March 31, 2003

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R/elXny5uP1eY23yNa6jSxQxIjb+EsU9T0Pi+nqlQBgTLu+MjF/GafWeGiFMzVFm fo2OvDME3lzfHBhQbW10rg== 0001021408-03-007926.txt : 20030515 0001021408-03-007926.hdr.sgml : 20030515 20030515153003 ACCESSION NUMBER: 0001021408-03-007926 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSURANCE MANAGEMENT SOLUTIONS GROUP INC CENTRAL INDEX KEY: 0001063167 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 593422536 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25273 FILM NUMBER: 03704622 BUSINESS ADDRESS: STREET 1: 360 CENTRAL AVENUE CITY: ST PETERSBURG STATE: FL ZIP: 33701 BUSINESS PHONE: 7278032040 MAIL ADDRESS: STREET 1: 360 CENTRAL AVENUE CITY: ST PETERSBURG STATE: FL ZIP: 33701 10-Q 1 d10q.htm MARCH 31, 2003 March 31, 2003

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 2003

		Or

o		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: 000-25273

INSURANCE MANAGEMENT SOLUTIONS GROUP, INC

(Exact name of registrant as specified in its charter)

Florida		59-3422536

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

801 94th Avenue North, St. Petersburg, Florida		33702

(Address of Principal Executive Offices)		(Zip Code)

(727) 803-2040

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 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 o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o

No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

Class: Common Stock, $.01 par value

Outstanding as of May 10, 2003: 12,246,063

TABLE OF CONTENTS

	Page Number


PART I. FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Consolidated Balance Sheets as of December 31, 2002 and March 31, 2003	1
Consolidated Statements of Operations for the three months ended March 31, 2002 and 2003	2
Consolidated Statement of Shareholders’ Equity for the year ended December 31, 2002 and the three months ended March 31, 2003	3
Consolidated Statements of Cash Flows for the three months ended March 31, 2002 and 2003	4
Notes to Consolidated Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3. Quantitative and Qualitative Disclosures about Market Risk	17
Item 4. Controls and Procedures	17
PART II. OTHER INFORMATION	17
Item 1. Legal Proceedings	17
Item 5. Other Information	20
Item 6. Exhibits and Reports on Form 8-K	21

The statements contained in this report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the Company’s expectations, hopes, beliefs, intentions, or strategies regarding the future. Forward-looking statements include statements regarding, among other things: (i) the ability to retain material customers; (ii) the Company’s intention to consummate the merger contemplated by the Agreement and Plan of Merger, dated April 9, 2003, among the Company, Fiserv Inc. and certain of its direct and indirect subsidiaries; (iii) trends affecting the Company’s financial condition or results of operations; (iv) the Company’s operating strategies; (v) changes in the business and/or financial condition of the Company’s clients; (vi) the ability of Bankers Insurance Group, Inc. (including its subsidiaries, “BIG”) to pay outstanding amounts owed the Company; (vii) potential increases in the Company’s costs; (viii) the impact of general economic conditions on the demand for the Company’s services; (ix) changes in existing service agreements; (x) the ability to obtain new customers and retain existing customers; (xi) the outcome of certain litigation involving the Company; (xii) the outcome of certain administrative proceedings involving BIG; and (xiii) the ability to implement expense reductions. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. All forward-looking statements included in this document are based on information available to the Company on the date hereof and the Company assumes no obligation to update any such forward-looking statement. Prospective investors should also consult the risks described from time to time in the Company’s Reports on Forms 8-K, 10-Q and 10-K and Annual Reports to Shareholders.

-i-

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31, 2002		March 31, 2003

			(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	13,109,540	$	18,155,923
Accounts receivable, net		1,015,450		1,595,864
Due from affiliates		4,892,216		5,751,867
Note and interest receivable – affiliate		6,660,259		—
Prepaid expenses and other assets		893,444		665,098
Income taxes recoverable		1,473,895		2,229,740

Total current assets		28,044,804		28,398,492
PROPERTY AND EQUIPMENT, net		2,277,716		1,859,497
OTHER ASSETS
Goodwill		2,250,409		2,250,409
Deferred tax assets		478,714		272,114
Capitalized software costs, net		125,896		88,601
Other, net		1,813,883		1,683,611

Total assets	$	34,991,422	$	34,552,724
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable, trade	$	625,863	$	589,752
Employee related accrued expenses		1,125,545		1,290,871
Other accrued expenses		1,840,267		2,200,315

Total current liabilities		3,591,675		4,080,938
COMMITMENTS AND CONTINGENCIES		—		—
SHAREHOLDERS’ EQUITY
Preferred Stock. $.01 par value; 20,000,000 shares authorized, no shares issued and outstanding		—		—
Common Stock, $.01 par value; 100,000,000 shares authorized, 12,246,063 shares issued and outstanding at December 31, 2002 and March 31, 2003, respectively		122,460		122,460
Additional paid-in capital		26,407,405		26,407,405
Retained earnings		4,869,882		3,941,921

Total shareholders’ equity		31,399,747		30,471,786

Total liabilities and shareholders’ equity	$	34,991,422	$	34,552,724

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

INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)

	Three Months Ended March 31

	2002			2003

REVENUES
Outsourcing services – affiliated	$	7,090,233		$	843,615
Outsourcing services		1,377,779			3,973,258

Total revenues		8,468,012			4,816,873
EXPENSES
Cost of outsourcing services		7,650,792			4,226,747
Selling, general and administrative		1,739,671			1,740,890
Management services from Parent		122,846			—
Depreciation and amortization		648,964			594,695

Total expenses		10,162,273			6,562,332

OPERATING INCOME/(LOSS)		(1,694,261	)		(1,745,459	)

OTHER INCOME/(EXPENSE):
Interest income		144,416			260,398

Total other income/(expense)		144,416			260,398
INCOME/(LOSS) FROM OPERATIONS BEFORE INCOME TAXES		(1,549,845	)		(1,485,061	)
PROVISION/(BENEFIT) FOR INCOME TAXES		(578,800	)		(557,100	)

NET INCOME/(LOSS)	$	(971,045	)	$	(927,961	)
NET INCOME/(LOSS) PER COMMON SHARE	$	(.08	)	$	(.08	)
Weighted average common shares outstanding		12,276,063			12,246,063

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

INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

	Common Stock			Additional Paid-In Capital			Retained Earnings			Total

Balance at December 31, 2001	$	122,760		$	26,394,438		$	7,892,381		$	34,409,579
Compensation expense related to stock options issued to non-employees		—			110,167			—			110,167
Purchase and retirement of 30,000 shares of Common Stock		(300	)		(97,200	)		—			(97,500	)
Net Loss		—			—			(3,022,499	)		(3,022,499	)

Balance at December 31, 2002	$	122,460		$	26,407,405		$	4,869,882		$	31,399,747
Net Loss (unaudited)		—			—			(927,961	)		(927,961	)

Balance at March 31, 2003 (unaudited)	$	122,460		$	26,407,405		$	3,941,921		$	30,471,786

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

INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,

	2002			2003

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)	$	(971,045	)	$	(927,961	)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Depreciation and amortization expense		648,963			594,695
Compensation expense related to non-employee stock options		45,000			—
Deferred income taxes, net		(2,300	)		206,600
Changes in assets and liabilities:
Accounts receivable, trade		189,070			(580,414	)
Accounts receivable, trade--affiliate		836,282			(859,651	)
Income taxes recoverable		(538,759	)		(755,845	)
Prepaid expenses and other current assets		(186,344	)		228,346
Accounts payable, trade		(363,886	)		(36,111	)
Employee related accrued expenses		199,541			165,326
Other accrued expenses		(388,618	)		360,048
Income taxes payable		(1,418,415	)		—

Net cash provided by/(used in) operating activities		(1,950,511	)		(1,604,967	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(161,328	)		(8,909	)
Payment of notes receivable – affiliated		—			6,660,259

Net cash used in investing activities		(161,328	)		6,651,350

CASH FLOWS FROM FINANCING ACTIVITIES:

Net cash used in financing activities		—			—

INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		(2,111,839	)		5,046,383
CASH AND CASH EQUIVALENTS, beginning of period		20,095,808			13,109,540

CASH AND CASH EQUIVALENTS, end of period	$	17,983,969		$	18,155,923

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

INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS

Insurance Management Solutions Group, Inc. (together with its subsidiaries, the “Company”) is a holding company that was incorporated in the State of Florida in December 1996 by its parent, Bankers Insurance Group, Inc. (“BIG”). Historically, the Company has operated in two principal business segments: providing outsourcing services to the property and casualty insurance industry, with an emphasis on flood insurance; and providing flood zone determinations primarily to insurance companies and financial institutions. The Company’s outsourcing services, which are provided by its wholly-owned subsidiaries, Insurance Management Solutions, Inc. (“IMS”) and Colonial Claims Corporation (“Colonial”), include for IMS: policy and claims administration (policy issuance, billing and collection) and information technology (“IT”) services; and for Colonial: claims adjusting and processing. The Company’s flood zone determination services had been provided by Geotrac of America, Inc. (“Geotrac”), a wholly-owned subsidiary of the Company, until December 28, 2001, when it was sold.

In 2002 and prior years, the Company was substantially dependent on the business of its affiliated insurance companies under the common control of BIG, as the Company derived a substantial portion of its revenue from outsourcing services provided to these affiliated companies and BIG.

The Company amended its existing Administration Services Agreement, effective October 1, 2001, with BIG (the “BIG Service Agreement”), such that, as of July 1, 2002, the Company no longer provides policy administration or claims processing services for BIG’s personal (i.e., automobile and homeowners) insurance lines of business or claims processing for BIG’s commercial insurance lines of business. The Company, pursuant to the BIG Service Agreement, continues to provide BIG with IT hosting and support services for a fixed monthly fee and also provides various other back-office support services, including cash office processing, records management, policy assembly, and print and mail distribution services, in connection with all of BIG’s personal and commercial insurance lines of business. Effective August 12, 2002, the Company further amended the BIG Service Agreement. Pursuant to this amendment, the Company provides additional IT support services to BIG.

