-----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, Fd4KQIwvCoGba/1gZDXsji3Gc6XC9mSO/efhmr32UC8OZ2HEnDnXjk1NSmeYqYn1 YVnAVaPQmpWy9xuGZklY0Q== 0000950152-97-006125.txt : 19970820 0000950152-97-006125.hdr.sgml : 19970820 ACCESSION NUMBER: 0000950152-97-006125 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970819 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL RESERVE LIFE CORP CENTRAL INDEX KEY: 0000215403 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 341017531 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08483 FILM NUMBER: 97666521 BUSINESS ADDRESS: STREET 1: 17800 ROYALTON RD CITY: STRONGSVILLE STATE: OH ZIP: 44136 BUSINESS PHONE: 2165722400 MAIL ADDRESS: STREET 1: 17800 ROYALTON RD CITY: STRONGSVILLE STATE: OH ZIP: 44136 10-Q 1 CENTRAL RESERVE LIFE CORPORATION FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________________ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___ TO ___ COMMISSION FILE NUMBER 0-8483 CENTRAL RESERVE LIFE CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) OHIO 34-1017531 ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 17800 ROYALTON ROAD, STRONGSVILLE, OHIO 44136 ------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (216) 572-2400 --------------- ____________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) The number of shares outstanding of the registrant's Common stock at June 30, 1997 was 4,195,172. 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- -------------------- A. Consolidated Condensed Balance Sheets B. Consolidated Condensed Statements of Operations C. Consolidated Condensed Statements of Cash Flows D. Notes to Consolidated Condensed Financial Statements - 2 - 3 CENTRAL RESERVE LIFE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30 DECEMBER 31 1997 1996 ------------- ------------- (UNAUDITED) ASSETS Investments: Fixed maturities held to maturity, at amortized cost $ 11,897,402 $ 11,892,925 Fixed maturities available for sale, at fair value 65,847,112 67,608,937 ------------- ------------- Total fixed maturities 77,744,514 79,501,862 Policy loans 116,917 111,646 Short-term investments, at cost which approximate market 12,981,002 11,109,910 ------------- ------------- Total investments 90,842,433 90,723,418 Cash 8,298,954 8,472,255 Accrued investment income 962,295 988,536 Premiums receivable 2,818,754 3,049,026 Property and equipment, at cost 10,628,466 11,196,987 Deferred federal income taxes 948,363 948,363 Federal income taxes recoverable 1,146,000 2,245,530 Other assets 3,507,842 1,764,582 ------------- ------------- $ 119,153,107 $ 119,388,697 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Policy liabilities and accruals: Future policy benefits, losses and claims $ 33,604,362 $ 33,741,819 Other policy claims and benefits payable 43,003,513 42,909,065 Other policyholders' funds 7,415,211 6,510,894 Other liabilities 5,159,178 6,255,346 ------------- ------------- 89,182,264 89,417,124 Note payable 5,200,000 -- Mortgage note payable 8,452,641 8,503,776 ------------- ------------- Total liabilities 102,834,905 97,920,900 ------------- ------------- Commitments and contingencies Shareholders' equity: Non-Voting Preferred shares, no par value -- -- Common shares, no par value, stated value $.50 2,097,586 2,072,586 Additional paid-in capital 4,122,319 4,005,819 Net unrealized holding gain (loss) (162,608) (247,637) Retained earnings 10,260,905 15,637,029 ------------- ------------- Total shareholders' equity 16,318,202 21,467,797 ------------- ------------- $ 119,153,107 $ 119,388,697 ============= =============
- 3 - 4 CENTRAL RESERVE LIFE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 JUNE 30 JUNE 30 1997 1996 1997 1996 --------------- -------------- --------------- ---------------- REVENUES Premiums $ 64,896,072 $ 65,110,506 $ 132,120,141 $ 126,507,853 Net investment income 1,592,919 1,589,963 3,217,774 3,279,169 Net realized investment gains 22,476 7,149 23,326 7,406 --------------- -------------- --------------- ---------------- 66,511,467 66,707,618 135,361,241 129,794,428 --------------- -------------- --------------- ---------------- BENEFITS, LOSSES AND EXPENSES Benefits, claims, losses and settlement expenses 51,696,958 51,556,074 104,901,447 101,681,638 Commissions 8,901,410 8,849,137 18,086,274 17,323,296 Other operating expenses 10,132,198 9,678,714 18,895,644 18,404,558 --------------- -------------- --------------- ---------------- 70,730,566 70,083,925 141,883,365 137,409,492 --------------- -------------- --------------- ---------------- Income (loss) before federal income taxes (4,219,099) (3,376,307) (6,522,124) (7,615,064) Federal income tax expense (benefit) (671,000) (706,479) (1,146,000) (1,546,479) =============== ============== =============== ================ Net income (loss) $ (3,548,099) $ (2,669,828) $ (5,376,124) $ (6,068,585) =============== ============== =============== ================ Weighted average shares outstanding 4,274,285 4,220,069 4,266,284 4,224,552 =============== ============== =============== ================ Net (loss) per share $ (.83) $ (.63) $ (1.26) $ (1.43) =============== ============== =============== ================
