<PAGE>
_______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-23181
PAULA FINANCIAL
(Exact name of registrant as specified in its charter)
DELAWARE 95-4640368
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
PAULA FINANCIAL
300 NORTH LAKE AVENUE, SUITE 300
PASADENA, CA 91101
(Address of principle executive offices)
(626) 304-0401
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Number of shares of Common
Stock, $.01 par value, outstanding as of close of business on May 4, 1998:
6,329,465 shares.
_______________________________________________________________________________
<PAGE>
PAULA FINANCIAL
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed consolidated balance sheets as of
December 31, 1997 and March 31, 1998 (unaudited) ..................... 2
Condensed consolidated statements of income for the three
months ended March 31, 1997 and 1998 (unaudited).......................3
Condensed consolidated statements of comprehensive income for the three
months ended March 31, 1997 and 1998 (unaudited).......................4
Condensed consolidated statements of cash flows for the three months
ended March 31, 1997 and 1998 (unaudited)..............................5
Notes to condensed consolidated financial statements for the three
months ended March 31, 1998 (unaudited) ...............................6
Item 2. Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations....................................8
PART II. OTHER INFORMATION
Item 5. Other Information.................................................12
Item 6. Exhibits and Reports on Form 8-K..................................12
SIGNATURE.......................................................................13
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PAULA FINANCIAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, March 31,
ASSETS 1997 1998
------------ -----------
(*) (Unaudited)
<S> <C> <C>
Investments:
Fixed maturities, available for sale, at market
(amortized cost: 1997, $112,294; 1998, $117,062) $114,525 $119,170
Equity securities, at market
Preferred stock (cost: 1997, $3,019; 1998, $6,191) 3,112 6,361
Common stock (cost: 1997, $5,546; 1998, $5,546) 5,545 5,656
Invested cash, at cost (approximates market) 14,682 16,471
-------- --------
Total investments 137,864 147,658
-------- --------
Cash (restricted: 1997, $1,491; 1998, $1,642) 4,770 4,284
Accounts receivable, net of allowance for uncollectible
accounts (1997, $600; 1998, $688) 24,320 32,653
Reinsurance recoverable on paid and unpaid losses and
loss adjustment expenses 6,394 7,635
Deferred income taxes 3,247 3,465
Other assets 11,669 11,247
-------- --------
$188,264 $206,942
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Unpaid losses and loss adjustment expenses $ 77,784 $ 84,807
Unearned premiums 15,390 25,610
Accrued policyholder dividends - 82
Accounts payable and accrued expenses 9,814 10,582
Notes payable 456 179
-------- --------
103,444 121,260
-------- --------
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.01 par value. Authorized 4,058,823
shares, none issued and outstanding - -
Common stock, $0.01 par value
(Authorized 15,000,000 shares, issued and outstanding:
1997, 6,321,177; 1998, 6,326,777) 63 63
Additional paid-in-capital 67,176 67,225
Retained earnings 16,048 16,818
Accumulated other comprehensive income:
Net unrealized gain on investments 1,533 1,576
-------- --------
84,820 85,682
-------- --------
$188,264 $206,942
-------- --------
-------- --------
</TABLE>
* Derived from audited financial statements.
See notes to condensed consolidated financial statements.