On August 15, 2002 the Company agreed to loan BIG and/or Bankers Underwriters, Inc., a wholly-owned subsidiary of BIG (“BUI”), up to $7.0 million under a revolving line of credit (the “Line of Credit”), secured by the insurance flood book of BUI. The Line of Credit was established in connection with an Agreement and Plan of Merger, dated August 15, 2002, by and among the Company and BIG, which Agreement and Plan of Merger was terminated as of November 21, 2002. All amounts outstanding under the Line of Credit (approximately $6.7 million) were paid in full, and the Line of Credit was terminated, on January 3, 2003.

Also, on January 3, 2003, BIG consummated the sale of First Community Insurance Company, a subsidiary of BIG and a fifty-state licensed insurance carrier (“FCIC”), and certain assets of BIG, including the rights to issue new and renewal flood insurance policies underwritten by BIG and its subsidiaries, Bankers Insurance Company (“BIC”), Bankers Security Insurance Company (“BSIC”) and FCIC, to Fidelity National Financial, Inc. (“FNF”). FNF, a Fortune 500 company, is the largest title insurance and diversified real estate related services company in the United States, with total revenue of nearly $3.9 billion in 2001. The transaction involved more than 360,000 flood insurance policies originated through a nationwide network of approximately 10,000 independent agents in conjunction with the National Flood Insurance Plan.

Write Your Own (“WYO”) Flood Insurance Program. As of the date of this Report, FCIC’s WYO Program consists solely of the flood insurance book of business previously administered by the Company on behalf of BIG. Given, among other factors, FNF’s substantial size and financial strength relative to BIG, the Company believes that FCIC’s prospects for both retention and growth of the existing flood insurance book of business are favorable. No assurances can be given, however, as to whether FCIC will be able to retain or grow the existing flood insurance book of business, or as to whether the acquisition of FCIC and certain related assets by FNF from BIG will have a positive impact on the Company’s business, financial condition or results of operations.

The FCIC Service Agreement expressly removed FCIC as a party from the BIG Service Agreement. Pursuant to the BIG Service Agreement, however, the Company continues to provide BIG, including its BIC and BSIC subsidiaries, with IT hosting and support services, as well as various other back-office support services, including cash office processing, records management, policy assembly, and print and mail distribution services, in connection with all of BIG’s personal and commercial insurance lines of business, with no changes in the existing fee structure. Nevertheless, as a result of the consummation of the sale of FCIC and related assets by BIG to FNF, the Company’s reliance on its affiliated customers is expected to diminish significantly on a going-forward basis.

On April 9, 2003, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Fiserv, Inc., a Wisconsin corporation (“Fiserv”), Fiserv Solutions, Inc., a Wisconsin corporation and a wholly-owned subsidiary of Fiserv (“Fiserv Solutions”), and Fiserv Merger Sub, Inc., a Florida corporation and a wholly-owned subsidiary of Fiserv Solutions (“Fiserv Merger Sub”), providing for, among other things, the merger of Fiserv Merger Sub with and into the Company, with the Company as the surviving corporation (the “Merger”). See Note 4. “Subsequent Events”.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and do not include all of the disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation of the consolidated financial position, results of operations and cash flows for the periods presented. The accompanying consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, as filed with the Securities and Exchange Commission on March 26, 2003. The results of operations for the three-month period ended March 31, 2003 are not necessarily indicative of the results that should be expected for a full fiscal year.

Goodwill

Effective as of January 1, 2002, the Company adopted Statements of Financial Accounting Standards (“SFAS”) 142, Goodwill and Intangible Assets, and 144, Accounting for the Impairment or Disposal of Long Lived Assets. In connection with the adoption of SFAS 142, Goodwill and Intangible Assets, the Company retained an independent third-party investment banking firm to conduct an analysis of its goodwill valuation at January 1, 2002. However, the valuation determined that no impairment of the Company’s goodwill existed as of January 1, 2002 at December 31, 2002 and March 31, 2003, management’s assessment of the Company’s January 1, 2002 valuation is that no impairment exists.

Stock Based Compensation

The Company account’s for its employee stock compensation plans using the intrinsic value method under Accounting Principles Board Opinion No. 25 with pro forma disclosures of net earnings and earnings per share, as if the fair value based method of accounting defined in SFAS 123 had been applied. The Company amortizes compensation costs related to the pro forma disclosure using the straight-line method over the vesting period of the employees’ common stock options.

Had compensation cost for the Company’s stock option plan been determined on the fair value at the grant dates for stock-based employee compensation arrangements consistent with the method required by SFAS 123, the Company’s net loss and net loss per common share would have been the pro forma amounts indicated below.

	Three Months Ended March

	2002			2003

Net loss, as reported	$	(971,045	)	$	(927,961	)
Less: stock-based employee compensation cost under the fair value based method, net of related tax effects		(33,500	)		—

Pro forma net loss	$	(1,004,545	)	$	(927,961	)

Net loss per common share-basic and diluted:
as reported	$	(.08	)	$	(.08	)

Pro forma net loss	$	(.08	)	$	(.08	)

During 2002 and 2001, there were no stock options granted and, as of March 31, 2003 there were no options that were exercisable. The per-share weighted-average fair value of stock options granted during 2000 was $1.16 using the Black-Scholes option-pricing model with the following weighted-average assumptions: expected dividend yield of 0%; risk-free interest rate of 5.75%; expected volatility of 65%; and an expected life of 5 years.

General

Effective August 20, 2002, each of the Company’s Directors and Executive Officers entered into a separate Option Termination Agreement whereby the Directors and Executive Officers agreed to the cancellation of all options granted under the Company’s 1999 Long-Term Incentive Plan, 1999 Non-Employee Director’s Stock Option Plan and/or Non-Qualified Stock Option Plan. Additionally, all other stock options granted under the 1999 Incentive Plan were cancelled effective January 2003, subject to an Option Termination Agreement signed by each of the Company’s current employees who held options under any of these plans. Consequently, no options remain outstanding under the aforementioned plans and no further options may be granted thereunder.

Recent Accounting Pronouncements

In December 2002, the FASB issued Statement No. 148, “Accounting for Stock-Based Compensation— Transition and Disclosure an amendment of FASB Statement No. 123” (“SFAS 148”). SFAS 148 amends FASB Statement No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation and to require prominent disclosures about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation. SFAS 148 also amends APB Opinion No. 28, “Interim Financial Reporting”, to require disclosures about those effects in interim financial information. The Company currently accounts for its stock-based compensation awards to employees and directors under the accounting prescribed by Accounting Principles Board Opinion No. 25 and provides the disclosures required by SFAS No. 123. The Company currently intends to continue to account for its stock-based compensation awards to employees and directors under the accounting prescribed by Accounting Principles Board No. 25. The Company has adopted the additional disclosure provisions of SFAS 148.

In December 2002, the FASB issued Interpretation 45 (“FIN 45”), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. For a guarantee subject to FASB Interpretation 45, a guarantor is required to:

	•	measure and recognize the fair value of the guarantee at inception (for many guarantees, fair value will be determined using a present value method); and

	•	provide new disclosures regarding the nature of any guarantees, the maximum potential amount of future guarantee payments, the current carrying amount of the guarantee liability, and the nature of any recourse provisions or assets held as collateral that could be liquidated and allow the guarantor to recover all or a portion of its payments in the event guarantee payments are required.

The disclosure requirement of this Interpretation is effective for financial statements for fiscal years ending after December 15, 2002 and did not have a material effect on the Company’s financial statements. The initial recognition and measurement provision are effective prospectively for guarantees issued or modified on or after January 1, 2003. FIN 45 had no material effect on the Company’s financial statements for the period ended March 31, 2003.

Net Income/(Loss) Per Common Share

Net income/(loss) per common share, which represents both basic and diluted earnings per share (“EPS”) since no dilutive securities were outstanding for all periods presented, is computed by dividing net income/(loss) by the weighted average common shares outstanding. The following table reconciles the numerator and denominator of the basic and dilutive EPS computation:

	Three Months Ended March 31,			Three Months Ended March 31,

	2002			2003

Numerator
Net income/(loss)	$	(971,045	)	$	(927,961	)
Denominator
Weighted average number of Common Shares used in basic EPS		12,276,063			12,246,063
Diluted stock options		—			—
Weighted average number of Common Shares and diluted potential Common Shares used in diluted EPS		12,276,063			12,246,063

As of March 31, 2002, options to purchase 472,250 shares of Common Stock were outstanding but were not included in the computation of diluted earnings per share, as the inclusion of such shares would have an anti-dilutive effect. There were no options to purchase shares of Common Stock outstanding at March 31, 2003.

