Prepared by MERRILL CORPORATION

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10–K/A

AMENDMENT NO. 1

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year end	Commission File Number
December 31, 1999	0–671

MOTOR CLUB OF AMERICA

(Exact name of registrant as specified in its charter)

New Jersey	22-0747730
(State of incorporation)	(I.R.S. Employer Identification No.)

95 Route 17 South, Paramus, New Jersey	07653
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (201) 291–2000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock (par value) $.50 per share

(Title of Class)

Indicate by check mark whether the registrant (l) 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 ý No o.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S–K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10–K or any amendment to this Form 10–K. ý

The aggregate market value of the voting Common Stock (par value $.50 per share) held by non–affiliates on March 24, 2000 was $8,061,604 based on the closing selling price.

2,124,387 shares of Common Stock were outstanding as of March 24, 2000.

Documents Incorporated by Reference: Portions of the Registrant's definitive proxy statement issued in conjunction with the June 7, 2000 Annual Meeting of Shareholders (Part III).

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999 amends the Form 10-K by restating certain financial information for prior periods which is discussed in Note V of the notes to consolidated financial statements.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to its Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

MOTOR CLUB OF AMERICA

(Registrant)

Dated: January 9, 2002	By	s/Patrick J. Haveron
	Patrick J. Haveron
	Executive Vice President,
	Chief Executive Officer and Chief
	Financial Officer

	By	s/Francis J. Fenwick
	Francis J. Fenwick
	Vice President - Finance
	Chief Accounting Officer

MOTOR CLUB OF AMERICA

ANNUAL REPORT ON FORM 10-K/A

DECEMBER 31, 1999

	PART I

ITEM 1.	BUSINESS
ITEM 2.	PROPERTIES
ITEM 3.	LEGAL PROCEEDINGS
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

	PART II

ITEM 5.	MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 6.	SELECTED FINANCIAL DATA
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

	PART III

ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11.	EXECUTIVE COMPENSATION
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

	PART IV

ITEM 14.	EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K

Cautionary Statement

This Report on Form 10-K contains statements that are not historical facts and are considered "forward-looking statements" (as defined in the Private Securities Litigation Reform Act of 1995), which can be identified by terms such as "believes", "expects", "may", "will", "should", "anticipates", the negatives thereof, or by discussions of strategy. Certain statements contained herein are forward-looking statements that involve risks, uncertainties, opinions and predictions, and no assurance can be given that the future results will be achieved since events or results may differ materially as a result of risks facing the Company. These include, but are not limited to, economic, market or regulatory conditions as well as risks associated with Motor Club of America's entry into new markets; Motor Club of America's acquisition of North East Insurance Company on September 24, 1999; Motor Club of America's acquisition of Mountain Valley Indemnity Company on March 1, 2000; diversification; catastrophic events; potential future tax liabilities related to an insolvent subsidiary; and state regulatory and legislative actions which can affect the profitability of certain lines of business and impede Motor Club of America's ability to charge adequate rates. Accordingly, Motor Club of America's premium growth and underwriting results have been and will continue to be potentially materially affected by these factors.

PART I

Item 1. Business

(a) General Development of Business

Motor Club of America (the "Registrant") and a group of directly or indirectly wholly–owned subsidiaries of which the Registrant is parent are known as the "Motor Club of America Companies" (the "Motor Club of America Group") and provide property and casualty insurance services. The Registrant, incorporated in New Jersey in 1933 as "Automobile Association of New Jersey", is the successor to a New Jersey corporation organized in 1926. The present name was adopted in 1958.

The Registrant has four subsidiaries which write property and casualty insurance. Motor Club of America Insurance Company ("Motor Club"), incorporated in 1989, writes private passenger automobile ("PPA") business. Preserver Insurance Company ("Preserver"), incorporated in 1992, writes small commercial, homeowners and ancillary coverages. Motor Club and Preserver are domiciled in the State of New Jersey and write insurance in that State only as well.

The Registrant is pursuing a strategy to: (1) increase its identification as a provider of small commercial lines insurance and has continued to expand its product line in support of this objective; and (2) expand and diversify its insurance operations outside the State of New Jersey. The Registrant believes that both of these objectives can be attained through the acquisition of other insurance companies which present opportunities to write these product lines in different geographic areas. The Registrant expects to continue to follow this strategy.

On September 24, 1999, the Registrant acquired North East Insurance Company ("North East") and its subsidiaries. North East, incorporated in 1965 in the State of Maine, writes private passenger and commercial automobile as well as small commercial and ancillary coverages in that State. American Colonial Insurance Company ("American Colonial"), a wholly–owned subsidiary of North East, was incorporated in 1982 and has not written any insurance coverage since March 1990. American Colonial is domiciled in New York.

Motor Club, Preserver, North East and American Colonial are collectively referred to as the "Insurance Companies".

On March 1, 2000, the Registrant completed the acquisition of Mountain Valley Indemnity Company ("Mountain Valley"). Mountain Valley was incorporated in 1995 in the State of New Hampshire and writes small and mid-sized commercial coverages in New York and all of the New England states except Connecticut. The Registrant believes that these acquisitions fully establish it as a regional commercial lines company in New England and the Mid–Atlantic regions.

The Company has restated certain financial information for prior periods, which is discussed in Note V of the Notes to Consolidated Financial Statements.

(b) Financial Information About Industry Segments

The Registrant does not have any reportable industry segments for the three fiscal years reported in this Form 10–K.

See Items 1 (a) and 7

Fire and Casualty Insurance Operations

General

The Insurance Companies distribute insurance policies and generate premium revenue through approximately 174 independent producers in New Jersey and 161 independent producers in Maine.

The Registrant anticipates continuing its emphasis of the small commercial and ancillary coverages written by Preserver in the State of New Jersey and through newly acquired American Colonial in New York and Mountain Valley in the States of New York, Massachusetts, New Hampshire, Vermont, Rhode Island and Maine. North East is expected to increase its emphasis of small commercial coverages as well. Motor Club and North east write private passenger automobile ("PPA") business in the States of New Jersey and Maine, respectively. PPA business is expected to increase as well.

At December 31, 1999 Preserver and Motor Club were separately rated B+ (Very Good) by A.M. Best; North East was rated B (Fair). American Colonial plans to commence insurance operations in New York in the second quarter of 2000. Best ratings are based upon factors relevant to policyholders and are not directed toward the protection of investors. Management believes that the Best rating is an important factor in marketing the Insurance Companies' and Mountain Valley's products.

Effective July 1, 1998, Motor Club began converting its existing policies from six month terms to twelve month policy terms ( the "Policy Term Conversion"). While the Policy Term Conversion temporarily increased the amount of premiums written by Motor Club in 1998, it did not effect the amount of premiums earned. The Policy Term Conversion was implemented to reduce the frequency of renewal, thereby increasing operating efficiency and service levels and reducing expenses.

The results of the Registrant include the operations of North East since its acquisition on September 24, 1999.

The tables which follow set forth the direct premiums written and earned, by line of insurance, for the last five years:

Direct Written Premiums

(Amounts in Thousands - Exclusive of Service Charges)

	1999				1998				1997				1996				1995
	Direct		Percent		Direct		Percent		Direct		Percent		Direct		Percent		Direct		Percent
Program	Premium		of Total		Premium		of Total		Premium		of Total		Premium		of Total		Premium		of Total

Motor Club PPA	$	39,611	64.2	%	$	54,254	76.7	%	$	43,238	74.7	%	$	41,055	76.0	%	$	32,100	73.1	%
Preserver Commercial	11,504		18.7	%	9,672		13.7	%	8,019		13.9	%	6,744		12.5	%	5,828		13.3	%
Preserver Personal	6,804		11.0	%	6,833		9.6	%	6,596		11.4	%	6,216		11.5	%	5,972		13.6	%
North East	3,777		6.1	%	0		0.0	%	0		0.0	%	0		0.0	%	0		0.0	%
Total	$	61,696	100.0	%	$	70,759	100.0	%	$	57,853	100.0	%	$	54,015	100.0	%	$	43,900	100.0	%

Direct Earned Premiums

(Amounts in Thousands - Exclusive of Service Charges)

	1999				1998				1997				1996				1995
	Direct		Percent		Direct		Percent		Direct		Percent		Direct		Percent		Direct		Percent
Program	Premium		of Total		Premium		of Total		Premium		of Total		Premium		of Total		Premium		of Total

Motor Club PPA	$	41,781	65.9	%	$	43,631	73.6	%	$	43,381	75.4	%	$	39,242	75.6	%	$	29,841	73.5	%
Preserver Commercial	10,508		16.6	%	8,916		15.0	%	7,698		13.4	%	6,526		12.6	%	5,184		12.7	%
Preserver Personal	6,843		10.8	%	6,764		11.4	%	6,422		11.2	%	6,152		11.8	%	5,592		13.8	%
North East	4,248		6.7	%	0		0.0	%	0		0.0	%	0		0.0	%	0		0.0	%
Total	$	63,380	100.0	%	$	59,311	100.0	%	$	57,501	100.0	%	$	51,920	100.0	%	$	40,617	100.0	%

The following table sets forth ratios for the Insurance Companies prepared in accordance with generally accepted accounting principles ("GAAP") and with statutory accounting practices ("SAP") prescribed or permitted by state insurance authorities. The SAP combined ratio, a standard measure of underwriting profitability, is the sum of: (i) the ratio of incurred losses and loss expenses to net earned premium ("loss ratio"); and (ii) the ratio of expenses incurred for commissions, premium taxes, administrative and other underwriting expenses to net written premium ("expense ratio"). The GAAP combined ratio is calculated in the same manner except that it is based on GAAP amounts and the denominator for each component is net earned premium.

	December 31,
	1999		1998		1997
GAAP operating ratios:
Loss ratio	72.8	%	68.6	%	65.1	%
Expense ratio	36.4	%	29.1	%	33.3	%
Combined ratio	109.2	%	97.7	%	98.4	%
Statutory operating ratios:
Loss ratio	74.7	%	69.9	%	66.3	%
Expense ratio	33.3	%	28.8	%	32.4	%
Combined ratio	108.0	%	98.7	%	98.7	%

In general, when the combined ratio is under 100%, underwriting results are considered profitable. Conversely, when the combined ratio is over 100%, underwriting results are generally considered unprofitable. The combined ratio reflects underwriting results and not investment income, federal income taxes or other non-operating income or expense. The Registrant's operating income is generally a function of both underwriting results and investment income.

Loss Reserves

Reserves for unpaid losses and loss expenses at any report date reflect the estimate of the liabilities for the ultimate net loss of reported claims and estimated incurred but not reported claims.

