-----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, SMtdKoMNfEkDoXIkMOY9YigY0PMRFn9WMNByfwX/YKdlAbh/yuhCngLQ/LfS1jZJ vAxxjp8JlPImChGIILIRgA== 0000950144-99-006218.txt : 19990518 0000950144-99-006218.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950144-99-006218 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOBILE AMERICA CORP CENTRAL INDEX KEY: 0000067199 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 591218935 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-06764 FILM NUMBER: 99625581 BUSINESS ADDRESS: STREET 1: P O BOX 10729 CITY: JACKSONVILLE STATE: FL ZIP: 32247-0729 BUSINESS PHONE: 9043636339 MAIL ADDRESS: STREET 1: P O BOX 10729 CITY: JACKSONVILLE STATE: FL ZIP: 32247-0729 10-Q 1 MOBILE AMERICA CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For quarter ended March 31, 1999 Commission File No. 0-6764 -------------- ------ Mobile America Corporation - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Florida 59-1218935 ----------------------------------- -------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 10475 Fortune Parkway, Jacksonville, Florida 32256 ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (904) 363-6339 ----------------- N/A - ------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report 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 . No X . ----- ----- (APPLICABLE ONLY TO CORPORATE ISSUERS) There were 7,167,542 shares of common stock, par value $.025 per share, outstanding as of the close of business on May 10, 1999. 2 PART I Mobile America Corporation INDEX
Financial Statements: Page Part I ------ Unaudited Consolidated Balance Sheets 1 Unaudited Consolidated Statements of Operations 2 Unaudited Consolidated Statements of Comprehensive Income 3 Unaudited Consolidated Statements of Cash Flows 4 Unaudited Consolidated Statements of Changes in Stockholders' Equity 5 Notes to Financial Statements 6-8 Management's Discussion and Analysis of the Unaudited Consolidated Statements of Operations 9-12 Exhibit 11 - Computations of Earnings Per Share 14 Part II ------- Other Information, and Signatures 13
3 Mobile America Corporation and Subsidiaries Consolidated Balance Sheets March 31,1999 and December 31, 1998
Assets 1999 1998 - --------------------------------------------------------------------------------------------------------- Investments: Securities held to maturity at amortized cost (fair value $27,578,821 and $30,811,888 ) $ 27,229,463 $ 30,321,793 Securities available for sale at fair value (amortized cost $27,079,245 and $27,240,132) 27,562,138 27,919,593 Short-term investments 18,549,746 21,210,230 --------------------------------- Total investments 73,341,347 79,451,616 Cash 956,488 1,082,422 Receivables: Insurance premiums 3,631,947 3,974,909 Accrued investment income 962,963 904,692 Reinsurance, paid losses and other 180,230 398,395 Reinsurance recoverable, unpaid losses 15,731,083 17,688,861 Current income taxes 2,190,408 2,747,359 --------------------------------- Total receivables 22,696,631 25,714,216 --------------------------------- Deferred income tax 1,391,527 985,578 Ceded unearned premium 16,000,447 16,372,379 Deferred policy acquisition costs (2,079,490) (2,743,281) Property and equipment 2,063,152 2,153,357 Equity in pools and associations 1,132,211 1,132,210 Other assets 495,744 514,919 --------------------------------- $ 115,998,057 $ 124,663,416 ================================= Liabilities and Stockholders' Equity 1999 1998 - --------------------------------------------------------------------------------------------------------- Insurance loss reserves, including life insurance policy benefits of $17,741 and $17,741 $ 27,647,857 $ 29,106,729 Unearned premium 30,864,881 26,913,770 Unearned service fees 276,979 448,117 Contractholders funds 3,691,858 11,740,802 Reinsurance funds withheld and balances payable 3,434,789 6,664,985 Claim payments outstanding 3,332,820 2,073,901 Accrued expenses and other liabilities 1,403,713 1,324,670 Deferred income tax on net unrealized gains securities available for sale 164,184 231,017 Note payable 9,000,000 9,600,000 --------------------------------- Total liabilities 79,817,081 88,103,991 --------------------------------- Stockholders' equity: Common stock, $.025 par value per share Authorized - 18,000,000 shares Issued - 7,644,414 shares 191,110 191,110 Preferred stock, $.10 par value per share Authorized - 500,000 shares Issued and outstanding - none 0 0 Capital in excess of par value 4,348,842 4,348,842 Accumulated other comprehensive income: Net unrealized appreciation on securities available for sale net of deferred income taxes of $164,184 and $231,017 318,710 448,444 Treasury stock at cost, 476,872 and 476,872 shares (1,233,069) (1,233,069) Retained earnings 32,555,383 32,804,098 --------------------------------- Total stockholders' equity 36,180,976 36,559,425 --------------------------------- $ 115,998,057 $ 124,663,416 =================================