NOTE 3. COMMITMENTS AND CONTINGENCIES

On September 28, 2000, October 25, 2000 and October 30, 2000, three alleged shareholders of the Company filed three nearly identical lawsuits in the United States District Court for the Middle District of Florida, each on behalf of a putative class of all persons who purchased shares of the Company’s Common Stock pursuant and/or traceable to the registration statement for the Company’s IPO in February 1999. The lawsuits were consolidated on December 1, 2000, and the consolidated action is proceeding under Case No. 8:00-CV-2013-T-26MAP (the “IPO Litigation”). The plaintiff’s Consolidated Amended Class Action Complaint, filed February 7, 2001, names as defendant the following parties: the Company; BIG, Venture Capital Corporation, a selling shareholder in the IPO; the five inside directors of the Company at the time of the IPO; and Raymond James & Associates, Inc. and Keefe, Bruyette & Woods, Inc., the underwriters for the IPO. The complaint alleges, among other things, that the defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, by making certain false and misleading statements in the roadshow presentations, registration statement and prospectus relating to the IPO. More specifically, the complaint alleges that, in connection with the IPO, the defendants made various material misrepresentations and/or omissions relating to: (i) the Company’s ability to integrate Geotrac’s flood zone determination business with the Company’s own flood zone determination business and with its insurance outsourcing services business; (ii) actual and anticipated synergies between the Company’s flood zone determination and outsourcing services business lines; and (iii) the Company’s use of the IPO proceeds. The complaint seeks unspecified damages, including interest, and equitable relief, including a rescission remedy. On March 26, 2001, the Company, BIG and the five inside director defendants filed a motion to dismiss the plaintiff’s complaint for, among other things, failure to allege material misstatements and/or omissions in the roadshow presentations, registration statement and/or prospectus relating to the IPO. On July 11, 2001, U.S. District Judge Richard A. Lazzara denied all of the defendants’ motions to dismiss the complaint.

issuer of the Company’s applicable Directors and Officers and Company Reimbursement insurance policy has agreed to pay $2.1 million to the plaintiff class. The settlement was also approved by BIG and by the other defendants represented by Company counsel. On April 18, 2003, the parties filed various pleadings seeking court approval of the settlement terms. On April 22, 2003, Judge Lazzara entered an order scheduling a July 18, 2003 hearing to determine whether the proposed settlement terms are fair, reasonable and adequate, and whether those terms should be approved by the court. Judge Lazzara’s order also sets a June 27, 2003 deadline for class members to request exclusion from the settlement, and for class members to file and serve any comments and/or objections to the settlement. The Company believes that the material allegations of the complaint are without merit, but has elected to settle the IPO Litigation to avoid the time, expense and risks associated with continuing the IPO Litigation. No assurances can be given, if the settlement is not consummated, with respect to the outcome of the IPO Litigation, and an adverse result could have a material adverse effect on the Company’s business, financial condition and results of operations.

In addition, the Company has been informed by the underwriters for the IPO that the underwriters will be seeking indemnification from the Company, BIG and/or Venture Capital Corporation for the underwriters’ legal fees and expenses incurred in the IPO Litigation, pursuant to the Underwriting Agreement between the Company, BIG, Venture Capital Corporation and the underwriters. The Company’s insurer has taken the position that it is not responsible for the payment of such monies. On October 18, 2002, the underwriters informed the Company that their legal fees and expenses in the IPO Litigation to date were approximately $110,000.

Following the announcement in August 2002 of the Company’s intention to commence a cash tender offer for all presently outstanding publicly-held shares of its Common Stock (the “Going-Private Transaction”), three alleged shareholders of the Company, each on behalf of a putative class consisting of the Company’s current public shareholders (the “Public Shareholders”), filed lawsuits against, among others, the Company and the Company’s current directors, challenging, among other things, the proposed Going-Private Transaction. The lawsuits were styled Pennapacker v. Insurance Management Solutions Group, Inc., et al., Case No. 02-6636 CI-011 and Karcich v. Insurance Management Solutions Group, Inc., et al., Case No. 02-6712 CI-008 (collectively, the “Pennapacker/Karcich Litigation”), and Short v. Insurance Management Solutions Group, Inc., et al., Case No. 02-6964 CI-013 (the “Short Litigation”). Each lawsuit was filed in the Circuit Court of the Sixth Judicial Circuit in and for Pinellas County, Florida.

On November 4, 2002, the Pennapacker and Karcich cases were consolidated. On November 21, 2002, the Company announced that its Board of Directors, upon the recommendation of a Special Committee thereof, had withdrawn its approval of, and the Company had terminated its intent to commence, the Going-Private Transaction. On December 6, 2002, a First Amended and Consolidated Class Action Complaint (the “Amended Complaint”) was filed in the Pennapacker/Karcich Litigation. The Amended Complaint names as defendants the Company, BIG and seven current or former directors of the Company. The pending complaint in the Short Litigation, filed August 30, 2002, names as defendants the Company and seven current or former directors of the Company.

In the Pennapacker/Karcich Litigation, the plaintiffs allege that each defendant has breached its or his fiduciary duties to the Public Shareholders in connection with the Company’s operations, the Going-Private Transaction, and the Company’s discussions with a third party potentially interested in acquiring the Company or its business. Specifically, the plaintiffs allege that each defendant either has violated its or his fiduciary duties (including its or his duties of loyalty, care, good faith, candor and independence), or is aiding and abetting other defendants’ breaches of their fiduciary duties, by, among other things, allegedly: (i) attempting to usurp through the Going-Private Transaction various funds obtained by the Company through its IPO and by its subsequent sale of the stock of the Company’s former Geotrac subsidiary; (ii) negotiating a transaction with an unnamed bidder for an undisclosed price for the Company or its business which plaintiffs believe will be inadequate; (iii) attempting to discourage other offers for the Company or its assets; (iv) falsely conditioning the Public Shareholders to believe that the Company’s value is impaired by a purported foreseeable decline in demand by BIG for the Company’s products and services, for the sole purpose of reducing the perceived value of the Company; (v) issuing a false and misleading registration statement in connection with the Company’s IPO; (vi) improperly brokering assets back and forth between the Company and BIG, based on non-arm’s length negotiations; (vii) allowing BIG to usurp critical Company assets and then allowing BIG to extend the deadline for repayment, without any consideration for the Company; (viii) misleading the Public Shareholders as to the true nature of the Company’s relationship with BIG and the true foreseeable dependence of BIG on the Company; (ix) managing the Company to dismal operating results and a low stock price; (x) failing to fill vacancies on the Company’s board of directors; (xi) asking the same financial advisor who reviewed the Going-Private Transaction to review the terms of the potential sale of the Company or its business; and (xii) attempting to usurp benefits of the Company for themselves as a result of the potential sale of the Company or its business.

the best interests of the Public Shareholders; and (iii) equitable relief rescinding any impediments that would prevent additional offers by qualified third parties for the Company or its business.

In the Short Litigation, the plaintiff alleged that in connection with the Going-Private Transaction, the defendants to the Short Litigation would fail to supply the Public Shareholders with sufficient information to enable them to make informed decisions with regard to the Going-Private Transaction, including material non-public information concerning the value of the Company’s assets, the full extent of the Company’s future earnings potential, and the Company’s expected increase in profitability. The plaintiff also alleged that the defendants have engaged in self-dealing, are not acting in good faith toward the Public Shareholders, and have breached their fiduciary duties to the Public Shareholders. Specifically, the plaintiff alleges, among other things, that: (i) the Company timed the Going-Private Transaction such that BIG and its affiliates would capture the Company’s future potential and value for their own ends without paying the Public Shareholders an adequate or fair value for their shares of Company Common Stock; (ii) the Company’s directors structured the Going-Private Transaction to benefit BIG and its affiliates at a substantially unfair price to the Company and its Public Shareholders, with the effect that BIG and its affiliates would acquire the Company’s assets and benefits at little or no cost by using the Company’s resources to fund the Going-Private Transaction and to provide substantial funding to BIG and its affiliates; (iii) the defendants’ valuation of the Company for purposes of the Going-Private Transaction inadequately evaluated the Company’s assets and total worth; (iv) certain of the individual defendants did not adequately take into consideration purported material conflicts of interest on the Company’s board of directors; and (vi) the Company’s acceptance of the terms of the Going-Private Transaction amounted to a rejection of a preferable prior offer made by BIG and its affiliates for the shares of Company Common Stock held by the Public Shareholders.

The plaintiff’s complaint in the Short Litigation seeks as relief: (i) a declaration that the defendants have breached their fiduciary and other duties to the Public Shareholders; (ii) orders enjoining the defendants from proceeding with, consummating, or closing, the Going-Private Transaction; and (iii) in the event that the Going-Private Transaction is consummated, an order rescinding the transaction, or, in the alternative, awarding compensatory damages against the defendants, together with prejudgment interest, costs, attorneys’ fees and expert witness fees.

On September 25, 2002, the Company and three other defendants to the Short Litigation removed the Short litigation to the U.S. District Court for the Middle District of Florida. On November 26, 2002, the Short Litigation was remanded to the Circuit Court of the Sixth Judicial Circuit in and for Pinellas County, Florida. On April 8, 2003, the judge assigned to both the Pennapacker/Karcich Litigation and the Short Litigation entered an order denying the objection of the plaintiff in the Short Litigation to the consolidation of that litigation with the Pennapacker/Karcich Litigation, and consolidating the two lawsuits. The plaintiffs’ counsel in the two lawsuits has informed the Company’s counsel that they intend to seek leave to file a new consolidated amended complaint, combining and amending the initial allegations contained in the lawsuits; however, the consolidated amended complaint has not yet been filed. Pending such action, there has been no recent activity in either case.

Although management of the Company believes that the material allegations of the complaints in the Pennapacker/Karcich Litigation and the Short Litigation are without merit and intends to vigorously defend the litigation, no assurances can be given with respect to the outcome of the litigation. Moreover, such litigation could have a material adverse effect on the Company’s business, financial condition and results of operation and could adversely affect the Company’s ability to consummate any transaction.

As of December 31, 2002 and March 31, 2003, the Company has recorded a liability for a settlement accrual of $800,000 relating to an unaffiliated third-party customer contract with a former customer that was terminated in 2000 and for which no settlement has yet been reached with this former customer. No discussions between the Company and this customer have taken place since October 2000. On November 6, 2002, the Company received a letter from the Deputy Insurance Commissioner of the Commonwealth of Pennsylvania, on behalf of the former customer. This letter notified the Company that the liquidator for this former customer disavows and terminates the Insurance Administration Services Agreement between IMS and this former customer. However, if this matter is re-opened, an adverse outcome could have a material effect on the Company’s business, financial condition and results of operations.

The Company is involved in various other legal proceedings arising in the ordinary course of business. Management believes that the ultimate resolution of these other proceedings will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity, although no assurances can be given in this regard.

NOTE 4. SUBSEQUENT EVENTS

As previously reported, on April 9, 2003, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Fiserv, Inc., a Wisconsin corporation (“Fiserv”), Fiserv Solutions, Inc., a Wisconsin corporation and a wholly-owned subsidiary of Fiserv (“Fiserv Solutions”), and Fiserv Merger Sub, Inc., a Florida corporation and a wholly-owned subsidiary of Fiserv Solutions (“Fiserv Merger Sub”), providing for, among other things, the merger of Fiserv Merger Sub with and into the Company, with the Company as the surviving corporation (the “Merger”).

