase shares of Holdings
common stock equal to 10% of the stock held by Insiders. 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 was repaid. The loan was repaid on December 4, 1996, therefore the
options will remain outstanding until December 4, 2001. If Underwriters
exercises all such options, it will not be the largest shareholder of Holdings
but will be able to influence the business and affairs of the Company.

In order to relieve the debt service burden created by the Underwriters
loan, improve the financing terms, increase the quota share reinsurance ceding
commission and generate more capital available to the Company, Holdings, on
December 4, 1996, entered into a Term Loan Agreement and a Securities Purchase
Agreement (the "Purchase Agreement") with TIG Reinsurance Company (hereinafter
"TIG" or the "TIG Loan").

Because the voting securities purchase aspect of the entire TIG transaction
required prior approval by the Florida Department of Insurance, closing occurred
in two phases.

The first closing occurred on December 4, 1996. At this first closing,
Holdings entered into a loan agreement with TIG evidenced by two promissory
notes (Note A and Note B). Note A is in the principal amount of $3 million,
bears interest at 10% per annum, payable interest only and, if not earlier
prepaid, is due December 4, 2003. Note B was in the principal amount of
$912,908, bore interest at 6% per annum, payable interest only and, if not
earlier prepaid, was due December 4, 2003; provided however, that upon approval
of the proposed securities purchase by the Florida Department of Insurance Note
B was to be canceled and returned to Holdings. The principal amount of the B
Note would then be credited by Holdings toward the acquisition by TIG of
2,912,908 shares of Holdings Series I Preferred Stock. Upon approval by the
Department of Insurance, TIG was also required to complete its purchase of
2,912,908 shares of Series I Preferred by the payment to Holdings of an
additional $2 million (the "second" closing).

In addition to the foregoing, at the first closing Holdings sold and TIG
purchased 87,092 shares of Holdings Series B Common Stock. The Series B Common
Stock was non-voting but carried all other

<PAGE>

features of common stock. The purchase price of Series B Common was $1.00 per
share. Upon approval by the Department of Insurance, Holdings agreed to exchange
voting common stock for the Series B Common.

The proceeds of the TIG loan from the first closing were used by Holdings
to retire in full the Underwriters' loan (approximately $3.6 million) and to
purchase an additional 400,000 shares of the Company's Series B Convertible
Preferred Stock. This refinance and payment in full to Underwriters served to
reduce the Underwriters quota share to 20% of net written premium and limited
Underwriters' options to 10% of shares held by Insiders.

The second closing occurred on March 31, 1997, after receipt of approval of
the entire transaction by the Department of Insurance. At the second closing,
TIG surrendered the B Note and the Series B Common Stock and paid the $2 million
due for the purchase of Holdings' Series I Preferred. Holdings canceled the B
Note and Series B Common Stock and issued to TIG 87,092 shares of Holdings'
Common Stock and 2,912,908 shares of Holdings' Series I Preferred Stock. The $2
million proceeds of the second closing were used by Holdings to purchase an
additional 1.5 million shares of the Company's Series B Preferred Stock and
$500,000 was advanced to the Company as working capital.

Therefore, as of March 31, 1997, TIG owns 87,092 shares of Holdings Common
Stock and 2,912,908 of Series I Preferred Stock of Holdings. TIG, as holder of
the Series I Preferred Stock is entitled to receive, when, as and if declared by
the Board of Directors of Holdings, cumulative dividends at the rate of 6% per
annum.

The Series I Preferred Stock is redeemable by Holdings upon payment of the
stated value ($1.00 per share) together with all accrued and unpaid dividends
provided that the TIG Loan is repaid. Holdings is required to redeem the Series
I Preferred Stock on December 4, 2003. On and after that date, if not earlier
redeemed, the Series I Preferred Stock is convertible to Holdings Common Stock
at the option of the holder and is similarly convertible in the event of default
under the TIG Loan.

The Holdings Common Stock purchased under the Purchase Agreement represents
an approximate 44% ownership interest in Holdings, provided, however, that in
the event Underwriters declines to exercise its options TIG may, in its
discretion, increase its interest, at the same price, to 49% of the number of
shares and options held by the founders, shareholders, officers, directors and
employees of Holdings.

In addition to the Loan and Purchase Agreement, the Company entered into a
proportional quota share reinsurance agreement with TIG, for the period January
1, 1997 through December 31, 1997. The quota share arrangement is renewable
annually, at the option of TIG, for so long as the Loan remains outstanding and
the Series I Preferred has not been redeemed. Under the terms of this quota
share treaty, the Company cedes 50% of its net written premium to TIG which
assumes 50% of the Company's retained losses. The treaty provides for
reimbursements to the Company for expenses associated with other reinsurance and
other underwriting expenses through direct reimbursement and through a
provisional ceding commission calculated at the rate of 28% of ceded premiums.
The ceding commission may decrease depending upon the Company's loss ratio
performance to a minimum of 23%. The treaty also provides for certain incentives
and additional costs depending upon claims loss history.

The Company has also renegotiated its quota share reinsurance arrangement
with Underwriters. Effective January 1, 1997, the Company cedes 20% of its net
written premium to Underwriters which assumes 20% of the Company's retained
losses. This treaty also provides for reimbursements to the Company for expenses
associated with other reinsurance and other underwriting expenses through direct
reimbursement and through a provisional ceding commission calculated at the rate
of 29% of ceded premiums. The agreement also provides for certain incentives
and/or additional costs depending upon claims loss history.

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

<PAGE>

Until the loan to Holdings is repaid in full, Holdings and its shareholders
have agreed to cause one designee of TIG to be elected to the board of directors
of Holdings. The current designee to the board of Holdings is Mr. Allen B.
Binder, Senior Vice President of TIG. Mr. Binder does not have any prior
relationship with Holdings or the Company and is not a director of the Company.

Holdings expects to repay TIG 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 TIG 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, TIG would be able to
elect all of the directors of the Company and thereby control the Company's
business and affairs. TIG may also foreclose its lien on the pledged shares of
the Company 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 the following covenants are not met:

(i) CONSOLIDATED NET WORTH. Holdings and its consolidated subsidiary shall
have at all times consolidated net worth of not less than $2 million.

(ii) THE COMPANY'S STATUTORY SURPLUS. Holdings will not permit the
statutory surplus of the Company at any time to be less than the greater of (1)
$4 million, or (2) the minimum statutory surplus required by the Florida
Insurance Department PLUS $500,000.

(iii) LOSS RESERVES. On each quarterly date, commencing with December 31,
1996, Holdings will not permit the loss reserves of the Company to be outside
the actuarial range determined annually by an independent actuary. To
illustrate, if the loss reserve is determined by the independent actuary for
December 31, 1996, then such reserve will be used to determine compliance with
this provision as of December 31, 1996. If such loss reserve is not redetermined
by the independent actuary until December 31, 1997, then the loss reserve for
December 31, 1996 will be used to determine compliance with this covenant for
the quarterly dates of March 31, 1997, June 30, 1997 and September 30, 1997.

(iv) RISK BASED CAPITAL RATIO. Holdings will not permit the risk-based
capital ratio of the Company at any time to be less than one hundred twenty
percent (120%) of the Company action level risk based capital ratio as
determined by the Florida Department of Insurance.

(v) WRITING RATIO. During each quarterly period, commencing with the
quarterly period for January 1, 1997 to March 31, 1997, Holdings will not permit
the result of the Company's annualized net premiums written during such period
to exceed three hundred twenty percent (320%) of the statutory surplus of the
Company as of the last day of such quarterly period.

(vi) DEBT TO EQUITY RATIO. Holdings will maintain the ratio of (x)
outstanding debt to TIG hereunder to (y) consolidated net worth PLUS outstanding
debt to TIG hereunder at no greater than the respective amounts for the periods
set forth below:

From the closing date to December 31, 1998 .....................3:7.00

From January 1, 1999 to December 31, 1999 .....................3:8.04

From January 1, 2000 to December 31, 2000 .....................3:8.33

From January 1, 2001 and all years thereafter ..................3:9.23

Based on the December 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

<PAGE>

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, as more particularly described above, Holdings
has also agreed to cause TIG to provide the Company with proportional quota
share reinsurance until the loan is repaid. If the rate of profit made by TIG on
the reinsurance agreement exceeds an agreed upon amount, the excess will reduce
the loan balance, on a dollar for dollar basis. If the term loan is paid in full
prior to its due date, all other amounts, if any, owed by Holdings to TIG under
the Term Loan Agreement have been paid in full and the redemption in full of
Holdings' Series I Preferred Stock, then on and after December 31, 2001 and
ending December 4, 2003, in the event the Company shall require any quota share
reinsurance, Holdings shall cause the Company to obtain such reinsurance from
TIG. The cession level will be determined by the Company without regard to
minimum cession levels, and the ceding commission provisional rate under the
reinsurance treaty shall increase to the Company's expense ratio based on a
weighted average of the prior three years, plus a 1% of ceded premium override.
The quota share reinsurance obligations were a material inducement to TIG to
agree to make the loan to Holdings to refinance the Underwriters' loan and
finance Holdings' purchase of additional 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
TIG 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 TIG 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.

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 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, 1997, there were
248,885 shares of Series A Preferred outstanding.

<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 four 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.

<PAGE>

SUMMARY FINANCIAL DATA

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECENBER 31, 1996
------------------------------------------------------
AS CURRENTLY
REPORTED AND APPLICATION OF PRO FORMA
ADJUSTED(1) NET PROCEEDS AS ADJUSTED(2)
--------------- ----------------- ----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and invested assets ........................... $ 12,364 $ 9,900 $ 22,264
Premium receivable ................................. 4,079 4,079
Reinsurance recoveries ........................... 21,516 21,516
Other assets ....................................... 5,823 100 5,923
-------- -------- --------
Total assets .................................... $ 43,782 $10,000 $ 53,782
======== ======== ========
Reserve for claims ................................. $ 31,982 $ 31,982
Other liabilities ................................. 5,156 5,156
Stockholders' equity:
Common Stock .................................... 102 102
Preferred Stock, Series A ........................ 249 1,000 1,249
Preferred Stock, Series B ........................ 5,100 5,100
Additional paid-in capital ........................ 2,252 9,000 11,252
Retained earnings (deficit) ..................... (1,059) (1,059)
-------- --------
Total stockholders' equity ........................ 6,644 10,000 16,644
-------- -------- --------
Total liabilities and stockholders' equity ...... $ 43,782 $10,000 $ 53,782
======== ======== ========
</TABLE>

- ----------------
(1) As reported by the Company as of December 31, 1996 in audited, GAAP-basis
financial statements included elsewhere in this Prospectus, adjusted to
reflect the sale of 1,500,000 additional shares of Series B Preferred to
Holdings on March 31, 1997.

(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."

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
--------------- --------------- --------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
REVENUES:
Standard premium earned, net discounts ............ $ 27,737 $ 16,877 $ -
Less premium ceded for reinsurance ............... 19,587 1,742 -
-------- -------- -----
Net premium earned .............................. 8,150 15,135 -
Less claims incurred and reserved, net of estimated
reinsurance and related recoveries ............... 5,657 14,886 -
-------- -------- -----
Premiums available for operations ............... 2,493 249 -
Investment and other income ..................... 832 73 -
-------- -------- -----
3,325 322 -
-------- -------- -----
UNDERWRITING EXPENSES .............................. 4,503 339 10
-------- -------- -----
Income (loss) before provision for taxes ......... (1,178) (17) (10)
INCOME TAXES (BENEFITS) ........................... (255) 5 -
-------- -------- -----
Net income (loss) ................................. (923) (12) (10)
TOTAL EQUITY (DEFICIT), BEGINNING OF PERIOD ...... 5,499 92 -
Proceeds of sales of Preferred Stock and other
additions and adjustments ........................ 568 5,419 102
-------- -------- -----
TOTAL EQUITY (DEFICIT), END OF PERIOD ............... $ 5,144 $ 5,499 $ 92
======== ======== =====
</TABLE>

- ----------------
(1) The audited financial data for the years ended December 31, 1996, 1995 and
1994 was derived from the GAAP-basis financial statements of the Company
included elsewhere in this Prospectus. The operations data for the Company
for 1995 includes the loss portfolio transfer premium of $15.3 million paid
by the Fund on December 7, 1995, and the related losses assumed of $14.4
million.