See notes to consolidated financial statements. 4 Mobile America Corporation and Subsidiaries Unaudited Consolidated Statements of Operations Quarters Ended March 31, 1999 and 1998
1999 1998 -------------------------------- Revenues: Insurance premiums earned net of premiums ceded of $11,209,580 and $11,154,669 $ 8,432,645 $ 10,424,576 Service fees earned 1,880,202 2,451,808 Investment income 1,001,581 1,232,723 Other 7,453 3,460 Net realized losses on investments (8,091) (23,924) -------------------------------- Total revenues 11,313,790 14,088,643 -------------------------------- Expenses: Losses and loss adjustment expenses, net of reinsurance recoveries of $8,545,738 and $9,574,695 7,554,837 6,221,541 Policy acquisition costs (239,260) 1,278,993 Salaries and wages 1,620,493 2,283,884 General and administrative 1,508,547 2,079,883 Interest on note 178,767 241,002 -------------------------------- Total expenses 10,623,384 12,105,303 -------------------------------- Income before provision for income taxes 690,406 1,983,340 -------------------------------- Provision and (benefit) for income taxes: Current 561,960 460,863 Deferred (405,949) 176,563 -------------------------------- Total provision for income taxes 156,011 637,426 -------------------------------- Net income $ 534,395 $ 1,345,914 ================================ Basic and diluted earnings per share: Net income $ 0.07 $ 0.19 ================================ Weighted average number of shares of common stock outstanding 7,167,542 7,167,755 ================================ Dividends per share $ 0.11 $ 0.35 ================================
See notes to consolidated financial statements. -2- 5 Mobile America Corporation and Subsidiaries Unaudited Statements of Comprehensive Income Quarters Ended March 31, 1999 and 1998
1999 1998 --------- ---------- Net Income $ 534,395 $1,345,914 --------- ---------- Other comprehensive income: Unrealized gains on securities: Unrealized holding gains (losses) arising during period net of taxes $(69,847) and $142,993 (135,585) 277,575 Reclassification adjustment for losses included in net income net of taxes $3,014 and $7,519 5,850 14,596 --------- ---------- Other comprehensive income (129,735) 292,171 --------- ---------- Comprehensive Income $ 404,660 $1,638,085 ========= ==========
See notes to consolidated financial statements. -3- 6 Mobile America Corporation and Subsidiaries Unaudited Consolidated Statements of Cash Flows Quarters Ended March 31, 1999 and 1998
1999 1998 ----------------------------- Cash Flows from Operating Activities: Net Income $ 534,395 $ 1,345,914 Adjustments to reconcile net income to net cash used in operating activities: Provision for depreciation 94,141 50,824 Loss on sale of investments 8,091 23,924 Change in assets and liabilities: Insurance premiums receivable 342,961 (235,923) Accrued investment income (58,271) (24,504) Deferred policy acquisition costs (663,791) 528,495 Prepaid expenses and other assets 19,175 212,920 Insurance loss reserves (1,458,872) (8,080,407) Unearned premium 3,951,111 598,008 Contractholder funds (8,048,944) (1,911,597) Reinsurance funds held and balances payable (3,230,196) (3,055,966) Claim payments outstanding 1,258,919 2,501,615 Accrued expenses 79,043 10,691 Current income taxes 556,951 300,184 Deferred income taxes recoverable (405,949) 176,563 Ceded unearned premium 371,932 (1,486,020) Reinsurance receivable 2,175,943 3,656,512 Unearned service fees (171,138) 199,194 ----------------------------- Net cash used in operating activities (4,644,499) (5,189,573) ----------------------------- Cash Flows from Investing Activities: Net change in short term investments 2,660,484 785,053 Purchase of investments (1,642,333) (3,106,397) Proceeds from sale and maturity of investments 4,887,460 7,744,726 Purchase of property and equipment (3,936) (238,480) ----------------------------- Net cash provided by investing activities 5,901,675 5,184,902 ----------------------------- Cash Flows from Financing Activities: Purchase of Treasury Stock 0 (2,114) Dividends paid to stockholders (783,110) (2,486,920) Principal repayment, note payable (600,000) (600,000) ----------------------------- Net cash used in financing activities (1,383,110) (3,089,034) ----------------------------- Net decrease in cash (125,934) (3,093,705) Cash, beginning of period 1,082,422 4,518,020 ----------------------------- Cash, end of period $ 956,488 $ 1,424,315 =============================
See notes to consolidated financial statements. -4- 7 Mobile America Corporation and Subsidiaries Unaudited Consolidated Statements of Changes in Stockholders' Equity Quarters Ended March 31, 1999 and 1998