The liability for unpaid losses and loss expenses is determined using case–basis evaluations and statistical projections and represents estimates of the ultimate net cost of all unpaid losses and loss expenses through December 31 of each year. These estimates are continually reviewed and refined as historical experience develops, new information becomes known and the effects of trends in future claim severity and frequency are considered.

The liabilities are adjusted accordingly with such adjustments being reflected in the current year operations. Apart from the emergence of PPA development for claims occurring in 1999 related to PPA legislation enacted in New Jersey (discussed below), no trends that are considered abnormal have been identified as of the most recent evaluation date, December 31, 1999.

Motor Club and Preserver generally reinsure all risks in excess of $100,000 for property lines (increased from $75,000 for losses incurred before July 1, 1997) and $150,000 for casualty lines. North East reinsures all risks in excess of $200,000 for both property and casualty lines.

The following table presents a reconciliation of beginning and ending liability balances for 1999, 1998 and 1997, reported under GAAP:

RECONCILIATION OF LIABILITY FOR LOSSES AND LOSS EXPENSES

	1999		1998		1997
	(Thousands of Dollars)
Liability for losses and loss expenses, net of reinsurance recoverables, at January 1	$	39,814	$	32,884	$	28,114
Liability for losses and loss expenses, net of reinsurance recoverables, North East Acquisition	8,820		-		-
Incurred losses and loss expenses
Provision for current year claims	37,272		32,598		29,369
Increase in provision for prior years' claims	3,359		3,881		3,773
Total incurred losses and loss expenses	40,631		36,479		33,142
Payments for losses and loss expenses
Payments on current year claims	16,448		12,038		12,169
Payments on prior years' claims	20,288		17,511		16,203
Total payments for losses and loss expenses	36,736		29,549		28,372
Liability for losses and loss expenses, net of reinsurance recoverables, at December 31	52,529		39,814		32,884
Reinsurance recoverables on unpaid losses and loss expenses, at December 31	18,454		18,521		17,363
Liability for losses and loss expenses, gross of reinsurance recoverables, at December 31	$	70,983	$	58,335	$	50,247

The reconciliation shows a 1999 deficiency of $3,359,000 in the liability recorded at December 31, 1998. The deficiency is primarily the result of initial net adverse development of reserves at December 31, 1998 and 1997 which is consistent with the Registrant's loss development history.

The Registrant believes that its book of business, particularly Motor Club's PPA book of business, has loss development characteristics which result in initial adverse development ("Initial Development") but ultimately develop closer to the reserves initially established. This Initial Development typically occurs during the first 24 to 36 months of a given year’s reserves. Historically, the Initial Development has been offset by redundancies from older years approximating or greater than the Initial Development. However, as Motor Club's PPA book of business has grown, the Initial Development has been greater than the redundancies in older years.

The Registrant believes that as the new PPA book of business written by Motor Club continues to stabilize and mature, the Net Cumulative Deficiency in the more recent years will decline and thus the deficiencies indicated will diminish. The Registrant believes this pattern is supported by the generally sequential decline in the Net Cumulative Deficiency from the most recent year presented to the oldest year presented. The Registrant also believes that the Initial Development referred to is generally consistent and identifiable in the table on page 15.

The Registrant also believes that the 1996 adverse development is attributable principally to losses which occurred in 1996, primarily in Motor Club's PPA book of business. During 1996, Motor Club's new PPA book of business was in its first twelve months of development. As is consistent with applicable New Jersey statutes, no new business had yet been non-renewed, resulting in a book of PPA business that lacked historical experience. Thereafter, certain business was non-renewed and the performance of the book has improved. Given the adverse development of this particular year, it is possible that the Net Cumulative Deficiency for 1996 may not develop consistently with the other years described above, but the Registrant does not believe that this is indicative of prospective loss development for years after 1996.

The differences between the liability for unpaid losses and loss expenses reported in the Registrant's consolidated financial statements prepared in accordance with GAAP and those reported in the annual statements filed by the Insurance Companies with State insurance departments in accordance with SAP are reconciled as follows:

	December 31,
	1999			1998			1997
	(thousands of dollars)
Liability for unpaid losses and loss expenses on a SAP basis (net of reinsurance recoverables on unpaid losses and loss expenses)	$	56,759		$	43,111		$	35,900
Reinsurance recoverables on unpaid losses and loss expenses	18,454			18,521			17,363
Anticipated salvage and subrogation recoveries	(4,230		)	(3,297		)	(3,016		)
Liability for unpaid losses and loss expenses, as reported in the Registrant's GAAP basis financial statements	$	70,983		$	58,335		$	50,247

The anticipated effect of inflation is implicitly considered when estimating liabilities for losses and loss expenses. While anticipated price increases due to inflation are considered in estimating the ultimate claim costs, the increase in the average severity of claims is caused by a number of factors that vary with the individual type of policy written. These anticipated trends are monitored based on actual development and are modified if necessary.

The table on Page 16 presents the development of the GAAP balance sheet liabilities for 1990 through 1999; data is presented for those years in which the Insurance Companies had operations and were owned by the Registrant.

The top line on the table shows the estimated liability for unpaid losses and loss expenses recorded at the balance sheet date for each of the indicated years. This liability represents the estimated amount of losses and loss expenses for claims arising in that and all prior years that are unpaid at the balance sheet date, including losses that had been incurred but not yet reported. The upper portion of the table shows the re–estimated amount of the previously recorded liability, based on experience as of the end of each succeeding year. The estimate is increased or decreased as more information becomes known about the frequency and severity of claims for development years. The Net Cumulative Deficiency represents the aggregate change in the estimates over all prior years. The lower section of the table shows the cumulative amounts paid with respect to previously recorded liabilities as of the end of each succeeding year.

In evaluating this information, it should be noted that each amount includes the effects of all changes in amounts for prior periods. For example, the amount of deficiency relating to losses settled in 1998, but incurred in 1993, will be included in the cumulative deficiency for the 1998 year.

This table does not present accident or policy year development data, which readers may be more accustomed to analyzing. Conditions and trends that have affected development of liabilities in the past may not necessarily occur in the future. Accordingly, it may not be appropriate to extrapolate future redundancies or deficiencies based on this table.

Prior to 1992, the Registrant conducted private passenger operations in New Jersey through Motor Club of America Insurance Company ("Motor Club") (which continues) and nationwide general insurance operations through a separate subsidiary, MCA Insurance Company ("MCAIC") and its insurance subsidiary, Property Casualty Company of MCA ("PCCMCA"). The operations of Motor Club are included in the Registrant's loss reserve disclosures. The operations of MCAIC and PCCMCA have not been included in the loss reserve disclosures due to MCAIC's insolvency in that year as a result of Hurricane Andrew. Since the Registrant wrote-off its investment in MCAIC that year, and because the losses attributable to MCAIC are subject to the control of its Receiver, there is no additional loss development from those operations which impact the results of the Registrant since that time. Accordingly, the loss reserve disclosures were amended to include only those operations in which the Registrant is currently involved.

LOSS AND LOSS EXPENSE DEVELOPMENT (In Thousands)

Year ended December 31	1990			1991			1992		1993		1994			1995			1996			1997			1998			1999

Liability for unpaid losses and loss expenses, net of reinsurance recoverables	$	27,362		$	26,494		$	28,469	$	25,334	$	22,356		$	23,409		$	28,114		$	32,884		$	39,814		$	52,529
Net Liability Re–estimated as of:
One year later	28,770			30,173			27,145		26,253		23,468			24,313			31,887			36,765			43,173			-
Two years later	29,580			28,954			28,563		26,766		23,813			25,759			33,848			38,422			-			-
Three years later	28,760			29,733			28,454		26,819		24,181			25,680			33,527			-			-			-
Four years later	28,636			28,934			28,702		26,572		23,759			25,252			-			-			-			-
Five years later	28,104			29,071			28,662		26,066		23,221			-			-			-			-			-
Six years later	28,229			28,954			28,516		25,330		-			-			-			-			-			-
Seven years later	28,205			28,920			27,719		-		-			-			-			-			-			-
Eight years later	28,197			28,653			-		-		-			-			-			-			-			-
Nine years later	27,953			-			-		-		-			-			-			-			-			-

Net Cumulative Redundancy (Deficiency)	$	(591	)	$	(2,159	)	$	750	$	4	$	(865	)	$	(1,843	)	$	(5,413	)	$	(5,538	)	$	(3,359	)	-

Cumulative Amount of Liability Paid Through:

One year later	14,270			11,979			12,314		12,311		11,106			11,414			16,203			17,511			20,288			-
Two years later	19,593			18,855			20,270		18,992		17,231			18,357			24,830			28,427			-			-
Three years later	23,796			24,161			24,546		23,032		20,821			22,164			30,685			-			-			-
Four years later	26,120			26,365			26,878		24,882		22,488			24,586			-			-			-			-
Five years later	26,900			27,696			27,642		25,373		23,297			-			-			-			-			-
Six years later	27,444			28,207			26,810		25,818		-			-			-			-			-			-
Seven years later	27,739			28,265			27,194		-		-			-			-			-			-			-
Eight years later	27,725			28,394			-		-		-			-			-			-			-			-
Nine years later	27,788			-			-		-		-			-			-			-			-			-

Net liability - December 31	$	27,362		$	26,494		$	28,469	$	25,334	$	22,356		$	23,409		$	28,114		$	32,884		$	39,814		52,529
Reinsurance recoverables	20,037			29,003			21,698		20,484		19,309			16,415			19,553			17,363			18,521			18,454
Gross liability - December 31	$	47,399		$	55,497		$	50,167	$	45,818	$	41,665		$	39,824		$	47,667		$	50,247		$	58,335		$	70,983

The reserve for net losses and loss expenses with respect to North East is only included in the consolidated net losses and expenses as of December 31, 1999. No reserve development is presented herein as these operations were not owned prior to the third quarter of 1999.

Reinsurance

The Insurance Companies follow the customary industry practice of reinsuring a portion of their risks and paying to reinsurers a portion of the premiums received on the policies. The Insurance Companies' reinsurance program permits greater diversification of business and the ability to write larger policies while limiting maximum net losses; in addition, the reinsurance program is designed to protect against catastrophic losses. Reinsurance does not legally discharge an insurer from its primary liability for the full amount of the policies, although it does make the reinsurer liable to the insurer to the extent of the reinsurance ceded. Therefore, the Insurance Companies are subject to credit risk with respect to their reinsurers.

Reinsurance for property losses of Preserver is maintained under a per risk excess of loss treaty affording recovery to $2 million, in excess of a retention of $100,000. This retention had been $75,000 until July 1, 1997. Preserver also maintains a 100% quota share treaty for boiler and machinery coverage.