<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. 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 PARTIES. The Company
markets its workers' compensation insurance products and services through
independent insurance agencies. As of March 31, 1997, there were approximately
222 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 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

<PAGE>

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 March 31, 1997, Holdings has employment agreements with the Company's key
personnel. 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. As of January 1, 1997, managed care
became mandatory for all Florida employers. The Company offers managed care
programs to its insureds. 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 at 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. 56.67% of the Common Stock of 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 TIG and redeem the Holdings Series I
Preferred sold to TIG, TIG will gain control of the Company. See "Prospectus
Summary-Investment by Holdings and TIG 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.

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

<PAGE>

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 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

<PAGE>

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 TIG and Underwriters under certain specific conditions.
See "Prospectus Summary-Investment by Holdings and TIG Loan" and
"Business-Reinsurance."

The Company has two quota share agreements in effect with Underwriters and
TIG under which the Company cedes to Underwriters and TIG a percentage
(currently 20% and 50%, respectively) of all written workers' compensation
premiums and Underwriters and TIG 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 arrangements. In the event that the Quota Share
Reinsurance agreements with Underwriters and TIG were 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 agreements are with reinsurers rated "A" or better by A.M.
Best. If Underwriters or TIG 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 reinsurers. Any such failure on the part of the Company's
reinsurers 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 Special Disability Trust
Fund (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. Through December 31, 1996, the Company's and the Fund's
consolidated estimated total recoveries from the SDTF were $5.6 million, and the
actual recoveries received from the SDTF through 1996 were $1.8 million. 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. Recent reports have indicated that the SDTF liabilities far exceed its
assets and that the Legislature is examining alternatives which range from
terminating the SDTF altogether to increased assessments. 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

<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.

<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 December 31, 1996, the Company had approximately 1,300
policyholders and $28 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 Associated Business and Commerce Workers' Compensation
Self-Insurance Fund (the "Fund").

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 $9,900,000, 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 TIG. 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, TIG, not to permit the Company to pay any dividends without TIG's
consent.

The Company has not declared or paid any dividends on its Common Stock
since inception. Through the October 1996 dividend, the Company received the
necessary approvals to pay the dividends due to holders of the Series A
Preferred. Although the Company was permitted to pay the October 1996 dividend,
there can be no assurance that either the Department of Insurance or TIG will
permit payment of future dividends. Dividends that are not able to be paid
pursuant to such restrictions will accumulate.

<PAGE>

CAPITALIZATION

The following table sets forth the actual short-term debt and
capitalization of the Company at December 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>
DECEMBER 31, 1996
------------------------------
ACTUAL AND PRO FORMA
ADJUSTED(1) AS ADJUSTED
-------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Liabilities ................................................... $ 37,138 $ 37,138
======== ========
Shareholders' equity:
Preferred Stock $1.00 par value, 10,000,000 shares authorized:
Series A, 248,885 shares outstanding ........................ 249 1,249
Series B, 5,100,000 shares outstanding ..................... 5,100 5,100
Common Stock, $1.00 par value, 15,000,000 shares authorized and
102,501 outstanding .......................................... 102 102
Additional paid-in capital ................................. 2,252 11,252
Retained earnings (deficit) .................................... (1,059) (1,059)
-------- --------
Total shareholders' equity .................................... 6,144 16,644
-------- --------
Total capitalization .......................................... $ 42,282 $ 53,782
======== ========
</TABLE>

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

(1) The data was derived from the Company's GAAP-based audited financial
statements at December 31, 1996 included elsewhere in this Prospectus,
adjusted to reflect the sale of 1,500,000 additional shares of Series B
Preferred to Holdings at $1.00 per share on March 31, 1997.

<PAGE>

SELECTED FINANCIAL DATA

Set forth below is financial information covering the period from the
October 1991 inception of the Fund through December 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 December 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>
THE COMPANY COMBINED THE FUND
-------------- ----------- -------------------------------------
1996 1995(1) 1994 1993 1992
-------------- ----------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Operating Data (GAAP):
Gross premium earned ..................... $ 27,737 $ 27,919 $ 24,704 $ 21,822 $ 8,766
Net premium earned ........................ 8,150 20,940 22,517 19,852 7,713
Losses and LAE ........................... 5,657 14,887 13,724 14,723 6,299
Underwriting expenses ..................... 4,503 7,587 7,320 5,703 1,854
Underwriting gain (loss) .................. (2,010) (1,533) 1,473 (574) (440)
Net investment income ..................... 860 846 606 284 133
Net realized capital gains (losses) ...... (28) 115 (31) 2 11
Income (loss) before income taxes ......... (1,178) (572) 2,049 (287) (296)
Income taxes (benefits) .................. (255) (322) 620 (41) (212)
Net income (loss) ........................ $ (923) $ (250) $ 1,429 $ (246) $ (84)
Primary Earnings Per Share (loss) ......... $ (10.12) $ (0.11) $ N/A $ N/A $ N/A
Other GAAP Operating Data (2):
Losses and LAE ratio ..................... 69.4 % 71.1 % 61.0% 74.2% 81.7%
Underwriting expense ratio ............... 55.3 % 36.2 % 32.5% 28.7% 24.0%
--------- -------- -------- --------- -------
Combined ratio ........................... 124.7 % 107.3 % 93.5% 102.9% 105.7%
Balance Sheet Data-GAAP (at end of period):
Total investments and cash ............... $ 10,864 $ 16,681 $ 12,979 $ 12,111 $ 4,592
Total assets(3) ........................... 42,282 40,701 25,092 20,120 7,663
Losses and LAE reserves(3) ............... 31,982 28,306 19,185 16,653 6,172
Total equity (deficit) .................. $ 5,144 $ 5,499 $ 1,075 $ (354) $ (108)
Statutory Data(4):
Policyholders' surplus (deficit) ......... $ 4,300 $ 4,669 $ (552) $ (1,995) $ (269)
Losses and LAE ratio ..................... 75.1 % 71.1 % 61.0% 74.2% 82.0%
Underwriting expense ratio ............... 55.3 % 36.8 % 32.5% 30.0% 26.1%
--------- -------- -------- --------- -------
Combined ratio ........................... 130.4 % 107.9 % 93.5% 104.2% 108.1%
</TABLE>

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

(1) Represents the sum of Associated Business & Commerce Workers' Compensation
Self Insurance Fund's results for the eleven months ended November 30, 1995,
and the Company's results for the one month ended December 31, 1995. The
loss portfolio transfer between the companies has been eliminated and the
combined sum has been presented for comparison of significant operating
data.
(2) GAAP losses and LAE ratio represents the sum of losses and LAE as a
percentage of net premiums earned. GAAP combined ratio represents the sum of
the GAAP loss and LAE ratio and GAAP underwriting expense ratio. See
"Management's Discussion and Analysis of the Company's Results of Operations
and Financial Condition".
(3) Stated in accordance with the gross financial reporting requirements as
prescribed by Financial Accounting Standard No. 113, "Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration Contracts."
(4) Statutory loss and LAE ratio represents the sum of statutory losses and LAE
as a percentage of statutory net premiums earned. Statutory underwriting
expense ratio represents statutory underwriting expenses as a percentage of
statutory net premiums written. Statutory combined ratio represents the sum
of the statutory loss and LAE ratio and the statutory underwriting expense
ratio. The Fund's first statutory loss year covered the fifteen month period
ended December 31, 1992. Therefore, no statutory data is presented for 1991.
See "Management's Discussion and Analysis of the Company's Results of
Operations and Financial Condition".

<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>
<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>

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

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

(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.

<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.

For the year ended December 31, 1996, the Company is reporting an after-tax
net loss of $923,000 determined under GAAP. Although the Company's net loss
ratio decreased from 1995, the ratio of net underwriting expenses to earned
premium increased significantly. Anticipated increases in premium volume over
1995 amounts did not materialize causing the relationship between increased
underwriting costs and premium to deteriorate.

The Selected Financial Data on Page 17 sets forth the operating results of
the Fund since January 1, 1992 through November 30, 1995, the effective date of
the loss portfolio transfer and assumption of the business by the Company and of
the Company from December 1, 1995 through December 31, 1996. The data in this
table 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, 1995 in order to allow comparison of 1995
operating results with that of the prior years and with 1996 results. 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, but which
terminated at the 70% level December 31, 1996.

Gross earned premium for 1996 amounted to $27.7 million compared to $27.9
million for 1995 and $24.7 million for 1994. Net earned premium amounted to $8.2
million for 1996 compared to $20.9 million for 1995 and $22.5 million for 1994.
Quota share premium ceded (which was effective October 1, 1995) for 1996
amounted to approximately $17.7 as compared to approximately $4.5 million for
1995. Net losses and loss adjustment expenses decreased by $9.2 million over
1995 (primarily the result of quota share ceding) and the loss ratio (losses
over net earned premium) decreased from 71.1% in 1995 to 69.4% in 1996.

1996 underwriting expenses decreased by $3.1 million from 1995, net of
expense reimbursements and ceding commissions of approximately $5.65 million.
However, as discussed below, as a percentage of net earned premium, underwriting
expenses increased by 19.1% over the prior year. The overall impact of these
factors upon the Company's underwriting operations produced an underwriting loss
of $2.0 million for 1996, compared to an underwriting loss for 1995 of $1.5
million, and an underwriting gain of $1.5 million in 1994. The GAAP combined
ratio for 1996 was 124.7% compared to 107.3% for 1995, 93.5% for 1994, and
102.9% for 1993.

The underwriting expense ratio increased from 36.2% in 1995 to 55.3% in
1996 due primarily to personnel additions and related costs, increases in
facilities costs, and increases in systems investments planned as a part of the
Company's anticipated growth. 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 $832,000 for 1996 compared to $960,000 for 1995, $605,981 for 1994, and
$285,000 for 1993. Depending on premium growth, management anticipates that
investment income will be less for 1997 than 1996 and 1995 due to anticipated
negative cash flows attributable to the quota share treaties, as discussed under
liquidity and capital resources.

<PAGE>

The Fund concluded more than four years of operations in December 1995 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."

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 7,300 claims reported as of December
31, 1996, 6,300 had been settled and closed. In dollar terms, of the $52.8
million total of net losses and LAE incurred and reserved, $49 million had been
paid as of December 31, 1996 with an ending reserve of $3.8 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. The
history of the Fund's and the Company's reserve development since inception
through December 31, 1996 is displayed in the Analysis of Loss and Loss
Adjustment Expense (LAE) Development under "Business-Reserves for Losses and
Loss Adjustment Expenses."

The Fund and the Company have 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.

RECONCILIATION OF GAAP SURPLUS TO STATUTORY SURPLUS (DEFICIT)

<TABLE>
<CAPTION>
THE COMPANY THE FUND(1)
------------------------------- ----------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992
--------------- --------------- --------------- --------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total equity (deficit) under GAAP ...... $ 5,144 $ 5,499 $ 1,075 $ (354) $ (108)
Non-admitted assets:
Deferred policy acquisition costs ...... (260) (390) (331) (304) (106)
Prepaid expenses ........................ (198) (101) (37) (65) (11)
Deferred income taxes .................. (715) (1,084) (1,227) (1,227)
Property and equipment .................. (79) (16) (32) (45) (45)
Other adjustments:
ULAE contingency reserve ............... (464)
Deferred ceding revenue ............... 228
Deferred gain on LPT transaction ...... 644 761 -0- -0- -0-
------- -------- -------- -------- -------
Total equity (deficit) under SAP ......... $ 4,300 $ 4,669 $ (552) $ 1,995) (270)
======= ======== ======== ======== =======
</TABLE>

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

(1) Calculated on a pro-forma basis for the Fund through December 31, 1994.

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

<PAGE>

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.

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 TIG and Underwriters
will have the effect of ceding 70% of the Company's underwriting income to
TIG and Underwriters and investment earnings will be reduced attributable
to reserves held by TIG and Underwriters.

/bullet/ The Company has entered into the Management Agreement with Holdings.
The fees payable to Holdings under this arrangement include amounts
necessary to service the debt related to Holdings term loan agreement with
TIG, the proceeds of which were used by Holdings to refinance the
Underwriters Loan and to add additional capital to the Company. The portion
of fees reserved for this debt service equates to approximately 2.3% of the
Company's written premium.