The Merger Agreement contemplates that, pursuant to the Merger, (i) subject to applicable dissenters’ rights available under Florida law, each issued and outstanding share of Common Stock, $.01 par value (“Company Common Stock”), of the Company (other than the 8,354,884 shares (the “BIG Shares”) of Company Common Stock owned beneficially and of record by Bankers Insurance Company, a Florida corporation (“BIC”), Bankers Security Insurance Company, a Florida corporation (“BSIC”), Bonded Builders Service Corp., a Florida corporation (“BBSC”), and BIG, a Florida corporation and the direct or indirect parent corporation of each of BIC, BSIC and BBSC (“BIG” and, collectively with BIC, BSIC and BBSC, the “Principal Shareholders”) would be converted into the right to receive $3.30 in cash, without interest, and (ii) each BIG Share would be converted into the right to receive $3.26 in cash, without interest. As of the date of this Report, the BIG Shares constitute approximately 68.1% of the issued and outstanding shares of Company Common Stock.

The transactions contemplated by the Merger Agreement will not be consummated unless certain conditions typical for this type of transaction are either satisfied or waived prior to closing. These conditions include, among other things, that the Merger Agreement and the transactions contemplated thereby are approved (i) by the shareholders of the Company in accordance with Florida law and the Company’s Amended and Restated Articles of Incorporation and Amended and Restated Bylaws and (ii) by at least 50.01% of the outstanding shares of Company Common Stock not owned or controlled by the Principal Shareholders. In connection with the Merger Agreement, each of the Principal Shareholders entered into an Agreement to Facilitate Merger with Fiserv, Fiserv Solutions and Fiserv Merger Sub (the “Agreement to Facilitate Merger”), pursuant to which, among other things, the Principal Shareholders have agreed to (i) vote the BIG Shares in favor of the approval and adoption of the Merger Agreement and the transactions contemplated thereby and (ii) accept $3.26 per BIG Share, in cash, pursuant to the Merger.

The Board of Directors of the Company has called a Special Meeting of Shareholders to be held at 3:00 p.m., local time, on Tuesday, June 24, 2003, at the Company’s offices at 801 94^th Avenue North, St. Petersburg, Florida, for the sole purpose of voting upon a proposal to approve the Merger and the Merger Agreement. Shareholders of record as of the close of business on April 30, 2003, will be entitled to notice of and to vote at the Special Meeting or any adjournment or postponement thereof.

NOTE 5. OPERATIONAL MATTERS

During the quarter-ended March 31, 2003, the Company experienced an after-tax loss of ($927,961) and consequently, did not have a positive cash flow from operations during such period. Also during the first quarter of 2003 and at the time of consummation of the sale by BIG of FCIC and certain other assets to FNF, the Company received payment in full of all amounts due and owing (approximately $6.7 million) from BIG under the Line of Credit.

As of March 31, 2003, BIG owed the Company an aggregate of approximately $5.8 million under the BIG Service Agreement (substantially all of which was overdue), including approximately $450,000 in late payment fees. The Company has made written demand on BIG for payment in full of all past due amounts owning under the BIG Service Agreement, and the Audit Committee of the Company’s Board of Directors continues to consider various alternatives for collecting such past due amounts. If such past due amounts are not paid in full and BIG does not thereafter continue to pay amounts due under the BIG Service Agreement on a timely basis, it could have a material adverse effect on the Company’s business, financial condition and results of operations.

Management of the Company believes cash and cash equivalents of approximately $18.2 million at March 31, 2003 are adequate to support operating cash needs for the foreseeable future as such.

NOTE 6. SEGMENT INFORMATION

	Outsourcing Services – Administration			Outsourcing Services – Claims Adjusting			Intercompany Eliminations And Other			Consolidated Totals

MARCH 31, 2002
Operating revenues-affiliated	$	7,096,983			—		$	(6,750	)	$	7,090,233
Operating revenues-unaffiliated	$	1,123,525		$	254,254			—		$	1,377,799
Operating income/(loss)	$	(1,454,979	)	$	(239,282	)		—		$	(1,694,261	)
Depreciation and amortization	$	638,359		$	10,605			—		$	648,964
Identifiable assets	$	38,188,330		$	5,525,287	(1)	$	(5,611,560	)	$	38,102,057
MARCH 31, 2003
Operating revenues-affiliated	$	843,615			—			—		$	843,615
Operating revenues-unaffiliated	$	3,424,127		$	549,131			—		$	3,973,258
Operating income/(loss)	$	(1,709,035	)	$	(36,424	)		—		$	(1,745,459	)
Depreciation and amortization	$	587,244		$	7,451			—		$	594,695
Identifiable assets	$	37,475,739		$	5,607,683	(1)	$	(8,530,698	)	$	34,552,724

(1) Includes Goodwill of $2,250,409.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain selected operating results of the Company as a percentage of total revenues:

	Three Months Ended March 31,

	2002			2003

REVENUES
Outsourcing services		100.0	%		100.0	%
Total revenues		100.0			100.0
EXPENSES
Cost of outsourcing services		90.3			87.8
Selling, general and administrative		20.5			36.2
Management services from Parent		1.5			—
Depreciation and amortization		7.7			12.3

Total expenses		120.0			136.3

Operating income/(loss)		(20.0	)		(36.3	)
Interest income, net		1.7			5.4

Income before income taxes		(18.3	)		(30.9	)
Provision/(benefit) for income taxes		(6.8	)		(11.6	)

Net income/(loss)		(11.5	)%		(19.3	)%

The following discussion and analysis should be read in conjunction with the Company’s consolidated financial statements (unaudited) and the notes thereto included in “Item 1. Financial Statements” above.

OVERVIEW

Insurance Management Solutions Group, Inc. (together with its subsidiaries, the “Company”) is a holding company that was incorporated in the State of Florida in December 1996 by Bankers Insurance Group, Inc. (together with its subsidiaries, “BIG”), which contributed to the Company two of its wholly-owned operating subsidiaries, Insurance Management Solutions, Inc. (“IMS”) and Bankers Hazard Determination Services, Inc. (“BHDS”) that were previously formed in August 1991 and June 1988, respectively. The Company, through its wholly-owned subsidiaries, IMS and Colonial Claims Corporation (“Colonial Claims”), provides comprehensive policy and claims outsourcing services to the property and casualty (“P&C”) insurance industry, with an emphasis on providing these services to the flood insurance market.

On January 3, 2003, BIG consummated the sale of First Community Insurance Company, a subsidiary of BIG and a fifty-state licensed insurance carrier (“FCIC”), and certain assets of BIG, including the rights to issue new and renewal flood insurance policies underwritten by BIG and its subsidiaries, Bankers Insurance Company (“BIC”), Bankers Security Insurance Company (“BSIC”) and FCIC, to Fidelity National Financial, Inc. (“FNF”). FNF, a Fortune 500 company, is the largest title insurance and diversified real estate related services company in the United States, with total revenue of nearly $3.9 billion in 2001. The transaction involved more than 360,000 flood insurance policies originated through a nationwide network of approximately 10,000 independent agents in conjunction with the National Flood Insurance Plan.

Effective as of the consummation of the foregoing transaction between BIG and FNF, the Company entered into a new Flood Insurance Full Service Vendor Agreement, dated January 3, 2003 (the “FCIC Service Agreement”), with FCIC, now a wholly-owned subsidiary of FNF, pursuant to which the Company continues to provide policy administration, claims administration, claims administration, data processing and other related services to FCIC in connection with FCIC’s Write Your Own (“WYO”) Flood Insurance Program. As of the date of this Report, FCIC’s WYO Program consists soley of the flood insurance book of business previously administered by the Company on behalf of BIG. Given, among other factors, FNF’s substantial size and financial strength relative to BIG, the Company believes that FCIC’s prospects for both retention and growth of the existing flood insurance book of business are favorable. No assurances can be given, however, as to whether the acquisition of FCIC and certain related assets by FNF from BIG will have a positive impact on the Company’s business, financial condition or results of operations.

The FCIC Service Agreement expressly removed FCIC as a party from the BIG Service Agreement. Pursuant to the BIG Service Agreement, however, the Company continues to provide BIG, including its BIC and BSIC subsidiaries, with IT hosting and support services, including cash office processing, records management, policy assembly, and print and mail distribution services, in connection with all of BIG’s personal and commercial insurance lines of business, with no changes in the existing fee structure. The Company is a 68.1%-owned subsidiary of BIG, which was the Company’s principal customer, representing 66.1% of outsourcing revenues, in 2002. Nevertheless, as a result of the consummation of the sale of FCIC and related assets by BIG to FNF, the Company’s reliance on BIG is expected to diminish significantly on a going-forward basis.

IMSG has experienced a significant decline in its volume of outsourcing business over the past year due primarily to changes in the amounts and lines of insurance business serviced on behalf of BIG. Management of the Company believes that it will be difficult to further reduce costs in the short term to mitigate the losses in revenue resulting therefrom.

ESTIMATES AND CRITICAL ACCOUNTING POLICIES

The preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and revenues and expenses for the respective period-ended for such statements. The determination of estimates requires the use of judgment since future events and their affect on the Company’s operations cannot be determined with absolute certainty. Actual results typically differ from these estimates in some fashion, and at times, these variances may be material to the Company’s financial statements. Management continually evaluates its estimates and assumptions, which are based on historical experience and other factors that are believed to be reasonable under these circumstances, but these estimates and the Company’s actual results are subject to certain risk factors. Nevertheless, management of the Company believes the following items involve a higher degree of complexity and judgment, and therefore, has commented on these items below.

(1) Valuation of Accounts Receivable and Due from Affiliate at December 31, 2002 and March 31, 2003, respectively.