1999 1998 ------------------------------- Common Stock: No change during period $ 191,110 $ 191,110 ------------------------------- Preferred Stock No change during period 0 0 ------------------------------- Capital in excess of par value: No change during period 4,348,842 4,348,842 ------------------------------- Accumulated other comprehensive income: Net unrealized appreciation on securities available for sale: Balance at beginning of period 448,444 78,861 Increase (decrease) (196,569) 442,683 Deferred taxes on unrealized gains 66,835 (150,512) ------------------------------- Balance at end of period 318,710 371,032 ------------------------------- Treasury Stock: Balance at beginning of period (1,233,069) (1,229,403) Purchases of 154 shares 0 (2,114) ------------------------------- Balance at end of period (1,233,069) (1,231,517) ------------------------------- Retained earnings: Balance at beginning of period 32,804,098 36,296,261 Net income 534,395 1,345,914 Cash dividends $.11 and $.35 per share (783,110) (2,486,920) ------------------------------- Balance at end of period 32,555,383 35,155,255 ------------------------------- Total stockholders' equity at end of period $ 36,180,976 $ 38,834,722 ===============================
See notes to consolidated financial statements. -5- 8 Mobile America Corporations and Subsidiaries Notes to Unaudited Consolidated Financial Statements Note 1. Basis of Presentation In the opinion of management, the accompanying balance sheets and related interim statements of income, comprehensive income and cash flows include all adjustments (which include reclassifications and normal recurring adjustments) necessary to present fairly the financial position and results of operations and cash flows at March 31, 1999 and for all periods presented. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with Management's Discussion and Analysis and financial statements and notes thereto included in the Mobile America Corporation 1998 10-K. Certain amounts in prior years' financial statements have been reclassified to conform to the 1999 presentation. Note 2. Earnings Per Share Basic earning per share is computed based on the weighted average number of common shares outstanding during the period. Diluted earnings per share presents the dilutive effect of options using the treasury stock method.
March 31,1999 March 31,1998 ------------- ------------- Numerator: Income available to common shareholders $ 534,395 $1,345,914 ========== ========== Denominator: Basic earnings per share weighted average shares 7,167,542 7,167,755 Effect of dilution: Employee stock options 0 67,823 ---------- ---------- Diluted earnings per share adjusted weighted average shares and assumed conversions 7,167,542 7,235,578 ========== ========== Basic earnings per share $ 0.07 $ 0.19 ========== ========== Diluted earnings per share $ 0.07 $ 0.19 ========== ==========
-6- 9 Mobile America Corporations and Subsidiaries Notes to Unaudited Consolidated Financial Statements Note 3. Business Segments The Company and its subsidiaries operate exclusively in Florida within principally six business segments: automobile insurance, excess surplus lines property insurance, fee for service administration, premium finance, corporate and other miscellaneous. The automobile insurance segment sells personal lines automobile insurance through independent insurance agents primarily in south Florida. The excess surplus lines segment writes specialized property insurance coverage. The fee for service segment contracts as a servicing carrier for the Florida Residential Property and Casualty Joint Underwriting Association, the Florida Automobile Joint Underwriting Association and as a subcontractor for Policy Management Systems Corporation performing various underwriting and claims administration services for a fee. The premium finance segment finances policies written through the Registrant. The corporate segment includes home office revenues and assets that are not specific to any particular segment. The other category is attributable to a life insurance company and other small inactive companies that do not meet the quantitative thresholds for a separate segment. Management evaluates performance and allocates assets based on the separate entities owned by the Registrant. The reportable segments are business units that offer different products or services. The reportable segments are each managed separately. The following schedule presents segment revenues and profit before taxes for the three months ended March 31,1999 and 1998 and assets by operating segment at March 31,1999 and 1998. The reconciling items for revenues and assets include adjusting available for sale securities to market value and the reclassification of reinsurance recoverable balances and the eliminations of intercompany holdings. -7- 10 Mobile America Corporations and Subsidiaries Notes to Unaudited Consolidated Financial Statements