/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 TIG
and Underwriters through the quota-share agreements.

/bullet/ The financial plan of the Company included as a part of its business
plan gave effect to these differences and assumed that direct premium
writings would increase by 50% (or approximately $15 million) during the
Company's initial year of operations (1996) with increases thereafter
approximating $10 million per year through December 31, 2000. The source of
this anticipated growth was customers of assessable self-insurance funds,
and, at the levels of writings projected, operating results and cash flows
were sufficient to meet the Company's obligations, including the payment of
dividends to holders of the Series A Preferred Stock. The Company failed to
achieve its goal of $15 million of direct new premium in 1996; however,
$10.8 million of direct new premium was added (which offset a similar
amount of premium losses due to cancellations and other factors) which
resulted in no net premium growth. The Company's inability to attain the
projected level of new premium was due to increased competition generated
by favorable legislative changes as well as rate adequacy during 1996.
Management initially adjusted budgeted expenditures to account for the
premium reduction and additionally has (effective December 4, 1996)
refinanced its debt structure and generated an additional $1.9 million of
capital through the TIG transactions. The financial and business plan of
the Company has been adjusted accordingly and the additional capital shall
be used for, among other things: expansion of marketing staff from three
(3) to seven (7); increase in marketing budget to accommodate more agent
incentive plans; increase in utilization of retrospective policy products;
expansion of underwriting staff; offset of Applied Systems computer
implementation costs and general mobilization costs associated with staff
increases necessary to accommodate an aggressive marketing and management
philosophy. The Company's ability to achieve the planned increase of $10
million per year in premium writings subsequent to 1996 appears attainable
(new premium written as of April 7, 1997 equals approximately $7.9 million)
and the number of submissions received from the Company's agents continues
to exceed those experienced by the Fund. However, the Company remains
dedicated to accelerated growth in new premium writings consistent with
adherence to the Company's long standing and conservative underwriting
philosophy.

/bullet/ The Florida workers' compensation insurance market has become
increasingly competitive since the elimination of the Florida Workers'
Compensation Assigned Risk Plan in 1994. These

<PAGE>

competitive pressures have required the Company to increase its insurance
agent commissions and incentive programs and to hire additional marketing
staff-there are now seven employees in this department-in order to better
attract new business. These competitive pressures have also reduced the
market standards for advanced premiums on new accounts. In the past, the
Company was able to obtain 20% advance premium. Now, many customers are
able to find competitors willing to offer coverage for 10% advance premium
or lower.

/bullet/ Despite the positive impact of system reforms, some system costs
continue to increase. Significant expenses have been incurred by the
Company to comply with SEC requirements for filing and reporting financial
results and these costs are anticipated to continue. Furthermore, the
Company has made a large investment in policy management system software.
The staff time used for testing, training and implementing the improved
system also affected the efficiency and cost of operating the Company in
1996 and such costs are continuing during the first part of 1997.

/bullet/ During 1996 and 1997, the Company has responded to the increased
competition in this line of business by improving the quality and quantity
of the underwriting staff by attracting more experienced underwriters.
These staff changes increased costs to the Company.

/bullet/ Finally, pressure on profits was exerted by increased fees from the
managed care contract with Humana, Inc. These costs increased by 13.6%
beginning in September, 1996. The estimated recoveries from the Florida
Special Disability Trust Fund also decreased from previous years even
though the assessment remained at 4.52% of premium.

/bullet/ The Company's statutory capital (policyholders' surplus) as of
December 31, 1996, was $4.3 million or $300,000 above the statutory minimum
of $4,000,000. However, the final funding of the TIG transaction did not
occur until March 31, 1997 due to delays incurred in awaiting necessary
approvals from the Florida Department of Insurance. Had the closing
occurred as planned (December 4, 1996) then statutory capital would have
been $5.8 million or $1.8 million in excess of the statutory minimum (see
"Liquidity and Capital Resources"). The final closing and its impact on the
Company's financial position will be reflected in the first quarter, 1997
unaudited financial reports (Form 10-Q). Although the Company may remain
solvent under GAAP and Statutory accounting practices during the soft
market, its continuation as a going concern will be dependent upon
maintaining statutory surplus above the minimum level.

<PAGE>

RESERVES FOR LOSS AND LOSS ADJUSTMENT EXPENSES

Loss reserves constituted 86% of the Company's liabilities as of December
31, 1996. The Company establishes reserves that reflect management's estimates
of the total losses and loss adjustment expenses ("LAE") the Company will
ultimately have to pay under insurance policies. These include losses that have
been reported but not settled and losses that 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 $21.5
million, $14.5 million, and $6.8 million at the end of 1996, 1995, and 1994,
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.

RECONCILIATION OF LOSS RESERVES

<TABLE>

<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
--------------- --------------- --------------
(DOLLARS IN THOUSANDS)
(INCLUDES RESERVE TRANSACTIONS OF THE FUND
THROUGH NOVEMBER 30, 1995)
<S> <C> <C> <C>
Loss and LAE reserves at beginning of year, as reported ...... $ 28,306 $19,185 $ 16,653
Less reinsurance and other recoverables on unpaid losses at
beginning of year .......................................... 14,471 6,825 4,242
-------- -------- --------
Net loss and LAE reserves at beginning of year ............ 13,835 12,360 12,411
Provision for losses and LAE for claims incurred:
Current year ................................................ 5,732 14,341 15,107
Prior years ................................................ (75) 324 (1,383)
-------- -------- --------
Total incurred ............................................. 5,657 14,665 13,724
-------- -------- --------
Losses and LAE payments for claims incurred:
Current year ................................................ 1,170 2,209 5,871
Prior years ................................................ 7,857 10,981 7,904
-------- -------- --------
Total paid ................................................ 9,027 13,190 13,775
-------- -------- --------
Net loss and LAE reserves at end of year ..................... 10,465 13,835 12,360
Plus reinsurance and other recoverables on unpaid losses
at end of year ............................................. 21,517 14,471 6,825
-------- -------- --------
Loss and LAE reserves at end of year, as reported ............ $ 31,982 $28,306 $ 19,185
======== ======== ========
</TABLE>

In 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

<PAGE>

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").

For 1996, the Company has recorded a net decrease in the provisions for
losses and LAE of prior years of $75,000.

For statutory purposes, the Company reported its loss reserves at $7.8
million for the year ended December 31, 1996. The difference between this amount
and the gross reserve of $31.9 million appearing above is attributable to the
reporting of recoveries due from reinsurance and the SDTF as reductions to gross
reserves with $3.1 million of prepaid fees for managed care also classified as
reductions to net reserves for statutory purposes. In addition, for statutory
purposes, the Company is required to reserve for unallocated loss adjustment
expenses (even though such costs have already been paid pursuant to the contract
with CCI) which serves to increase statutory reserves by approximately $460,000.

EXCESS OF LOSS REINSURANCE

The Company retains the first $350,000 of liability on each claim.
Reinsurance contracts attach thereafter, with SCOR RE providing coverage for up
to $2,000,000 and Continental Casualty Company providing coverage for up to the
maximum statutory benefits. For 1996, the Company entered into a reinsurance
treaty with Allstate RE (now SCOR 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).

Commencing January 1, 1997, the Company has entered into a substantially
similar aggregate reinsurance treaty with SCOR RE. However, the Company has
secured this cover for its own account and therefore no recoveries have been
assigned and the cost will be borne by the Company.

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 $0, $95,000,
and $204,000 for 1996, 1995, and 1994, 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.

For 1996, premium ceded amounted to approximately $17.7 million and expense
reimbursements and commissions amounted to approximately $5.65 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

<PAGE>

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.

Commencing January 1, 1997, the Company has entered into a quota share
treaty with Underwriters for the 1997 calendar year. The treaty is substantially
similar to the 1996 treaty explained above with the exception of the percentage
of quota share, which has been reduced to 20%, and the provisional ceding
commission due the Company, which has been increased to 29% of ceded premium.

For the 1997 calendar year, the Company has entered into a 50% proportional
quota share reinsurance treaty with TIG. The treaty is substantially similar to
the 1996 Underwriters treaty with the exception that the provisional ceding
commission has been increased to 28% of ceded premium.

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 Company has included,
as recoverables against losses and LAE, amounts submitted and to be submitted to
the Bureau. The following table summarizes the history of the Company's
recordings of SDTF recoverables.

SPECIAL DISABILITIES TRUST FUND RECOVERIES

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992
--------------- --------------- --------------- --------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Earned premium for the year ...... $27,737 $27,919 $24,704 $21,822 $8,766
-------- -------- -------- -------- -------
Assessments paid .................. $ 1,254 $ 1,262 $ 1,117 $ 986 $ 396
-------- -------- -------- -------- -------
Estimated total recoverables as of
December 31, 1996(1) ............ $ 1,028 $ 1,028 $ 565 $ 1,961 $1,041
Recoveries received through
December 31, 1996 ............... 0 0 14 1,011 774
-------- -------- -------- -------- -------
STDF Recoverables ............... $ 1,028 $ 1,028 $ 551 $ 950 $ 267
======== ======== ======== ======== =======
</TABLE>

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

(1) Includes estimated amounts receivable on claims incurred but not reported
(IBNR).

<PAGE>

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

RECOVERIES AND RECOVERABLES DUE BY LOSS YEAR

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992
--------------- --------------- --------------- --------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Reimbursements due from and
estimated additional recoveries from
excess of loss reinsurers by loss year:
1992 .............................. $ 246 $ 1,155 $ 747 $ 652 $ 950
1993 .............................. 1,211 1,828 1,013 1,450
1994 .............................. 1,738 2,420 150
1995 .............................. 2,780 2,766
1996 .............................. 2,780
--------
Reimbursements due from and
estimated additional recoveries from
quota-share reinsurer
1995 .............................. 1,074 2,421
1996 .............................. 7,864
--------
Estimated recoveries from claims
submitted and to be submitted to
SDTF and other non-reinsurance
recoverables
1992 .............................. 267 280 909 629 595
1993 .............................. 950 1,402 1,746 1,541
1994 .............................. 551 994 2,259
1995 .............................. 1,028 1,205
1996 .............................. 1,028
--------
Total reinsurance and related
receivables ........................... $21,517 $14,471 $6,824 $4,272 $1,545
======== ======== ======= ======= =======
</TABLE>

The Special Disability Trust Fund was created in 1955 to provide a
financial incentive for employers to hire previously injured workers. If the
worker was injured a second time and the employer (or insurance carrier) could
prove that the two injuries were related, the Trust Fund will reimburse the
insurer for claims paid regarding the second or subsequent injuries.

It has been reported that the Trust Fund is financially impaired with
claims exceeding the Fund's ability to pay. The Florida Legislature is
considering legislation to deal with the issue but no definite laws have yet
been adopted. Proposals range from increased assessments to carriers to
terminating the Fund at a date certain as a means of dealing with the problem.

The Company is unable to ascertain with any certainty what, if any,
legislation will be adopted regarding the Trust Fund. If terminated at a date
certain or if assessments are increased, such actions could adversely impact the
Company.

MANAGED CARE

In September 1996, the Company extended its contract with Humana for a
two-year period to provide a managed care arrangement under which Humana
provides medical services to injured workers whose employers were participating
in the managed care arrangement. The terms of the agreement with Humana 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.

<PAGE>

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, 1996 of $3.1 million equals the amount of covered
medical losses recorded as unpaid and included in reserves.

As of December 31, 1996, approximately 68% 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. The Vincam/HIP agreement is a
three-year contract terminable with 90 days' notice. 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, 1996, total financial statement investments and cash
under GAAP (pursuant to which certain assets are stated at amortized cost)
decreased to $10.9 million, a decrease of 35% over the year ended December 31,
1995 total of $16.7 million. The 1996 amount includes $8.7 million of fixed
maturity investments carried at amortized cost as held to maturity securities
and $0 million carried at fair value as available for sale securities. The net
decrease in financial statement investments and cash reflects the underwriting
results including net premium ceded to reinsurers and 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.

The following table reflects investment results for the three year period
ended December 31, 1996.