- 4 - 5 CENTRAL RESERVE LIFE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30 1997 1996 -------------- --------------- INSURANCE COMPANY ACTIVITIES Cash provided by (used by) operating activities $ (7,523,363) $ (3,406,359) Purchases of investments (3,157,783) (9,890,254) Sales or maturities of investments 5,105,210 11,476,943 Purchase of property and equipment -- (167,055) Dividends paid -- (1,000,000) Paid in capital 5,000,000 -- ----------- ------------ Increase (decrease) in cash from insurance company activities (575,936) (2,986,725) ----------- ------------ NON-INSURANCE COMPANY ACTIVITIES Capital contribution to subsidiary (5,000,000) -- Note payable 5,200,000 -- Dividends from subsidiaries -- 1,000,000 Dividends paid to shareholders -- (1,051,050) Other, net 202,635 (244,834) ----------- ------------ Increase from non-insurance company activities 402,635 (295,884) ----------- ------------ Cash at beginning of period 8,472,255 9,102,020 ----------- ------------ Cash at end of period $ 8,298,954 $ 5,819,411 =========== ============
- 5 - 6 CENTRAL RESERVE LIFE CORPORATION AND SUBSIDIARIES D. Notes to Consolidated Condensed Financial Statements ---------------------------------------------------- 1. These consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996, as certain information and footnote disclosures required to be included with financial statements prepared in accordance with generally accepted accounting principles have either been condensed or omitted. 2. The consolidated condensed balance sheets at June 30, 1997 and the consolidated condensed statements of operations and cash flows for the six months ended June 30, 1997 and 1996 were prepared without audit. In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of June 30, 1997 and the results of operations for the six months then ended and cash flows for the six months then ended. 3. The Federal income tax returns for the Company and its subsidiaries have been examined by the Internal Revenue Service (IRS) for 1991 and 1992. During the third quarter of 1994, the IRS issued a proposal for adjustments to the Company's returns for 1991 and 1992. The proposed deficiencies are approximately $2.4 million of which $215,303, pertaining to some non deductible expenses and certain assets expensed and not capitalized, was agreed to and paid in 1994. The balance primarily deals with whether or not the Company's subsidiary, Central Reserve Life Insurance Company, qualified as a life company, for tax purposes. The Company intends to vigorously protest the proposed deficiency and management believes existing law supports the Company's position. Therefore, the Company has not recorded a liability for the difference. On June 2, 1997 the case was continued and the stipulation of facts are to be submitted in August 1997. 4. The Ohio Department of Insurance imposes risk-based capital (RBC) requirements on insurance enterprises, including the Company's subsidiary Central Reserve Life Insurance Company (Central). The RBC Model serves as a benchmark for the regulation of life insurance companies by state insurance regulators and provides for targeted surplus levels based on formulas which specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk, and are set forth in the RBC requirements. Such formulas focus on four general types of risk: (a) the risk with respect to the company's assets (asset or default risk); (b) the risk of adverse insurance experience with respect to the company's liabilities and obligations (insurance or underwriting risk); (c) the interest rate risk with respect to the company's business (asset/liability matching); and, (d) all other business risks (management, regulatory action, and contingencies). The amount determined under such formulas is called the Authorized Control Level RBC (ACL). - 6 - 7 The RBC guidelines define specific capital levels based on a company's ACL, that are determined by the ratio of the company's total adjusted capital (TAC) to its ACL. TAC is equal to statutory capital, plus or minus certain other specified adjustments. The specific capital levels, in declining order, and applicable ratios are generally as follows: "Company Action Level" where TAC is less than or equal to 2.0 times ACL; "Regulatory Action Level" where TAC is less than or equal to 1.5 ACL; "Authorized Control Level" where TAC is less than or equal to 1.0 times ACL; and, "Mandatory Control Level" where TAC is less than or equal to 0.7 times ACL. Companies at the Company Action Level must submit a RBC financial plan to the insurance commissioner of the state of domicile. Companies at the Regulatory Action Level are subject to a mandatory examination or analysis by the commissioner and possible required corrective actions. At the Authorized Control Level, a company is subject to, among other things, the commissioner placing it under regulatory control. At the Mandatory Control Level, the insurance commissioner is required to place a company under regulatory control. At December 31, 1996, Central's TAC was $17,137,515 or 1.4 times its ACL and accordingly, Central was at the Regulatory Action Level. The RBC calculation is done annually. On March 5, 1997, Central filed its RBC financial plan with the Ohio Department of Insurance (ODI) outlining plans for attaining the levels of RBC required to raise the Company's RBC above the Company Action Level. The RBC financial plan identifies the conditions that contributed