Item 1. Business Introduction
Mobile America Corporation (the "Registrant"), through its two (2) principal, wholly owned subsidiaries, Mobile America Insurance Group, Inc. ("MAIG"), a managing general agent for the Registrant's insurance company subsidiaries, and Fortune Insurance Company ("Fortune"), a Florida domiciled property and casualty insurance company, is engaged primarily in the underwriting and marketing of minimum requirement automobile insurance in Florida. This business has accounted for more than 80% of the Registrant's consolidated revenues in each of the last five (5) years.
The Registrant's other significant wholly owned subsidiaries are as follows:
Fortune Life Insurance Company ("Fortune Life"), an Arizona domiciled company, is engaged in the business of writing life insurance coverage primarily in Florida. Fortune Life is also licensed in Louisiana.
Pegasus Insurance Company ("Pegasus"), an Oklahoma domiciled property and casualty insurance company, was acquired in 1993 to operate as an excess and surplus lines insurer in Florida.
Fortune Financial Corporation ("Fortune Financial") acts as a servicing provider for Fortune Insurance Company which is a servicing carrier for the Florida Automobile Joint Underwriting Association (FAJUA) and a subcontractor, through a third party arrangement, for the Florida Residential Property and Casualty Joint Underwriting Association (FRPCJUA).
Big Gorilla, Inc., a licensed Florida premium finance company, provides a policy financing source for MAIG's brokers.
Operations
The Registrant and its subsidiaries are primarily engaged in insurance and insurance, related services with the bulk of the business being minimum requirement automobile insurance coverages in the State of Florida. The insurance operations of the Registrant generated gross insurance premiums earned of $92.1 million during 1997. Insurance premiums earned, net of reinsurance cessions, have increased from $40.4 million in 1996 to $44.3 million in 1997.
Automobile Insurance
During 1980, Fortune began to market automobile insurance, placing emphasis on physical damage, personal injury protection, and in recent years, property damage liability coverage in the private passenger automobile market. Because of the nature of private passenger and commercial automobile insurance, Fortune carefully monitors underwriting results in these lines. Fortune's marketing and underwriting will strive to improve results and the Registrant will continue to emphasize and actively market these lines. Total written premium for all automobile lines totaled $80.7 million, with $75.6 million from private passenger personal Injury protection and property damage liability coverage.
Personal Property Insurance
The Registrant's property and casualty insurance subsidiaries, Fortune and Pegasus, have continued to write homeowners and dwelling fire policies throughout the State of Florida. As of December 31, 1997, these companies insured nearly 9,700 property risks, with a total written premium for all property lines of $6.5 million in 1997. Growth in this area is primarily related to the expansion of excess and surplus lines business written through Pegasus. The Registrant plans to be active in this line of business, however, extreme caution will be exercised with respect to rates, profitability and the competitive market.
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Commercial Lines
The Registrant's two property and casualty insurance subsidiaries also write special multi-peril insurance on restaurants, small offices, businesses, and churches, all in Florida. In 1997, gross earned premiums totaled approximately $222,000.
Life Insurance
Fortune Life sells annual renewable term life insurance with limited first year benefits. During 1997, total life insurance premium written was $135,000.
Excess and Surplus Lines Insurance
During 1993, the Registrant purchased Pegasus which was subsequently admitted on an excess and surplus lines basis in Florida during December 1993. In September 1994, Pegasus marketed its first insurance program, a commercial general liability (CGL) policy for artisan contractors. Pegasus wrote $133,000 in premiums in 1995 and has increased its premium writings to $1,858,000 in 1996 and $4,367,000 in 1997. This growth has been accomplished by expanding its product line to include homeowners, mobile homeowners and commercial multi-peril products.
Fee for Service Operations
During 1993, Fortune Financial was formed to act as a servicing provider for Fortune which was selected as one of eight servicing carriers for the FRPCJUA, the first residential underwriting association in the nation. This association was formed to function as an insurance pool for individuals who, because of Hurricane Andrew, either lost their homeowners insurance or could not obtain homeowners insurance.
Since 1993, Fortune Financial has written in excess of $40 million in premiums on approximately 45,000 policies for the FRPCJUA. As a servicing provider, Fortune Financial underwrites and pays claims with no risk of loss because the FRPCJUA provides the funds for claim payments. For providing this service, Fortune Financial retains a percentage of the gross written premiums generated from the policies it services. This agreement terminated during 1996 and is currently in runoff status. Fortune Financial continues to service policies in force. In June 1996, Fortune Financial entered into an agreement to act as a subcontractor for Policy Management Systems Corporation (PMSC) with responsibility for processing FRPCJUA policies. For providing this service, Fortune Financial retains a percentage of the gross written premiums (less catastrophe premiums) generated from policies it services. As of year-end, Fortune Financial has written in excess of $20.1 million in premiums on 23,000 policies under the June 1996 agreement. In October 1997, the FRPCJUA extended this contract through March 1999.
In October 1997, the Registrant was awarded a three year contract by the FAJUA, effective January 1,1998. Fortune Financial has been servicing this business since October of 1994. During the first two months of 1998 the registrant has processed approximately 2,350 policies with a total written premium volume of over $1.7 million.
While it is impossible to predict with certainty, service fees generated from these new contracts could be as much as $14 million.
In November 1994, Fortune was selected by the Federal Insurance Administration to be a producer of the Federal Government's Write Your Own Flood Program. Fortune has written $294,000 in gross premium during 1997.
Premium Finance
The Registrant's premium finance company subsidiary, now entering it's fifth year in the Premium Finance business, will provide some 300 broker agents a source for financing their policy premiums. During 1997, the subsidiary financed nearly 15,200 policies and thus far in 1998, is writing about 1,434 contracts per month. The subsidiary is planning for significant growth in this area since 95% of Fortune's and Pegasus' insureds utilize this method of financing.
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Financial Information about Industry Segments
The financial information regarding the Registrant's Industry segments presented in Note 10 of Notes to Consolidated Financial Statements for the three years ended December 31, 1997, is incorporated herein by reference.