INVESTMENT RESULTS
<TABLE>

<CAPTION>
PRE-TAX
NET PRE-TAX REALIZED NET
AVERAGE INVESTMENT EFFECTIVE CAPITAL GAINS
INVESTMENTS(1) INCOME(2) YIELD(3) (LOSSES)
----------------- -------------- ------------ ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended
December 31, 1996 ...... $11,574 $860 7.4% $ (28)
December 31, 1995 ...... $14,386 $846 5.9% $ 115
December 31, 1994 ...... $11,772 $605 5.2% $ (31)
</TABLE>
- ----------------

(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, have been annualized.

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.

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

28
<PAGE>

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. During 1996, the
competitive pressures of the market drove the average deposit below 10% although
the Company strives to maintain higher deposits whenever possible. 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. 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 operations of the Company for 1996 totaled a negative $6.2
million, compared to cash flows from the combined operations of the Fund and the
Company for 1995 of a negative $1.5 million and the Fund's operating cash flows
of $1.1 million in 1994. Operating cash flows for 1997 are expected to continue
negative because of the Company's quota share arrangements with Underwriters and
TIG (see "Results of Operations" above). 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, 1996 amounted to $10.9 million
with approximately $2.4 million of such amount consisting of investments with
maturities of less than one year or cash. The impact of quota-share arrangements
and the related negative operating cash flows may require liquidations of
investments in advance of their fixed maturities, although such liquidations are
not anticipated.

<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, 1996 and December 31, 1995 compared to the
Fund's GAAP surplus as of the end of December 31, 1994.

CAPITALIZATION

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
--------------- --------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
THE COMPANY:
Common shareholders' equity (deficit):
Common Stock, 102,501 shares issued, $1 par value ......... $ 103 $ 103 $ 103
Retained earnings (deficit) .............................. (1,059) (22) (10)
-------- ------- -------
Total common shareholders' equity (deficit) ............ (956) 81 93
-------- ------- -------
Preferred Stock, Series A:
Preferred shares, 248,885 (1996), 221,805 (1995) shares
issued, $1 par value....................................... 249 222 -0-
Additional paid-in capital, preferred stock ............... 2,252 1,996 -0-
-------- ------- -------
Total Preferred Stock, Series A ........................ 2,501 2,218 -0-
-------- ------- -------
Preferred Stock, Series B:
Preferred shares, 3,600,000 (1996), 3,200,000 (1995) shares
issued, $1 par value....................................... 3,600 3,200 -0-
-------- ------- -------
Total Preferred Stock, Series B ........................ 3,600 3,200 -0-
-------- ------- -------
Total capitalization .................................... $ 5,145 $ 5,499 $ 93
-------- ------- -------
THE FUND:(1)
Undistributed surplus .................................... $ 1,075
-------
Total capitalization .................................... $ 1,075
</TABLE>
- ----------------
(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.

The Company's registered Series A Preferred was sold to former members of
the Fund and sales agents and vendors. The unregistered 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
workers' 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, 1996, the Company's statutory surplus approximates $4.3
million or approximately $300,000 above the statutory minimum. The TIG
transaction (see Business Developments 1996), was originally scheduled to close
December 4, 1996. Due to delays suffered while awaiting Florida Department of
Insurance approval only the TIG Loan portion of the transaction closed on
December 4, 1996 (the first closing). The proceeds of the first closing were
used to pay in full the Underwriters loan (approximately $3.6 million) and the
balance was used by Holdings to purchase an additional 400,000 shares of the
Company's Series B Preferred. The Securities Purchase Agreement closed March 31,
1997 (the second closing) and generated an additional approximate $2 million
available to Holdings. The proceeds of this transaction were used by Holdings to
purchase an additional 1.5 million shares of the Company's Series B Preferred
Stock at $1.00 per share and $500,000 was advanced to the Company by

<PAGE>

Holding as additional working capital. This additional capital (combined with
the quota share) has increased the Company's direct writing capacity to $65
million which is more than double the Company's current 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 TIG Reinsurance Company. The Company
entered into a 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, 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.

In connection with these financing arrangements, the Company and Holdings
have provided these and additional covenants and entered into other agreements
with TIG, 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 If Holdings defaults on the loan, and fails to
common stock and Series B preferred stock as cure the default, then TIG would own and
collateral for the TIG loan. control the operations of the Company.
Holdings and the Company have agreed not to The company expects to continue to offer for
declare or pay any dividends on any class of sale its Series A preferred stock in order to
stock without the approval of TIG for so long expand its premium writing capacity. The
as Holdings in indebted to TIG. inability to pay a dividend, even though
dividends accumulate, may nevertheless
adversely affect these plans.
As a condition to the acquisition of the Fund's The Department's determination of the
assets and approval of the TIG transaction, the Company's capacity to pay a dividend may be
Company has agreed to not pay a dividend on biased in favor of policyholders, with a possible
any class of stock without the written approval further adverse effect upon the Company's
of the Department for a period of five years. continuing sale of its preferred stock.
The Company has agreed to not pay any form The Company's continued retention of former
of premium refund to the Fund's former Fund insureds as customers of the Company
insureds without the approval of the may be jeopardized if refunds are not paid.
Department.

The Company has entered into a total 70% The quota share arrangements serve to reduce
proportional quota share reinsurance contract the Company's required capital thus increasing
with TIG and Underwriters and has granted the Company's writing capacity. However,
TIG and Underwriters a continuing interest in underwriting and investment incomes related to
such arrangements for so long as Holdings' debt ceded premium are eliminated.
is unpaid and for a lesser period in the case of
Underwriters, respectively.
Holdings has granted Underwriters options to Even though the loan by TIG to Holdings may
purchase the equivalent of up to an be paid, TIG and Underwriters may still
approximate 5% interest in Holdings common exercise significant influence over operations of
stock and has sold approximately 44% of its the Company in the future.
common stock to TIG.
</TABLE>

<PAGE>

<TABLE>

<CAPTION>
DESCRIPTION POSSIBLE EFFECTS UPON THE COMPANY
- ----------------------------------------------- --------------------------------------------------
<S> <C>
Holdings has sold TIG 2,912,908 shares of its If Holdings fails to redeem this stock on or
Series I Preferred Stock. before December 4, 2003, TIG will be in a
position to control the Company.

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

Management of the Company and Holdings considers the relationship with TIG
and Underwriters a mutually beneficial alliance. Through its loan to Holdings,
TIG provided the financing necessary to complete a restructuring of debt and the
addition of further capitalization to the Company; and, through the quota share
arrangements, TIG and Underwriters assist the Company in reducing the amount of
required capital. Both TIG and Underwriters are major reinsurers with high AM
Best ratings. Management is of the opinion that its alignment with TIG is
significant to the Company and its plans for the future.

Quota share arrangements 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 arrangements facilitate 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 premium refunds, if any.

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 TIG, management is of the opinion that TIG
would approve such payments.

<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
December 31, 1996, the Company had approximately 1,300 policyholders and
approximately $28 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.

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 chose not to be
insured by the Company. Former members of the Fund representing approximately
$23.5 million of premium 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 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

<PAGE>
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.

The table below represents a five year history of the Fund and the
Company's Business Development.

FIVE YEAR HISTORY OF BUSINESS DEVELOPMENT
<TABLE>
<CAPTION>

THE COMPANY COMBINED THE FUND
-------------- ----------- --------------------------------------
1996 1995(1) 1994 1993 1992(3)
-------------- ----------- ----------- ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Statutory Data:
Direct premium earned ..................... $ 27,737 $ 27,919 $ 24,704 $ 21,822 $ 8,865
Less: Premium ceded to reinsurers(2) ...... 19,587 6,979 2,186 1,969 1,084
-------- -------- -------- ---------- -------
Net premium earned ........................ $ 8,150 $ 20,940 $ 22,518 $ 19,853 $ 7,781
-------- -------- -------- ---------- -------
Losses and LAE(4) ........................ $ 5,657 $ 14,886 $ 13,724 $ 14,723 $ 6,378
Ratio of losses and LAE to net
premiums earned ........................... 69.41% 71.09% 60.95% 74.16% 81.97%
Statutory surplus (deficit)(5) ............ $ 4,300 $ 4,669 $ (552) $ (1,995) $ (269)
GAAP Data (6):
Total assets .............................. $ 42,282 $ 40,701 $ 25,092 $ 20,120 $ 7,663
Total equity (deficit) ..................... $ 5,144 $ 5,499 $ 1,075 $ (354) $ (108)
</TABLE>

- ----------------
(1) Represents the sum of Associated Business & Commerce Workers' Compensation
Self Insurance Fund's results for the eleven months ended November 30, 1995,
and the Company's results for the one month ended December 31, 1995. The
loss portfolio transfer between the companies has been eliminated and the
combined sum has been presented for comparison of significant operating
data.
(2) Gives effect to $17.7 million paid to quota share reinsurer in 1996 and $4.5
million paid in 1995 under agreement effective October 1, 1995.
(3) Represents the sum of Associated Business & Commerce Workers' Compensation
Self Insurance Fund's results for the fifteen months October, 1991
(inception) through December 31, 1992, the Fund's first statutory loss year.

(4) Gives effect to loss and loss adjustment expense development of previous
years. See the discussion under "Reserves for Losses and Loss Adjustment
Expenses (LAE)".

(5) Calculated in accordance with statutory accounting practices applicable to
stock insurance companies, on a pro-forma basis for the Fund through
November 30, 1995.
(6) Calculated in accordance with Generally Accepted Accounting Principles.

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 March 31, 1997, there are approximately 222 agencies representing the
Company throughout the state of Florida, spanning from Key West to Pensacola.
The Company intends to increase the number of agencies by which it is
represented to at least 265 by the end of 1997. 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

34
<PAGE>

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 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%;
and (iii) 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 a 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, a portion of the fees received by Holdings
under the Management Agreement will be used to repay the loan from TIG. Holdings
has pledged its rights under the Management Agreement to TIG as additional
collateral for the loan. See "Prospectus Summary-Investment by Holdings and TIG
Loan" and "Principal Shareholders-Investment by Holdings and TIG Loan."

SALES AND MARKETING

The Company's sales are conducted by approximately 222 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

<PAGE>

the Company does write accounts starting from approximately $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, who supervises seven field marketing representatives. Each of the
Company's marketing representatives are experienced in workers' compensation
insurance and marketing. The marketing representatives 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.

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 for a period of three years from
the date of injury. The agreement was renewed in September 1996 for two years.
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. In 1996, a policyholder of
the Company could 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 in 1996 was able to receive up to a 10% premium discount. The amount
of the premium discount was subject to approval by the Company and the
Department of Insurance annually.

Effective January 1, 1997, the managed care premium discount of 10% was
eliminated by act of the Florida Legislature. Furthermore, participation by all
Florida employers in a managed care arrangement became mandatory on that same
date. In consequence, the Company's ability to offer managed care is no longer a
matter of enhancing a competitive product but is now essential. As a result of
anticipated mandatory managed care, the cost to the Company of maintaining its
capitated program increased by 14% as a result of negotiations with Humana in
September 1996. This increase (equivalent to 3% of participating premium) will
have a direct impact upon the Company by increasing the Company's claims loss
ratio to earned premium.

In addition, in March 1996, the Company entered into a managed care
arrangement with Vincam/ HIP and anticipates continuing this contractual
relationship through 1997. Vincam/HIP offers a PPO

<PAGE>

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 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 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
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, 1996, the
Company received new applications requesting a quote for coverage representing
approximately $88.1 million of premium. Of such applications, 697 were bound for
a total premium of $10.8 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.

<PAGE>

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.

/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.

For the period January 1, 1996 through December 31, 1996, the Company
entered into a reinsurance treaty with SCOR 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.

Commencing January 1, 1997, the Company has renewed the SCOR RE aggregate
treaty under substantially similar terms. However, this cover has now been
purchased by the Company for its own account and the proceeds have not been
assigned.

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.

<PAGE>

Effective January 1, 1997 through December 31, 1997, the Company has
entered into proportional quota share reinsurance treaties with TIG and
Underwriters for 50% and 20% respectively (See Business Developments above).