The Company’s allowance for doubtful accounts of approximately $179,000 and $178,000 at December 31, 2002 and March 31, 2003, respectively, is based on management’s estimates of the credit worthiness of its customers, current economic conditions and historical information. In the opinion of management, the Company’s allowance for doubtful accounts is believed to be an amount sufficient to respond to normal business conditions. Historically the level of recorded bad debt expense and write-offs has not been material to the Company’s financial statements. Should business conditions deteriorate or any customer, including BIG, default on its obligations to the Company, this allowance may need to be significantly increased, which would have a negative impact upon the Company’s financial condition and results of operations.

As of December 31, 2002 and March 31, 2003, respectively, BIG owed the Company an aggregate of approximately $4.9 million and $5.8 million (substantially all of which was overdue) under the BIG Service Agreement, including approximately $310,000 and $450,000 in late payment fees. The Company has made written demand on BIG for payment in full of all past due amounts owing under the BIG Service Agreement, and the Audit Committee of the Company’s Board of Directors continues to consider various alternatives for collecting such past due amounts. The Audit Committee and management of the Company believe that no valuation allowance for such past due fees should be recorded at March 31, 2003 based on discussions with management of BIG and an analysis of BIG’s ability to make payment for such past due amounts.

(2) Impairment Valuations

On a quarterly basis, management assesses the composition of the Company’s assets and liabilities, as well as the events that have occurred and the circumstances that have changed since the most recent fair value determination. If events occur or circumstances change that would more likely than not reduce the fair value of the related asset or liability below its carrying amount, the related asset or liability would be tested for impairment.

Goodwill

Under SFAS 142, Goodwill and Intangible Assets, the Company retained an independent third-party investment banking firm to conduct an analysis of its goodwill valuation at January 1, 2002. The valuation determined that no impairment of the Company’s goodwill existed as of January 1, 2002. The Company’s internal assessment during 2002 and 2003 concluded that no impairment existed at December 31, 2002 and at March 31, 2003.

Impairment of Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets (principally property and equipment and intangible service contract) whenever circumstances indicate that the carrying amount of an asset may not be recoverable. Factors considered include current operating results, trends, and anticipated undiscounted future cash flows. An impairment loss is recognized to the extent the sum of discounted (using the Company’s incremental borrowing rate) estimated future cash flows (over a period ranging from generally four to ten years) expected to result from the use of the asset is less than the carrying value. Management of the Company believes no impairment exists for any of the periods presented.

Service Contract

In conjunction with the sale of Geotrac of America, Inc. (“Geotrac”), the Company’s former flood zone determination subsidiary, on December 28, 2001, the Company obtained a favorable long-term service contract with Geotrac for flood zone determinations, which was recorded at its estimated fair value of $2,189,090 at December 27, 2001. Accumulated amortization was $387,807 and $518,079 at December 31, 2002 and March 31, 2003, respectively. The unamortized balance is classified in Other Assets in the Company’s consolidated balance sheet. This contract is amortized over the 10-year contract period using a method that approximates the projected annual requirements of flood zone determinations. The Company’s internal assessment during 2002 and 2003 concluded that no impairment existed at December 31, 2002 or March 31, 2003.

(3) Estimated Liabilities

The Company makes a number of estimates in the ordinary course of business. Historically, past changes to these estimates have not had a material impact on the Company’s financial condition. However, circumstances could change which would alter future financial information based upon a change in estimated-vs.-actual results.

The Company is subject to various matters of litigation in the ordinary course of business. As the outcome of any litigation is unknown, management estimates the potential amount of liability, if any, in excess of any applicable insurance coverage, based on historical experience and/or the best estimate of the matter at hand. As the outcome of litigation is difficult to predict and significant estimates are made with regard to future events, significant changes in estimated amounts could occur. To date, the Company has not had to pay any legal settlements in excess of existing insurance coverage.

-14-

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2002 AND 2003

Outsourcing Services Revenues. Outsourcing services revenues decreased $3.7 million, or 43.1%, to $4.8 million for the three months ended March 31, 2003 from $8.5 million for the corresponding period in 2002. This decrease primarily relates to decreases in the Company ‘s affiliated outsourcing revenues resulting from the implementation of changes to the BIG Service Agreement effective July 1, 2002. This resulted in significant changes in the amounts and lines of business that the Company processes for BIG, resulting in reduced homeowner and automobile outsourcing services revenue when compared with the corresponding period of the prior year. Also, as described above, in January 2003 the affiliated flood business serviced by the Company was sold to FNF by BIG. See “--Overview.” As a result of this transaction, affiliated outsourcing services revenues decreased 88.1% from the prior year to approximately $844,000 and, correspondingly, unaffiliated outsourcing services revenues increased 188.4% from the prior year to approximately $4.0 million.

Cost of Outsourcing Services. Cost of outsourcing services decreased $3.4 million, or 44.8%, to $4.2 million for the three months ended March 31, 2003 from approximately $7.6 million for the corresponding period in 2002. As a percentage of outsourcing services revenues, cost of outsourcing services decreased to 87.7% for the three months ended March 31, 2003 from 90.3% for the corresponding period in 2002. This $3.4 million decrease was due primarily to payroll and other staff-related expense decreases from 2002 as a result of the changes to the BIG Service Agreement effective July 1, 2002, whereby the Company ceased processing BIG’s personal insurance lines of business. In addition to the direct staff-related expense decreases, other indirect costs also decreased from the prior period, including leased office space expense, telephone, postage and printing costs.

Selling, General and Administrative Expense. Selling, general and administrative expenses remained relatively unchanged at approximately $1.7 million for the three months ended March 31, 2003 as compared to the corresponding period of 2002. These expenses primarily consist of administrative operating expenses such as professional fees, insurance expense and other administrative expenses, including Special Committee-associated expenses for professional services which were also incurred during the first three months of 2002.

Management Services from Parent. Management Services from Parent decreased $123,000, or 100%, for the three months ended March 31, 2003 from the corresponding period in 2002. The decrease was fully related to reduced office lease expense, as the Company no longer leases its office space from Bankers Financial Corporation. Office lease costs are now reported under the caption “Cost of Outsourcing Services” above.

Interest Income. Interest Income increased 80.6% to $260,000 for the three months ended March 31, 2003 from $144,000 in 2002. The increase reflects interest earned on the remaining net cash proceeds from the sale of Geotrac in late December 2001, coupled with interest earned on the Company’s line of credit and service fees with BIG. See Liquidity and Capital Resources below.

Provision/(Benefit) for Income Taxes. The Company’s effective income tax/(benefit) rates were (37.5%) and (37.3%) for the three months ended March 31, 2003 and 2002, respectively.

For additional information on the reconciliation of the Company’s effective income tax rate to the federal statutory income tax rate, see “Note 8 - Income Taxes”, in the Notes to the Consolidated Financial Statements of the Company for the year ended December 31, 2002, included in the Company’s Form 10-K filed with the Securities and Exchange Commission on March 26, 2003.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2002, the FASB issued Statement No. 148, “Accounting for Stock-Based Compensation— Transition and Disclosure an amendment of FASB Statement No. 123” (“SFAS 148”). SFAS 148 amends FASB Statement No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation and to require prominent disclosures about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation. SFAS 148 also amends APB Opinion No. 28, “Interim Financial Reporting”, to require disclosures about those effects in interim financial information. The Company currently accounts for its stock-based compensation awards to employees and directors under the accounting prescribed by Accounting Principles Board Opinion No. 25 and provides the disclosures required by SFAS No. 123. The Company currently intends to continue to account for its stock-based compensation awards to employees and directors under the accounting prescribed by Accounting Principles Board No. 25. The Company has adopted the additional disclosure provisions of SFAS 148.

	•	measure and recognize the fair value of the guarantee at inception (for many guarantees, fair value will be determined using a present value method); and

	•	provide new disclosures regarding the nature of any guarantees, the maximum potential amount of future guarantee payments, the current carrying amount of the guarantee liability, and the nature of any recourse provisions or assets held as collateral that could be liquidated and allow the guarantor to recover all or a portion of its payments in the event guarantee payments are required.

See Note 2 of the Notes to Consolidated Financial Statements for further information.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s principal sources of liquidity consist of cash on-hand and cash proceeds from the sale of the Company’s Geotrac subsidiary in late December 2001. The Company received net cash proceeds of approximately $19 million as a result of the sale of its Geotrac subsidiary in late December 2001.

During the quarter-ended March 31, 2003, the Company experienced an after-tax loss of ($927,961), and consequently, did not have a positive cash flow from operations during such period. Also during the first quarter of 2003 and at the time of consummation of the sale by BIG of FCIC and certain other assets to FNF, the Company received payment in full of all amounts due and owing (approximately $6.7 million) from BIG under the Line

of Credit. At March 31, 2003, cash and cash equivalents of approximately $18.2 million.

As of March 31, 2003, BIG owed the Company an aggregate of approximately $5.8 million under the BIG Service Agreement (substantially all of which was overdue), including approximately $450,000 in late payment fees. The Company has made written demand on BIG for payment in full of all past due amounts owing under the BIG Service Agreement, and the Audit Committee of the Company’s Board of Directors continues to consider various alternatives for collecting such past due amounts. If such past due amounts are not paid in full and BIG does not thereafter continue to pay amounts due under the BIG Service Agreement on a timely basis, it could have a material adverse effect on the Company’s business, financial condition and results of operations.

Based upon and subject to the aforementioned, the Company expects cash on hand to be adequate to support its operating cash needs for the foreseeable future, although no assurances can be given in this regard.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has not entered into any transactions using derivative financial instruments or derivative commodity instruments and believes that its exposure to market risk associated with other financial instruments (such as variable rate debt) is not material.