Competitive Conditions
The insurance industry is a highly competitive industry. Certain of the Registrant's competitors have been in the business longer, have a larger volume of business and have substantially greater financial resources than the Registrant. Since the Registrant's insurance operations are modest compared to several of its significant competitors (the Registrant employed 288 people at year-end), management is continuing to focus its marketing and other operations on specialized insurance coverages. Additionally, since the Registrant's insurance subsidiaries transact their business in a heavily regulated industry, they are sensitive to both adverse legislation and administrative directives.
Loss and Loss Adjustment Expense Reserves
Reserves for unpaid claims and adjustment expenses are maintained to cover the probable ultimate cost of settling all losses incurred, including those not yet reported. Reserves for losses incurred in prior years may be adjusted by review or by payment which could result in either a redundancy or deficiency to the reserve reported at the end of the prior year. Such changes are reflected in current operations.
The Registrant's insurance subsidiaries have entered into several reinsurance agreements covering specific lines of business, which provide reinsurance protection on a quota share or excess of loss basis.
Adverse loss and loss adjustment expense development is generally experienced in liability lines where settlements may not be reached until several years following the initial claim. Claims adjustment costs consisting primarily of legal expenses, are traditionally high on these particular losses.
The following tables present loss and loss adjustment expenses on a paid and incurred basis for the past three one year periods, and development of losses and loss adjustment expenses over the past ten years, all net of reinsurance.
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Item 2.
Item 2. Properties
The executive and general offices of the Registrant and its subsidiaries, consisting of approximately 22,915 square feet, are located at 10475 Fortune Parkway, Suite 110, Jacksonville, Florida. In 1997 the Registrant exercised a renewal option extending the term of the lease on this space to 2002. Annual lease payments range from $207,839 to $231,442 in the final year of the lease.
In 1997, the Registrant expanded its facilities by leasing approximate 7,500 square feet for its personal property, excess and surplus lines and fee for service processing. Annual lease payments range from $58,155 to $61,445 over a three year period.
The Registrant's subsidiaries, Fortune Insurance Company and Fortune Life Insurance Company own property in Jacksonville, Florida for which there are no definite plans for development at this time. Fortune Insurance Company purchased land in 1987 and 1986 for $165,000 and $140,000 respectively. During 1982, Fortune Life Insurance Company purchased land and a building for $88,000. In 1996 the Registrant purchased land and a building in Jacksonville, Florida for $167,000. This facility serves as off-sight storage.
Item 3.
Item 3. Legal Proceedings
The Registrant, through its subsidiaries, is routinely a party to pending or threatened legal proceedings and arbitrations. These proceedings may include claims for punitive damages in addition to other specified relief. Based upon information currently available, and in light of legal and other defenses available to the Registrant and its subsidiaries, management does not consider liability from threatened or pending litigation to be material.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year covered by this report.
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PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
Market Information
The Registrant's common stock is traded on the NASDAQ Stock Market under the symbol MAME.
The following table shows the range of high and low sale quotations for the Registrant's common stock for each of the last eight quarters ended December 31, 1997, as obtained from the National Association of Securities Dealers.
Holders
At March 2, 1997, the Registrant had 394 record holders of its common stock.
Dividends (adjusted for stock dividends)
In January, 1993 the Registrant declared and paid a dividend of $.29 per share on each of its shares of $.025 par value common stock.
In September, 1993 the Registrant declared and paid a dividend of $.09 per share on each of its shares of $.025 par value common stock.
In January, 1994 the Registrant declared and paid a dividend of $.18 per share on each of its shares of $.025 par value common stock.
In January, 1995 the Registrant declared and paid a dividend of $.16 per share on each of its shares of $.025 par value common stock.
In January, 1996 the Registrant declared and paid a dividend of $.30 per share on each of its shares of $.025 par value common stock.
In January, 1997 the Registrant declared and paid a dividend of $.35 per share on each of its shares of $.025 par value common stock.
In January, 1998 the Registrant declared and paid a dividend of $.35 per share on each of its shares of $.025 par value common stock.
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Item 6.
Item 6. Selected Financial Data
Mobile America Corporation & Subsidiaries
Years Ended December 31, 1997, 1996, 1995, 1994, and 1993
Earnings per share and cash dividends per share amounts have been restated to conform with stock dividends and splits.
Earnings per share amounts are presented in conformity with Statement of Financial Accounting Standards No. 128.
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Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 1997 Compared to 1996
Operations
Income before provision for income taxes decreased 1.3% in 1997 to $8,867,896 compared to $8,986,164 reported in 1996 primarily due to increased earned premium and lower acquisition costs being offset by reduced service fee income and higher salaries, wages and general and administrative costs. Net income decreased 18.4% in 1997 to $6,175,796 compared to $7,571,392 reported in 1996 principally due to a nonrecurring tax benefit resulting from the release of a valuation allowance and the recognition of income tax credits during 1996.
Total consolidated revenues, exclusive of state mandated automobile assigned risk pool business, increased 3.9% from $57,836,017 in 1996 to $58,921,414 in 1997. Overall, total consolidated revenues increased 22.1% to $58,810,207 during 1997 from $48,163,935 for 1996. This change was influenced by an increase in insurance premiums earned (which was adversely effected by adjustments to state mandated assigned risk pool business in 1996), offset by a decline in service fees earned and lower net investment income.
Insurance premiums earned, exclusive of state mandated automobile assigned risk pool business, increased 9.7% during 1997 due primarily to a 55.6% increase in property earned premium and a 6.7% increase in private passenger automobile personal injury protection/property damage earned premium. Overall insurance premiums earned increased 43.9% after giving effect to business associated with the state mandated automobile assigned risk pool.
Direct written premium in the Registrant's automobile lines decreased 10% in 1997 to $80,727,841 reflecting a decrease in market share as a result of rate increases instituted in December 1996 and increased competition in the market place. The Registrant believes premium volume may increase if competitors adjust their premium rates to offset the impact of adverse loss experience. The Registrant has taken steps, with the March 1998 rate revision, to exploit pockets of opportunity resulting in the establishment of new territories, more competitive rates and a revised commission structure.
Property insurance direct written premium produced through the Registrant's surplus lines insurance subsidiary increased 135% in 1997 to $4,367,466. The Registrant plans to remain active in this market.