Casualty reinsurance is currently maintained for Motor Club and Preserver under an excess of loss treaty affording recovery up to $3 million, in excess of a retention of $150,000. This retention was increased to $200,000 on January 1, 2000. Preserver also maintains reinsurance coverage for personal and commercial umbrella policies up to $2 million for personal lines policies and up to $5 million for commercial lines policies. Effective March 1, 1998, Preserver entered into reinsurance contracts for the workers' compensation policies it commenced writing on that date. An 80% quota share reinsurance contract on the first $500,000 of workers' compensation coverage has been implemented; an excess of loss treaty affording coverage up to $10 million in excess of the retention of $500,000 has also been implemented.

Effective January 1, 1999, Preserver purchased aggregate stop loss reinsurance for all of its lines of business which will provide $3 million coverage in excess of a loss ratio of 67.5% (in 1999) after the application of all other reinsurance. The treaty is subject to experience adjustments over a three-year period. This treaty affords Preserver protection against elevated levels of frequency or severity of losses which are not consistent with its historical experience, and includes, but is not limited to, weather-related events which may not rise to the level of a catastrophe, subject to a dollar limit.

Motor Club and Preserver also maintained an 80% quota share reinsurance agreement for their non-automobile policies issued prior to February 19, 1994, until their expiration dates.

North East's reinsurance protection is provided through two layers of excess of loss reinsurance. The first layer assumes $150,000 of coverage beyond the first $50,000. The second layer allows North East to offer policy limits up to $1,000,000 by assuming $800,000 of coverage beyond the first $200,000.

In addition, Motor Club, Preserver and North East's catastrophe reinsurance program presently covers substantially all of the losses in excess of $500,000 up to $42.5 million.

The Insurance Companies consider numerous factors in selecting reinsurers, the most important of which is the financial stability of the reinsurer. The Insurance Companies have not experienced any material collectibility problems for its reinsurance recoverables.

Competition

The property and casualty insurance industry is generally highly competitive on the basis of both price and service.

There are numerous companies competing for the coverages which Preserver offers in New Jersey, many of which are substantially larger and have considerably greater resources than Preserver. In addition, because Preserver's insurance products are marketed exclusively through independent insurance agencies, most of which represent more than one insurance company, Preserver faces competition within each agency.

The commercial lines markets that the Registrant's insurance subsidiaries engage in are highly competitive markets that are often subject to significant pressures, including but not limited to the pricing of individual risks. As the Registrant's insurance subsidiaries become more involved in the commercial lines markets, these competitive issues will become more widespread.

While Motor Club distributes its personal auto policies similarly and thus faces the same issues as Preserver in concept, the personal auto regulatory environment in New Jersey, particularly its "take-all-comers" requirements (see Regulation), has suppressed competition and effectively eliminated risk selection. In addition, the New Jersey market has historically been subject to regulatory and legislative volatility which has, at times, adversely affected the profitability of the PPA line of business, further suppressing competition. Finally, approximately 24% of Motor Club's appointed independent insurance agencies represent only Motor Club for PPA coverage and thus, Motor Club has no competition for this business in those agencies. New Jersey law also substantially restricts the ability of an insurer to terminate its agencies, limiting Motor Club's ability to manage its agency force for PPA. Management believes this lack of competition in PPA presents a significant business risk which must be monitored very closely on an ongoing basis.

North East similarly distributes its products through the independent insurance agency system.

Investments and Information about Market Risk

Management has maintained, in its opinion, a conservative investing philosophy. The Registrant manages its investment portfolio with the assistance of investment professionals based on guidelines established by management and approved by the Board of Directors.

The overall goal of the portfolio is to enhance investment returns within the structure of limited credit risk assumption which management has utilized, with evaluations of portfolio duration made in relation to the current interest rate environment.

During 1998, the Registrant's investment guidelines were expanded to allow for a higher percentage of investments in investment grade corporate bonds and mortgage-backed securities and to include certain investment grade asset-backed securities, which provide more structured cash flows. The objectives of these changes to the Registrant's investment policy were: (1) to reduce the amount of interest risk in the portfolio; and (2) enhance portfolio yield without unreasonably increasing credit risk. The Registrant believes these objectives have been accomplished.

The Registrant does not invest in or hold any derivative financial instruments.

Tax exempt securities have not been acquired. Management believes that the current tax position of the Registrant, which includes net operating loss carryforwards, dictates the exclusion of tax exempt securities from the portfolio, which historically provide substantially lower yields on a before tax basis than taxable securities.

Market risk represents the potential for loss due to adverse changes in the fair value of financial instruments. The market risks related to the financial instruments of the Registrant relate to the investment portfolio, which exposes the Registrant to risks related to interest rates, and to a lesser extent, credit quality and prepayment. The Registrant does not have exposure to foreign currency exchange rates or equity prices.

Interest rate risk is the price sensitivity of a fixed income security to changes in interest rates. The Registrant views these potential changes in price within the overall context of asset and liability management. The payout pattern of insurance liabilities are actuarially determined, to determine their duration, which is the present value of the weighted average payments expressed in years. Duration targets are then set for the Registrant's fixed income investment portfolio after consideration of these liabilities and other factors, which the Registrant believes mitigates the overall effect of its exposure to interest rate risk.

At December 31, 1999 and 1998, the Registrant's investment portfolio was comprised of the following types of securities:

	December 31, 1999				December 31, 1998
	Market				Market
	Value		Percent		Value		Percent
Taxable Fixed Maturities	$	78,242,322	89.9	%	$	69,594,904	91.6	%
Equity Securities	57,053		0.1	%	-		-
Short Term Investments	8,528,858		9.8	%	5,995,299		7.9	%
Mortgage Loans	153,616		0.2	%	361,038		0.5	%
Total Investment Portfolio	$	86,981,849	100.0	%	$	75,951,241	100.0	%

At December 31, 1999 and 1998, the taxable fixed maturity portfolio consisted of the following types of securities:

	December 31, 1999				December 31, 1998
	Market				Market
	Value		Percent		Value		Percent
United States Treasuries	$	16,247,679	20.8	%	$	18,669,055	26.8	%
United States Government Agencies	3,674,004		4.7	%	4,476,576		6.5	%
Mortgage-Backed Securities	10,406,357		13.3	%	11,213,589		16.1	%
Asset-Backed Securities	10,238,852		13.1	%	10,805,970		15.5	%
Corporate Bonds	37,675,430		48.1	%	24,429,714		35.1	%
Total	$	78,242,322	100.0	%	$	69,594,904	100.0	%

Mortgage-backed securities ("MBS") consist primarily of Government National Mortgage Association issues, along with other MBS issues of the United States Government. Asset-backed securities ("ABS") issues are all rated "Aaa" by Moody's and "AAA" by Standard & Poor's. The underlying collateral of ABS issues at December 31, 1999 consists primarily of home equity loans.

The taxable fixed maturity portfolio duration at December 31, 1999 and 1998 was 3.60 and 3.69 years, respectively.

United States Treasuries are weighted towards maturities of five years or less, to reduce interest rate risk and match the Insurance Companies' claims payout ratios; corporate obligations are generally weighted towards five to ten year maturities, to take advantage of the yield curve; the average life of the GNMA portfolio has been maintained at approximately 10 years to reduce interest rate risk.

Please refer to Note C in the Notes to Consolidated Financial Statements ("Notes") for statistics regarding portfolio maturity composition.

The Registrant has not acquired, nor are there plans to acquire, below investment grade or "junk" bonds. Ninety- three percent of the fixed maturity portfolio as of December 31, 1999 was graded Class 1 according to the National Association of Insurance Commissioners' valuation system. This classification is reserved for only the highest quality securities, generally rated A or better by two major rating services.

At December 31, 1999 and 1998, the Registrant's taxable fixed maturity investment portfolio at market value by Moody's rating was:

	December 31, 1999				December 31, 1998
	Market				Market
	Value		Percent		Value		Percent

United States Government Securities	$	29,806,727	38.1	%	$	34,359,229	49.4	%
Aaa	10,238,852		13.1	%	11,311,103		16.2	%
Aa	10,242,675		13.1	%	7,504,082		10.8	%
A	23,062,545		29.4	%	13,388,045		19.2	%
Baa	4,891,523		6.3	%	3,032,445		4.4	%
Total	$	78,242,322	100.0	%	$	69,594,904	100.0	%

The following table provides information about the Registrant's taxable fixed maturity portfolio at December 31, 1999 that are sensitive to changes in interest rates. The table presents cash flows of principal amounts and related weighted average interest rates by expected maturity dates. The cash flows are based on the earlier of the call date or the maturity date or, for mortgage and asset-backed securities, expected payments patterns. Actual cash flows could differ from the expected amounts.

EXPECTED CASH FLOWS OF PRINCIPAL AMOUNTS

																						ESTIMATED
																			AMORTIZED			MARKET
	2000			2001			2002			2003			2004			Thereafter			COST			VALUE
Taxable-- Other than mortgage- backed securities	$	5,046,263		$	6,167,374		$	5,723,201		$	4,697,212		$	4,423,521		$	33,663,944		$	59,721,515		$	57,600,113
Average interest rate	6.3		%	7.0		%	6.5		%	6.1		%	6.8		%	6.4		%	6.5		%
Mortgage- backed securities	108,869			378,804			1,079,497			1,924,791			2,726,253			4,460,149			10,678,363			10,406,357
Average interest rate	7.1		%	5.7		%	6.6		%	6.3		%	7.2		%	6.6		%	6.7		%
Asset-backed securities	1,772,715			3,499,834			999,971			1,997,409			-			2,184,957			10,454,886			10,238,852
Average interest rate	6.3		%	6.4		%	6.4		%	6.2		%	0.0		%	6.7		%	6.4		%
Total	$	6,927,847		$	10,046,012		$	7,802,669		$	8,619,412		$	7,149,774		$	40,309,050		$	80,854,764		$	78,242,322

Management anticipates continuing this minimum risk approach to investing for the foreseeable future. Management believes that the mix of investments in both type and maturity length is appropriate in order to preserve capital, take advantage of investment opportunities as they are presented, and provide the Registrant and its subsidiaries with sufficient liquidity to react to economic and business circumstances as they evolve.

The Registrant's investment portfolio yielded 6.43%, 6.30% and 6.41% in 1999, 1998 and 1997, respectively. Including realized gains and losses, the investment portfolio yielded 6.57%, 6.34% and 6.41% in 1999, 1998 and 1997, respectively.