Note 3. Business Segments (continued) March 31,1999 March 31,1998 ------------- ------------- Segment revenues: Automobile insurance $ 9,333,842 $ 11,738,453 Excess and surplus lines insurance 899,490 1,057,833 Fee for service 636,235 744,830 Corporate 342,074 472,741 Premium finance 191,897 139,539 Other 54,558 82,388 ------------- ------------- Total segment revenues $ 11,458,096 $ 14,235,784 Intercompany eliminations (144,318) (147,141) ------------- ------------- Total consolidated revenues $ 11,313,778 $ 14,088,643 ============= ============= Segment profit before taxes: Automobile insurance $ 26,770 $ 1,513,004 Excess and surplus lines insurance 297,794 124,015 Fee for service 298,703 262,184 Corporate (57,247) 75,350 Premium finance 102,776 (9,472) Other 21,598 18,258 ------------- ------------- Total consolidated profit before taxes $ 690,394 $ 1,983,339 ============= ============= Segment assets: Automobile insurance $ 70,533,184 $ 74,028,367 Excess and surplus lines insurance 10,036,245 8,201,022 Fee for service 6,131,072 5,834,852 Corporate 33,519,536 36,734,892 Premium finance 3,390,876 2,693,983 Other 3,217,657 3,380,000 ------------- ------------- Total segment assets $ 126,828,570 $ 130,873,116 GAAP adjustments & reclassifications 30,792,589 37,953,226 Intercompany Eliminations (41,623,102) (41,623,102) ------------- ------------- Total consolidated segment assets $ 115,998,057 $ 127,203,240 ============= =============
-8- 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998 Operations The Registrant reports net income of $534,395 ($.07 a share) for the three months ended March 31, 1999. This is significantly lower than the net income of $1,345,914 ($.19 a share) reported during the first quarter of 1998. The decline in net income is primarily due to lower earned revenues and an increase in loss experience off set by lower operating expenses. Consolidated revenues decreased 19.7% during the period due to a 19.1% reduction in earned insurance premiums and reduced service fee income and lower investment income. Direct earned premium in the automobile segment declined 9.4% to $18,206,911 from $20,086,116 earned during the first quarter of 1998. This decline is due to lower direct premium writings during the second half of 1998 the result of reduced market share resulting from rate increases, increased competition and processing backlogs resulting from computer modification problems during the Year 2000 conversion process. Net earned premium (after reinsurance ceded premium of $10,811,817) in the automobile segment declined 19.8% to $7,395,094 from $9,216,511 reported in 1998 following the trend in direct business. Direct written premium in the automobile segment increased 6.3% to $21,934,302 during the current quarter compared to the comparable period in 1998 and is a significant improvement over the third and fourth quarters of 1998 when direct written premium averaged approximately $17,000,000. Direct excess and surplus lines earned premium remained steady at $1,024,000 during the period. Net earned premium declined 15.3% reflecting higher reinsurance cost for excess loss coverage. Direct written premium increased 15.0% to $1,100,246 during the first quarter of 1999 over the same period in 1998. The processing backlog problems, resulting from computer modification problems during the Year 2000 conversion process, which were experienced during the second half of 1998 and into the first quarter of 1999 are being addressed with increased staffing and with the use of outsourcing assistance. The Registrant is on schedule to eliminate the backlog and return to more normal operating patterns during the second quarter of 1999. The Registrant believes that with these efforts it will be able to recapture market share and better service the needs of its insureds and agents. Service fee revenue which includes fee-for-service revenue, premium finance revenue and Mobile America Insurance Group, Inc.'s agency revenue declined 23.3%. Revenues from the fee-for-service business declined 17.2% to $836,000 reflecting a continued decline in the Florida property and automobile joint underwriting associations pool of available business. Premium finance revenues increased 37.4% to $190,000 as insureds continue to utilize this method of financing premiums. Net investment income declined 18.7% the result of a decrease in invested assets during 1998 and into 1999 and the reinvestment of maturities at lower interest rates. The decline in premium volume during 1998 coupled with quicker claim settlement procedures, debt repayment requirements and computer system enhancements has resulted in reduced cash flow. Net loss and loss adjustment expenses increased 21.4% in 1999 reflecting a $3,300,000 increase in ultimate loss reserve, as the Registrant continued to strengthen reserves primarily in the personal injury protection automobile line of business, coupled with a 20% reduction in the reinsurance cession participation. The incurred loss and loss expense to earned premium ratio is 89.6% in 1999 compared to 59.7% in 1998. During 1999 net incurred loss and loss expenses in the automobile segment increased 28.3% to $7,190,000. This includes a 25.9% decline in direct paid loss and loss adjustment expense to $17,324,000 offset by the reserve strengthening discussed previously and the reduction in the reinsurance participation. The net loss and loss expense ratio in this segment was 92.2% in 1999 and 58.1% in 1998. Adjusting for the reserve increase, the 1999 loss ratio would have approximated 72.7%. -9- 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998 