Service fees earned declined 18.6% in 1997 to $8,957,080 compared to $11,001,222 reported in 1996. This decrease is the result of lower fee-for-service revenue due to the cancellation of certain service agreements with the FRPCJUA during the second quarter of 1996. In the fourth quarter of 1997, the Registrant was awarded a three year servicing contract by the FAJUA, effective January 1, 1998. In November 1997, the FRPCJUA extended a major servicing contract through March 1999. While it is impossible to predict with certainty, service fees generated over the life of these contracts could be as much as $14,000,000.
Investment income decreased 9.2% in 1997 due to lower available rates and the utilization of cash to meet the maturation of prior years loss costs.
Total consolidated expenses, exclusive of state mandated automobile assigned risk pools, increased 3.7% from $48,385,265 during 1996 to $50,173,849 during 1997. Overall, total consolidated expenses increased 27.5% from $39,177,771 in 1996 to $49,942,311 in 1997, primarily due to losses and expenses associated with assigned risk pool business.
Loss and loss adjustment expenses incurred increased 5.0% during 1997 over 1996, exclusive of assigned risk pool business, for all lines of business written by the Registrant's insurance company subsidiaries. However, substantially all of this increase is attributable to the minimum limits automobile personal injury protection line of business. Loss and loss adjustment expenses incurred as a percentage of earned premium were 81.3% in 1995, 78.2% in 1996 and 74.8% in 1997, in each case, exclusive of assigned risk pool business. In its efforts to reduce loss and loss adjustment expenses incurred, as it relates to earned premium, the Registrant initiated a significant rate increase in the minimum limits personal injury protection line of business in the fourth quarters of 1995 and 1996. The Registrant will introduce a new rate increase in March 1998.
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1997 Compared to 1996 (continued)
Due to the inherent uncertainty in estimating reserves for losses and loss adjustment expenses, which are estimates of the amounts necessary to settle reported and unreported claims and their related loss adjustment expenses, there can be no assurance that the ultimate liability will not exceed the amounts reserved, resulting in an adverse effect on the Registrant. At year end 1997, the Registrant's loss and loss adjustment expense reserves were at the lower end of a range which the Registrant's independent actuary deems appropriate. The Registrant believes its current reserves are adequate. The Registrant's independent actuary's range of reasonable direct reserve estimates as of December 31, 1997 is between $31.8 million and $43.0 million and net of reinsurance recoveries the reserve range is between $15.1 million to $20.5 million.
The loss and loss adjustment expense experienced on the business which the Registrant originates and cedes to its reinsurers may also adversely affect the Registrant's profitability in the future. The Registrant decreased the ceding percentage from 70% to 60% on certain lines effective January 1, 1996. The Registrant will increase the ceding percentage to 75% in 1998, taking advantage of reduced reinsurance costs. If the Registrant's ratio of loss and loss adjustment expenses to earned premium deteriorates, it is likely that over time, the Registrant's cost of reinsurance would increase, and it is possible that at some future point the Registrant could not obtain reinsurance on economically viable terms.
Policy acquisition costs decreased 13.5% during 1997 due principally to a reduction in direct premium volume. Salary and wages increased 10.3% due to the hiring of a number of key personnel to help manage the Registrant into the next century. This included a senior vice president of claims, a vice president of information systems and a vice president of human resources.
Financial Position, Liquidity and Capital Resources
Net cash flow from operations was negative in 1997 as loss and loss adjustment expense payments and consolidated operating expense payments exceeded premiums, fees and investment revenues. The Registrant put forth a concerted effort in 1997 to settle outstanding claims, thereby reducing the number of claims outstanding in the minimum limits automobile personal injury protection line of business. This process accelerated loss payments contributing to the negative cash flow the Registrant experienced. The Registrant believes this practice will improve overall loss and loss expense experience by reducing ultimate loss settlement costs and litigation expenses. The Registrant's practice of maintaining a highly liquid investment portfolio allowed the Registrant to meet cash demands with no adverse impact on operating performance. The Registrant is optimistic that cash flow will improve as rate increases take effect and the settlement of losses returns to a more normal pattern.
In January 1998, the Registrant is scheduled to begin making principal payments on the $12,000,000 note payable. Payments of $600,000 plus accrued interest are due quarterly with the entire unpaid balance due October 2002.
The Registrant is in the process of purchasing a new computer system to meet the year 2000 transition and provide support for a growing business. The Registrant has budgeted $1.4 million for this project. The new computer system will allow the Registrant to process more business in-house eliminating the costs of using third party providers as well as providing cost saving opportunities on the Registrant's core business.
In prior years, certain computer programs were written using two digits rather than four to define the applicable year. These programs were written without considering the impact of the upcoming change in the century and may experience problems handling dates beyond the year 1999. This could cause computer applications to fail or create erroneous results unless corrective measures are taken. Incomplete or untimely resolution of the Year 2000 issue could have a material adverse impact on the Registrant's business, operations or financial condition in the future. However, with the number of options available in the form of software solutions, the Year 2000 issue should not pose a significant problem to the Registrant.
On June 10, 1997, the Registrant issued 924,018 shares of common stock pursuant to a 15% stock dividend on its $.025 par value common stock, effective for shareholders of record on June 23, 1997. Earnings per share and dividend per share amounts have been adjusted to reflect this stock dividend.
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1997 Compared to 1996 (continued)
The Registrant paid an annual dividend of $.35 per share on February 3, 1998 to shareholders of record on January 20, 1998. The dividend payment totaled $2,526,724.
The Registrant maintains sufficient liquidity to meet operational needs. Cash dividend, capital expenditure and operating requirements will be provided by operations and investment activities. The investment policy continues to emphasize higher quality securities matched closely with the short liability duration.
Forward-Looking Statements
This Form 10-K contains certain forward-looking statements within the meaning of section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are deemed by the Registrant to be covered by and to qualify for safe harbor protection provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, (a) the expected benefits from (i) the award of a three year servicing contract by the Florida Automobile Joint Underwriting Association, and (ii) the extension of a service contract by the Florida Residential Property and Casualty Joint Underwriting Association, and (b) the improvement of cash flow as a result of rate increases and a return to a more normal pattern of loss settlements. Such statements reflect the current views of the Registrant and are subject to certain risks and uncertainties that include, but are not limited to, obtaining policy volume service levels under the Joint Underwriting Association service contracts, continued market acceptance of premium rate increases in the automobile minimum limits personal injury protection line of business and adequacy of loss reserves. The Registrant disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.