to the Regulatory Action Level, including underpricing of a new product, PMO, sold primarily in 1995, and state mandated benefits and guaranteed issue. The RBC financial plan also contains corrective actions taken by Central beginning April 1, 1996, including an increase of PMO premium rates, changes in certain policy benefits and the renegotiating of certain provider contracts to produce further cost savings. The PMO plan represented approximately 40% of Central's premiums collected in 1996. Since the PMO plan is monthly business, the rate action taken on April 1, 1996 will not be completed until the end of March 1997. In addition to these corrective actions, the Company had engaged an investment banking firm to assist the Company in its efforts to raise additional capital for Central. Raising of additional capital will be necessary to raise Central's RBC above the Company Action Level within the short term. The ODI notified Central that the action plan submitted was acceptable for implementation, subject to examination of Central's 1996 year-end claim reserves and current premium rate levels. That examination was completed by ODI with no specific action required at this time. Failure to meet the capital requirements and interim capital targets included in Central's RBC financial plan could expose Central to such actions by the ODI as being placed under regulatory control. In line with the Company's plans to raise additional capital for Central, it borrowed $5,200,000 in June 1997, from a bank and contributed $5,000,000 to Central. The note payable is due December 31, 1997 and the rate of interest is at prime. Management believes, that Central will be able to meet the plan's capital requirements and interim targets. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 5. RECENTLY ISSUED ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per Share." SFAS No. 128 is required to be adopted on December 31, 1997. At that time, the Company will - 7 - 8 be required to change the method currently used to compute earnings per share and to restate prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options and stock warrants will be excluded. Because the Company reported a loss for the quarter and period ending June 30, 1997, no material change is expected in reported loss per share. 6. The results of operations for the six months ending June 30, 1997 are not necessarily indicative of the results for the full year. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY: The assets of the Company and its major subsidiary, Central Reserve Life Insurance Company (Central), decreased slightly to $119,153,107 for the period ending June 30, 1997. Central primarily invests in bonds which amounts to about 65% of the total assets. Central does not have any so-called "junk" bonds or what is considered high yield type securities and 97% of the bonds are of investment grade quality. Current assets and short term investments (not including government bonds of about $22 million which have a ready market) amounted to about 22% of total assets. In accordance with SFAS 115 the Company recorded unrealized losses of $162,608 at June 30, 1997, to reflect the reporting of certain investments at fair value which was lower than amortized cost. This compares to unrealized losses of $247,637 at December 31, 1996. The difference between the fair value and the amortized cost is reflected in shareholders' equity. Reserves and accruals for future claim payments decreased slightly from $76,650,884 at December 31, 1996 to $76,607,875 at June 30, 1997, primarily due to a decrease in the annuity reserves. Shareholders' equity decreased to $16,318,202 at June 30, 1997 after the net loss of $5,376,124 for the period and a change of $85,029, due to the SFAS 115 adjustment. CAPITAL RESOURCES: Central suffered a large decrease in its statutory capital and surplus to $16,595,497 at December 31, 1996 from $27,477,972 at December 31, 1995. The decrease was primarily due to the $9,321,633 statutory loss, after tax benefits of $2,810,830. This decrease caused Central to fall under the regulatory action level (RAL) imposed by the Ohio Department of Insurance under the recently adopted Risk-Based Capital (RBC) requirements on insurance enterprises (see note 4). Central's adjusted capital, under the RBC standards (which is only calculated annually), at December 31, 1996, was $17,137,515 and the RAL was $18,508,044 at December 31, 1996. Central is required to, and did, submit a RBC financial plan to the Ohio Department of Insurance reflecting certain projections and steps to be taken to return the adjusted capital to the required levels. In June 1997, the Company negotiated a loan due December 31, 1997, from a bank for $5.2 million and contributed $5 million to the capital and surplus of Central. The statutory capital and surplus of Central was $16,365,148 at June 30, 1997. With the assistance of the investment banking firm it previously retained, the Company is engaged in detailed discussions with entities which are interested in providing Central means of returning adjusted capital to required levels. - 8 - 9 Certain of those entitles have expressed an interest in acquiring all of the outstanding stock of, or making a substantial investment in, the Company as part of any such transaction