1999 Compared to 1998 (continued) Excess and surplus lines net incurred loss and loss expense totaled $350,921 in 1999, 41.9% lower than in 1998. Direct loss and loss expense payments totaled $181,000 in 1999 compared to $439,000 reported during 1998 primarily due to storm damage incurred during the first quarter of 1998. For 1999 the loss and loss expense ratio was 56.0% compared to 81.6% in 1998. Due to the inherent uncertainty in estimating reserves for losses and loss adjustment expenses, which are estimates of the amounts necessary to settle reported and unreported claims and their related loss adjustment expenses, there can be no assurance that the ultimate liability will not exceed the amounts reserved, resulting in an adverse effect on the Registrant. The loss and loss adjustment expense experienced on the business which the Registrant originates and cedes to its reinsurers may also adversely affect the Registrant's profitability in the future. The Registrant decreased the ceding percentage to 60% from 75% on certain lines effective January 1, 1999. If the Registrant's ratio of loss and loss adjustment expenses to earned premium deteriorates, it is likely that over time, the Registrant's cost of reinsurance would increase, and it is possible that at some future point the Registrant could not obtain reinsurance on economically viable terms. The decrease in reinsurance participation will enhance top-line growth over time and reduce reinsurance costs, however the Registrant will be responsible for a higher level of loss. Policy acquisition costs declined in 1999 reflecting reduced reinsurance participation and the elimination of one quota share reinsurance agreement covering automobile business which resulted in a commission credit of approximately $1,000,000. First quarter of 1999 salary and wages are 29.0% lower than the amount reported in 1998 due to a general downsizing and the curtailment of bonuses due to the loss reported in 1998. General and administrative expenses declined 27.5% due to a general downsizing, lower cost of administering fee-for-service business and the elimination of executive relocation costs which were incurred in 1998. Financial Position, Liquidity and Capital Resources Net cash flow from operations was negative in 1999 as loss and loss adjustment expense payments and consolidated operating expense payments and debt payments exceeded premiums, fees and investment revenues. The Registrant put forth a concerted effort to settle outstanding claims, thereby reducing the number of claims outstanding in the minimum limits automobile personal injury protection line of business, in addition, legislative changes now require a more timely reporting of claims. These processes accelerated loss payments contributing to the negative cash flow the Registrant experienced. The Registrant believes this practice will improve overall loss and loss expense experience by reducing ultimate loss settlement costs and litigation expenses. The Registrant's practice of maintaining a highly liquid investment portfolio allowed the Registrant to meet cash demands. The Registrant is optimistic that cash flow will improve as rate increases take effect, premium volume improves and the settlement of losses returns to a more normal pattern. The Registrant maintains sufficient liquidity to meet operational needs. Capital expenditures, debt repayment and operating requirements will be provided by operations and investment activities. The investment policy continues to emphasize higher quality securities matched closely with the short liability duration. -10- 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998 1999 Compared to 1998 (continued) Year 2000 Disclosure The Registrant is aware of the issues associated with the programming code in existing computer systems as the Year 2000 approaches. The "Year 2000" problem is pervasive and complex, as virtually every computer system will be affected in some way by the rollover of the two-digit value to "00". The issue is whether computer systems will properly recognize date-sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or fail. In the ordinary course of business, the Registrant has installed various software and hardware that is Year 2000 compliant. The Registrant's telephone system is not completely Year 2000 compliant but the Registrant expects to install the necessary upgrades prior to September 30, 1999. The Registrant believes all other mission critical systems to be Year 2000 compliant. The Registrant has confirmed with its primary processing vendors that they have or will make the necessary software and hardware upgrades prior to the end of 1999. As a result of installing a new Year 2000 compliant premium and claims processing system the Registrant experienced an increase in the backlog of policies, endorsements and cancellations to be processed. Progress continues to be made in this area and operations should be at normal levels during the second quarter of 1999. However, it was necessary to increase