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1996 Compared to 1995
Operations
Total consolidated revenues, exclusive of state mandated automobile assigned risk pool business, increased 18% from $48,917,912 in 1995 to $57,836,017 in 1996. Overall, total consolidated revenues decreased 9% to $48,163,935 during 1996 from $52,925,874 for 1995.
Insurance premiums, exclusive of state mandated automobile assigned risk pool business, increased 20% during 1996 due primarily to an increase in automobile personal injury protection and property damage rates initiated in September and October 1995 as well as the continued earning of premiums at a lower reinsurance cession rate. Overall insurance premiums decreased 19% as a result of an amendment of premiums assumed from the state mandated automobile assigned risk pool. This amendment resulted in no material effect on net income.
Service fees earned during 1996 increased 28% over 1995 due to increases in the number of policies administered for the FAJUA and FRPCJUA/PMSC, fees earned on business produced by the Registrant's managing general agency subsidiary and continued growth in the number of policies financed by the Registrant's premium financing subsidiary. Investment income increased 7% from $5,562,074 for 1995 to $5,935,194 in 1996. This increase is attributable to an increase in interest rates on taxable fixed assets combined with a repositioning of securities from tax exempt to taxable investments in the Registrant's principal property and casualty insurance subsidiary. Net realized gains on the sale of investments increased 107% from $252,153 in 1995 to $521,995 in 1996.
Total consolidated expenses, exclusive of state mandated automobile assigned risk pools, increased 20% from $40,429,009 during 1995 to $48,385,265 during 1996. Overall, total consolidated expenses decreased 12% from $44,340,175 in 1995 to $39,177,771 in 1996.
The reserves for loss and loss adjustment expenses established by the insurance subsidiaries of the Registrant are estimates of the amounts necessary to settle reported and unreported claims and their related loss adjustment expenses. Loss and loss adjustment expenses increased 15% during 1996 over 1995. This increase is principally due to continued strengthening of the Registrant's property and casualty insurance company subsidiary's loss and loss adjustment expense reserves relating to the minimum limits automobile personal injury protection line of business. Policy acquisition costs increased significantly due principally to reduced ceding commission rates. Total consolidated expenses, including the state mandated automobile assigned risk pool, decreased 12% as a result of an amendment of losses assumed from the state mandated automobile assigned risk pool. Interest payments due on the Note have to date been generated from the proceeds of the $12,000,000 loan which was consummated in the fourth quarter 1995.
Loss and loss adjustment expenses as a percentage of earned premium were 77.0% in 1994, 81.6% in 1995 and 72.8% in 1996. The Registrant believes that its current reserves are adequate and proper. However, additional reserve increases may be required in the future. In it's efforts to reduce loss and loss adjustment expenses, as it relates to earned premium, the Registrant initiated a significant rate increase in the minimum limits personal injury protection line of business during the fourth quarter 1996. This increase follows closely behind a similar sized rate increase in the fourth quarter 1995. Due to the inherent uncertainty in estimating reserves for losses and loss adjustment expenses there can be no assurance that the ultimate liability will not exceed the amounts reserved, resulting in an adverse effect on the Registrant. At year end 1996, the Registrant's loss and loss adjustment expense reserves were at the lower end of a range which the Registrant's independent actuary deems appropriate.
The increasing loss and loss adjustment expense experienced on the business which the Registrant originates and cedes to its reinsurers may also adversely affect the Registrant's profitability in the future. In an effort to reduce it's reliance on reinsurance, the Registrant decreased the ceding percentage from 70% to 60% on certain lines effective January 1, 1996.
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1996 Compared to 1995 (continued)
Financial Condition
Cash dividend and capital expenditure requirements continue to be provided by funds generated from operations. The Registrant maintains sufficient liquidity to meet operational needs. The Registrant's investment policy continues to emphasize high quality securities matched closely with the Registrant's short liability duration.
Net cash flow from operations was negative in 1996 as loss and loss adjustment expense payments and consolidated operating expense payments exceeded premium and investment revenues. Such negative cash flow resulted in part from poor loss development in the minimum limit automobile personal injury protection line of business for the years prior to 1996. The Registrant's practice of maintaining a highly liquid investment portfolio allowed the Registrant to meet cash demands with no adverse impact on operating performance.
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Report of Independent Certified Public Accountants
To the Board of Directors and Stockholders Mobile America Corporation Jacksonville, Florida
We have audited the accompanying consolidated balance sheets of Mobile America Corporation and Subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements and schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mobile America Corporation and Subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the accompanying Index in Item 14(a)2 of this Form 10-K are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
CHERRY, BEKAERT & HOLLAND, L.L.P.
Orlando, Florida March 27, 1998
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Mobile America Corporation and Subsidiaries Consolidated Balance Sheets December 31, 1997 and 1996
See notes to consolidated financial statements.
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Mobile America Corporation and Subsidiaries Consolidated Statements of Operations Years Ended December 31, 1997, 1996 and 1995
See notes to consolidated financial statements.
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Mobile America Corporation and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31, 1997, 1996 and 1995
See notes to consolidated financial statements.
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Mobile America Corporation and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity Years Ended December 31, 1997, 1996 and 1995
See notes to consolidated financial statements.
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Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
(a) Basis of Financial Statement Presentation
The consolidated financial statements have been prepared on the basis of generally accepted accounting principles which vary from statutory reporting practices prescribed or permitted for insurance companies by regulatory authorities.
(b) Principles of Consolidation
The accompanying consolidated financial statements include Mobile America Corporation (the Company) and its subsidiaries, including Fortune Insurance Company (Fortune), Pegasus Insurance Company (Pegasus), both property and casualty insurers and Fortune Life Insurance Company (Fortune Life), all of which are wholly-owned. All significant intercompany transactions have been eliminated in consolidation.