with Central. No agreement has been reached with any such entities. RESULTS OF OPERATIONS: During the quarter ending June 30, 1997, premiums decreased slightly to $64,896,072 compared to $65,110,506 or a 12% increase for the same quarter in 1996. For the six month period ending June 30, 1997, premiums increased 4% to $132,120,141 compared to $126,507,853 or 10% for the same six month period in 1996. The increase, which was primarily due to rate renewals, was again, in the group life and health division. Certificates in force at June 30, 1997 were 107,143. This represents a net decrease of 9,161 or 8% compared to a net increase of 7,524 or 4% for the same six month period in 1996. New certificates issued during the six month period ending June 30, 1997, were 15,178, down 36% from 23,565 issued during the same period in 1996. Lapses were 24,339, up 52% for the six month period ending June 30, 1997 compared 16,041 for the same period in 1996. Since Central started implementing more significant rate increases in April 1996, more unprofitable business is terminating faster than new profitable business is being issued. This has been a major factor for the decrease in the number of certificates in force. Management also believes the combination of Central's risk-based capital (RBC) level and the new Kennedy-Kassebaum legislation, effective July 1, 1997, has had a negative impact on sales during the first six months of 1997. With an additional capital infusion into Central, as planned, net certificates in force should increase. Net investment income decreased about 2% to $3,217,774 for the six month period ending June 30, 1997 compared to $3,279,169 or an increase of 5% for the same period in 1996. Lower interest rates and a decrease of 2% in fixed maturities invested were the main reasons for the decrease. Policy benefits, claims, losses and settlement expenses increased slightly to $51,696,958 for the quarter ending June 30, 1997 compared to $51,556,074 or a 30% increase in the same quarter in 1996. The loss ratio for the quarter ending June 30, 1997 was 79.7% compared to 79.2% for the same quarter in 1996. The decrease in the premiums for the quarter in 1997 was the primary cause for the ratio increase. For the six month period ending June 30, 1997, policy benefits, claims, losses and settlement expenses increased to $104,901,447 or 3% compared to $101,681,638 or 27% for the same six month period in 1996. The loss ratio for the six month period in 1997 was 79.4% compared to 80.4% for the same six month period in 1996. There was no additional increase in the reserve established at June 30, 1997 from the reserve at December 31, 1996, for group accident and health claims, compared to a $4.6 million increase at June 30, 1996. Central has paid and incurred a larger number of prior years claims (1996) during the first six months of 1997 than anticipated when the December 31, 1996 reserves were established. The year end 1996 reserves are estimated to be understated approximately $5 to $6 million. Although a large portion of these claims were paid during the period in 1997, no reserves were released as of June 30, 1997. Also during the six month period ending June 30, 1997, Central paid approximately $13 million in claims on policies that terminated and only received approximately $9 million in premiums during the same period. This run off in claims was attributed to the rate renewal actions taken and the conversion program, for old business, started January 1, 1997 to convert certain policies to a new policy with current rates and - 9 - 10 benefits. Inventory of claims since year end 1996 has been reduced and claim turn-around time has also been reduced. Commissions were 13.7% of premiums for the quarter ending June 30, 1997 compared to 13.6% for the same quarter in 1997. For the six month period ending June 30, 1997 commissions were 13.7% of premiums, the same as in 1996. Other operating expenses increased 5% in the second quarter ending June 30, 1997 to $10,132,198 compared with an increase in the second quarter in 1996 of 3% to $9,678,714. For the six month period ending June 30, 1997 other operating expenses increased 3% to $18,895,644 compared to $18,404,558 or a 4% increase for the same period in 1996. The increase in other operating expenses was primarily one time charges in the second quarter of 1997 for payroll expenses related to the claim backlog and printing, postage expenses related to the new Kennedy-Kassebaum legislation effective July 1, 1997 and certain expenses related to the installation of the new computer system. At June 30, 1997 the ratio of other operating expenses to premiums was 14.3% compared to 14.5% at the same time in 1996. The Company incurred losses of $3,548,099 ($.83 per share) for the quarter and $5,376,124 ($1.26 per share) for the six months ending June 30, 1997. This compares to losses of $2,669,828 ($.63 per share) for the quarter and $6,068,585 ($1.43 per share) for the six months ending June 30, 1996. The combination of lower premiums in the quarter, a claims run off and prior year claims were the primary reasons for the losses in 1997. The book value per share at June 30, 1997 was $3.89 ($3.93 before unrealized losses) compared to $5.18 ($5.24 before unrealized gains) at December 31, 1996. Federal income