ITEM 4. CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this Report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes were made in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Bruyette & Woods, Inc., the underwriters for the IPO. The complaint alleges, among other things, that the defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, by making certain false and misleading statements in the roadshow presentations, registration statement and prospectus relating to the IPO. More specifically, the complaint alleges that, in connection with the IPO, the defendants made various material misrepresentations and/or omissions relating to: (i) the Company’s ability to integrate Geotrac’s flood zone determination business with the Company’s own flood zone determination business and with its insurance outsourcing services business; (ii) actual and anticipated synergies between the Company’s flood zone determination and outsourcing services business lines; and (iii) the Company’s use of the IPO proceeds. The complaint seeks unspecified damages, including interest, and equitable relief, including a rescission remedy. On March 26, 2001, the Company, BIG and the five inside director defendants filed a motion to dismiss the plaintiff’s complaint for, among other things, failure to allege material misstatements and/or omissions in the roadshow presentations, registration statement and/or prospectus relating to the IPO. On July 11, 2001, U.S. District Judge Richard A. Lazzara denied all of the defendants’ motions to dismiss the complaint.

The case had been set for trial during the trial term commencing May 5, 2003. On August 6, 2002, the plaintiff offered to accept, in full settlement of the IPO Litigation as to all defendants, payment of $2.1 million to the putative plaintiff class. On August 14, 2002, the Company’s Board of Directors voted to accept this offer, and the issuer of the Company’s applicable Directors and Officers and Company Reimbursement insurance policy has agreed to pay $2.1 million to the plaintiff class. The settlement was also approved by BIG and by the other defendants represented by Company counsel. On April 18, 2003, the parties filed various pleadings seeking court approval of the settlement terms. On April 22, 2003, Judge Lazzara entered an order scheduling a July 18, 2003 hearing to determine whether the proposed settlement terms are fair, reasonable and adequate, and whether those terms should be approved by the court. Judge Lazzara’s order also sets a June 27, 2003 deadline for class members to request exclusion from the settlement, and for class members to file and serve any comments and/or objections to the settlement. The Company believes that the material allegations of the complaint are without merit, but has elected to settle the IPO Litigation to avoid the time, expense and risks associated with continuing the IPO Litigation. No assurances can be given, if the settlement is not consummated, with respect to the outcome of the IPO Litigation, and an adverse result could have a material adverse effect on the Company’s business, financial condition and results of operations.

for the Company or its assets; (iv) falsely conditioning the Public Shareholders to believe that the Company’s value is impaired by a purported foreseeable decline in demand by BIG for the Company’s products and services, for the sole purpose of reducing the perceived value of the Company; (v) issuing a false and misleading registration statement in connection with the Company’s IPO; (vi) improperly brokering assets back and forth between the Company and BIG, based on non-arm’s length negotiations; (vii) allowing BIG to usurp critical Company assets and then allowing BIG to extend the deadline for repayment, without any consideration for the Company; (viii) misleading the Public Shareholders as to the true nature of the Company’s relationship with BIG and the true foreseeable dependence of BIG on the Company; (ix) managing the Company to dismal operating results and a low stock price; (x) failing to fill vacancies on the Company’s board of directors; (xi) asking the same financial advisor who reviewed the Going-Private Transaction to review the terms of the potential sale of the Company or its business; and (xii) attempting to usurp benefits of the Company for themselves as a result of the potential sale of the Company or its business.

The Amended Complaint in the Pennapacker/Karcich Litigation seeks as relief: (i) unspecified damages (including costs, attorney’s fees and expert witness fees); (ii) equitable relief directing the individual defendants to exercise their fiduciary duties to properly negotiate a fair transaction with BIG or with any other “acquirer,” which properly and adequately compensates the Public Shareholders for their shares, or any other transaction which is in the best interests of the Public Shareholders; and (iii) equitable relief rescinding any impediments that would prevent additional offers by qualified third parties for the Company or its business.

ITEM 5. OTHER INFORMATION

As previously reported on January 3, 2003, Bankers Insurance Group, Inc. (including its subsidiaries, “BIG”) consummated the sale of First Community Insurance Company, a subsidiary of BIG and a fifty-state licensed insurance carrier (“FCIC”), and certain assets of BIG, including the rights to issue new and renewal flood insurance policies underwritten by BIG and its subsidiaries, Bankers Insurance Company (“BIC”), Bankers Security Insurance Company (“BSIC”) and FCIC, to Fidelity National Financial, Inc. (“FNF”). (As of the date of this Report, BIG beneficially owns approximately 68.1% of the outstanding common stock of the Company.) FNF, a Fortune 500 company, is the largest title insurance and diversified real estate related services company in the United States, with total revenue of nearly $3.9 billion in 2001. The transaction involved more than 360,000 flood insurance policies originated through a nationwide network of approximately 10,000 independent agents in conjunction with the National Flood Insurance Program.

At the time of consummation of the foregoing transaction between BIG and FNF, the Company received payment in full of all amounts due and owing (approximately $6.7 million) from BIG under the revolving line of credit of up to $7.0 million (the “Line of Credit”) established by the Company in favor of BIG and Bankers Underwriters, Inc., a wholly-owned subsidiary of BIG, in August 2002. The Line of Credit was secured by a first priority lien security interest in the book of flood insurance business sold by BIG to FNF. This security interest, as well as all loan documentation relating to the Line of Credit, was terminated upon receipt by the Company of all amounts due under the Line of Credit.

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with FCIC, now a wholly-owned subsidiary of FNF, pursuant to which the Company will continue to provide policy administration, claims administration, data processing and other related services to FCIC in connection with FCIC’s Write Your Own (“WYO”) Flood Insurance Program. As of the date of this Report, FCIC’s WYO Program consists solely of the flood insurance book of business previously administered by the Company on behalf of BIG. Given, among other factors, FNF’s substantial size and financial strength relative to BIG, the Company believes that FCIC’s prospects for both retention and growth of the existing flood insurance book of business are favorable. No assurances can be given, however, as to whether FCIC will be able to retain or grow the existing flood insurance book of business, or as to whether the acquisition of FCIC and certain related assets by FNF from BIG will have a positive impact on the Company’s business, financial condition or results of operations.

For the services provided by the Company under the FCIC Service Agreement, FCIC currently pays the Company: (i) for policy administration and other related services (other than claims administration services) a monthly fee equal to a fixed percentage (which percentage is higher for manual policies than for internet policies) of FCIC’s monthly gross written flood insurance premium (“GWP”) as measured on the effective date of each policy (commencing as of January 3, 2005, the applicable rates for Internet policies and manual policies will each be reduced by 0.5%); and (ii) for claims administration services a monthly fee equal to a fixed percentage of incurred losses. The percentage rates initially applicable to FCIC under the FCIC Agreement are identical to those percentage rates which were applicable to BIG for flood insurance administration services immediately prior to the transaction between BIG and FNF.

The FCIC Service Agreement is for a six-year term, subject to early termination by either party under certain circumstances. FCIC, for example, may terminate the FCIC Service Agreement in the event of, among other things, (i) a material breach by the Company of any material representation, warranty or covenant contained therein (subject to certain limited cure rights) or (ii) the lapse, termination, or cancellation of the fidelity, errors and omissions insurance coverages required to be maintained by the Company under the FCIC Service Agreement.

Pursuant to the FCIC Service Agreement, the Company has agreed to indemnify FCIC and its directors, officers, representatives, agents and employees from losses and expenses (including losses and expenses relating to lost business or profits and special, consequential or punitive damages, but only to the extent they arise out of the Company’s gross negligence, bad faith or willful misconduct) resulting from any act or omission of the Company or its agents in violation or breach of, outside the scope of, or otherwise in contravention of the terms of the FCIC Service Agreement.

The Audit Committee of the Board of Directors of the Company approved the FCIC Service Agreement on December 26, 2002.

The FCIC Service Agreement expressly removed FCIC as a party from the existing Administrative Services Agreement, effective October 1, 2001, as amended, between the Company and each of BIG, BIC, BSIC and FCIC (the “BIG Service Agreement”). Pursuant to the BIG Service Agreement, however, the Company continues to provide BIG, including its BIC and BSIC subsidiaries, with IT hosting and support services, as well as various other back-office support services, including cash office processing, records management, policy assembly, and print and mail distribution services, in connection with all of BIG’s personal and commercial insurance lines of business, with no changes in the existing fee structure. Nevertheless, as a result of the consummation of the sale of FCIC and related assets by BIG to FNF, the Company’s reliance on its affiliated customers is expected to diminish significantly on a going-forward basis. If the foregoing transaction between BIG and FNF had occurred effective January 1, 2002, BIG, which accounted for approximately 66% of the Company’s total revenue on an actual basis for the year ended December 31, 2002, would have accounted for only approximately 31% of the Company’s total revenue during such year, and FCIC would have accounted for 35% of the Company’s total revenue during such year.

Effective January 7, 2003, William D. Hussey resigned as a director of the Company for health-related reasons. As a result of Mr. Hussey’s resignation (and the earlier resignations of Mr. Alejandro M. Sanchez and Mr. Robert G. Menke), the Company’s Board of Directors presently consists of six (6) members.

On February 17, 2003, the Company entered into a one-year agreement with the Texas Fair Plan Association (“TFPA”) to provide full business processing, including policy processing, accounting, document packaging and claim services. The Company was approved as one of three service vendors providing this service to Texas-based insurance agents placing homeowners insurance business through the TFPA. Revenues from this agreement are derived as a percentage of premiums produced by agents and on a per claim fee for claim administration. The Company has no assurances and/or guarantees of the level of revenue this agreement will provide during the next twelve months.

Also as previously reported, on April 9, 2003, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Fiserv, Inc., a Wisconsin corporation (“Fiserv”), Fiserv Solutions, Inc., a Wisconsin corporation and a wholly-owned subsidiary of Fiserv (“Fiserv Solutions”), and Fiserv Merger Sub, Inc., a Florida corporation and a wholly-owned subsidiary of Fiserv Solutions (“Fiserv Merger Sub”), providing for, among other things, the merger of Fiserv Merger Sub with and into the Company, with the Company as the surviving corporation (the “Merger”).