The Company has also entered into an agreement with Humana which transfers
the risk of providing medical services to injured workers for a period of three
years 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 $75 million of workers' compensation
premium, and processes over 5,500 claims annually. Claims Capabilities, Inc. has
developed 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. 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 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.

<PAGE>

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.

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 on these 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 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 1996, 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 of the table shows the estimated reserves for unpaid
claim and claim settlement expenses for the 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 1996 for 1992 loss reserves will be reflected in
the re-estimated ultimate net loss for each of the years 1992 through 1995. 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.

<PAGE>

ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE (LAE) DEVELOPMENT

<TABLE>

<CAPTION>
YEAR ENDED DECEMBER 31 1992 1993 1994 1995 1996
- ------------------------------------------------- --------- ---------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net liability for unpaid losses and LAE ......... $4,627 $12,411 $ 12,360 $13,835 $10,376
======= ======== ======== ======== ========
Cumulative amount of net liability paid through:
One year later ................................. 2,507 7,874 8,659 7,909
Two years later .............................. 4,139 10,018 11,813
Three years later .............................. 4,315 10,701
Four years later .............................. 4,370
Liability re-estimated as of:
One year later ................................. 4,497 11,028 12,684 12,603
Two years later .............................. 4,138 11,036 12,849
Three years later .............................. 4,464 11,538
Four years later .............................. 4,545
Cumulative redundancy (deficiency) ............ $ 82 $ 873 $ (489) $ 1,232
======= ======== ======== ========
</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.

/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.

FIXED MATURITY PORTFOLIO

<TABLE>

<CAPTION>
AMORTIZED MARKET PRETAX NET
COST AT VALUE AT INVESTMENT PRETAX AFTER-TAX
YEAR YEAR-END YEAR-END INCOME YIELD YIELD
- ------------ ------------ ----------- ------------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1996 ...... $ 8,709 $ 8,586 $860 6.5% 4.3%
1995 ...... $14,439 $14,412 $858 6.3% 4.2%
1994 ...... $12,631 $12,016 $575 5.0% 3.3%
1993 ...... $10,566 $10,567 $286 3.9% 2.6%
1992 ...... $ 3,975 $ 3,941 $144 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

<PAGE>

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.

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 10,000 square feet of office space for a monthly rental of
$12,878. The Company may enter into a lease for larger office space within the
South Florida area as growth may require.

<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>
Lawrence J. Marchbanks(2) ...... 50 Chairman of the Board of Directors
James R. Nau .................. 45 President
Errol Bader(1)(2) ............... 50 Executive Vice President and Director
Frederick R. Prout(1)(2) ...... 49 Secretary and Director
Daniel J. Webber(2) ............ 57 Director
James L. Wilson(1) ............ 52 Director
James R. Harris ............... 46 Vice President, Loss Control
Clifford G. Merritt ............ 41 Vice President, Finance
R. James Wiggins ............... 56 Vice President, Marketing and Field Operations
</TABLE>

- ----------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.

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.

James R. Harris is Vice President, Loss Control. He has held this position
since May 1995. He is responsible for loss control, safety and inspection
activities. Mr. Harris has been employed by the Fund and by Holdings and the
Company since 1994. Prior to joining ABC, Mr. Harris was employed as a loss
control representative by CIGNA Insurance Corporation, a major property/casualty
insurer, and was risk manager at a Jacksonville, Florida hospital.

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

<PAGE>

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 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.

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 R. Wiggins is Vice President, Underwriting/Marketing. Mr. Wiggins
joined the Company in this capacity in September 1996. Mr. Wiggins was formerly
an underwriter at Hartford Insurance Company from 1964 to 1992. Mr. Wiggins was
also Chief Workers Compensation Underwriter for Reliance Insurance Company from
1992 until joining the Company.

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 TIG, Mr. Allen B. Binder was added to
the Board of Directors of Holdings in December 1996. Mr. Binder is Senior Vice
President of TIG.

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 1999. 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 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.

<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, 1996, 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 1996
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>

ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------------ --------------------------------------------
(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) ($) ($)
- --------------------- ------- --------- -------- --------------- ------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jim Nau 1996 220,000
President
Errol Bader 1996 250,000
Executive
Vice-President
</TABLE>

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

(1) 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.

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
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

<PAGE>

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.

<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, 1996 were $327,000. The fees for such
services may 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 1996 were $3.8 million.

<PAGE>

PRINCIPAL SHAREHOLDERS

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, 1997, 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.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------
NAME NUMBER PERCENT
- --------------------------------------------------- ----------------- ---------
<S> <C> <C>
Errol Bader(1) ................................. 133,700(1) 47.6 %
Suite 400
4700 N.W. Boca Raton Blvd.
Boca Raton, FL 33431
James R. Harris ................................. - -
Lawrence J. Marchbanks ........................... 131,034(1) 44.6 %
Suite 400
4700 N.W. Boca Raton Blvd.
Boca Raton, FL 33431
Clifford G. Merritt .............................. - -
James R. Nau .................................... - -
Frederick R. Prout(1) ........................... 105,367(1) 37.5 %
Suite 400
4700 N.W. Boca Raton Blvd.
Boca Raton, FL 33431
TIG Reinsurance Company ........................... 87,092(2) 45.9 %
300 First Stamford Place
Stamford, Connecticut 06902
Underwriters Reinsurance Co. ..................... 11,389(3) 6.0%
22801 Ventura Boulevard
Woodland Hills, California 91364
Daniel J. Webber(1) .............................. 105,367(1) 37.5 %
Suite 400
4700 N.W. Boca Raton Blvd.
Boca Raton, FL 33431
R. James Wiggins ................................. - -
James L. Wilson ................................. 59,033(1) 23.7 %
Suite 400
4700 N.W. Boca Raton Blvd.
Boca Raton, FL 33431
Directors and executive officers as a group ...... 534,501(1) 86.0 %
</TABLE>

<PAGE>

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

(1) Under Holdings Stock Option Plan, the named executive officers and directors
have the right to acquire beneficial ownership of the following number of
shares within 60 calendar days: Mr. Bader-91,200 shares; Mr.
Marchbanks-101,867 shares; Mr. Prout-91,200 shares; Mr. Webber-91,200
shares; Mr. Wilson-56,533 shares; and all directors and executive officers
as a group-432,000 shares. These shares are included in the totals shown for
each individual and the group of all directors and executive officers.

(2) TIG Reinsurance currently owns 87,092 shares and has the option to purchase
such additional shares as may be necessary in order to own up to 49% of all
issued shares, subject to Underwriters' option.

(3) Underwriters' has the option to acquire 10% of the shares held by the
Company's founders and directors.

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 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)
December 31, 2003.

INVESTMENT BY HOLDINGS AND TIG LOAN AND SECURITIES PURCHASE

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
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."

The Company is a wholly owned subsidiary of Holdings. Holdings was
organized for the purpose of providing financing for the Company and performing
certain management services for the Company

<PAGE>

under the Management Agreement. The 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."

As of March 31, 1997, Holdings has invested $5,100,000 in the Company
through the purchase of 5,100,000 shares of Company Series B Preferred. Holdings
entered into a term loan agreement (the "Loan") with TIG Reinsurance Company
("TIG") pursuant to which (after giving effect to the first and second closing)
TIG has loaned Holdings $3,000,000. The loan bears interest at 10% per annum. If
not earlier prepaid, the loan is due on December 4, 2003. Holding has pledged as
collateral for the loan, among other things, all of the Common and Series B
Preferred Stock of the Company held by Holdings. Holdings expects to repay the
loan from fees it receives under the Management Agreement.

As of March 31, 1997, pursuant to the Securities Purchase Agreement (the
"Agreement"), Holdings (after giving effect to the first and second closing) has
sold and TIG has purchased 87,092 shares of Common Stock and 2,912,908 shares of
Series I Preferred Stock at a purchase price of $1.00 per share. TIG, as holder
of the Series I Preferred Stock, is entitled to receive, when, as and if
declared by the Board of Directors of Holdings cumulative dividends at the rate
of 6% per annum. The Series I Preferred Stock is redeemable by Holdings upon
payment of the stated value ($1.00 per share) together with all accrued and
unpaid dividends provided that Holdings shall redeem on or before December 4,
2003 and the TIG Loan is repaid. On and after that date, if not earlier
redeemed, the Series I Preferred Stock is convertible to common stock at the
option of the holder and is similarly convertible in the event of default under
the TIG Loan.

The Common Stock purchased under the Agreement represents an approximate
44% stake in Holdings, provided, however, that in the event Underwriters shall
decline to exercise its options TIG may, in its discretion, increase its stake,
at the same price, to 49% of the number of shares and options held by the
founders, shareholders, officers, directors and employees of Holdings.

As a result of the securities purchased by TIG, it is the largest
beneficial owner of Holdings securities and will be able to significantly
influence the business and affairs of the Company.

The proceeds from the sale of the Common and Series I Preferred Stock may
solely be used by Holdings for (i) the repayment of indebtedness owing by
Holdings to Underwriters, (ii) the purchase of equivalent amounts of Convertible
Preferred Stock, Series B, of the Company, when necessary to increase the
capital of the Company, (iii) loan repayment to TIG, (iv) redemption of Series I
Preferred Stock, and (v) reasonable operating expenses of the Company.

Until the TIG loan to Holdings is repaid in full, Holdings and its
shareholders have agreed to cause one designee of TIG to be elected to the board
of directors of Holdings. As of the date hereof, Holdings has been advised that
such designee will be Mr. Allen B. Binder, Senior Vice President of TIG. Mr.
Binder does not have any prior relationship with Holdings or the Company and
will not be a director of the Company.

Holdings expects to repay TIG 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 TIG 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, TIG would be able to elect all of the
directors of the Company and thereby control the Company's business and affairs.
TIG 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 default if the
following covenants are not met:

<PAGE>

CONSOLIDATED NET WORTH. Holdings and its consolidated subsidiary shall
have at all times consolidated net worth of not less than $2 million.

THE COMPANY'S STATUTORY SURPLUS. Holdings will not permit the statutory
surplus of the Company at any time to be less than the greater of (1) $4
million, or (2) the minimum statutory surplus required by the Florida Insurance
Department PLUS $500,000.

LOSS RESERVES. On each quarterly date, commencing with December 31, 1996,
Holdings will not permit the loss reserves of the Company to be outside the
actuarial range determined annually by an independent actuary. To illustrate, if
the loss reserve is determined by the independent actuary for December 31, 1966,
then such reserve will be used to determine compliance with this provision as of
December 31, 1996. If such loss reserve is not redetermined by the independent
actuary until December 31, 1997, then the loss reserve for December 31, 1996
will be used to determine compliance with this covenant for the quarterly dates
of March 31, 1997, June 30, 1997 and September 30, 1997.

RISK BASED CAPITAL RATIO. Holdings will not permit the risk-based capital
ratio of the Company at any time to be less than one hundred twenty percent
(120%) of the Company action level risk based capital ratio as determined by the
Florida Department of Insurance.

WRITING RATIO. During each quarterly period, commencing with the quarterly
period from January 1, 1997 to March 31, 1997, Holdings will not permit the
result of the Company's annualized net premiums written during such period to
exceed three hundred twenty percent (320%) of the statutory surplus of the
Company as of the last day of such quarterly period.

DEBT TO EQUITY RATIO. Holdings will maintain the ratio of (x) outstanding
debt to TIG hereunder to (y) consolidated net worth PLUS outstanding debt to TIG
hereunder at no greater than the respective amounts for the periods set forth
below:

From the closing date to December 31, 1998 .....................3:7.00

From January 1, 1999 to December 31, 1999 .....................3:8.04

From January 1, 2000 to December 31, 2000 .....................3:8.33

From January 1, 2001 and all years thereafter ..................3:9.23

As of the date of this filing, the Company and Holdings are 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 and Holdings shall 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 TIG to
provide the Company with proportional quota share reinsurance until the loan is
repaid and the Series I Preferred Stock is redeemed. If the rate of profit made
by TIG 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 and the Series I Preferred Stock is redeemed,
Holdings has agreed to cause the Company to obtain quota share reinsurance from
TIG at cession levels selected by the Company in its sole discretion, through
December 4, 2003. These quota share reinsurance obligations were a material
inducement to TIG to agree to make the loan to Holdings and to purchase the
Series I Preferred Stock of Holdings. Holdings has also pledged to TIG as
additional collateral all of Holdings' rights in the Management Agreement.