Regulation

General

Insurance companies are subject to supervision and regulation in the states in which they transact business. Such supervision and regulation relate to numerous aspects of an insurance company's business and financial condition. The primary purpose of such supervision and regulation is the protection of policyholders. The extent of such regulation varies, but generally derives from state statutes which delegate regulatory, supervisory and administrative authority to state insurance departments. Accordingly, the authority of the state insurance departments includes the establishment of standards of solvency which must be met and maintained by insurers; the licensing to do business of insurers and agents; the nature of and limitations on investments; premium rates for property and casualty insurance; the provisions which insurers must make for current losses and future liabilities; the deposit of securities for the benefit of policyholders; and the approval of policy forms. Insurance departments also conduct periodic examinations of the affairs of insurance companies and require the filing of annual and other reports relating to the financial condition of insurance companies.

State law requires the Insurance Companies to participate in involuntary insurance programs for automobile insurance, as well as other property and casualty lines. These programs include joint underwriting associations, assigned risk plans, fair access to insurance requirements plans and reinsurance facilities. These laws generally require all companies that write lines covered by these programs to provide coverage (either directly or through reinsurance) for insureds who cannot obtain insurance in the voluntary market. The legislation creating these programs usually allocates a pro rata portion of risks attributable to such insureds to each company on the basis of direct written premiums or the number of automobiles insured. Generally, state law requires participation in such programs as a condition to doing business. The loss ratio on insurance written under involuntary programs generally has been greater than the loss ratio on insurance in the voluntary market.

During 1997, Motor Club began to participate in the New Jersey Personal Automobile Insurance Plan; fees totaling $153,000, $254,000 and $191,000 were paid in 1999, 1998 and 1997, respectively, to a servicing carrier rather than process these policies and take a risk of further loss.

State insurance holding company acts regulate insurance holding company systems. Each insurance company in the holding company system is required to register with the insurance supervisory agency of its state of domicile and furnish certain information concerning the operations of companies within the holding company system that may materially affect the operations, management or financial condition of the insurers within the system. Such laws further require disclosure of material transactions including the payment of “extraordinary dividends” from the insurance subsidiaries to the Registrant.

Insurance holding company acts require that all transactions within the holding company system affecting the insurance subsidiaries must be fair and equitable. Further, approval of the insurance commissioner is required prior to the consummation of transactions affecting the control of an insurer.

Motor Club and Preserver are restricted by the insurance laws of New Jersey as to the amount of dividends they may pay to the Registrant without prior approval of the Commissioner of Banking and Insurance. To the extent that statutorily defined surplus is available, the maximum dividend that may be paid by either Motor Club or Preserver during any year without prior regulatory approval is limited to the greater of 10% of that Company's statutory surplus as of the prior December 31, or adjusted net income of that Company, for the preceding year. Applying current regulatory restrictions as of December 31, 1999, approximately $1.2 and $1.3 million in dividends would be available for distribution by Motor Club and Preserver, respectively, to the Registrant without prior regulatory approval during 2000. During 1999 and 1998, Motor Club paid $250,000 and $1,000,000 in dividends to the Registrant, respectively. No dividends were paid in 1997.

North East is restricted by the insurance laws of Maine as to the amount of dividends it may pay to the Registrant without prior approval of the Maine Superintendent of Insurance. To the extent that statutorily defined surplus is available, the maximum dividend that may be paid by North East without prior regulatory approval is limited to the greater of 10% of the Company's statutory surplus as of the prior December 31 or net investment income. Based on the current accumulated statutory unassigned deficit, North East is prohibited from paying dividends.

American Colonial is restricted by the insurance laws of New York as to the amount of dividends it may pay North East without prior approval of the Insurance Commissioner of the State of New York. To the extent that statutorily defined surplus is available, the maximum dividend that may be paid by American Colonial without prior regulatory approval is limited to 100% of net investment income. Applying current regulatory restrictions as of December 31, 1999, approximately $453,000 in dividends would be available for distribution by American Colonial. During 1999, American Colonial paid $499,031 in dividends to North East. No dividends were paid in 1998 or 1997.

National Association of Insurance Commissioners ("NAIC")

The Insurance Companies are subject to the general statutory accounting practices and reporting formats established by the NAIC as well as accounting practices prescribed or permitted by the respective Departments of Insurance in the states in which they are domiciled. The NAIC has codified SAP to afford preparers and users of statutory basis financial statements a more uniform application of SAP by insurers in differing states of domicile. It is not known whether regulatory authorities in the State of New York will recognize SAP as codified by the NAIC as the approved basis of financial statement preparation for insurers domiciled in that State. The States of Maine and New Jersey have adopted codification of SAP. The Registrant has not yet determined the impact of codification of SAP on the Insurance Companies statutory financial statements.

The NAIC also promulgates model insurance laws and regulations relating to the financial and operational regulation of insurance companies, which includes the Insurance Regulating Information System (“IRIS”). IRIS identifies eleven industry ratios and specifies "usual values" for each ratio. Departure from the usual values on four or more of the ratios can lead to inquiries from individual state insurance commissioners as to certain aspects of an insurer’s business. The Insurance Companies have, in recent years, met substantially all of the IRIS test ratios.

NAIC model rules and regulations generally are not directly applicable to an insurance company until they are adopted by applicable state legislatures and departments of insurance. However, NAIC model laws and regulations have become increasingly important in recent years, due primarily to the NAIC's Financial Regulations Standards and Accreditation Program. Under this program, states which have adopted certain required model laws and regulations and meet various staffing and other requirements are "accredited" by the NAIC. Such accreditation reflects an eventual nationwide regulatory network of accredited states. The States of New Jersey, New York and Maine are accredited by the NAIC.

The NAIC has adopted Risk-Based Capital ("RBC") requirements for property/casualty insurance companies, to evaluate the adequacy of statutory capital and surplus in relation to investment and insurance risks such as asset quality, credit risk, loss reserve adequacy and other business factors. The RBC formula is used by State insurance regulators as an early warning tool to identify, for the purpose of initiating regulatory action, insurance companies that potentially are inadequately capitalized. Regulatory compliance is determined by a ratio of the insurer's regulatory total adjusted capital to its authorized control level RBC, as defined by the NAIC. Insurers below specific trigger points or ratios are classified within certain levels, each of which requires specific corrective action. The ratios of the Insurance Companies are in excess of that required, therefore requiring no action.

New Jersey Private Passenger Automobile

The New Jersey PPA market has historically been subject to regulatory and legislative volatility which has, at times, adversely affected the profitability of this line of business, despite New Jersey having among the highest average premium rates in the United States. New Jersey insurance law presently requires insurers to write all eligible PPA coverage presented to them from drivers with eight points or less on their driving record. This is commonly referred to as "take-all-comers".

The NJ DOBI may grant an insurer relief, by written notification, from writing new PPA business pursuant to the take-all-comers provisions of New Jersey law if a showing finds that the insurer's premium to surplus ("leverage") ratio exceeds 3 to 1. Motor Club's present applicable leverage ratio for the year ended December 31, 1999 is 2.90 to 1.

In June 1997, the State of New Jersey enacted PPA legislation, which principally: (1) repealed the annual "flex" rate increase available to insurers, which was required by law to be no less than 3%, and replaced it with an expedited prior approval rate filing process for rate increase requests up to 3% on an overall basis. Subsequent to the enactment of this legislation, the Commissioner of the NJ DOBI froze all PPA insurance rates until March 1998, but still has not yet promulgated the regulations required for insurers to file for an expedited rate increase; (2) restricted the ability of insurers to non-renew at their discretion up to 2% of their policies; (3) repealed the ability of insurers to non-renew one policy for every two new policies written in each rating territory; and (4) replaced the rating system which assessed surcharges to insureds' policies for specific driving violations and accidents with a broader-based tiered rating system. Motor Club’s tier rating system was approved by the NJ DOBI and was implemented on all PPA policies with effective dates on and after November 1, 1998.

Additional PPA legislation was enacted in 1998 which: 1) allows insureds to reduce levels of compulsory coverages, including the option to reduce their coverage for Personal Injury Protection ("PIP") to as low as $15,000, from the presently required $250,000; 2) revises the PIP policy form to set forth the medical treatments and services, valid diagnostic tests and appropriate health care protocols which are eligible to be paid; 3) seeks to limit lawsuits by claimants by redefining of the type of injury which would be grounds for litigation; 4) replaces the present PIP arbitration system which utilizes part-time arbitrators who render only oral decisions without consulting medical professionals with one using full-time dispute resolution professionals who may refer questions of medical necessity or diagnosis to medical review organizations and who must render written decisions; 5) appoints a special fraud prosecutor to increase enforcement of fraudulent acts committed against insurance companies; 6) removes the system of territorial rating caps which have been in place since 1983, enabling insurers to modify (as appropriate) rates charged in various rating territories, which will be redefined; and 7) requires up to a 15% reduction in rates on all PPA policies.

Implementation of most of the provisions of the 1998 legislation (with one exception) commenced with new policies issued on March 22, 1999. The only exception is the redefinition of the territories and removal of the territorial rating caps, which was scheduled to be implemented in 2000. The Registrant believes that the legislation ultimately will have only a modest net negative effect on Motor Club's PPA operations and profitability, because the mandated rate reductions do not appear to be completely cost justified (based on information presently available) by the cost savings in the legislation. However, in 1999, the Registrant did experience a more adverse negative effect which is discussed in greater detail in Item 7 - Management's Discussion and Analysis.

Consistent with New Jersey's regulatory and legislative history, the enacted and proposed legislation, current rate freeze and ongoing volatility could adversely affect the Registrant's long-term profitability in the PPA line of business.

The State of New Jersey also maintains an excess profits law which provides that PPA insurers whose profits exceed a statutorily computed maximum over a three year period will be required to pay such excess to its policyholders. Motor Club has never reported any excess profits under this law and the Registrant believes that in 2000 none will be reported.

The Insurance Companies were subject to certain assessments in the State of New Jersey, the most substantial of which had been the FAIR Act surtaxes and assessments commencing in 1990; the surtaxes expired after 1992 and the assessments expired after 1997. FAIR Act assessments totaled $971,000 in 1997.

Year 2000

The computer systems of the Registrant and its subsidiaries successfully made the transition to the Year 2000. The Registrant's internal operating systems (hardware and software), infrastructure elements, communications systems, and personal computer hardware and software continued to function properly in the Year 2000. No external vendor or business partner experienced century change disruptions that materially affected the Registrant or its subsidiaries. The Registrant did not experience any business interruptions related to the Year 2000. The Company's total cost of testing, contingency planning and administrative support, including cost of personnel involved, cost to construct the technical test environment and cost of consulting resources was less than $250,000. All Year 2000 related costs have been expensed as incurred. The related costs incurred in 2000 are not expected to be material.