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

	a) Exhibits

Exhibit Number		Description

10.1		Flood Insurance Full Service Vendor Agreement, dated as of January 3, 2003, by and between First Community Insurance Company and Insurance Management Solutions Group, Inc. (1)
10.2		Release of Security Interests, dated as of January 3, 2003, by and between Bankers Insurance Group, Inc., Bankers Underwriters, Inc. and Insurance Management Solutions Group, Inc. (2)
10.3		Termination Agreement (relating to Technical Support Agreement), dated as of January 3, 2003, by and between Insurance Management Solutions, Inc., Bankers Insurance Group, Inc., and First Community Insurance Company. (3)
10.4		Agreement and Plan of Merger, dated as of April 9, 2003, among Fiserv, Inc., Fiserv Solutions, Inc., Fiserv Merger Sub, Inc. and Insurance Management Solutions Group, Inc. (excluding the exhibits and schedules thereto). (4)
10.5		Agreement to Facilitate Merger, dated as of April 9, 2003, by and among Fiserv, Inc., Fiserv Solutions, Inc., Fiserv Merger Sub, Inc., Bankers Insurance Group, Inc., Bankers Insurance Company, Bankers Security Insurance Company and Bonded Builders Service Corp. (excluding the schedules thereto). (5)
10.6		Claims Service Agreement, dated February 17, 2003, among Texas Fair Plan Association, Texas Windstorm Insurance Association and Insurance Management Solutions, Inc.
99.1		Written Statement of Chief Executive Officer Pursuant to 18 U.S.C. §1350.
99.2		Written Statement of Chief Financial Officer Pursuant to 18 U.S.C. §1350.

(1) Previously filed as Exhibit 10.1 to the Company’s current report on Form 8-K as filed on January 7, 2003 and incorporated by reference herein.

(2) Previously filed as Exhibit 10.2 to the Company’s current report on Form 8-K as filed on January 7, 2003 and incorporated by reference herein.

(3) Previously filed as Exhibit 10.3 to the Company’s current report on Form 8-K as filed on January 7, 2003 and incorporated by reference herein.

(4) Previously filed as Exhibit 2.1 to the Company’s current report on Form 8-K as filed on January 7, 2003 and incorporated by reference herein.

(5) Previously filed as Exhibit 99.1 to the Company’s current report on Form 8-K as filed on January 7, 2003 and incorporated by reference herein.

	b) Reports on Form 8-K

	The Company filed two current reports on Form 8-K from January 1, 2003 and through the date of this report:

(i) The Company filed a current report on Form 8-K on January 3, 2003 to announce that: (A) on January 3, 2003, BIG consummated the sale of FCIC, a subsidiary of BIG and a fifty-state licensed insurance carrier, and certain assets of BIG, including the rights to issue new and renewal flood insurance policies underwritten by BIG and its subsidiaries, BIC, BSIC and FCIC, to FNF; and (B) at the time of consummation of the foregoing transaction between BIG and FNF, the Company received payment in full of all amounts due and owing (approximately $6.7 million) from BIG under the Line of Credit of up to $7.0 million established by the Company in favor of BIG and BUI, a wholly-owned subsidiary of BIG, in August 2002.

(ii) The Company also filed a current report on Form 8-K on April 9, 2003 to announce that, on April 9, 2003, the Company entered into the Merger Agreement with Fiserv, Fiserv Solutions and Fiserv Merger Sub, providing for, among other things, the merger of Fiserv Merger Sub with and into the Company, with the Company as the surviving corporation.

SIGNATURES

Pursuant to the requirements 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.

Date: May 15, 2003		INSURANCE MANAGEMENT SOLUTIONS GROUP, INC
		(Registrant)

	By:	/s/ DAVID M. HOWARD

		David M. Howard
		Chairman, President and Chief Executive Officer (Principal Executive Officer)

	By:	/s/ ANTHONY R. MARANDO

		Anthony R. Marando
		Chief Financial Officer and Corporate Secretary (Principal Financial and Accounting Officer)

WRITTEN STATEMENT OF PRINCIPAL
EXECUTIVE OFFICER

I, David M. Howard, certify that:

	1.	I have reviewed this quarterly report on Form 10-Q of Insurance Management Solutions Group, Inc.;

	2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

	3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

	4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

			a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

			b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

			c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

			a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

			b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

	6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003	/s/ DAVID M. HOWARD

	David M. Howard Chairman, President and Chief Executive Officer

WRITTEN STATEMENT OF PRINCIPAL
FINANCIAL OFFICER

I, Anthony R. Marando, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Insurance Management Solutions Group, Inc.;

2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

		a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

		b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

		c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

		d)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

		e)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003	/s/ ANTHONY R. MARANDO

	Anthony R. Marando Chief Financial Officer

EXHIBIT INDEX

Exhibit Number		Description

10.1		Flood Insurance Full Service Vendor Agreement, dated as of January 3, 2003, by and between First Community Insurance Company and Insurance Management Solutions Group, Inc.*
10.2		Release of Security Interests, dated as of January 3, 2003, by and between Bankers Insurance Group, Inc., Bankers Underwriters, Inc. and Insurance Management Solutions Group, Inc.*
10.3		Termination Agreement (relating to Technical Support Agreement), dated as of January 3, 2003, by and between Insurance Management Solutions, Inc., Bankers Insurance Group, Inc., and First Community Insurance Company.*
10.4		Agreement and Plan of Merger, dated as of April 9, 2003, among Fiserv, Inc., Fiserv Solutions, Inc., Fiserv Merger Sub, Inc. and Insurance Management Solutions Group, Inc. (excluding the exhibits and schedules thereto).*
10.5		Agreement to Facilitate Merger, dated as of April 9, 2003, by and among Fiserv, Inc., Fiserv Solutions, Inc., Fiserv Merger Sub, Inc., Bankers Insurance Group, Inc., Bankers Insurance Company, Bankers Security Insurance Company and Bonded Builders Service Corp. (excluding the schedules thereto).*

10.6		Claims Service Agreement, dated February 17, 2003, among Texas Fair Plan Association, Texas Windstorm Insurance Association and Insurance Management Solutions, Inc.
99.1		Written Statement of Chief Executive Officer Pursuant to 18 U.S.C. §1350.
99.2		Written Statement of Chief Financial Officer Pursuant to 18 U.S.C. §1350.