staffing and engage outsourcing assistance in order to be able to eliminate the backlog in a reasonable time. At this time the Registrant is not able to estimate the extent to which costs of implementing this system will be in excess of the proposed budget of $1.4 million. However, the Registrant has budgeted an additional $200,000 for these expenses. Expenses associated with the installation of the Year 2000 compliant system were approximately $139,000 during 1998. Capital investments for this project approximate $860,000. Failure of the Registrant, or its significant third party suppliers and vendors, to become fully Year 2000 compliant prior to December 31, 1999 could have a material adverse impact on the Registrant's results of operations, financial position and cash flows. The Registrant has identified certain third parties that could service its major lines of business in the event that critical system applications should fail as a result of the date roll-over to January 1, 2000. The Registrant has conducted a comprehensive review of its underwriting guidelines and has determined that there is very little Year 2000 exposure in the insurance policies it sells. The Registrant believes that its exposure to Year 2000 claims will not be material. However, changing social and legal trends may create unintended coverage for exposures by reinterpreting insurance contracts and exclusions. It is impossible to predict what, if any, exposure insurance companies may ultimately have for Year 2000 claims whether coverage for the issue is specifically excluded or included. Other Items The Registrant paid an annual dividend of $.11 per share on February 5, 1999 to shareholders of record on January 22, 1999. The dividend payment totaled $783,110. During 1998 the Registrant conducted discussions with various companies interested in merging with or acquiring the Registrant and its subsidiaries. Due to stock market volatility during the last half of 1998 and an inability to reach a firm offer, the Registrant has discontinued any further negotiation and is not currently pursuing a merger or acquisition candidate. -11- 14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998 1999 Compared to 1998 (continued) Forward-Looking Statements This Form 10-Q contains certain forward-looking statements within the meaning of section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are deemed by the Registrant to be covered by and to qualify for safe harbor protection provided by the Private Securities Litigation Reform Act of 1995. Investors and prospective investors are referred to the Registrant's Annual Report on Form 10K for the fiscal year ended December 31, 1998 for a more detailed discussion of the factors that could cause actual results to differ. These forward-looking statements relate to, among other things, (a) the expected benefits from (i) the award of a three year servicing contract by the Florida Automobile Joint Underwriting Association, and (ii) the extension of a service contract by the Florida Residential Property and Casualty Joint Underwriting Association, and (b) the improvement of cash flow as a result of rate increases and a return to a more normal pattern of loss settlements. Such statements reflect the current views of the Registrant and are subject to certain risks and uncertainties that include, but are not limited to, obtaining policy volume service levels under the Joint Underwriting Association service contracts, continued market acceptance of premium rate increases in the automobile minimum limits personal injury protection line of business and adequacy of loss reserves. The Registrant disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise. -12- 15 Part II Other Information Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits: 11. Unaudited computations of earnings per share. 27. Financial Data Schedule (for SEC use only). (b) Reports on Form 8K No reports on Form 8K were filed for the quarter ended March 31, 1999. SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MOBILE AMERICA CORPORATION -------------------------- Registrant May 15, 1999 By/s/ Allan J McCorkle - ------------ ----------------------- Date Allan J. McCorkle President and Chief Executive Officer -13- EX-11 2 UNAUDITED COMPUTATIONS OF EARNINGS PER SHARE 1 EXHIBIT 11 Mobile America Corporation and Subsidiaries Unaudited Computations of Earnings per share Quarters ended March 31, 1999 and 1998 See Note 2 to financial statements. -14- EX-27 3 FINANCIAL DATA SCHEDULE
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF MOBILE AMERICA CORPORATION FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 25,607,186 27,229,463 27,578,821 1,472,056 0 0 73,341,347 956,488 180,230 (2,079,490) 115,998,057 27,647,857 30,864,881 0 0 9,000,000 0 0 191,110 35,989,866 115,998,057 8,432,645 1,001,581 (8,091) 1,887,655 7,554,837 (239,260) 3,307,807 690,406 156,011 534,395 0 0 0 534,395 .07 .07 11,400,131 5,665,000 1,878,000 1,178,000 5,865,000 11,899,033 1,878,000
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