2
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1998
---- ----
(Unaudited)
<S> <C> <C>
INCOME:
Premiums earned:
Workers' compensation $17,410 $27,820
Group medical and life 226 175
Commissions 935 717
Net investment income 1,216 2,054
Net realized investment gains - 30
Other 150 199
------- -------
19,937 30,995
------- -------
EXPENSES:
Losses and loss adjustment
expenses incurred 11,449 20,798
Dividends provided for policyholders 511 423
Operating 6,817 8,632
------- -------
18,777 29,853
------- -------
Income before income tax expense 1,160 1,142
Income tax expense 244 119
------- -------
NET INCOME $ 916 $ 1,023
------- -------
------- -------
Earnings per share $ 0.48 $ 0.16
Weighed average shares outstanding 1,903,933 6,322,455
Earnings per share - assuming dilution $ 0.23 $ 0.15
Weighed average shares outstanding -
assuming dilution 3,951,513 6,799,951
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1998
---- ----
(Unaudited)
<S> <C> <C>
Net income $ 916 $1,023
Other comprehensive income, net of tax:
Unrealized gains (losses) on investments:
Unrealized holding gains (losses)
arising during period (tax impact:
1997, $265; 1998, $31) (514) 59
Reclassification adjustment for gains
(losses) included in net income
(tax impact: 1997, $0; 1998, $9) - (16)
------ ------
(514) 43
------ ------
COMPREHENSIVE INCOME $ 402 $ 1,066
------ ------
------ ------
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1998
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 916 $ 1,023
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Depreciation and amortization 297 336
Amortization of fixed maturity premium, net 162 153
Loss on sale of property and equipment 5 4
Gain on sales and calls of fixed maturities - (30)
Increase in accounts receivable (5,271) (8,024)
Increase in deferred income taxes (242) (240)
Increase in unpaid losses and loss adjustment expenses 2,340 7,023
Increase (decrease) in accrued policyholder dividends (193) 82
Increase in accounts payable and accrued expenses 1,375 768
Increase in unearned premiums 4,262 10,220
Other, net (709) (982)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,942 10,333
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of available for sale fixed maturities - 3,285
Proceeds from maturities and calls of available for sale fixed maturities 2,034 1,202
Proceeds from sale of property and equipment 14 19
Purchase of preferred and common stocks (994) (3,183)
Purchase of available for sale fixed maturities - (9,367)
Purchase of property and equipment (236) (506)
------- -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 818 (8,550)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit agreement, net 1,571 -
Payments on notes payable (1,618) (277)
Dividends paid - (253)
Exercise of stock options - 50
------- -------
NET CASH USED IN FINANCING ACTIVITIES (47) (480)
------- -------
NET INCREASE IN CASH AND INVESTED CASH 3,713 1,303
Cash and invested cash at beginning of period 10,707 19,452
------- -------
CASH AND INVESTED CASH AT END OF PERIOD $14,420 $20,755
------- -------
------- -------
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
PAULA Financial and subsidiaries (the "Company") is an integrated insurance
organization specializing in the production, underwriting and servicing of
workers' compensation and accident and health insurance for agribusiness clients
in California, Arizona, Oregon, Idaho, Alaska, Texas, Florida and New Mexico.
The accompanying unaudited condensed consolidated financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles ("GAAP") for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments, including normally
occurring accruals, considered necessary for a fair presentation have been
included.
Operating results for the three months ended March 31, 1998 are not necessarily
indicative of the results to be expected for the year ended December 31, 1998.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
NOTE B - ADOPTION OF NEW ACCOUNTING STANDARDS
During the first quarter of 1998, the Company adopted the provisions of
Financial Accounting Standards Board ("FASB") Statement No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). SFAS 130 requires companies to report
comprehensive income and its components in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in-capital. Comprehensive income includes all
changes in equity during a period except those resulting from investments by
stockholders and distributions to stockholders. In accordance with the interim
reporting requirements of SFAS 130, the Company has included condensed
consolidated statements of comprehensive income in the accompanying condensed
consolidated financial statements.
Also, during the first quarter of 1998, the Company adopted the provisions of
FASB Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information: ("SFAS 131"). This statement specifies revised guidelines for
determination of an entity's operating segments and the type and level of
financial information to be disclosed. Based on the guidance included in SFAS
131, the Company has determined that it operates in a single segment: the
production, underwriting and servicing of workers' compensation and accident and
health insurance.
6
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE C - NEW ACCOUNTING STANDARDS NOT YET ADOPTED
During the fourth quarter of 1997, the American Institute of Certified Public
Accountants issued Statement of Position No. 97-3, "Accounting by Insurance and
Other Enterprises for Insurance-Related Assessments" ("SOP 97-3"). SOP 97-3
addresses the recognition and measurement of assets and liabilities related to
guaranty funds and other assessments. SOP 97-3 is effective for fiscal years
beginning after December 31, 1998, although early adoption is encouraged. The
Company has not determined the impact of SOP 97-3 and has not yet adopted SOP
97-3.