<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, 1997, there were outstanding
102,501 shares of Common Stock, 248,885 shares of Series A Preferred and
5,100,000 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

<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.

<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 four 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.

The only persons authorized to make this offer on behalf of the Company are
Errol Bader, Patricia Orrico, 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.

No person or firm, including the four 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
1,248,885 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, 5,100,000 shares
of Series B Preferred are outstanding. Therefore, subsequent to this offering,
at least 3,651,115 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 5,100,000 shares of Series B
Preferred outstanding are held by Holdings and have not been registered. Such
shares are "restricted" securities within the meaning of Rule 144.

<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. The
Commission maintains a web site that contains all information filed
electronically by the Company. The address of the Commission's web site is
http://www.sec.gov.

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
THE COMPANY
Independent Accountants' Report ................................................... F-2
Balance Sheets at December 31, 1996 and 1995 .................................... F-3
Statements of Operations for the Years Ended December 31, 1996 and 1995
and for the period May 13, 1994 through December 31, 1994 ........................ F-4
Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1996
and 1995 and for the Period May 13, 1994 through December 31, 1994 ............... F-5
Statements of Cash Flows for the Years Ended December 31, 1996 and 1995
and for the period May 13, 1994 through December 31, 1994 ........................ F-6
Notes to Financial Statements ................................................... F-8
THE FUND
Independent Accountants' Report ................................................... F-22
Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993 ... F-23
Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 ... F-24
Notes to Financial Statements ................................................... F-25
</TABLE>

F-1

<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, 1996 and 1995 and the related
statements of operations, changes in stockholders' equity and cash flows for the
years ended December 31, 1996 and 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, 1996 and 1995 and the results
of its operations, and its cash flows for the years ended December 31, 1996 and
1995 and the period May 13, 1994 (inception) through December 31, 1994 in
conformity with generally accepted accounting principles.

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

Boca Raton, Florida
April 11, 1997

F-2

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1996 1995
--------------- --------------
ASSETS
<S> <C> <C>
Investments with fixed maturities (Note 2) ........................... $ 8,708,519 $ 14,439,231
Cash and cash equivalents (Note 12) ................................. 2,155,583 2,242,245
Premiums receivable, less allowance for doubtful accounts
1996 $1,247,602; 1995 $613,125 ....................................... 4,078,520 4,849,556
Reinsurance and related recoverables (Note 4)
Paid loss recoverable ................................................ -0- 94,598
Loss and loss adjustment expenses .................................... 21,516,000 14,471,111
Prepaid reinsurance premiums ....................................... 49,782 530,957
Advances receivable (Note 8) .......................................... -0- 175,832
Accrued investment income ............................................. 122,318 211,277
Prepaid expenses (Note 5) ............................................. 3,200,485 1,821,000
Deferred and refundable income taxes (Note 6) ........................ 1,474,093 1,084,000
Deferred policy acquisition costs .................................... 260,004 389,737
Equipment, less accumulated depreciation
1996 $102,709; 1995 $47,465 .......................................... 640,202 289,871
Other assets, net ................................................... 76,948 101,202
------------ ------------
$ 42,282,454 $ 40,700,617
============ ============
RESERVES, LIABILITIES AND STOCKHOLDERS' EOUITY
Reserve for losses and loss adjustment expenses ..................... $ 31,982,392 $ 28,306,416
Liabilities:
Accounts payable (Note 8) .......................................... 417,445 459,929
Accrued expenses and other liabilities .............................. 1,682,234 2,249,540
Unearned premium ................................................... 2,411,708 2,346,983
Deferred gain on loss portfolio transfer ........................... 644,209 760,878
Accrued income taxes and special tax deposits (Note 6) ............... -0- 1,078,200
------------ ------------
Total reserves and liabilities ....................................... 37,137,988 35,201,946
------------ ------------
Commitments and contingencies (Notes 4, 10 and 12)
Stockholders' equity (Note 7):
Convertible preferred stock series A, 6% cumulative, $1 par value,
authorized shares 1,900,000; issued and outstanding 248,885
shares (aggregate liquidation preference of $2,488,850 at
December 31, 1996) ................................................... 248,885 221,805
Additional paid-in capital, preferred series A ..................... 2,251,816 1,996,245
Convertible preferred stock series B, $1 par value, authorized, issued
and outstanding 3,600,000 shares .................................... 3,600,000 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) .......................................... (1,058,736) (21,880)
------------ ------------
5,144,466 5,498,671
------------ ------------
$ 42,282,454 $ 40,700,617
============ ============
</TABLE>

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

F-3

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND THE
PERIOD MAY 13, 1994 (INCEPTION) THROUGH DECEMBER 31, 1994

<TABLE>
<CAPTION>
1996 1995 1994
--------------- -------------- ------------
<S> <C> <C> <C>
Revenues:
Standard premium earned, net of discounts ............... $ 27,737,366 $ 16,877,344 $ -0-
Less premium ceded for reinsurance ..................... 19,587,560 1,741,757 -0-
------------ ------------ ----------
Net premium earned .................................... 8,149,806 15,135,587 -0-
------------ ------------ ----------
Less loss and loss adjustment expenses .................. 5,656,627 14,886,606 -0-
------------ ------------ ----------
Premiums available for operations ..................... 2,493,179 248,981 -0-
Interest earnings ....................................... 860,171 73,455 -0-
Net realized gains (losses) ........................... (27,740) (404) -0-
------------ ------------ ----------
3,325,610 322,032 -0-
Expenses:
Policy acquisition and other underwriting expense ...... 4,392,125 333,315 10,245
Other expenses .......................................... 111,105 6,152 -0-
------------ ------------ ----------
4,503,230 339,467 10,245
------------ ------------ ----------
Income (loss) before income taxes ..................... (1,177,620) (17,435) (l0,245)
Income taxes (Note 6) .................................... (254,991) (5,800) -0-
------------ ------------ ----------
Net income (loss) ....................................... $ (922,629) $ (11,635) $ (10,245)
============ ============ ==========
Earnings (loss) per common share and common
share equivalent ....................................... $ (10.12) $ (0.11) $ (0.10)
============ ============ ==========
</TABLE>

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

F-4

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND THE
PERIOD MAY 13, 1994 (INCEPTION) THROUGH DECEMBER 31, 1994

<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN
CAPITAL RETAINED
PREFERRED STOCK COMMON EARNINGS
SERIES A SERIES B SERIES A STOCK (DEFICIT)
------------ ------------ ------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period ......... $ -0- $ -0- $ -0- $ -0- $ -0-
Common stock issued for cash ......... 102,501
Net (loss) ........................... (10,245)
-------------
Balance, December 31, 1994 ............ -0- -0- -0- 102,501 (10,245)
Preferred stock issued for cash ...... 221,805 3,200,000 1,996,245
Net income (loss) ..................... (11,635)
-------------
Balance, December 31, 1995 ............ 221,805 3,200,000 1,996,245 102,501 (21,880)
Preferred stock issued for cash ...... 55,972 400,000 503,748
Preferred stock cancelled ............ (28,892) (248,177)
Preferred dividends paid ............ (114,227)
Net income (loss) ..................... (922,629)
-------------
Balance, December 31, 1996 ............ $ 248,885 $3,600,000 $ 2,251,816 $102,501 $ (1,058,736)
========= =========== =========== ========= =============
</TABLE>

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

F-5

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FOR
THE PERIOD MAY 13, 1994 (INCEPTION) THROUGH DECEMBER 31, 1994

<TABLE>
<CAPTION>
1996 1995 1994
---------------- --------------- ------------
<S> <C> <C> <C>
OPERATING ACTITIVIES
Cash received for premiums ........................ $ 27,679,531 $ 1,341,812 $
Cash received from reinsurers ..................... 5,225,080 298,994
Cash paid to reinsurers ........................... (19,961,034) (2,213,424)
Cash paid for claims .............................. (15,452,872) (1,380,808)
Cash (paid) reimbursed for operating expenses ...... (3,465,898) 227,355 (10,245)
Income taxes paid ................................. (1,213,052)
Investment income collected ........................ 986,220 61,961
------------- ------------
Net cash and cash equivalents
(used in) operating activities ..................... (6,202,025) (1,664,110) (10,245)
------------- ------------ ---------
INVESTING ACTIVITIES
Purchase of investments ........................... (99,328) (3,921,036)
Sale of investments ................................. 4,080,210 2,538,365
Proceeds from investment maturities ............... 1,685,000 28,237
Purchase of equipment .............................. (455,382) -0-
(Receipts of) Payments for other assets ............ 18,200 (31,790) (41,895)
Collections (Payments) of advances, net ............ 175,832 (175,832)
------------- ------------
Net cash and cash equivalents
(used in) investing activities ..................... 5,404,532 (1,562,056) (41,895)
------------- ------------ ---------
FINANCING ACTIVITIES
Proceeds from issuance of preferred stock ......... 959,720 5,418,050 -0-
Repurchases of preferred stock ..................... (134,662) -0- -0-
Proceeds from issuance of common stock ............ -0- -0- 102,501
Preferred dividends paid ........................... (114,227) -0- -0-
------------- ------------ ---------
Net cash and cash equivalents provided
by financing activities ........................... 710,831 5,418,050 102,501
------------- ------------ ---------
Net increase in cash and cash equivalents ............ (86,662) 2,191,884 50,361
Cash and cash equivalents, beginning of period ...... 2,242,245 50,361 -0-
------------- ------------ ---------
Cash and cash equivalents, end of period ............ $ 2,155,583 $ 2,242,245 $ 50,361
============= ============ =========
</TABLE>

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

F-6

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FOR
THE PERIOD MAY 13, 1994 (INCEPTION) THROUGH DECEMBER 31, 1994

<TABLE>
<CAPTION>
1996 1995 1994
--------------- -------------- -----------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME (LOSS) TO NET
CASH AND CASH EOUIVALENTS (USED IN)
OPERATING ACTIVITIES
Net income (loss) ................................. $ (922,629) $ (11,635) $ (10,245)
Adjustments to reconcile net income (loss) to net cash
and cash equivalents (used in) operating activities:
Depreciation ....................................... 105,051 4,837 -0-
Amortization ....................................... 6,054 1,315 -0-
Loss on sale of investments ........................ (27,740) 404 -0-
Net amortization of bond discounts/premiums ...... 37,090 4,230 -0-
Amortization of deferred gain ..................... (116,669) (75,070) -0-
(Increase) decrease, netted for effects
of assets assumed, in:
Premiums receivable .............................. 628,629 197,712 -0-
Reinsurance and related recoverables ............ (6,469,116) (6,981,217) -0-
Accrued interest receivables ..................... 88,959 (15,724) -0-
Prepaid expenses ................................. (1,379,485) (122,342) -0-
Deferred and refundable income taxes ............ (390,093) (1,084,000) -0-
Deferred policy acquisitions costs ............... 129,733 86,921 -0-
Increase (decrease), netted for effects
of liabilities assumed, in:
Reserves for claims .............................. 3,675,976 6,057,569 -0-
Accounts payable and accrued expenses ............ (609,790) 342,846 -0-
Advance premiums ................................. 64,725 (1,148,156) -0-
Accrued income tax and special tax deposits ...... (1,078,200) 1,078,200 -0-
------------- ------------- ----------
Net cash and cash equivalents
(used in) operating activities ..................... $ (6,202,025) $ (1,664,110) $ (10,245)
============= ============= ==========
</TABLE>

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

F-7

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 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.

F-8

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1-NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES-(CONTINUED)

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 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 10% to 20% 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. Amortization expense for the year ended December 31, 1996
approximated $1,371,000. 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

F-9

<PAGE>

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, 1996 and 1995, all of the Company's investments were in
fixed maturity securities. At December 31, 1996 all investments are classified
as held-to-maturity. At December 31, 1995 investments were classified as
available-for-sale and held-to-maturity. At December 31, 1995, aggregate
carrying value approximated market for those securities classified as
available-for-sale, therefore, there was 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.

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.

Notwithstanding the forgoing, the Company has agreed, as a condition of
obtaining its certificate of authority, not to pay dividends on any class of
stock until December 7, 2000 without prior written consent of the Florida
Department of Insurance.