Employees

At December 31, 1999, the Motor Club of America Group had approximately 132 employees.

Item 2. Properties

Effective January 1, 1996, the Registrant entered into a lease at 95 Route 17 South, Paramus, New Jersey. The Registrant's home office is located at this facility. The lease expires on December 31, 2005. The Registrant has an option to terminate the lease after six years, and an option to extend the lease for an additional five years after the initial lease term expires.

North East leases its home office located in Scarborough, Maine. The lease expires on December 31, 2000 and North East pays annual rent of $145,000.

Item 3. Legal Proceedings

The Insurance Companies are a party to numerous lawsuits arising in the ordinary course of their insurance business. The Registrant believes that the resolution of these lawsuits will not have a material adverse effect on its results of operations, financial condition, or cash flows.

Item 4. Submission of Matters to a Vote of Security Holders

No matter was submitted to a vote of security holders in the fourth quarter of 1999.

Item Pursuant to Instruction 3 to Paragraph (b) of Item 401 of Regulation S–K. Executive Officers of the Registrant.

At December 31, 1999, the executive officers of the Registrant and their offices with the Registrant and principal occupations were as follows:

			Years in
			Which Officer
			Has Served
		Office and Principal	as
Name	Age	Occupation	Such(3)
Archer McWhorter (1)	78	Chairman of the Board of Directors and Director of the Registrant and Companies in the Motor Club of America Group	1986-1999
Stephen A. Gilbert (2)	60	President, Chief Executive Officer, General Counsel and Director of the Registrant and Companies in the Motor Club of America Group; Chairman of the Board, Chief Executive Officer and Director of North East Insurance Company	1975-1999
Patrick J. Haveron (2)	38	Executive Vice President, Chief Executive Officer, Chief Financial Officer and Director of the Registrant and Companies in the Motor Club of America Group; Treasurer of Motor Club of America Insurance Company and Preserver Insurance Company	1988-1999
Peter K. Barbano	49	Vice President, Secretary and Associate General Counsel	1993-1999
Myron Rogow	56	Vice President	1987–1999
G. Bruce Patterson	55	Vice President	1989–1999
Charles J. Pelosi	54	Vice President	1983–1999
Norma Rodriguez	50	Treasurer	1984–1999

(1) Chairman of the Board of Directors of Companies in the Motor Club of America Group; from 1995 to March 1997, Director of National Car Rental Systems, Inc. and affiliated corporations, a car rental enterprise ("NCR"); from 1995 to February 1997, one-third owner of Santa Ana Holdings, Inc., which exchanged its 90% stock interest in NCR for stock in Republic Industries, Inc.; from February 1997 to February 1998, consultant to NCR; President (to January 1996) of Acceptance Inc., a finance company.

(2) Member of Finance Committee.

(3) Includes years during any portion of which the officer served as such. All terms of office are until the date of the 2000 Annual Meetings of Stockholders and Directors.

Except for Archer McWhorter, each of the officers devoted substantially all of their business time to the affairs of the Registrant or one or more other companies in the Motor Club of America Group.

PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters

The Registrant's Common Stock trades on the NASDAQ Stock Market under the symbol MOTR. The following are the high and the low selling prices for each quarter of 1998 and 1999, as reported by the NASDAQ:

1998
Quarter	High	Low
I	17 1/2	13 5/8
II	17 5/8	15
III	15 3/4	10
IV	15 1/4	11 1/2

1999
Quarter	High	Low
I	14 7/8	13
II	14	12
III	13 1/2	10
IV	10 7/8	7 1/2

There were approximately 460 holders of record of the Common Stock of the Registrant as of December 31, 1999. The Registrant paid no dividends in 1998 and 1999.

Item 6. Selected Financial Data

	Years ended December 31,
	1999(1)(2)			1998(2)			1997(2)			1996(2)			1995
	(in thousands, except as to per share data)
Operating Results:
Revenues from operations	$	55,951		$	53,347		$	51,102		$	46,525		$	36,703
Realized gains on sale of investments	36			28			-			5			57
Realized gain on sale of subsidiary	-			-			-			702			-
Net investment income	5,081			4,305			3,595			3,087			2,764
Total revenues	$	61,068		$	57,680		$	54,697		$	50,319		$	39,524
Income before federal income taxes	$	102		$	5,719		$	4,630		$	3,297		$	2,455
Net income	$	91		$	3,778		$	3,356		$	5,330		$	2,417

Financial Condition:
Total assets	$	156,588		$	131,046		$	102,787		$	97,128		$	81,959
Convertible subordinated debentures	10,000			-			-			-			-
Shareholders' equity	$	26,909		$	28,814		$	24,415		$	20,381		$	14,081

Per Common Share:
Net income – Basic	$	0.04		$	1.79		$	1.62		$	2.61		$	1.18
Net income – Diluted	$	0.04		$	1.78		$	1.60		$	2.56		$	1.17
Book Value	$	12.67		$	13.61		$	11.66		$	9.95		$	6.89

Weighted average number of shares outstanding:
Basic	2,117,912			2,108,722			2,074,473			2,045,590			2,043,197
Diluted	2,121,697			2,121,366			2,102,395			2,081,080			2,061,791

Significant Insurance Indicators:
Net premiums written	$	54,508		$	64,303		$	51,680		$	47,337		$	38,073

Loss and loss expense ratio	72.8		%	68.6		%	65.1		%	64.5		%	58.7		%
Expense ratio	36.4		%	29.1		%	33.3		%	37.9		%	43.9		%
Combined ratio	109.2		%	97.7		%	98.4		%	102.4		%	102.6		%

(1) Includes North East's balance sheet as of December 31, 1999 and results of operations for the three months ended December 31, 1999.

(2) The financial data as of and for the years ended December 31, 1996, 1997, 1998 and 1999 have been restated as described in Note V in the Notes to the Consolidated Financial Statements.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview of Business Operations

The Registrant and a group of affiliated corporations provide property and casualty insurance related services.

The Registrant has four subsidiaries which write property and casualty insurance. Motor Club writes PPA business in the State of New Jersey. Preserver writes small commercial, homeowners and ancillary coverages in that State.

On September 24, 1999, the Registrant acquired North East and its subsidiaries for $10,483,000, principally in cash. North East writes private passenger and commercial automobile as well as small commercial and ancillary coverages in the State of Maine. American Colonial, a wholly–owned subsidiary of North East, has not written any insurance coverage since March 1990.

On March 1, 2000, the Registrant completed the acquisition of Mountain Valley Indemnity Company ("Mountain Valley") from Unitrin, Inc. for $7.5 million in cash. Mountain Valley was incorporated in 1995 in the State of New Hampshire and writes small and mid-sized commercial coverages in New York and all of the New England states except Connecticut. The Registrant believes that these acquisitions fully establish it as a regional commercial lines company in New England and the Mid–Atlantic regions.

The Registrant anticipates continuing its emphasis of the small commercial and ancillary coverages written by Preserver in the State of New Jersey and through newly acquired American Colonial in New York and Mountain Valley in the States of New York, Massachusetts, New Hampshire, Vermont, Rhode Island and Maine. North East is expected to increase its emphasis of small commercial coverages as well. Motor Club and North East write PPA business in the States of New Jersey and Maine, respectively. PPA business is expected to increase.

The Registrant also anticipates continued reductions in its operating expenses, namely through the implementation of operating efficiencies which should reduce other overhead expenditures.

Historically, the Insurance Companies' results of operations have been influenced by factors affecting the property and casualty insurance industry in general and the New Jersey PPA market in particular. The operating results of the U.S. property and casualty insurance industry have been subject to significant variations due to competition, weather, catastrophic events, regulation, general economic conditions, judicial trends, fluctuations in interest rates and other changes in the investment environment.

Results of Operations

In March 2001, the Company’s management determined that certain tax benefits should not have been recognized and that certain deferred tax liabilities had not been recorded. These tax matters relate to the tax effects of temporary differences arising from MCAIC, which was de-consolidated for financial reporting purposes due to its insolvency in 1992(see Note I in the Notes to the Consolidated Financial Statements). These tax matters have no impact on the operations, cash flow or capital and surplus of the Company’s active insurance subsidiaries or on consolidated income before Federal income taxes for the periods presented, nor is the Company subject to penalties and interest on the recording of the deferred tax liabilities.

As a result, the 1997, 1998 and 1999 Consolidated Financial Statements have been restated from amounts previously reported. The principal effects of these items on the accompanying financial statements are presented in Note V in the Notes to Consolidated Financial Statements.

In addition, deferred tax assets were not recorded for the tax effects of the minimum pension liability that is presented as a component of other comprehensive income. Shareholders’ equity at December 31, 1996 increased by $1,594,906, representing the cumulative effect on prior periods’ results of revising the tax accrual.

1999 Compared to 1998

On September 24, 1999 the Registrant acquired North East. Accordingly, the consolidated results of operations include, using the purchase method of accounting, the results of operation of North East for the three months ended December 31, 1999. The table below details the North East results from September 24 through December 31, 1999:

Insurance premiums	$	4,184,755
Net investment income	246,204
Realized gains on sales of investments (net)	31,382
Total revenues	4,462,341

Losses and loss expenses incurred	2,373,245
Amortization of deferred policy acquisition costs	981,149
Other operating expenses	857,655
Total losses and expenses	4,212,049

Income before federal income taxes	250,292
Provision for federal income taxes	79,371
Net income	$	170,921

In addition, the Registrant incurred $800,000 in expenses related to the acquisition of North East. For purposes of this discussion, the North East results and non-recurring merger expenses are excluded in order to afford comparability.

Excluding these items, net income decreased $2,621,779 to $1,634,012 in 1999 from the $4,255,791 reported in 1998. The decrease was the result of significantly higher New Jersey PPA losses occurring in 1999, specifically PIP (No Fault) first party claims. The provision for current year claims was $2,301,000 higher in 1999 than 1998. The Company believes that this development is attributable to the 1999 implementation of the New Jersey Automobile Cost Reduction Act ("AICRA"), which was designed to reduce both premium and losses in that line of business in that State.

The Registrant's net income was also reduced by $511,000 of losses and expenses incurred as a result of Hurricane Floyd which struck New Jersey in September 1999 and $217,000 in losses from severe storms which struck New Jersey in September 1998.