(c) Nature of Operations
The Company is a publicly held holding company providing property and casualty insurance, life insurance, insurance administrative services to various state underwriting associations on a fee for service basis and premium financing. The Company is principally involved in writing personal lines automobile insurance in Florida.
(d) Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
(e) Method for Valuing Investments
The Company classifies all of its fixed maturities and equity securities as either available-for-sale or held- to-maturity. Fixed maturities held-to-maturity consist of certain bonds, presented at amortized cost, that management intends and has the ability to hold to maturity. Fixed maturities available-for-sale consist of bonds, presented at fair value, that management may not hold until maturity. Equity securities available-for-sale are comprised of common and preferred stock which are carried at fair value. Unrealized gains or losses on investments classified as available-for-sale, net of deferred income taxes, are included as a separate component of stockholders' equity. Fair values are based on quoted market prices or dealer quotes, if available. If a quoted
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Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies (continued)
market price is not available, fair value is estimated using quoted market prices for similar securities.
Realized gains and losses on sale of fixed maturities and equity securities are determined on the specific identification basis using amortized cost for fixed maturities and cost for equity securities. Any gains and losses are reflected in the accompanying statements of operations.
(f) Cash and Short-term Investments
For purposes of the consolidated statement of cash flows, cash includes balances in bank deposit accounts maintained with high credit quality financial institutions. Short-term investments are stated at cost, and consist primarily of certificates of deposits, money market accounts, commercial paper and repurchase agreements. For purposes of the consolidated statement of cash flows, the Company does not consider short-term investments to be cash equivalents as they generally have original maturities in excess of three months.
(g) Financial Instruments
In the normal course of business, the Company enters into transactions involving various financial instruments, including debt, investments such as fixed maturities, and equity securities. These instruments involve credit risk and also may be subject to risk of loss due to interest rate fluctuations. The Company evaluates and monitors each financial instrument to minimize the risk of loss.
(h) Deferred Policy Acquisition Costs
The costs, primarily commissions, associated with acquiring new insurance contracts have been deferred. Such costs are being amortized to income as premiums are earned or over the contracts premium paying period.
(i) Property and Equipment
Property and equipment is carried at cost and is depreciated principally under the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs are charged to expenses as incurred; additions and major betterments are capitalized and depreciated. Upon retirement or disposal of assets, the accounts are relieved of the cost and the related accumulated depreciation and any gains or losses are reflected in the consolidated statements of operations.
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Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies (continued)
(j) Insurance Contracts
The insurance contracts accounted for in these financial statements include both short-duration contracts and long-duration contracts. Short-duration contracts provide insurance protection for a fixed period of short-duration, usually six months to one year, and enable the insurer to cancel the contract or to adjust the provisions at the end of any contract period. Most property-liability insurance contracts and certain term life insurance contracts are short-term and generally are not subject to unilateral changes in their provisions and require the performance of various functions and services, including insurance protection, for the contract term. Long-duration contracts include whole-life contracts and guaranteed renewable term life contracts. The Company has not issued participating policies.
(k) Insurance Loss Reserves
The liabilities for unpaid claims of property-liability contracts and related adjustment expenses are determined using case basis evaluations and statistical analysis and represent estimates of the ultimate net cost of all reported and unreported claims relating to insured events which are unpaid at year-end. The liabilities include estimates of future trends in claims severity and frequency and other factors which could vary as the claims are ultimately settled. Although such estimates may vary, management believes that the liabilities for unpaid claims and related adjustment expenses are adequate. The estimates are continually reviewed, and as adjustments to these liabilities become necessary, they are reflected in current operations.
The liability for future policy benefits of long-duration contracts has been provided for on a net level premium method based on estimated investment yields, withdrawals, mortality, termination's, morbidity, and other assumptions which were appropriate at the time the contracts were issued.
Estimates of future policy benefits were based on past experience as adjusted to provide for possible adverse deviation from the estimates. Interest assumptions are based on historical assumptions and experience, and range from 3% to 4.5% at December 31, 1997.
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Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies (continued)
(l) Recognition of Premium Revenues and Related Expenses
Premiums for long-duration contracts are recognized as revenues when due from the policyholders. Premiums for short-duration contracts are recognized as revenues on a pro rata basis over the term of the policies. The portion of premiums written applicable to the unexpected terms of the policies is recorded as unearned premium. Benefits, losses and related expenses are matched with premiums, resulting in their recognition over the lives of the contracts. This matching is accomplished through the provision for future policy benefits, estimates of unpaid losses and amortization of deferred policy acquisition costs.
Earned premiums and incurred losses are stated after a reduction for amounts ceded to reinsurers. The Company considers anticipated investment income in determining if a premium deficiency exists on short-duration contracts.
(m) Recognition of Service Fee Income
Service fees represent proceeds from servicing insurance policies for third parties on a fee-for-service basis. Fees are recognized as revenue over the expected term of the underlying insurance policies.
(n) Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share". Statement 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully dilutive earnings per share. All earnings per share amounts for all periods have been presented , and where appropriate, restated to conform to the Statement 128 requirements.
(o) Supplemental Cash Flow Information
Income Taxes Paid - Income taxes paid totaled $2,230,000 in 1997, $3,577,423 in 1996 and $2,008,351 in 1995. Interest paid totaled $1,014,161 in 1997, $1,005,760 in 1996 and $156,375 in 1995.
II-17
Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies (continued)
(p) Income Taxes
Income taxes are calculated under the liability method. Deferred taxes are provided for temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. Items giving rise to such differences are insurance reserves and unearned premiums.
(q) Stock-Based Compensation
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" , encourages, but does not require companies to record compensation costs for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. Accordingly, compensation cost of stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock.
(r) Stock Dividend
All common shares and per share amounts have been adjusted to give effect to a 15% stock dividend distributed to shareholders on June 23, 1997.
(s) Pending Accounting Change
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income". Statement 130 requires the reporting and display of comprehensive income and it's components in a full set of financial statements. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. It included all changes in equity, including net income, during a period except those resulting from investments by owners and distributions to owners. The Company will adopt Statement 130 in the first quarter of 1998 and, based on current circumstances, the only additional component of comprehensive income to be reported is the change in the net unrealized gain or loss on securities available for sale.