In addition, as part of a term loan agreement of the Company's parent
Corporation (Note 7), the Company has agreed to pay no dividends on any class of
stock for so long as the parent remains indebted without the creditors approval.
Moreover, if any dividends are approved, declared and paid on the common stock,
such dividends are required to be used to retire any then remaining indebtedness
of the parent under the term loan.

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.

F-10

<PAGE>

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 "Reserves for Losses and Loss Adjustment Expenses" section on page 24
of the Prospectus includes a schedule of the development of the Company's loss
reserves for the last three years and further discussion relating to the
Company's reinsurance and related recoveries.

Statutory reserves differ from GAAP reserves by inclusion of a reserve for
unpaid unallocated loss adjustment expenses which approximated $464,000 at
December 31, 1996.

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 $6,504 and $1,315 for the years ended December 31,
1996 and 1995, respectively.

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 and aggregate excess loss
reinsurance with unaffiliated insurance companies. For 1996 and 1995 the Company
retained the first $350,000 of each loss under its specific reinsurance
policies. For 1996, the Company entered into an aggregate excess loss policy for
coverage of up to 70% of 15% excess 75% of earned standard premium subject to a
$4,500,000 maximum limit.

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 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" (SFAS 109). 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.

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

F-11

<PAGE>

during the year. There was no change in the number of common shares outstanding
during 1996. Also, no dilution of earnings per share is calculated because the
Series A preferred stock is not convertible to common shares before January 1,
2000 and the Preferred series B preferred stock are not included in the
calculation because of an anti-dilutive effect at December 31, 1996 and 1995.
Therefore, the basis for determining earnings per share at December 31, 1996 and
1995 was as follows:

<TABLE>
<CAPTION>
1996 1995
---------------- ------------
<S> <C> <C>
Net income (loss) .................. $ (922,629) $ (11,635)
less preferred dividends ............ (114,227) -0-
============== ===========
Net income (loss), as adjusted ...... $ (1,036,856) $ (11,635)
============== ===========
</TABLE>

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 years
ended December 31, 1996 and 1995 and the period ended December 31, 1994:

<TABLE>
<CAPTION>
1996 1995 1994
------------- ----------- ------
<S> <C> <C> <C>
Balance, beginning of period ......... $ 613,125 $ 0 $ 0
Allowance assumed from the Fund ...... -0- 560,094 0
Additions to the allowance ............ 634,477 53,031 0
Write-offs against the allowance ...... -0- -0-
------------ ----------
Balance, end of period ............... $ 1,247,602 $ 613,125 $ 0
============ ========== ====
</TABLE>

NOTE 2-INVESTMENTS IN SECURITIES

GROSS INVESTMENT INCOME FOR THE PERIODS ENDED DECEMBER 31, 1996, 1995 AND
1994 TOTALED $860,171, $73,455 and none, respectively. There were no investment
expenses for the same periods.

Investments included in the accompanying balance sheet at December 31, 1996
and 1995 are summarized as follows (there were no investments in securities at
December 31, 1994):

<TABLE>
<CAPTION>
1996
---------------------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED EST. MARKET
COST APPRECIATION DEPRECIATION VALUE
-------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Held to maturity:
Fixed Maturities:
U.S. Treasury Notes ..................... $ 2,452,739 $ -0- $ 0 $ 2,452,739
U.S. Government agency notes, various
maturities and interest rates ............... 2.503,278 -0- (23,034) 2,480,244
GNMA and FNMA Mortgage pools,
various maturities and interest rates ...... 3,752,502 -0- (99,929) 3,652,573
------------ ------ ----------- ------------
Total held to maturity .................. $ 8,708,519 $ -0- $ (119,713) $ 8,585,556
============ ====== =========== ============
</TABLE>

F-12

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 2-INVESTMENTS IN SECURITIES-(CONTINUED)

<TABLE>
<CAPTION>
1995
---------------------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED EST. MARKET
COST APPRECIATION DEPRECIATION VALUE
-------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Held to maturity:
Fixed Maturities:
U.S. Treasury Notes ......... $ 500,224 $ 711 $ 0 $ 500,935
U.S. Government agency notes,
various maturities and
interest rates .................. 1,996,310 13,190 0 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 0 0 4,230,499
------------- --------- ----------- -------------
Total investments ............ $ 14,439,231 $ 30,093 $ (57,865) $ 14,411,459
============= ========= =========== =============
</TABLE>

The fair value of investments was determined using outside pricing
services.

Estimated fair value of investments at January 31, 1997, the most recently
available date, approximated $8,571,000.

Following is a summary of investment purchases, sales and maturities for
the years ended December 31, 1996 and 1995:

<TABLE>
<CAPTION>
PURCHASES: 1996 1995
- -------------------------- ----------- ---------
<S> <C> <C>
Fixed maturities ...... $ 99,328 $ -0-
========= ========
</TABLE>

<TABLE>
<CAPTION>
1996
---------------------------------------------
Sales:
Fixed Maturities Available For Sale PROCEEDS COST GAIN (LOSS)
------------- ------------- -------------
<S> <C> <C> <C>
Sales .............................. $ 657,031 $ 658,539 $ (1,508)
Maturities ........................ 1,685,000 1,685,000 -0-
------------ ------------ -----------
2,342,031 2,343,539 (1,508)
------------ ------------ -----------
Fixed Maturities Held-To-Maturity
Sales .............................. 3,333,859 3,360,091 (26,232)
Maturities ........................ 89,320 89,320 -0-
------------ ------------ -----------
3,423,179 3,449,411 (26,262)
------------ ------------ -----------
Totals ........................... $ 5,765,210 $ 5,792,950 $ (27,740)
============ ============ ===========
</TABLE>

Sale of held-to-maturity securities during 1996 was the result of the
non-recurring and unanticipated rapid funding of liabilities arising from the
quota share arrangement with Underwriters

F-13

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 2-INVESTMENTS IN SECURITIES-(CONTINUED)

Reinsurance. As of December 31, 1996, as a result of additional equity financing
(Note 7), management has the positive intent to hold all investments to their
respective maturities.

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.

The carrying value and estimated market value of debt securities at
December 31, 1996 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.

<TABLE>
<CAPTION>
ESTIMATED
CARRYING MARKET
VALUE VALUE
-------------- -------------
<S> <C> <C>
Due in one year or less ..................... $ 2,353,230 $ 2,353,230
Due after one year through five years ...... 1,596,050 1,586,333
Due after five years through ten years ...... 1,006,737 993,993
------------ ------------
4,956,017 4,933,556
GNMA and FNMA Mortgage pools ............... 3,752,502 3,652,000
------------ ------------
$ 8,708,519 $ 8,585,556
============ ============
</TABLE>

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, 1996 was $2,353,231.

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.

F-14

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 4-REINSURANCE AND RELATED RECOVERABLES-(CONTINUED)

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, 1996, 1995 and 1994 approximated $4,786,000, $416,000 and none,
respectively.

The following table summarizes the effect of reinsurance on premiums earned
and written for the periods ended December 31, 1996, 1995 and 1994:

<TABLE>
<CAPTION>
1996 1995(A) 1994
------------------------------------- ---------------- --------
WRITTEN EARNED
----------------- -----------------
<S> <C> <C> <C> <C>
Direct ...... $ 27,685,422 $ 27,620,697 $ 2,420,743 $ 0
Assumed ...... 116,669 116,669 14,456,601
Ceded ......... (19,629,696) (19,587,560) (1,741,757)
-------------- -------------- -------------
Net ......... $ 8,172,395 $ 8,149,806 $ 15,135,587 0
============== ============== ============= ========
</TABLE>

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.

(a) For 1995, 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, 1996, 1995 and 1994, reinsurance and related recoverables
consisted of none, $94,598 and none, respectively, of recoverables on paid claim
and claim settlement expenses and $21,516,000, $14,471,111 and none,
respectively, of estimated recoverables on unpaid claim and claim settlement
expenses.

Approximately $8,525,000 of the reinsurance and related recoverables at
December 31, 1995 are from Score RE (formerly Allstate Reinsurance Company).
Also, included in reinsurance and related recoverables at December 31, 1996 is
approximately $8,937,000 related to the Company's quota share agreement with
Underwriters. In addition, estimated undiscounted recoveries from the SDTF
approximated $3,824,000 at December 31, 1996.

The Special Disability Trust Fund was created in 1955 to provide a
financial incentive for employers to hire previously injured workers. If the
worker was injured a second time and the employer (or insurance carrier) could
prove that the two injuries were related, the Trust Fund will reinburse the
insurer for claims paid regarding the second or subsequent injuries.

F-15

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 4-REINSURANCE AND RELATED RECOVERABLES-(CONTINUED)

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 Score RE (formerly Allstate Re), 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, 1996 and 1995 includes $3,129,000 and
$1,821,000, respectively, 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 a letter of
credit to the benefit of the Company in the amount of $3,500,000, which expires
December 15, 1997.

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.

F-16

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 6-INCOME TAXES-(CONTINUED)

The provision for income taxes are as follows for the periods ended
December 31, 1996, 1995 and 1994:

<TABLE>
<CAPTION>
1996 1995 1994
-------------- ---------------- --------
<S> <C> <C> <C>
Current ...... $ (304,991) $ 1,078,200 $ 0
Deferred ...... 50,000 (1,084,000)
------------ -------------
$ (254,991) $ (5,800) $ 0
============ ============= ========
</TABLE>

The effective tax rate of 21.7% for 1996 differs from the statutory income
tax rate of 34% due to the effects during 1996 of underestimated 1995 income
taxes approximating $135,000.

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1996, 1995
and 1994 are as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------ --------
<S> <C> <C> <C>
Deferred tax assets:
Discount on net loss reserves ...... $ 515,000 $ 706,000 $ 0
Deferred charge ..................... 219,000 259,000
Unearned premium .................. 227,000 159,000
Net operating loss .................. 319,000 -0-
Other .............................. -0- 12,000
------------ -----------
Total deferred tax assets ......... 1,280,000 1,136,000 0
Deferred tax liabilities:
Loss reserves ..................... 158,000 -0-
Policy acquisition costs ......... 88,000 52,000
------------ -----------
246,000 52,000 0
------------ ----------- --------
$ 1,034,000 $1,084,000 $ 0
============ =========== ========
</TABLE>

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-STOCKHOLDERS' EQUITY AND SUBSEQUENT EVENT

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.
During 1996, the board increased the authorized series A 6% cumulative
Convertible Preferred Series A shares from 900,000 to 1,900,000. At December 31,
1996 and 1995, 248,885 and 221,805 shares, respectively, have been issued and
have been registered with the U.S. Securities and Exchange Commission. At
December 31, 1996 and 1995, 3,600,000 and 3,200,000 shares, respectively are
authorized and have been issued of Convertible Preferred Series B, which are
unregistered. Accordingly, a total of 6,151,115 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

F-17

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 7-STOCKHOLDERS' EQUITY AND SUBSEQUENT EVENT-(CONTINUED)

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, 1996 the
aggregate liquidation preference is $2,488,850.

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.

During March 1995, the founding stockholders of the Company entered into a
stock exchange agreement with Associated Business & Commerce Holdings, Inc.
(Holdings) whereby 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. 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 employees of Holdings devote their full business time
to the business and affairs of the Company pursuant to the terms of the
Management Agreement.

Holdings obtained the funds for the initial purchase of the 3,200,000
shares of Series B preferred stock by entering into a term loan agreement with
one of the Company's quota share reinsurers, Underwriters Reinsurance Company
("Underwriters"). The loan bore interest at 12.75% per annum, and, if not
earlier prepaid, was due on September 30, 2000. Holdings pledged as collateral
for the loan, among other things, all the Common and Series B Preferred Stock of
the Company held by Holdings. 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 on which the final payment to
Underwriters was made.

In order to relieve the debt service burden created by the Underwriters
loan, improve the financing terms, increase the quota share reinsurance ceding
commission and generate more capital available to the Company, Holdings, on
December 4, 1996, entered into a Term Loan Agreement and Securities Purchase
Agreement with TIG Reinsurance Company (hereinafter "TIG" or the "TIG Loan").