__________
*Indicates document incorporated herein by reference.

E-1

EX-10.6 3 dex106.txt CLAIMS SERVICE AGREEMENR, DATED 2/17/2003 EXHIBIT 10.6 CLAIMS SERVICE AGREEMENT This agreement is among the TEXAS FAIR PLAN ASSOCIATION ("Association"), the FAIR Plan's administrator TEXAS WINDSTORM INSURANCE ASSOCIATION ("TWIA"), and INSURANCE MANAGEMENT SOLUTIONS, INC.("Servicer"), a corporation authorized to serve as claims administrator, having a business address at 801 94TH Avenue North, St. Petersburg, FL 33702. Association, TWIA and Servicer hereby agree that Servicer will provide claims services to Association and TWIA for claims ensuing from policies of the Association's Texas Policies of insurance issued pursuant to Art. 21.49A, TEX. INS. Code and the Association Plan of Operation according to the following terms and conditions: 1. EFFECTIVE DATE, TERM, AND CANCELLATION This Agreement is effective as of February 17, 2003, and shall continue in effect continuously until terminated by either party with sixty (60) days written notice to the other party. 2. OBLIGATIONS OF SERVICER The obligations of Servicer under this Agreement are to: (A) Employ properly licensed claims adjusters ("Adjusters") to adjust Claims and to exercise its best efforts to ensure that every adjuster, investigator, and appraiser, whether an employee of Servicer or a third party vendor, is in compliance with every applicable code, statute, law or regulation. (B) Use only Texas licensed adjusters and Texas defense attorneys approved by the Association or TWIA to investigate, adjust, settle, pay, defend or provide legal opinions regarding Claims of the Association and otherwise administer Claims, to the extent it deems necessary in accordance with its best professional judgment and subject to the approval of the Association or TWIA. Servicer may meet its obligation by engaging at its discretion and on behalf of Association and TWIA, the services of persons or firms other than Servicer and Adjusters, provided use of such other persons or firms does not violate any Texas statutory or regulatory requirement. Servicer does not have an obligation to continually seek approval of Servicer's employees involved in the administration of claims under this Agreement however the Association or TWIA can request that an employee of Servicer or a previously approved third party vendor no longer handle Claims of the Association and Servicer will comply with all such reasonable requests. (C) With respect to those claims which fall within the authority limit of Servicer set forth in Schedule A of this Agreement, Servicer shall: . Determine the amount of any settlement, including Allocated Loss Adjustment Expenses, which should be paid on behalf of Association for all Claims. 1 . In those instances where the policy on which a Claim has been filed contains language subrogating the rights of the insured to the Association, Servicer will pursue collection in accordance with guidelines approved in writing by Association or TWIA; however, if such efforts are not successful Servicer will inform the person or entity alleged to have caused the loss that the matter will be turned over to legal counsel for collection. The Association and TWIA shall have the right of approval of any legal counsel engaged in this respect, and Association shall be responsible for the payment of the additional collection expenses as an Allocated Loss Adjustment Expense, as defined in item 6(A), Definitions. . Make payment for settlement of claims and for Allocated Loss Adjustment Expenses, including attorneys' fees and defense costs, out of funds provided by the Association. Association agrees that Servicer has no obligation to pay or otherwise expend its funds for payment of Claims or Allocated Loss Adjustment Expenses. . Maintain a claim file on each reported Claim at the St. Petersburg, FL office of Servicer. The claim files will be the property of the Association and will be available for inspection by the Association or TWIA upon reasonable notice. Servicer shall store and retain all records produced under this Agreement in accordance with the record retention requirements of the Texas Department of Insurance and accepted industry practice. . Provide statistical or loss experience reports concerning Claim status, Claims services, and Claims payments on a monthly basis containing the content and the format required by the Association or TWIA. . Comply with all other terms of this Agreement. . Maintain reserve amounts set at amounts that reflect the probable cost to close Claims. . Establish and maintain capacity for online Claims review by the Association and TWIA. . Maintain complaint log records in accordance with guidelines provided by the Association and TWIA. . Provide prior written notice of any files to be referred to the Texas Department of Insurance Fraud Unit. 2 D With respect to all Claims which fall outside Servicer's authority limit set forth in Schedule A Servicer shall perform all the services in C. above, subject however to Servicer's limit of authority, and Servicer shall also: . Send to the Association or TWIA a report within 30 days of posting a reserve outside the Servicer's authority limit or of Servicer's determination of the existence of other criteria identifying the Claim as falling outside the authority limit. The report shall be in a format approved by the Association or TWIA. . Send to the Association or TWIA additional information or reports on Claims outside Servicer's authority as the Association or TWIA may require on a case by case basis. . Obtain written authorization for a settlement or payment in excess of the authorized payment amount set out in Schedule A of the Agreement. 3. OBLIGATIONS OF ASSOCIATION The obligations of Association under this Agreement are to: (A) Refer to Servicer all Claims which fall within the terms of this Agreement immediately following receipt by the Association or TWIA of notice of the Claim. (B) Pay consideration monthly to Servicer in accordance with the terms of this Agreement. (C) Maintain sufficient monies with Servicer in the Claim Fund at all times so that Servicer may pay Claims and Allocated Loss Adjustment Expenses as required. (D) Reimburse the Claim Fund on a daily basis or as needed. (E) Notify reinsurers and others of any Claim required by Association to be reported to them for any reason. (F) Pay monthly to Servicer the fees as provided in Schedule A, Compensation of Servicer. (G) Comply with all other terms and conditions of this Agreement. 4. ADMINISTRATIVE PROVISIONS (A) Servicer has full authority and control in all matters pertaining to the investigation, adjustment, and administration of Claims covered by this Agreement, subject to the ultimate authority of Association or TWIA and the Discretionary Settlement Authority Limit. 3 (B) This Agreement is for the sole benefit of the parties. Servicer shall not be liable to any person not a party to this Agreement for any loss, liability, damage, or expense relating in any way to the services provided under this Agreement. (C) Servicer has the right and duty to manage and conserve deposits of Association into a Trust account of a standard bank acceptable to the Association and TWIA and endorse checks. The Trust Fund is to be used by Servicer to pay obligations of the Association, including Claim settlements and Allocated Loss Adjustment Expenses. All Association or TWIA funds shall be held by Servicer as a fiduciary. (D) Servicer has the right and duty to communicate with any reinsurer providing excess coverage (collectively "reinsurers") as required by the Association or TWIA. Servicer shall provide information to any such reinsurer, including data which relates to any open or closed Claim or loss, regardless of whether such Claim or loss involves or may involve that reinsurer, provided a full copy of such information is simultaneously provided to the Association. (E) The parties agree that the TWIA is entering into this Agreement for the limited purposes of: receiving the benefits of the indemnification provided by the Servicer hereunder; and acquiring the rights to enforce the provisions of this Agreement. The parties further agree that the TWIA will have no liability to the Servicer under this Agreement. (F) The Association and TWIA have authority to audit the files, business records and services of Servicer related to this Agreement. The Servicer, during the term of this Agreement and subsequent to any termination, unless otherwise instructed by the Association or the TWIA in writing, shall retain policy files and other relevant documentation in accordance with instructions received from the Association or the TWIA for a period not to exceed two years following the termination of this Agreement or any renewal or extension thereof. The Association shall reimburse the Servicer for its reasonable costs of shipment of such files and documentation to the Association or its designee. 5. ESTABLISHMENT OF ACCOUNT (A) Association and TWIA shall open a deposit account at a commercial bank. (B) The account shall be closed following termination of this Agreement, continuing long enough after contract termination for Servicer to responsibly reconcile any outstanding checks and statements. Upon termination, all funds in this account shall be distributed to the Association. 6. DEFINITIONS (A) Allocated Loss Adjustment Expense means any cost or expense incurred by Servicer on behalf of Association as a result of engaging the service of firms or persons other than Servicer and Servicer's employees for work in connection with the investigation, adjustment, settlement or defense of a Claim. Allocated Loss 4 Adjustment Expenses include, but are not limited to the following: all costs and expenses associated with subrogation; salvage; rehabilitation; medical cost management; property, or other physical damage; appraisals by others ; all court costs, fees, and expenses; fees for service of process; fees to attorneys; the cost of services of undercover operations and detectives; fees of independent adjusters for investigation or adjustment of Claims in areas removed from reasonable access by Adjusters outside the State of Texas; the cost of employing experts for the purpose of preparing maps, photographs, diagrams, and chemical or physical analysis, or for expert advice or opinion; the cost of obtaining copies of any public records; the costs of depositions and court reporters or recorded statements; and additional fees associated with adjustment of catastrophe claims. (B) Cancellation means the termination of this Agreement after one party has given sixty (60) days prior written notice of cancellation to the other party to this Agreement. (C) Claim(s) means any demand for the benefits provided under subject Policies of insurance lawfully issued by Association. (D) Claim Fund means the money made available by Association to Servicer for use in paying Allocated Loss Adjustment Expenses, Claims, and defense costs. (E) Discretionary Settlement Authority Limit means the total amount of money specified in Schedule A, item 5 which Association authorizes Servicer to spend without seeking prior approval from Association in order to settle any single Claim. Such limit may be changed in the sole discretion of Association or TWIA without affecting the other terms and conditions of this Agreement. Allocated Loss Adjustment Expenses and legal costs are subject to, and included in, the Discretionary Settlement Limit. (F) Policies means insurance policies of the Association pursuant to Art. 21.49A, TEX. INS. Code and the Association's Plan of Operation. 7. GENERAL PROVISIONS (A) Servicer represents and warrants that this Agreement has been duly authorized and is binding upon Servicer. (B) This Agreement shall be construed in accordance with the laws of the State of Texas and shall inure to and be binding upon the parties hereto. Travis County, Texas shall be the venue for any litigation arising out of or related to this Agreement. (C) This Agreement constitutes the entire Agreement between the parties. No amendments to or modifications of this Agreement shall be valid unless made in writing and executed by the parties in the form of an amendment to this Agreement. 5 (D) If all or part of any covenant, condition, or other provision of this Agreement is declared by a court of competent jurisdiction to be invalid and not binding, such declaration shall in no way affect the validity of the other remaining covenants, conditions, and provisions of this Agreement. (E) Servicer agrees to hold the Association and TWIA, their respective Boards and Governing Committee (individually or collectively), representatives or employees (the "Indemnified Party" or "Indemnified Parties") harmless and agrees to indemnify same from any civil penalties, damages, claims, causes of actions, or fines (including attorneys fees) imposed, or sought to be imposed against an Indemnified Party as a result of Servicer's performance, or failure or deficiency of performance of any undertakings, obligations, or actions under this Agreement. The foregoing "hold harmless" agreement shall not apply to liabilities incurred through the reasonable action or inaction of Servicer so long as the course of conduct is undertaken as required under the terms of this Agreement or at the express direction of the Association and in the good faith belief that Servicer is operating in accordance with all applicable laws of Texas, rules of the Department and the Plan of Operation of the Association. (F) The Association agrees to hold Servicer harmless and agrees to indemnify Servicer from any civil penalties, charges, claims, causes of actions, or fines (including attorneys fees) imposed, or sought to be imposed against Servicer as a result of the Association's or TWIA's failure to perform any of their obligations under this Agreement or the performance of Servicer's duties and responsibilities under this Agreement or due to actions of Servicer which are at the express direction of the Association, TWIA or required by the Plan of Operation of the Association. (G) This Agreement may not be assigned by either party without written consent of the other party. (H) This Agreement shall be binding and inure to the benefit of the parties hereto and their successors and assigns. (I) In the event any provision of this Agreement is contrary to any law or regulation governing the parties or their performance under this Agreement, such provision shall be modified, if possible, to conform to such law or regulation so as to as nearly as possible comply with the intent of the parties hereto. (J) This Agreement supersedes all prior agreements between the parties hereto concerning the subject matter hereto and all such prior agreements shall be of no further force or effect. (K) The headings and subheadings in this Agreement are inserted solely for reference purposes and shall have no substantial significance in the interpretation of this Agreement. 6 FAIR PLAN ASSOCIATION BY: /s/ Jim Oliver -------------------------------- (Signature) Jim Oliver, General Manager (Printed name and title) TEXAS WINDSTORM INSURANCE ASSOCIATION BY: /s/ Jim Oliver -------------------------------- (Signature) Jim Oliver, General Manager (Printed name and title) Insurance Management Solutions, Inc. ("SERVICER") BY: /s/ D.M. Howard -------------------------------- (Signature) D.M. Howard, Pres/CEO (Printed name and title) 7 SCHEDULE A COMPENSATION OF SERVICER Claims Administration Fee: 1. $250.00 for each non-Catastrophe claim file opened, plus applicable sales tax. 2. $210.00 for each Catastrophe claim file opened, plus applicable sales tax. 3. Catastrophe means an event or series of events that is assigned a unique catastrophe number by Property Claims Services. 4. Claims Administration Fees shall be paid as follows: (a) One-half when the claim file is opened; and (b) One-half when the claim file is closed. 5. Servicer's discretionary settlement authority limit for comprehensive personal liability is $10,000.00 per claim. Servicer's discretionary settlement authority limit for property claims is $25,000.00 per claim. 8 EX-99.1 4 dex991.htm CERTIFICATION - HOWARD Certification - Howard

Exhibit 99.1

WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. § 1350

Solely for the purposes of complying with 18 U.S.C. § 1350, I, the undersigned Chief Executive Officer of Insurance Management Solutions Group, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2003 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ DAVID M. HOWARD

David M. Howard May 15, 2003

EX-99.2 5 dex992.htm CERTIFICATION - MARANDO Certification - Marando

Exhibit 99.2

WRITTEN STATEMENT OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. § 1350

Solely for the purposes of complying with 18 U.S.C. § 1350, I, the undersigned Chief Financial Officer of Insurance Management Solutions Group, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2003 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ANTHONY R. MARANDO

Anthony R. Marando
May 15, 2003

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