taxes would increase in the future if the IRS, as indicated in note 3 to the consolidated condensed financial statements, were to pursue litigation and prevail in their position that Central no longer qualifies as a life company for tax purposes. Presently, as a small life company, Central is permitted, among other things, a deduction from the first $3,000,000 of income of 60% or $1,800,000, which is decreased by 15% for amounts over $3,000,000. As Central's income increases the effect is lowered. Management is relying on existing case law applied favorably to another taxpayer to resolve this issue. Also, Central may have, under certain circumstances, the ability to change and market policies that could insure it's qualification as a life company for tax purposes in the future, if the need arises. IMPACT OF INFLATION: Inflation rates impact the financial statements and operating results in several areas. Changes in inflation rates impact the market value of the investment portfolio and yields on new investments. Inflation has had an impact on claim costs and overall operating costs and although it has been lower in the last few years, hospital and medical costs have still increased at a higher rate than general inflation. While to a certain extent these increased costs are offset by interest rates (investment income), hospital charges increased, more than interest rates did. The Company will continue to increase premium rates in accordance with trends in hospital and medical costs along with concentrating on various cost containment programs. - 10 - 11 FORWARD LOOKING STATEMENTS: This report contains certain forward looking statements with respect to the financial condition, results of operations and business of the Company. Such forward looking statements are subject to inherent risks and uncertainties that may cause actual results to differ materially from those comtemplated by such forward looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the results of the Company's efforts to raise additional capital, rising health care costs, business conditions and competition in the managed care industry, developments in health care reform and other regulatory issues. PART II - OTHER INFORMATION --------------------------- All items of Part II other than Item 6 are either inapplicable to Registrant or would not require a response. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ----------------------------------------------------------- a) Central Reserve Life Corporation's 1996 Annual Meeting of Shareholders was held on May 6, 1997. b) Proxies were solicited by Central Reserve Life Corporation's management pursuant to Regulation 14 under the Securities Exchange Act of 1934, there was no solicitation in opposition to management's nominees as listed in the proxy statement, and all of such nominees were elected to the classes indicated in the proxy statement pursuant to the vote of the stockholders. The total number of shares of the Company's Common Stock, no par value, outstanding as of March 31, 1997, the record date for the Annual Meeting, was 4,145,172. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ----------------------------------------- a) Exhibits. Exhibit 11 - Statement Regarding Computation of Per Share Earnings. Exhibit 27 - Financial Data Schedule. b) Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter for which this report is filed. - 11 - 12 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. CENTRAL RESERVE LIFE CORPORATION Date: August 19, 1997 By: Frank W. Grimone -------------------------- -------------------------------- Frank W. Grimone Executive Vice President Date: August 19, 1997 By: Frank W. Grimone -------------------------- --------------------------------- Frank W. Grimone Principal Financial Officer and Chief Accounting Officer - 12 - 13 Exhibit 11 ---------- STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS ----------------------------------------------------- In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per Share." Statement 128 was issued to simplify the computation of EPS and to make the U.S. standard more compatible with the EPS standards of other countries and that of the International Accounting Standards Committee (IASC). It will replace Primary EPS and Fully Diluted EPS with Basic EPS and Diluted EPS, respectively. Basic EPS, unlike Primary EPS, excludes all dilution while Diluted EPS, like Fully Diluted EPS, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. For the quarter and period ending June 30, 1997, the net loss per share was computed using the weighted average number of common shares outstanding. These shares were increased by the number of shares issuable on the exercise of options, reduced by the number of shares assumed to have been purchased with the proceeds from the exercise of these common stock equivalents. - 13 - EX-27 2 EXHIBIT 27
7 0000215403 CENTRAL RESERVE LIFE CORPORATION 6-MOS DEC-31-1996 JAN-01-1997 JUN-30-1997 65,847,112 11,897,402 11,684,346 0 0 0 90,842,433 8,298,954 0 324,715 119,153,107 33,604,362 0 43,003,513 7,415,211 13,652,641 2,097,586 0 0 14,220,616 119,153,107 132,120,141 3,217,774 23,326 0 104,901,447 0 36,981,918 (6,522,124) (1,146,000) (5,376,124) 0 0 0 (5,376,124) (1.26) (1.26) 0 0 0 0 0 0 0
-----END PRIVACY-ENHANCED MESSAGE-----