Because the voting securities purchase aspect of the entire TIG transaction
required prior approval by the Florida Department of Insurance, closing occurred
in two phases.

The first closing occurred on December 4, 1996. At this first closing,
Holdings entered into a loan agreement with TIG evidenced by two promissory
notes (Note A and Note B). Note A is in the principal amount of $3 million,
bears interest at 10% per annum, payable interest only and, if not earlier
prepaid, is due December 4, 2003. Note B was in the principal amount of
$912,908, bears interest at 6% per annum, payable interest only and, if not
earlier prepaid, was due December 4, 2003, provided however, that upon approval
of the proposed securities purchase by the Florida Department of Insurance Note
B was to be canceled and returned to Holdings. The principal amount of the B
Note would then be credited by Holdings toward the acquisition by TIG of
2,912,908 shares of Holdings

F-18

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 7-STOCKHOLDERS' EQUITY AND SUBSEQUENT EVENT-(CONTINUED)

Series I Preferred Stock. Upon approval by the Department of Insurance, TIG
was also required to complete its purchase of 2,912,908 shares of Series I
Preferred by the payment to Holdings of an additional $2 million (the "second"
closing).

The second closing occurred on March 31, 1997, after receipt of approval of
the entire transaction by the Department of Insurance. At the second closing,
TIG surrendered the B Note and paid the $2 million due for the purchase of
Holdings' Series I Preferred. Holdings canceled the B Note and issued to TIG
87,092 shares of Holdings' Common Stock and 2,912,908 shares of Holdings' Series
I Preferred Stock. The $2 million proceeds of the second closing were used by
Holdings to purchase an additional 1.5 million shares of the Company's Series B
Preferred Stock and $500,000 was advanced to the Company as working capital.

Unaudited statutory policyholders' surplus as of December 31, 1996 and 1995
and unaudited statutory net income (loss) for the periods ended December 31,
1996 and 1995 are $4,300,000 and $4,800,000 and $(430,000) and $(375,000),
respectively. Statutory minimum surplus is $4,000,000.

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 8-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, 1996, 1995 and 1994
approximated $327,000, $21,000 and none, respectively. At December 31, 1996 and
1995 accounts payable includes the $59,000 and $21,000 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.
The Fund is not seeking reimbursement from the Company for the organizational
costs incurred by the Fund on behalf of the Company. Included in premiums
receivable at December 31, 1995 is approximately $1,900,000 due from the Fund in
connection with the loss portfolio transaction.

F-19

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 8-RELATED PARTY TRANSACTIONS-(CONTINUED)

The Fund repaid the Company the balance of the $1,900,000 immediately upon
its receipt of an expected income tax refund during 1996.

All of the Company's' outstanding common stock as well as all of the
outstanding Series B preferred stock are owned by Holdings. Holdings performs
certain administrative functions and pays certain costs for the Company under a
management agreement. The management agreement calls for the Company to pay up
to 14.1% of written premium to Holdings. Management fee expense incurred by the
Company under the terms of this agreement approximated $3,847,000 and $345,000
for the years ended December 31, 1996 and 1995, respectively. 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 9-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, 1996.

NOTE 10-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 a party to any legal proceedings, other than those initiated by the Company
relating to the recovery of accounts receivable, 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 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 filed
an

F-20

<PAGE>

ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
NOTE 10-LEGAL PROCEEDINGS-(CONTINUED)

appeal as to this judgment as well. On or about April 10, 1997, the Fourth
District Court of Appeal rendered its decision affirming the final judgment of
the Trial Court. The appellate decision is not final until the time period (15
days) for filing motions to rehear has passed. Although ARMI may appeal this
decision to the Florida Supreme Court, it is unlikely that the Supreme Court
will assume jurisdiction. The Fund intends to continue to defend this claim, in
the event further proceedings occur, 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 at this time to be extremely
unlikely, the Fund's liability is estimated at less than $1,000,000.

NOTE 11-NON-CASH INVESTING AND FINANCING ACTIVITIES

DURING 1996, THE COMPANY FORECLOSED $142,000 OF SERIES A PREFERRED STOCK
AND APPLIED THE balance to unpaid premiums receivable.

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:

<TABLE>
<S> <C>
Investments received ...... $ 13,089,432
=============
Equipment received ......... $ 294,707
=============
Other assets received ...... $ 28,834
=============
</TABLE>

NOTE 12-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, 1996 approximated $1,706,000. 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.

NOTE 13-FAIR VALUE OF FINANCIAL INSTRUMENTS

THE FOLLOWING METHODS AND ASSUMPTIONS WERE USED TO ESTIMATE THE FAIR VALUE
OF EACH CLASS OF financial instruments for which it is practicable to estimate
that value:

Cash and cash equivalents: The carrying amount is a reasonable estimate of
fair value.

Investments in securities: Fair values are based upon quoted market prices
or dealer quotes, if available.

NOTE 14-COMMITTMENTS

DURING 1996, THE COMPANY ENTERED INTO AN AGREEMENT FOR NEW OPERATING,
POLICY, AND CLAIMS administration software for a total contract amount
approximating $525,000. As of December 31, 1996, approximately $130,000 of the
contract is still outstanding.

F-21

<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-22

<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-23

<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-24

<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-25

<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

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.

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-26

<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)

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 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

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.

DEFERRED POLICY ACQUISITION COSTS

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

F-27

<PAGE>

(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

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

F-28

<PAGE>

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

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 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.

RECLASSIFIATIONS

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.

F-29

<PAGE>

ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
NOTE 3-INVESTMENT EARNINGS-(CONTINUED)

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.

NOTE 5-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.

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.

F-30

<PAGE>

ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993

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.

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 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:

<TABLE>
<CAPTION>
1995 1994 1993
--------------- ----------- -------------
<S> <C> <C> <C>
Current ...... $ (1,543,407) $619,997 $ 823,336
Deferred ...... 1,227,000 -0- (863,941)
------------- --------- ----------
$ (316,407) $619,997 $ (40,605)
============= ========= ==========
</TABLE>

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.

F-31

<PAGE>

ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
NOTE 8-LEASE COMMITMENT AND TOTAL RENTAL EXPENSE-(CONTINUED)

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 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 April1, 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

F-32

<PAGE>

ASSOCIATED BUSINESS AND COMMERCE
WORKERS' COMPENSATION SELF-INSURANCE FUND
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
NOTE 11-LEGAL PROCEEDINGS-(CONTINUED)

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.

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:

<TABLE>
<S> <C>
Investments transferred ...... $13,089,432
============
Equipment transferred ......... $ 294,707
============
Other assets transferred ...... $ 28,834
============
</TABLE>

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:

<TABLE>
<S> <C>
1995 (unaudited) ...... $ (1,368,811)
=============
1994 .................. $ 1,090,325
=============
1993 .................. $ (246,380)
=============
</TABLE>

F-33

<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 IZNFORMATION 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

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Prospectus Summary .................. 3
Risk Factors ........................ 10
The Company ........................... 15
Use of Proceeds ..................... 15
Dividend Policy and History ......... 15
Capitalization ........................ 16
Selected Financial Data ............... 17
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ............ 18
Business ........................... 33
Management ........................... 43
Certain Transactions .................. 47
Principal Shareholders ............... 48
Description of Capital Stock ......... 52
Plan of Distribution .................. 54
Shares Eligible for Future Sale ...... 54
Legal Matters ........................ 55
Experts .............................. 55
Additional Information ............... 55
Index to Financial Statements ......... F-1
</TABLE>

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

[GRAPHIC OMITTED]

6% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES A
---------
PROSPECTUS
---------

May , 1997

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

<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*

<TABLE>
<S> <C>
SEC Registration .............................. $ 3,449
Printing and Engraving ........................ 55,000
Legal Fees and Expenses ........................ 25,000
Accounting Fees and Expenses .................. 10,000
Blue Sky Qualification Fees and Expenses ...... 1,000
Miscellaneous ................................. 5,551
--------
Total ....................................... $100,000
========
</TABLE>

- ----------------
* 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.

II-1

<PAGE>

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The Company sold the following number of shares of Series B Preferred to
Holdings for the aggregate cash consideration indicated.

<TABLE>
<CAPTION>
NUMBER OF AGGREGATE
DATE SHARES CASH CONSIDERATION
- ---------------- ------------ --------------------
<S> <C> <C>
December 1995 3,200,000 $3,200,000
December 1996 400,000 400,000
March 1997 1,500,000 1,500,000
</TABLE>

Each 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.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ------------------------------------------------------------------------------------------
<S> <C>
3.1 Articles of Incorporation*
3.2 Bylaws*
3.3 Amendment to Articles of Incorporation***
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**
10.18 Amendment to Exchange and Shareholders' Agreement, dated November 27, 1996***
</TABLE>

II-2

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -----------------------------------------------------------------------------------------
<S> <C>
10.19 Letter Agreement, dated August 9, 1996, extending Humana Managed Care contract for two
years***
10.20 Securities Purchase Agreement, dated as of December 4, 1996 by and among Associated
Business and Commerce Holdings, Inc., Errol Bader, Lawrence J. Marchbanks, Frederick R.
Prout, Daniel J. Webber and James L. Wilson and TIG Reinsurance Company***
10.21 Term Loan Agreement, dated as of December 4, 1996, between Associated Business and
Commerce Holdings, Inc. and TIG Reinsurance Company together with amendments dated
February 24, 1997 and March 19, 1997, respectively***
10.22 Pledge Agreement between Associated Business and Commerce Holdings, Inc. and TIG
Reinsurance Company***
10.23 Security Agreement between Associated Business and Commerce Holdings, Inc. and TIG
Reinsurance Company***
10.24 Agreement as to Reinsurance between Associated Business and Commerce Holdings, Inc.
and TIG Reinsurance Company***
12 Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends
23.1 Consent of Schmidt, Raines, Trieste, Dickenson & Adams, P.L.
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)****
28.1 Schedule P from the Statutory Annual Statement for 1996-Analysis of Losses and Loss
Expense***
</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.
*** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
**** Previously filed.

(b) Financial Statement Schedules

Schedule VIII Changes in Valuation of Assets (included in financial
statements)

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:

II-3

<PAGE>

(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-4

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 1 to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in Boca
Raton, Florida, on the 9th day of May, 1997.

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
Post-Effective 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 May 9, 1997
Errol Bader Government Affairs and Director
/s/ LAWRENCE J. MARCHBANKS Chairman of the Board and May 9, 1997
Lawrence J. Marchbanks Director
* Vice President, Finance (Principal May 9, 1997
Clifford G. Merritt Financial and Accounting Officer)
* President (Principal Executive Officer) May 9, 1997
James R. Nau
* Secretary and Director May 9, 1997
Frederick R. Prout
* Treasurer and Director May 9, 1997
Daniel J. Webber
* Director May 9, 1997
James L. Wilson
</TABLE>

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

<TABLE>
<S> <C>
*By: /s/ LAWRENCE J. MARCHBANKS
Attorney-in-Fact
</TABLE>

II-5

<PAGE>

INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
- ------ -----------

12 Computation of Ratio of Earnings to Fixed Charges and
Preferred Dividends.

23.1 Consent of Schmidt, Raines, Trieste, Dickenson & Adams, P.L.

EXHIBIT 12

Associated Business & Commerce Insurance Corporation
Computation of Ratio of Earnings to Fixed Charges
and Preferred Dividends

For the
Year Ended
December 31,
1996
------------
Operating income (loss) before provision for income taxes
per statement of operations $(922,629)
Note: No adjusting items are present =========

Preferred dividend requirements $ 114,227

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

Preferred dividend factor on a pretax basis $ 153,064
=========

Ratio of earnings to fixed charges (6.03)
=========

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in Form S-1, dated May 9, 1997 of Associated
Business & Commerce Insurance Corporation, of our report dated April 11, 1997
upon the financial statements of Associated Business & Commerce Insurance
Corporation as of December 31, 1996 and 1995, and for the years ended December
31, 1996, 1995, and 1994 and our report dated March 20, 1996 upon the financial
statements of Associated Business and Commerce Workers' Compensation
Self-Insurance Fund for the years ended December 31, 1995, 1994 and 1993.

Schmidt, Raines, Trieste, Dickenson & Adams, P.L.

May 9, 1997