Insurance premiums declined by $1,553,000 or 3% in 1999 as compared to 1998, due principally to the rate rollback provisions of AICRA which were implemented commencing in 1999. These amounts were offset by increases in Preserver insurance premiums, particularly those generated by its commercial lines business. The following table details the annual changes in the 1999 Insurance Premiums and underlying in force policy counts as compared to 1998:

						Change in
	Change in					Policy		Change
Class of Business	Net Premium			Percent		Count		in Percent
Private Passenger Automobile	$	(2,069,000	)	(5	)%	14		0	%
Commercial Lines	537,000			7	%	404		7	%
Personal Property	(21,000		)	0	%	(268	)	(2	)%
Total	$	(1,553,000	)	(3	)%	150		0	%

As the table identifies, the decrease in PPA business written by Motor Club was attributable to the rate rollback and not a significant change in the number of policies inforce at December 31, 1999 as compared to 1998. The increase in Commercial Lines insurance premiums is reflective of the increased number of policies that Preserver wrote during 1999. Personal Property insurance premiums written by Preserver reflect modest amounts of new business written offset by a slightly higher attrition rate on existing policies in 1999 as compared to 1998.

Net investment income increased $530,000 or 12% resulting from an increase in invested assets. Average assets (at amortized cost) were $73,420,000 during 1999 compared to $68,374,000 during 1998. The average rate of return on invested assets increased to 6.6% in 1999 from 6.3% in 1998.

Losses and loss expenses increased by $1,778,217 or 5%, which produced the following loss and loss expense ratios:

	1999		1998
Motor Club	76.8	%	71.6	%
Preserver	66.7	%	59.6	%
	74.1	%	68.6	%

As noted, the increase in the Motor Club loss ratio was largely driven by significantly higher PIP (No Fault) first party medical claims occurring in 1999 ("Accident Year 1999"). The provision for Accident Year 1999 PPA claims was $1,723,000 higher in 1999 as compared to 1998, accounting for 75% of the consolidated increase. These losses did not increase until after the rate rollback and other provisions of AICRA were implemented. The Registrant believes that claimants filing more severe claims on an accelerated basis than historical patterns dictated caused this increase. The Registrant further believes that this acceleration was caused by the implementation of regulations tightening the fee schedule, allowing pre-certification methodologies and permitting a revised arbitration system, all of which should serve to ultimately reduce PIP claim costs.

While this acceleration increased the level of reported losses incurred by Motor Club in 1999, the Registrant reserved for its projected ultimate losses for Accident Year 1999 in coverage, generally using historical loss development patterns which indicate longer development patterns than those which may occur in Accident Year 1999. Therefore the Registrant increased the amount of incurred but not reported reserves for this coverage by $317,000 or 19% in 1999 as compared to 1998.

The Registrant does not believe that the Motor Club Accident Year 1999 loss experience is indicative of longer-term trends in PPA. The Registrant expects to closely monitor loss development patterns in 2000 and beyond to ensure that the level of reserves carried for PPA is adequate and appropriate as dictated by actual loss development.

In addition, elements of AICRA and other statutory amendments have yet to be implemented, and as such, may still have an impact on Motor Club's operations. The New Jersey PPA market continues to be subject to volatility, and consistent with the Registrant's long-stated goal to increase its identification as a provider of small commercial lines insurance and expand and diversify its operations outside the State of New Jersey, the Registrant is reviewing strategies to improve the profitability of its PPA business and to otherwise add more value to its shareholders.

The net loss ratio for Preserver in 1998 was historically low; therefore the increase in Preserver's net loss ratio in 1999 as compared to 1998 was partially caused by the net loss ratios returning to more representative experience. However, Preserver's direct loss ratio actually declined in 1999 as compared to 1998, as the table below shows:

	1999		1998
Direct Loss Ratio	56.7	%	69.2	%
Ceded Loss Ratio	16.7	%	117.2	%
Net Loss Ratio	66.7	%	59.6	%

With Preserver's reinsurance rates essentially unchanged during 1999 as compared to 1998, the remainder of the increase in the net loss ratio was attributable to an increased number of severe losses that did not have any reinsurance recoveries, as compared to 1998. Given the relatively small size of the Preserver book of business, a limited number of severe losses can adversely affect Preserver's net loss ratio results, depending on whether these losses were severe enough to generate a reinsurance recovery. There were no trends or indications in 1999 that Preserver's reinsurance programs were ineffective or that loss experience was adverse.

The increase in amortization of deferred policy acquisition costs relates to the amortization of expenses associated with the Policy Term Conversion which began in 1998 and was completed in 1999.

The 30% increase in other operating expenses is primarily due to the write off of uncollectible premium balances, which should be non-recurring. Expenses for 1999 also include $800,000 of general merger and acquisition expense and $448,000 of interest expense.

The Registrant continues to place emphasis on reducing overhead expenses relative to premium volume. Though the expense ratio increased to 34.3% in 1999 from 29.1% in 1998, the increase is primarily related to nonrecurring events. The Policy Term Conversion, completed in 1999, will provide greater consistency in the amount of expense amortized related to acquisition expenses in 2000. Expenses associated with merger and acquisition efforts, by definition are included in the expense ratio, and are part of the Registrant's ongoing efforts to expand and diversify its operations beyond the State of New Jersey.

The Registrant's book value decreased to $12.67 per share at December 31, 1999 from $13.61 per share at December 31, 1998.

The principal sources of the net decrease were: (1) net income of $91,000 or $.04 per share described previously; (2) an increase of $938,000 or $.44 per share (net of applicable deferred taxes) due to the decrease of the minimum required pension liability for the defined benefit pension plan sponsored by the Registrant as a result of asset gains and higher interest rates; offset by (3) a decrease of $3,007,000 or $1.42 per share due to the decrease (net of applicable deferred taxes) in the fair value of fixed maturity and equity security investments accounted for as available-for-sale securities under SFAS No. 115 ("Accounting for Certain Investments in Debt and Equity Securities").

As a company with insurance subsidiaries that invests substantial sums in fixed income securities, the Registrant is accustomed to fluctuations in the value of its fixed income investments. As noted, it has also identified one hundred percent of those investments as available for sale pursuant to SFAS 115. Accordingly, changes in the value of those investments are recorded as other comprehensive income. Because the Registrant and the Insurance Companies' investment portfolios are composed completely of securities which are generally highly liquid (i.e., U.S. government securities and investment grade corporate bonds), and that no default notices have been received on any of those securities, there are no grounds to believe that the unrealized losses incurred in 1999 are other than temporary. In addition, the combination of the duration of the portfolio being sufficiently short (approximately 3.60 years at December 31, 1999), combined with the highly liquid nature of those securities and the Registrant's proclivity to hold those bonds to maturity (although they are classified as available to sale), the par value of those bonds should be fully realized at maturity, resulting in those unrealized losses being temporary.

In addition, the Registrant generally believes that the longer-term trend for future movements in interest rates is toward lower interest rates, which would positively effect the value of fixed income investments and reduce those unrealized losses and possibly convert those losses to unrealized gains, which were experienced as recently as twelve to eighteen months ago. The Registrant believes the combination of economic circumstances, which should result in slower overall economic growth, modest inflation and real long-term interest rates that remain historically high, all combines to result in lower longer-term interest rate trends. The Registrant therefore would expect the unrealized losses experienced in 1999 to be temporary.

1998 Compared to 1997

The 13% increase in net income was largely due to the elimination of FAIR Act assessments paid through 1997, when $971,000 in expenses were incurred for this assessment. Absent the FAIR Act assessments in 1997, pre-tax income increased $118,000 or 2% in 1998 as compared to 1997, due to continuing improvements in the combined ratio and higher revenues for Preserver, higher investment income, offset by higher combined ratios for Motor Club due to the increasing effects of the new PPA business which it has written.

Insurance premiums increased by $2,298,000 or 5% during the year, due primarily to commercial lines premiums written by Preserver and savings on reinsurance programs. The following table details the annual increases in the 1998 Insurance Premiums and underlying in force policy counts as compared to 1997:

	Increase in				Change in
	Net				Policy
Class of Business	Premium		Percent		Count		Percent
Private Passenger Automobile	$	659,000	2	%	(36	)	0	%
Commercial Lines	951,000		14	%	476		9	%
Personal Property	688,000		14	%	140		1	%
Total	$	2,298,000	5	%	580		1	%

The Registrant continued to write new amounts of personal lines business, both PPA by Motor Club and Homeowners by Preserver. However, the growth in those respective lines of business was at a slower rate than the Commercial Lines business written by Preserver.

Net investment income increased $710,000 or 20% resulting from an increase in invested assets. Average invested assets (at amortized cost) were $68,374,000 during 1998 as compared to $56,239,000 during 1997. The increase in insurance premiums noted above, combined with the Note Payable discussed in Liquidity and Capital Resources, provided the increase in invested assets. Other revenues decreased $53,000 or 24%, due to declines in mortgage loan revenue, servicing fee income and other miscellaneous income items.

Losses and loss expenses incurred increased by $3,338,000 or 10%, which produced the following loss and loss expense ratios:

	1998		1997
Motor Club	71.6	%	66.8	%
Preserver	59.6	%	59.7	%
Total	68.6	%	65.1	%

Despite the higher loss and loss expense ratio on a comparative basis, no significant adverse trends were experienced or identified during 1998.

The increase in Motor Club's PPA loss and loss expense ratio was largely due to the new business written by Motor Club since January 1995 which constituted 53% of Motor Club's total PPA business as of December 31, 1998.

As the Registrant continues to write additional new PPA business, PPA loss and loss expense ratios should generally continue to trend higher, although within levels that should remain profitable. However, the effects of the 1997 and 1998 PPA reforms continue to be uncertain as to their ultimate outcome. As noted previously, the Registrant believes that the collective effect of these reforms to be a modest net negative. During 1999 however, PPA revenue may decline on a per policy basis and its combined ratio may increase as a result of the reforms.

Preserver continues to experience stable loss and loss expenses and loss ratios. During September 1998, severe storms struck New Jersey, resulting in $217,000 in losses to Preserver which increased its loss ratio by 2 points during 1998. Frequency of losses remains at acceptable levels for all lines of Preserver's business.

More than half of the $1,787,000 or 12% decrease in acquisition costs was attributable to the 1998 elimination of the FAIR Act assessments previously paid, which totaled $971,000 in 1997. The remainder of the decrease was attributable to the temporary effects of the Policy Term Conversion, which has resulted in additional expenses being deferred to reflect the increase in unearned premiums through December 31, 1998. This circumstance was temporary as noted, and the amount of expense amortized in 1999 related to acquisition expenses was expected to rise in conjunction with the completion of the Policy Term Conversion.

The $343,000 or 20% increase in other operating expenses was due to increased expenditures related to the Registrant’s merger and acquisition efforts along with expenditures to comply with the PPA reforms being implemented in New Jersey.