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Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies (continued)
(s) Pending Accounting Change (continued)
Also in June 1997, the FASB issued Statement No. 131, "Disclosure about Segments of an Enterprise and Related Information". This Statement establishes standards for the way enterprises report information about operating segments and also establishes standards for related disclosure about products and services, geographic area and major customers. The Company will adopt Statement 131 in 1998 and, based on current circumstances, does not believe the effect of adoption will be material.
(t) Reclassifications
Certain prior-year amounts have been reclassified to conform with current-year presentations.
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Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 2. Investments
Major categories of investment income are summarized as follows:
Net realized and change in net unrealized gains (losses) on fixed maturities and equity securities are summarized as follows:
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Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 2. Investments (continued)
The aggregate fair value, gross unrealized gains, gross unrealized losses and amortized cost of available for sale and held to maturity securities by major security type at December 31, 1997 and 1996 are as follows:
II-21
Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 2. Investments (continued)
The scheduled maturities of available for sale and held to maturity securities at December 31, 1997 are as follows. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations without penalties.
Proceeds from sales of held to maturity securities and related gross realized gains and losses were as follows:
The Company's three insurance subsidiaries, Fortune, Fortune Life, and Pegasus maintain certain deposits with state regulatory agencies as a statutory licensing requirement. The carrying value of the investments on deposit was $1,550,000 at December 31, 1997 and $1,550,000 at December 31, 1996. These deposits are included in the investment tables and exhibits of this report.
The Company's two finance companies also maintain certain deposits with state regulatory agencies as a statutory licensing requirement. The carrying value of these investments was $70,000 at December 31, 1997 and 1996.
II-22 Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 3. Deferred Policy Acquisition Costs
Costs, principally commissions, related to the production of new business, are deferred and amortized as summarized below:
Several of the automobile insurance lines written by Fortune have been reinsured on a quota share basis, whereby a reinsurer provides ceding commission to the Company in return for ceded premium. In some instances
II-23
Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 3. Deferred Policy Acquisition Costs (continued)
the ceding commissions received exceed the costs to the Company of soliciting new business, thereby generating credits to commission expense and deferred policy acquisition costs. Ceding commission received in 1997, 1996 and 1995 is approximately $7,932,000, $7,527,000 and $15,694,000, respectively. Deferred policy acquisition cost reinsurance credits reported in the Company's balance sheet at December 31, 1997 and 1996 are $7,049,081 and $8,516,878, respectively.
Note 4. Property and Equipment
Property and equipment consists of the following at December 31, 1997 and 1996:
In 1995, Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" was issued. This statement requires the recognition of an impairment loss for an asset held for use when the estimate of undiscounted future cash flows expected to be generated by the asset is less than its carrying amount. Due to the nature of the Company's business, with limited use of long-lived assets, it has been determined that no impairment loss need be recognized.
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Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 5. Reinsurance
The insurance subsidiaries have various reinsurance agreements which significantly affect their operations. Risks are reinsured to limit loss size and to increase underwriting capacity, although the Company remains primarily liable to the policyholders on all risks transferred.
The Company acquires property and casualty excess of loss reinsurance separately for it's primary insurance business lines. This program provides the Company with coverage in the amount of $260,000 in excess of $40,000 on a per risk basis, and up to $520,000 on a per occurrence basis.
Catastrophic property losses are reinsured under two programs. Fortune limits it's liability to 5% of losses in excess of $500,000 up to $1,300,000 and up to 10% of losses in excess of $1,400,000. Pegasus limits it's liability to 5% of losses in excess $500,000 up to $10,000,000. Catastrophic reinsurance, provided by various reinsures in multiple layers, serves to protect the insurer from significant aggregate loss exposure arising from a single event such as windstorm, hail, tornado, hurricane, riot, vandalism, earthquake, freezing temperatures or other extraordinary events. The Company also maintains reinsurance coverage for extra contractual obligations and excess limits judgements up to $1,500,000 for each property risk and/or each casualty occurrence subject to a deductible of the greater of $100,000 or a loss in excess of its underlying reinsurance programs.
The effect of reinsurance on premiums written and earned for 1997, 1996 and 1995 is as follows (dollars in thousands):
The amount of reinsurance recoveries deducted from direct and pool participation losses incurred during 1997, 1996 and 1995 was approximately $39,000,000, $37,970,000 and $59,612,000, respectively.
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Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 5. Reinsurance (continued)
The Company evaluates the financial condition of its reinsurers to minimize its exposures to significant losses from reinsurer insolvency. Reinsurance receivables, prepaid reinsurance premiums and offsetting funds withheld/payable balances for each significant reinsurer at December 31, 1997 is presented below (in thousands):
Note 6. Regulatory Restrictions
Fortune, Fortune Life and Pegasus are subject to regulation by the insurance departments of the states in which they are licensed. Under the regulations, cash dividends may only be paid out of accumulated surplus funds derived from net operating profits and capital gains, or out of earned surplus even though total surplus may be less than capital stock and paid-in capital. Fortune, which is subject to Florida law, may not pay, unless otherwise approved by the State Insurance Commissioner, dividends in any one year which exceed the greater of (a) 10% of such surplus funds or (b) the total amount of such funds derived during the immediate preceding year.
The insurance companies did not pay dividends in 1997, 1996 and 1995.
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Mobile America Corporation and Subsidiaries Notes to Consolidated Financial Statements
Note 6. Regulatory Restrictions (continued)
Following are reconciliations of net income and stockholders' equity for Fortune, Fortune Life and Pegasus from a statutory basis to those presented on a GAAP basis for the year ended December 31, 1997:
Note 7. Pension Plan
The Company's defined contribution pension plan covers substantially all full-time employees. Contributions are based on employee earnings. Total contributions made by the Company during 1997, 1996, and 1995 were $288,000, $240,000, and $210,000, respectively.