7
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a California-based specialty underwriter and distributor of
commercial insurance products which, through its subsidiary PAULA Insurance
Company ("PICO"), is one of the largest underwriters specializing in workers'
compensation insurance products and services for the agribusiness industry. The
Company sells complementary products through the Company's insurance agency
subsidiaries (collectively "Pan Am"), including group health and life products
provided by the Company's subsidiary PAULA Assurance Company ("PACO"), and
third-party claims administration services to self-insured group medical benefit
plans provided by the Company's subsidiary Pan Pacific Benefit Administrators,
Inc.
The Company's revenues have consisted primarily of premiums earned from workers'
compensation insurance underwriting, premiums earned from group medical
insurance, commission income, net investment income and other income. Premiums
earned during a period represent the portion of direct premiums written for
which all or a portion of the coverage period has expired, net of reinsurance.
Premiums written for the three months ended March 31, 1997 and 1998, were $22.5
million and $39.0 million, respectively. Commission income is earned from Pan
Am's distribution of insurance for insurers other than PICO and PACO. Net
investment income represents earnings on the Company's investment portfolio,
less investment expenses. Other income consists of third party administration
fees and other miscellaneous items.
The Company's expenses have consisted of losses and loss adjustment expenses
incurred, dividends provided for policyholders and operating expenses. Losses
include reserves for future payments for medical care and rehabilitation costs
and indemnity payments for lost wages. Loss adjustment expenses include
expenses incurred in connection with services provided by third parties,
including expenses of independent medical examinations, surveillance costs, and
legal expenses as well as staff and related expenses incurred to administer and
settle claims. Loss and loss adjustment expenses are offset in part by
estimated recoveries from reinsurers under excess of loss reinsurance treaties.
Operating expenses include commission expenses to third party insurance agencies
and other expenses that vary with premium volume, such as premium taxes, state
guaranty fund assessments and underwriting and marketing expense, as well as
general and administrative expenses, which are less closely related to premium
volume.
The Company's revenues are seasonal, and have tended to be highest in the second
and third quarters of each year. This is due primarily to the seasonality of
the size of the workforce employed by the Company's agribusiness clients.
8
<PAGE>
RESULTS OF OPERATIONS:
PREMIUMS WRITTEN. The Company's premiums written for the three months ended
March 31, 1998 increased 73.3% to $39.0 million from $22.5 million for the
comparable 1997 period. The growth in premiums written was primarily
attributable to the net addition of new policyholders and increased policyholder
payrolls. The Company's growth is particularly strong in California and Texas.
PREMIUMS EARNED. For the reasons described above for premiums written, the
Company's premiums earned for the three months ended March 31, 1998 increased
58.7% to $28.0 million from $17.6 million for comparable 1997 period.
COMMISSION INCOME. Commission income decreased 23.3% to $0.7 million for the
three months ended March 31, 1998 from $0.9 million for the comparable 1997
period. The decrease was primarily the result of decreased premiums placed with
carriers other than PICO and PACO, as a result of the Company's decision to
focus on writing PICO workers' compensation insurance.
NET INVESTMENT INCOME. Net investment income increased 68.9% to $2.1 million
for the three months ended March 31, 1998 from $1.2 million for the comparable
1997 period. The increase was the result of significant cash flow increases from
PICO's underwriting activity and the proceeds from the initial public offering.
Average invested assets increased to $140.4 million for the three months ended
March 31, 1998 from $87.2 million for the comparable period in 1997. The
Company's average yield on its portfolio was 5.9% for the three month period in
1998 and 5.6% for the three month period in 1997.
LOSSES AND LOSS ADJUSTMENT EXPENSES INCURRED. The Company's loss ratio for the
three months ended March 31, 1998 increased to 74.3% from 64.9% for the
comparable 1997 period. The Company's loss ratio for the three months ended
March 31, 1997 was positively impacted by net recoveries from loss and loss
adjustment expense reserves for prior years of $0.6 million or 3.2% of first
quarter 1997 earned premium. In the first quarter of 1998, the Company's loss
ratio included a net strengthening of prior year reserves, principally 1997, of
$1.4 million or 5.0% of first quarter 1998 earned premium.
DIVIDENDS PROVIDED FOR POLICYHOLDERS. With the advent of open rating in
California and an emphasis in most states in which the Company operates on,
among other things, competitive pricing at inception, the Company's dividends
provided for policyholders decreased significantly commencing in late 1995.