This decrease in net expenses is the realization of the Registrant's previously stated strategy to increase its revenue while decreasing its overhead expenditures and resulted in a decrease in the expense ratio to 29.1% in 1998 as compared to 31.4% in 1997 (as adjusted for the FAIR Act assessments described above).

The Registrant expects to reduce its expenses and expense ratio further in the long-term by pursuing further automation of its policy processing functions, particularly as relates to data provided by and to its independent agents. During 1997, the Registrant converted its information systems to a smaller, more contemporary computing platform which will allow for more efficient operations and lower maintenance costs. The Registrant expects to continue the efforts made previously to reduce all unnecessary overhead expenditures.

However, during 1999, the aforementioned completion of the Policy Term Conversion, in conjunction with the rate rollback required under the 1998 PPA reforms, increased the Registrant's expense ratio. Although the Registrant continues to anticipate that the net impact of these reforms will be a modest net negative, the impact of these reforms on premiums, losses, expenses or related financial ratios cannot be completely quantified.

The Registrant's book value increased to $13.61 per share at December 31, 1998 from $11.66 per share at December 31, 1997. The principal sources of the net increase were: (1) net income of $3,778,000 or $1.79 per share described previously; and (2) $668,400 or $.32 per share increase due to the increase (net of applicable deferred taxes) in the fair value of the fixed maturity investments accounted for as available-for-sale securities under SFAS No. 115 ("Accounting for Certain Investments in Debt and Equity Securities").

These increases in book value were offset by (1) $105,000 or $.05 decrease per share (net of applicable deferred taxes) due to the increase of the minimum required pension liability for the defined benefit pension plan sponsored by the Registrant; and (2) the dilutive effects ($.11 per share) of the issuance of 22,000 shares of common stock upon exercise of employee stock options granted under the 1987 and 1992 Stock Option plans. See Note P of the Notes for additional information regarding the Registrant's stock option plans.

The increase in the minimum pension liability was the result of a decrease in the discount rate used to compute Plan liabilities to 6.75% at December 31, 1998, from 7.25% at December 31, 1997, offset by the performance of the Plan assets in excess of the expected return on these assets. See Note L of the Notes for additional information regarding the Registrant's minimum pension liability.

Liquidity and Capital Resources

The Insurance Companies' need for liquidity arises primarily from the obligation to pay claims. The primary sources of liquidity are premiums received, collections from reinsurers and proceeds from investments.

Deferred tax liabilities related to MCAIC (captioned as “Excess Loss Account” in the schedule of net deferred tax assets in Note I in the Notes to Consolidated Financial Statements) will likely be payable on the final liquidation of MCAIC by its Receiver, which the Company does not control. It is not presently known when MCAIC’s final liquidation will occur, although the Company does anticipate that it will have approximately one year notice before this event occurs and that this should occur prior to 2006. Accordingly, the Company may be required to seek financing depending on the timing and magnitude of this liability.

Except as noted in Motor Club's PPA business, reserving assumptions and payment patterns of the Insurance Companies did not materially change from the prior year and there were no unusually large retained losses resulting from claim activity. Unpaid losses are not discounted.

Operating and Investing Activities

Net cash provided by operating activities was $910,000, $10,547,000 and $10,389,000 in 1999, 1998 and 1997, respectively. The lower amount for 1999 is attributable to the reduction in insurance premiums in 1999 as a result of the New Jersey PPA rate rollback and increased payment of PIP losses for the 1999 Accident Year.

Net cash utilized in investing activities was $10,313,000, $11,054,000 and $13,886,000 in 1999, 1998 and 1997, respectively. The amounts used in 1999 reflect the investment of cash provided by operating and finance activities. The amounts used in 1998 and 1997 reflect the investment of cash provided by operating activities.

Aside from the changes in operating expenditures noted previously, particularly the expenditures associated with the acquisition of North East, no unusual or nonrecurring operating expenditures have been incurred over this period.

The payout ratio of losses, other than PIP, has not fluctuated substantially over this period. Cash flow from operations is expected to increase as the Registrant increases its revenue through additional premium writings, specifically commercial lines and PPA, and continues to reduce its expenses and expense ratio. This will be offset somewhat by the development and payment of losses on the new PPA which Motor Club is writing.

Financing Activities

The Registrant paid no dividend on its common stock in 1999, 1998 and 1997.

In connection with its acquisition of North East, on September 23, 1999, the Registrant issued $10 million of Convertible Subordinated Debentures ("Debentures"), in one series, under a plan previously approved by its shareholders. For more information on the Debentures, please refer to Note H in the Notes to Consolidated Financial Statements.

On December 27, 1999, the Registrant repaid the $3 million borrowed from Dresdner Bank, AG ("Dresdner") in September 1998. As of September 30, 1999, the Registrant had been in violation with one covenant and one term of its Loan Agreement with Dresdner. The Registrant had received a waiver of both conditions from Dresdner and the parties mutually agreed to have the loan repaid and the facility closed.

In connection with its acquisition of Mountain Valley, on February 29, 2000 the Registrant borrowed $11.5 million ("Debt") from its three Executive Committee members, who presently own 42% of the Registrant's outstanding shares. For more information on the Debt, please refer to Note T in the Notes to Consolidated Financial Statements.

Recent Accounting Pronouncements

In October 1998, AcSEC issued SOP 98-7, "Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk." This Statement identifies several methods of deposit accounting and provides guidance on the application of each method. This Statement classifies insurance and reinsurance contracts for which the deposit method is appropriate as contracts that (i) transfer only significant timing risk, (ii) transfer only significant underwriting risk, (iii) transfer neither significant timing nor underwriting risk, and (iv) have an indeterminate risk. This Statement is effective for financial statements for the year commencing January 1, 2000. Restatement of previously issued financial statements is not permitted. The Registrant does not believe the Insurance Companies' reinsurance contracts would require the deposit method of accounting.

Item 8. Financial Statements and Supplementary Data

See Item 14 (a).

Item 9. Disagreements with Accountants on Accounting and Financial Disclosures

None

PART III

Items 10, 11, 12 and 13 are omitted from this Report on Form 10–K; the Registrant shall file a definitive proxy statement pursuant to Regulation 14A not later than May 1, 2000, which is 120 days after the close of the fiscal year of the Registrant.

PART IV

Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8–K

(a) (1) The following financial statements are included in Part II, Item 8:

Report of Independent Accountants

Consolidated Balance Sheets at December 31, 1999 and 1998

Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997

Consolidated Statements of Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997

Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997

Notes to Consolidated Financial Statements

(2) The following financial statement schedules for the years 1999, 1998 and 1997 (pursuant Rule 5–04 of Regulation S–X) are presented herewith:

Schedule I – Summary of Investments– Other than Investments in Related Parties*

Schedule II – Condensed Financial Information of Registrant

Schedule IV – Reinsurance*

Schedule V – Valuation and Qualifying Accounts and Reserves

Schedule VI – Supplemental Information Concerning Property/Casualty Insurance Operations*

*Presented pursuant to Rule 7–05 of Regulation S–X.

Schedules other than those mentioned above are omitted because the conditions requiring their filing do not exist, or because the information is given in the financial statements filed herewith, including the notes thereto.

(b) Exhibits:

Exhibit No.	Description	Reference
2–a	Agreement and Plan of Merger between Motor Club of America and North East Insurance Company, dated as of March 16, 1999	Exhibit 2 to Motor Club of America's Form 8-K dated March 17, 1999

3–a	Restated and Amended Certificate of Incorporation of Motor Club of America, dated June 12, 1972	Exhibit 1(i) to Motor Club of America's Annual Report on Form 10–K for fiscal year ended December 31, 1972

3–b	By–Laws of Motor Club of America, effective March 15, 1989	Exhibit 3-l to Motor Club of America's Annual Report on Form 10-K for fiscal year ended December 31, 1988

3-c	By-law Amendment of Motor Club of America, effective August 3, 1994	Exhibit 3-m to Motor Club of America's Form 8-K dated July 21, 1994

4–a	Specimen Certificate representing Common Stock, $.50 par value	Exhibit 4 to File No. 2–39996 on Form S–1

10–a	Motor Club of America 1987 Stock Option Plan	Exhibit 10–o to Motor Club of America's Annual Report on Form 10–K for fiscal year ended December 31, 1987

10–b	Specimen copy of Motor Club of America 1987 Stock Option Agreement	Exhibit 10–p to Motor Club of America's Annual Report on Form 10–K for fiscal year ended December 31, 1987

10–c	Motor Club of America 1992 Stock Option Plan	Exhibit A to Motor Club of America's Proxy Statement for fiscal year ended December 31, 1991

10-d	Motor Club of America 1999 Stock Option Plan	Exhibit A to Motor Club of America's Proxy Statement for the fiscal year ended December 31, 1998

10-e	Specimen copy Motor Club of America 1992 Stock Option Plan Agreement	Exhibit 10-r to Motor Club of America's Annual Report on Form 10-K for fiscal year ended December 31, 1992

10-f	Settlement Agreement between Motor Club of America et als. and Receiver of MCA Insurance Company in Liquidation et als. and related documents	Exhibit 99 to Motor Club of America's Form 8-K dated December 20, 1994

10-g	Order dated December 30, 1994 Approving Settlement between Motor Club of America et als and Receiver of MCA Insurance Company in Liquidation et als and related conformed documents	Exhibit 99-C to Motor Club of America's Form 8-K dated December 30, 1994

10-h	Stock Purchase Agreement between Motor Club of America and JVL Holding Properties, Inc	Exhibit 99-F to Motor Club of America's Form 8-K dated December 2, 1996

10-i	Agreement dated December 2, 1996 between Motor Club of America and Motor Club of America Enterprises, Inc	Exhibit 99-G to Motor Club of America's Form 8-K dated December 2, 1996

10–j	$3 Million Senior Unsecured Revolving Credit Facility between Motor Club of America and Dresdner Bank, AG and related documents	Exhibit 10-i to Motor Club of America's Annual Report on Form 10-K for fiscal year ended December 31, 1998

10-k	Purchase Agreement dated as of December 16, 1999 between Valley Insurance Company and Motor Club of America	Exhibit 10.1 to Motor Club of America's Form 8-K dated December 16, 1999

10-l	Specimen copy of Form of Convertible Subordinated Debentures	Exhibit 1 to Form 13D of Archer McWhorter dated September 23, 1999

10-m	Specimen copy of Promissory Note	Exhibit 10-m to Motor Club of America’s Annual Report on Form 10-K for fiscal year ended December 31, 1999

22	Specimen copy of Promissory Note	Exhibit 22 to Motor Club of America’s Annual Report on Form 10-K for fiscal year ended December 31, 1999

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MOTOR CLUB OF AMERICA
	(Registrant)


Dated: March 29, 2000	By	s/Stephen A. Gilbert
	Stephen A. Gilbert
	President, Chief Executive Officer, General Counsel and Director

Dated: March 29, 2000	By	s/Patrick J. Haveron
	Patrick J. Haveron
	Executive Vice President, Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Dated: March 29, 2000	By	s/Archer McWhorter
	Archer McWhorter
	Chairman of the Board and Director

Dated: March 29, 2000	By	s/Alvin E. Swanner
	Alvin E. Swanner
	Director

Dated: March 29, 2000	By	s/William E. Lobeck,Jr.
	William E. Lobeck, Jr.
	Director

REPORT OF INDEPENDENT ACCOUNTANTS

____________

To the Board of Directors of

Motor Club of America:

In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 58 present fairly, in all material respects, the financial position of Motor Club of America and Subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 14(a)(2) on page 53 present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.