II-27
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 8. Capital Stock
Stock Options
The Company's incentive plan, adopted in 1995, provides for the issuance to key employees and directors of up to 300,000 shares of common stock through options, stock appreciation rights and other stock-based awards as defined under current tax laws. An additional 200,000 shares will be added to the plan pending shareholder approval at the 1998 Annual Meeting. Incentive stock options for employees are exercisable for periods of up to ten years from the date of the grant at a price equal to the fair market value on the date of the grant. In the case of an incentive option granted to an individual who owns at least 10% of the total combined voting power of the Company, the exercise price must be at least 110% of the fair market value of the common stock on the date of grant and the option term cannot exceed five years. Stock appreciation rights entitle the recipient to receive the difference between the fair market value of the common stock on the date of exercise and the stock appreciation rights price in cash or in shares of common stock, or a combination. Restricted stock awards entitle the recipient to receive shares of common stock subject to forfeiture restrictions that lapse over time or upon the occurrence of specific events.
The options are accounted for under Accounting Principles Board Opinion No. 25 (APB 25). Under APB 25, if the exercise price of the options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. During 1997, the Company granted options to purchase 5000 shares at $4.40 when the market price of the Company's common stock was $9.63. These options vest 20% per year beginning on the first anniversary date of grant. Compensation expense of $3,487 was charged to operations in 1997. Deferred compensation of $48,813 is reported in other assets and will be charged to operations over the vesting period.
Changes in Stock Options were as follows:
II-28
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 8. Capital Stock (continued)
In compliance with Statement of Financial Accounting Standards No. 123, the Company has elected to provide pro forma disclosures. As such, the Company's net income and earnings per share for 1997, 1996 and 1995 adjusted to reflect pro forma amounts are indicated below (dollar amounts in thousands except for earnings per share) :
The fair value of options granted in 1997, 1996 and 1995 was estimated using the Black-Scholes option pricing model. The weighted average fair value and related assumptions were as follows:
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Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 9. Income Taxes
The following analysis reconciles the statutory Federal income tax rate to the effective tax rates:
Consolidated deferred tax expense (credit) results from timing differences in the recognition of revenue and expense for tax and financial statement purposes. The source of these differences and their tax effect are summarized as follows (in thousands):
Consolidated deferred taxes receivable resulting from temporary differences in the recognition of revenue and expense for tax and financial statement purposes are summarized as follows (in thousands):
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Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 9. Income Taxes (continued)
The Company believes, that based upon its lengthy and consistent history of profitable operations, it is probable that the deferred tax asset will be realized and no deferred tax allowance is deemed necessary at December 31, 1997.
Deferred taxes payable of $40,625 and $61,072 are provided on unrealized gains, on equity securities and fixed maturities available for sale at December 31, 1997 and 1996, respectively.
Beginning in 1995, the Company and its subsidiaries filed a consolidated federal income tax return, while prior to 1995 the life insurance subsidiary filed a separate return.
Note 10. Business Segments
The Company and its subsidiaries operate principally in five business segments consisting of automobile insurance, personal property insurance, commercial lines insurance, life insurance, and fee for service insurance administration. The four insurance segments sell various forms of property, liability and life insurance marketed through independent insurance agents in the state of Florida. The Company acts as a servicing carrier for the Florida Residential Property and Casualty Joint Underwriting Association, the Florida Automobile Joint Underwriting Association and as a subcontractor for Policy Management Systems Corporation performing various underwriting and claims services for a service fee.
II-31
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 10. Business Segments (continued)
Summarized financial information by business segment for 1997, 1996 and 1995 is as follows:
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Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 11. Pools and Associations
Fortune Insurance Company, as a direct premium writer in the state of Florida, is required to participate in the Florida Automobile Joint Underwriting Association (FAJUA). Fortune's participation is based on its automobile premium to total automobile premiums written state wide by all automobile insurers. A summary of FAJUA participation as reported in the accompanying financial statements for 1997,1996 and 1995 is presented below:
In 1996 the FAJUA issued reports amending Fortune's participation for years prior to 1996. These changes were reported in the 1996 financial statements. A summary of Fortune's 1996 participation and the prior year adjustment is presented below.
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Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 12. Operating Leases
The Company leases office facilities under operating leases which contain renewal options. Lease terms range from 18 months to five years. Rent expense was $329,464, $295,499 and $297,597 for 1997, 1996 and 1995, respectively.
Minimum future rental payments are as follows:
Note 13. Concentrations of Credit Risk
The Company is subject to credit risk through short-term cash investments, insurance premium receivables and reinsurance receivables. Short-term investments are placed with high credit quality financial institutions or in short duration high quality debt securities. At times, such investments may be in excess of FDIC insurance limits. No losses have been experienced on such investments.
A significant portion of insurance premium receivables relates to the financing of automobile insurance premiums in south Florida. An allowance for non-collection of $900,000 and $300,000 has been provided for at December 31, 1997 and 1996, respectively. The Company's exposure to loss is limited by the fact that non-payment of premiums will result in cancellation of the underlying insurance policy.
For a discussion of credit risk related to reinsurance see note (5) of the consolidated financial statements.
II-34
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 14. Note Payable
On October 24, 1995 the Company obtained a bank loan in the amount of $12,000,000, for which the proceeds have been used primarily as additional capital for the insurance subsidiaries. The note accrues interest at the 90 day LIBOR rate plus 275 basis points, reduced to 250 basis points during 1997. Interest only is paid through January 24, 1998 with the first principal payment due on the twenty seventh monthly interest payment date and quarterly thereafter in the amount of $600,000 each payment. The entire unpaid principal balance, together with accrued interest thereon is due and payable on the loan maturity date of October 24, 2002.
The note was collateralized by the assignment of the capital stock of the Company's subsidiaries on October 24, 1995, as well as the execution of guaranty agreements between the bank and certain subsidiaries of the Company.
The following is a schedule of the required annual principal payments:
Loan acquisition costs are being amortized on a straight-line basis over the term of the loan and are included in the other asset section of the consolidated balance sheets.
Note 15. Insurance Loss Reserves
Reserves for unpaid losses and loss adjustment expenses are maintained to cover the probable ultimate cost of settling all losses incurred including those not yet reported. Reserves for losses incurred in prior years may be adjusted by review or by payment which could result in either a redundancy or deficiency to the reserve reported at the end of the prior year. Such changes are reflected in current operations.