Dividends provided for policyholders decreased as a percentage of premiums
earned for the three months ended March 31, 1998 to 1.5% from 2.9% for the
comparable 1997 period. During the first quarter of 1998, the Company paid $0.3
million in policyholder dividends related to certain Arizona policies in which
the loss experience developed better than anticipated. The Company does not
anticipate paying significant policyholder dividends in the future.
OPERATING EXPENSES. Operating expenses increased 26.6% to $8.6 million for the
three months ended March 31, 1998 from $6.8 million for the comparable 1997
period primarily due to a $1.2 million increase in commissions paid to
unaffiliated agencies.
9
<PAGE>
INCOME TAXES. Income tax expense for the three months ended March 31, 1998
decreased to $0.1 million from $0.2 million for the comparable 1997 period. The
effective combined income tax rates for the three months ended March 31, 1998
and 1997 were 10.4% and 21.0%, respectively. These rates are below the combined
statutory rate due to the significant portion of the Company's investment
portfolio consisting of tax-exempt securities. The difference in effective tax
rates between the 1998 and 1997 periods is due to a change in the mix of income
before taxes among tax-exempt interest, taxable interest and underwriting
income.
LIQUIDITY AND CAPITAL RESOURCES:
As a holding company, PAULA Financial's principal sources of funds are dividends
and expense reimbursements from its operating subsidiaries, and proceeds from
the sale of its capital stock. PAULA Financial's principal uses of funds are
capital contributions to its subsidiaries, payment of operating expenses and
dividends to its stockholders.
California law places significant restrictions on the ability of the insurance
subsidiaries to pay dividends to PAULA Financial. Based on these restrictions
and the statutory results, as of December 31, 1997, PAULA Financial would be
able to receive $6.4 million in dividends in 1998 from its insurance
subsidiaries without obtaining prior regulatory approval from the California
Department of Insurance ("DOI"). No dividends were paid by the insurance
subsidiaries to PAULA Financial during the quarter ended March 31, 1998.
The Company retained $16.6 million from the proceeds of its initial public
offering at the parent company level on a short-term basis. The Company
anticipates contributing $11.8 million to PICO to supports its underwriting
activities in the next twelve to eighteen months. Management believes that the
remaining offering proceeds, funds available under the Credit Agreement
described below, and expense reimbursements and dividends from its operating
subsidiaries will be sufficient to meet the parent company's operating cash
needs for at least two years.
In March 1997, PAULA Financial entered into the Credit Agreement with a
commercial bank providing PAULA Financial with a revolving credit facility of
$15.0 million until December 31, 1999. At such time PAULA Financial may elect to
convert all or a portion of the borrowings then outstanding under such facility
into a term loan payable in quarterly installments and maturing on December 31,
2001. Each of PAULA Financial's non-insurance subsidiaries has guaranteed all
obligations of PAULA Financial under the Credit Agreement. As of April 30, 1998,
no amounts were outstanding under this facility.
The Company's investments consist primarily of taxable and tax-exempt United
States government and other investment grade securities and investment grade
fixed maturity commercial paper and, to a lesser extent, equity securities. The
Company does not have significant investments in below investment grade fixed
maturity securities, mortgage loans or real estate. The Company has invested in
the equity securities of two founders of the PAULA Trading Company other than
Pan Am as part of the parent company's investment portfolio. The Company's
investments in fixed maturity securities are carried at market value as such
securities may be sold in response to changes in interest rates, tax planning
considerations or other aspects of asset/liability management. As of March 31,
1998, the carrying value of the Company's fixed maturity securities portfolio
was $119.2 million and 94.9% of the portfolio was rated "A" or better by S&P,
Moody's or Fitch.
10
<PAGE>
California workers' compensation insurance companies are required to maintain
some of their investments on deposit with the California DOI for the protection
of policyholders. Other states in which PICO is licensed have also required
PICO to post deposits for the protection of those states' policyholders.
Pursuant to applicable state laws, PICO had, as of March 31, 1998, securities
with a book value of $67.2 million held by authorized depositories pursuant to
these deposit requirements. In addition to the deposits, the Company's
insurance company operating subsidiaries must maintain capital and surplus
levels related to premiums written and the risks retained by the subsidiaries.