II-35
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 15. Insurance Loss Reserves (continued)
Activity in the liability for insurance loss reserves is summarized as follows:
Note 16. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value:
- - Cash and Short-term Investments The carrying amounts approximates fair value because of the short-term maturity of these investments.
- - Investment in Securities Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.
- - Insurance Premium Receivable The carrying amount approximates fair value due to the short-term nature of the receivable.
- - Note Payable The interest rate on the note payable is reset monthly to reflect current market rates, consequently the carrying value of the note approximates fair value.
II-36
Mobile America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 16. Fair Value of Financial Instruments (continued)
The carrying amounts and fair values of the Company's financial instruments at December 31, 1997 and 1996 are presented below:
II-37
Part III
Items 10, 11, 12, and 13 have been omitted pursuant to instructions to Form 10-K. The Registrant intends to file with the Securities and Exchange Commission not later than April 30, 1998 a definitive proxy statement to be used in connection with its Annual Meeting of Shareholders, at which time directors will be elected for the ensuing year.
III-1
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8K
All other schedules are omitted as the required information is not applicable or the required information is otherwise presented in the financial statements or notes thereto.
IV-1
(a) 3. Exhibits
3.3 The Articles of Incorporation and by-laws of the Company originally filed on Form S-1 Registration Statement No. 2-42438, effective March 3, 1972 are hereby incorporated herein by reference. The Amendment to the Articles of Incorporation filed as Exhibit C to the Registrant's form 10-Q for the quarter ended September 30, 1980, is also hereby incorporated herein by reference. The Amendment to the Articles of Incorporation filed as Exhibit 4 to the Registrant's Form 10-Q for the quarter ended September 30, 1987, is also hereby incorporated by reference. The Amendment to the Articles of Incorporation filed as Exhibit 4 to the Registrant's Form 10-Q for the quarter ended September 30, 1993 is also hereby incorporated by reference.
3.11 Earnings Per Share Computations IV-3
3.21 Subsidiaries of Registrant IV-4
3.27 Financial Data Schedule (for SEC use only)
3.29 Information from reports furnished to state insurance regulatory authorities IV-5-10
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the year ended December 31, 1997.
IV-2
Exhibit 3.11 Schedule of Computation of Earnings Per Share
See Note 8 to the consolidated financial statements.
IV-3
Exhibit 3.21 Subsidiaries of Registrant
The following table lists the Registrant and its subsidiaries as of December 31, 1997, the jurisdiction in which each subsidiary was organized, and the percentage of voting securities of each subsidiary owned by the immediate parent:
All of the above subsidiaries are included in the Consolidated Financial Statements of the Registrant and its subsidiaries. All unnamed subsidiaries and other affiliates, when considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.
IV-4
Information From Reports Furnished to State Insurance Regulatory Authority Exhbit 29 Schedule P Detailed Information on Losses and Loss Expenses (In Thousands)
The Registrant has no affiliations with unconsolidated subsidiaries or 50%-or-less owned equity investees.
IV-5
Information From Reports Furnished to State Insurance Regulatory Authority Exhbit 29 Schedule P Detailed Information on Losses and Loss Expenses (In Thousands)
The Registrant has no affiliations with unconsolidated subsidiaries or 50%-or-less owned equity investees.
IV-6
Information From Reports Furnished to State Insurance Regulatory Authority Exhbit 29 Schedule P Detailed Information on Losses and Loss Expenses (In Thousands)
The Registrant has no affiliations with unconsolidated subsidiaries or 50%-or-less owned equity
IV-7
Exhbit 29 Information From Reports Furnished to State Insurance Regulatory Authority
Schedule P History of Incurred Losses and Allocated Expenses (In Thousands)
The Registrant has no affiliations with unconsolidated subsidiaries or 50%-or-less owned equity
IV-8
Exhbit 29 Information From Reports Furnished to State Insurance Regulatory Authority
Schedule P History of Cumulative Paid Losses and Allocated Expenses (In Thousands)
The Registrant has no affiliations with unconsolidated subsidiaries or 50%-or-less owned equity
IV-9
Exhbit 29 Information From Reports Furnished to State Insurance Regulatory Authority
Schedule P History of Bulk and Incurred but not Reported Reserves (In Thousands)
The Registrant has no affiliations with unconsolidated subsidiaries or 50%-or-less owned equity investees.
IV-10
Schedule I Mobile America Corporation and Subsidiaries Summary of Investments - Other than Related Parties December 31, 1997
IV-11
SCHEDULE II Mobile America Corporation and Subsidiaries Condensed Financial Information of Registrant December 31, 1997 and 1996 Parent Company - Balance Sheets
IV-12
SCHEDULE II Mobile America Corporation and Subsidiaries Condensed Financial Information of Registrant Years Ended December 31, 1997, 1996 and 1995 Parent Company - Statements of Operations
IV-13
SCHEDULE II Mobile America Corporation and Subsidiaries Condensed Financial Information of Registrant Years Ended December 31, 1997, 1996 and 1995 Parent Company - Statements of Cash Flows
IV-14
Schedule III Mobile America Corporation and Subsidiaries
Supplementary Insurance Information
Years Ended December 31, 1997, 1996 and 1995
IV-15
Schedule III Mobile America Corporation and Subsidiaries
Supplementary Insurance Information
Years Ended December 31, 1997, 1996 and 1995
IV-16
Schedule III Mobile America Corporation and Subsidiaries
Supplementary Insurance Information
Years Ended December 31, 1997, 1996 and 1995
IV-17
Schedule IV Mobile America Corporation and Subsidiaries Supplementary Insurance Information - Reinsurance Years Ended December 31, 1997, 1996 and 1995
IV-18
Schedule VI Mobile America Corporation and Subsidiaries Supplemental Insurance Information Consolidated Property-Casualty Entities Years Ended December 31, 1997, 1996 and 1995
IV-19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, The Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MOBILE AMERICA CORPORATION -------------------------- Registrant
March 27, 1998 By: /s/ Allan J. McCorkle ------------------------- Allan J. McCorkle President
March 27, 1998 By: /s/ Thomas L. Stinson ------------------------- Thomas L. Stinson Senior Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
IV-20