YEAR 2000 CONSIDERATIONS
The Company is currently working to resolve the potential impact of the year
2000 on the processing of date-sensitive information systems. The Company
believes that it has identified substantially all of its application software
programs which require modification in order to become year 2000 compliant and
has a formal plan to correct and test the programs affected by the conversion
from a two-digit year to a four-digit year. The Company expects the early
phases of the project to be completed during late 1998. The final phase of the
project is scheduled to be completed by the third quarter of 1999. The review
of systems also included the identification of vendors that may have a
significant impact on the Company's operations and their expected completion of
any conversions. Based on preliminary information, costs of addressing
potential problems are not currently expected to have a material adverse impact
on the Company's financial position, results of operations or cash flows in
future periods. However, if the Company or its vendors are unable to resolve
such processing issues in a timely manner, it could result in a material
financial risk. Accordingly, the Company plans to devote the necessary
resources to resolve all significant year 2000 issues in a timely manner.
FORWARD-LOOKING STATEMENTS
The discussions above contain statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933,
as amended and Section 21E of the Securities and Exchange Act of 1934, as
amended. The words "believe," "estimate," "expect," "intend," "anticipate,"
and similar expressions and variations thereof identify certain of such
forward-looking statements, which speak only as of the dates on which they
are made. PAULA Financial undertakes no obligation to publicly update or
revise any forward-looking statement, whether as a result of new information,
future events, or otherwise. Readers are cautioned that any such
forward-looking statements are no guarantees of future performance and
involve risks and uncertainties, and that actual results may differ
materially from those indicated in the forward-looking statements as a result
of various factors. Readers are cautioned not to place undue reliance on
these forward-looking statements.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 5: OTHER INFORMATION.
In April 1998, the Company invested $10.0 million of proceeds from the
Company's initial public offering in a series of longer-term investments
recommended by the Company's second portfolio investment manger, Trust
Company of the West ("TCW"). The Company and TCW entered into an investment
management agreement pursuant to which the Company will pay TCW customary
fees which are not based on investment results. The proceeds invested with
TCW were initially invested on a temporary basis in mutual funds holding
short-term investment grade fixed income maturities.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits.
11. Computation of Earnings Per Share
27. Financial Data Schedule.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the three months
ended March 31, 1998.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed
on its behalf by the undersigned thereunto duly authorized.
Date: May 11, 1998 PAULA FINANCIAL
By: /S/ JAMES A. NICHOLSON
----------------------------
Senior Vice President
and Chief Financial Officer
13
<PAGE>
Exhibit 11
PAULA FINANCIAL AND SUBSIDIARIES
COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1997 1998
-------- -------
<S> <C> <C>
Net Income $ 916 $1,023
-------- -------
-------- -------
Weighted average shares outstanding for calculating
basic earnings per share 1,904 6,322
Convertible preferred stock 1,882 -
Warrants 130 -
Options 36 478
-------- -------
Total shares for calculating diluted earnings
per share 3,952 6,800
-------- -------
-------- -------
Basic earnings per share $ 0.48 $0.16
-------- -------
-------- -------
Diluted earnings per share $ 0.23 $0.15
-------- -------
-------- -------
</TABLE>
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<DEBT-HELD-FOR-SALE> 119,170
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 12,017
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 147,658
<CASH> 4,284
<RECOVER-REINSURE> 272
<DEFERRED-ACQUISITION> 3,368
<TOTAL-ASSETS> 206,942
<POLICY-LOSSES> 84,807
<UNEARNED-PREMIUMS> 25,610
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 82
<NOTES-PAYABLE> 179
0
0
<COMMON> 63
<OTHER-SE> 85,619
<TOTAL-LIABILITY-AND-EQUITY> 206,942
27,995
<INVESTMENT-INCOME> 2,054
<INVESTMENT-GAINS> 30
<OTHER-INCOME> 916
<BENEFITS> 20,798
<UNDERWRITING-AMORTIZATION> 8,632
<UNDERWRITING-OTHER> 423
<INCOME-PRETAX> 1,142
<INCOME-TAX> 119
<INCOME-CONTINUING> 1,023
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,023
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.15
<RESERVE-OPEN> 71,390
<PROVISION-CURRENT> 19,396
<PROVISION-PRIOR> 1,402
<PAYMENTS-CURRENT> 3,111
<PAYMENTS-PRIOR> 11,633
<RESERVE-CLOSE> 77,444
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