As discussed in Note V, the Company has restated its December 31, 1999 and 1998 financial statements for certain tax matters.

PricewaterhouseCoopers LLP

New York, New York

March 14, 2000, except for Note V, as to which the date is April 16, 2001.

MOTOR CLUB OF AMERICA AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

__________

	December 31,
	1999			1998
	(Restated)			(Restated)
ASSETS
Investments:
Fixed maturity securities, available- for-sale, at fair value (amortized cost $80,854,764 -1999 and $67,676,411 -1998)	$	78,242,322		$	69,594,904
Equity securities, at fair value (cost $43,346 -1999)	57,053			-
Mortgage loans on real estate – at the unpaid principal amount	153,616			361,038
Short–term investments, at fair value which approximates cost	8,528,858			5,995,299
Total investments	86,981,849			75,951,241
Cash and cash equivalents	443,733			2,773,427
Premiums receivable	27,132,246			20,401,069
Reinsurance recoverable on paid and unpaid losses and loss expenses	21,163,574			19,234,277
Notes and accounts receivable	212,598			125,444
Deferred policy acquisition costs	10,560,763			8,708,329
Fixed assets – at cost, less accumulated depreciation	1,858,621			1,671,902
Federal income tax recoverable	47,100			12,993
Prepaid reinsurance premiums	1,485,450			1,015,581
Deferred tax asset	3,637,551			46,625
Goodwill, less accumulated amortization	1,593,801			-
Other assets	1,470,744			1,104,782
Total Assets	$	156,588,030		$	131,045,670

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Losses and loss expenses	$	70,983,383		$	58,335,143
Unearned premiums	38,698,028			30,733,144
Commissions payable	2,802,516			2,835,408
Accounts payable	1,397,263			875,327
Accrued expenses	3,112,157			4,763,950
Drafts outstanding	2,685,423			1,688,835
Note payable	-			3,000,000
Convertible subordinated debentures	10,000,000			-
Total liabilities	129,678,770			102,231,807

Shareholders' Equity:
Common Stock, par value $.50 per share: Authorized - 10,000,000 shares; issued and outstanding shares 2,124,387 - 1999 and 2,116,429 – 1998	1,062,194			1,058,215
Paid in additional capital	2,066,089			1,996,954
Accumulated other comprehensive loss	(3,897,396		)	(1,828,343		)
Retained earnings	27,678,373			27,587,037
Total Shareholders' Equity	26,909,260			28,813,863
Total Liabilities and Shareholders' Equity	$	156,588,030		$	131,045,670

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

MOTOR CLUB OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

__________

	For the years ended December 31,
	1999			1998			1997
	(Restated)			(Restated)			(Restated)

REVENUES

Insurance premiums (net of premiums ceded totaling $8,358,946, $6,776,174 and $7,151,207)	$	55,807,330		$	53,175,663		$	50,877,890
Net investment income	5,080,939			4,304,507			3,594,509
Realized gains on sales of investments (net)	36,040			28,545			-
Other revenues	143,410			171,171			224,271
Total revenues	61,067,719			57,679,886			54,696,670

LOSSES AND EXPENSES

Losses and loss expenses incurred (net of reinsurance recoveries totaling $1,544,026, $4,736,671 and $3,650,474)	40,631,053			36,479,591			33,141,691
Amortization of deferred policy acquisition costs	14,305,501			13,375,221			15,162,320
Other operating expenses	4,780,902			2,105,668			1,762,192
Merger-related expenses	800,000			-			-
Interest expense	448,117			-			-
Total losses and expenses	60,965,573			51,960,480			50,066,203
Income before Federal income taxes	102,146			5,719,406			4,630,467
Benefit (provision) for Federal income taxes:
current	28,331			(179,661		)	(37,573		)
deferred	(39,141		)	(1,763,361		)	(1,236,495		)
Total Federal income tax	91,336			(1,941,022		)	(1,274,068		)

Net income	$	91,336		$	3,778,384		$	3,356,399

Net Income per common share:
Basic	$	.04		$	1.79		$	1.62
Diluted	$	.04		$	1.78		$	1.60

Weighted average common and potential common shares outstanding:

Basic	2,117,912			2,108,722			2,074,473
Diluted	2,121,697			2,121,366			2,102,395

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

MOTOR CLUB OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

________

	Common Stock (a)			Paid–In		Accumulated Other
	Shares			Additional		Comprehensive			Retained
	Issued	Amount		Capital		Income (Loss)(b)			Earnings		Total
						(Restated)			(Restated)		(Restated)

Balance at December 31, 1996	2,047,504	$	1,023,752	$	1,730,508	$	(2,825,957	)	$	20,452,254	$	20,380,557
Net income									3,356,399		3,356,399
Other comprehensive income, net of tax:
Unrealized investment gains, net of reclassification adjustment						327,721					327,721
Minimum pension liability adjustment						106,788					106,788
Comprehensive income											3,790,908
Common stock issued	46,925	23,463		219,696							243,159
Balance at December 31, 1997	2,094,429	1,047,215		1,950,204		(2,391,448		)	23,808,653		24,414,624

Net income									3,778,384		3,778,384
Other comprehensive income, net of tax:
Unrealized investment gains, net of reclassification adjustment						668,309					668,309
Minimum pension liability adjustment						(105,204		)			(105,204		)
Comprehensive income											4,341,489
Common stock issued	22,000	11,000		46,750							57,750
Balance at December 31, 1998	2,116,429	1,058,215		1,996,954		(1,828,343		)	27,587,037		28,813,863

Net income									91,336		91,336
Other comprehensive income, net of tax:
Unrealized investment losses, net of reclassification adjustment						(3,006,583		)			(3,006,583		)
Minimum pension liability adjustment						937,530					937,530
Comprehensive loss											(1,977,717		)
Common stock issued	7,958	3,979		69,135							73,114
Balance at December 31, 1999	2,124,387	$	1,062,194	$	2,066,089	$	(3,897,396	)	$	27,678,373	$	26,909,260

(a) Par value $.50 per share; authorized – 10,000,000 shares.

(b) Net of deferred taxes.

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

MOTOR CLUB OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

__________

	For the years ended December 31,
	1999			1998			1997
	(Restated)			(Restated)			(Restated)
Net income	$	91,336		$	3,778,384		$	3,356,399

Adjustments to reconcile net income to cash provided by operating activities:
Depreciation expense	639,119			527,644			461,845
Amortization of bond premium - net	50,354			35,375			103,308
Amortization of goodwill	21,174			-			-
Gain on sale of investments	(36,040		)	(28,545		)	-
Deferred tax provision (benefit)	39,141			1,761,361			1,236,495

Changes in:
Premiums receivable	575,790			(12,591,502		)	(7,984		)
Notes and accounts receivable	(87,154		)	(775		)	124,206
Deferred policy acquisition costs	434,040			(2,849,679		)	(97,154		)
Federal income tax - current	(24,526		)	(53,035		)	(13,118		)
Reinsurance recoverable on paid and unpaid losses and loss expenses	1,071,741			(568,211		)	3,101,263
Prepaid reinsurance premiums	353,015			(320,336		)	450,699
Other assets	57,273			116,941			(100,563		)
Losses and loss expenses	1,435,399			8,088,365			2,579,922
Unearned premiums	(1,652,130		)	11,447,387			351,557
Commissions payable	(32,892		)	1,512,739			(121,991		)
Accounts payable	521,936			312,874			(33,332		)
Accrued expenses	(3,544,396		)	(914,385		)	(1,089,809		)
Drafts outstanding	996,588			292,620			86,778
Total cash provided by operating activities	909,750			10,547,222			10,388,521

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

MOTOR CLUB OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

__________

	For the years ended December 31,
	1999			1998			1997
	(Restated)			(Restated)			(Restated)
Investing activities:
Proceeds from:
Maturities of fixed maturities	8,074,333			17,444,834			4,852,707
Sales of fixed maturities	1,205,824			2,000,000			2,700,000
Sale of equity securities	630,612			-			-
Payments received on mortgage loan principal	207,422			161,517			111,937
Sale or maturities of short-term investments	89,390,755			245,390,264			86,804,893
Purchase of:
Fixed maturities	(9,343,352		)	(31,304,235		)	(15,927,470		)
Short–term investments	(87,656,130		)	(244,133,789		)	(92,206,193		)
Acquisition of North East, net of cash acquired	(12,200,953		)	-			-
Fixed assets	(621,069		)	(612,897		)	(221,741		)
Total cash utilized in investing activities	(10,312,558		)	(11,054,306		)	(13,885,867		)
Financing activities:
Convertible subordinated debentures	10,000,000			-			-
Note payable	(3,000,000		)	3,000,000			-
Common stock issued	73,114			57,750			243,159
Total cash provided by financing activities	7,073,114			3,057,750			243,159
Net increase (decrease) in cash	(2,329,694		)	2,550,666			(3,254,187		)
Cash and cash equivalents at beginning of year	2,773,427			222,761			3,476,948
Cash and cash equivalents at end of year	$	443,733		$	2,773,427		$	222,761

Supplemental Disclosures of Cash Flow Information

(1) Total interest paid was $448,782 (1999) $60,389 (1998), and $8,890 (1997).

(2) Total Federal income taxes paid was $0 (1999), $212,738 (1998), and $50,691 (1997).

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

MOTOR CLUB OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

__________

Note A – Summary of Significant Accounting Policies:

(a) Basis of Presentation and Principles of Consolidation:

The consolidated financial statements of Motor Club of America (the "Company") include its accounts and those of its directly or indirectly wholly–owned subsidiary companies. The financial statements have been prepared on the basis of generally accepted accounting principles ("GAAP"). The preparation of financial statements in conformity with these practices requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

The Company's insurance subsidiaries, Motor Club of America Insurance Company ("Motor Club"), Preserver Insurance Company ("Preserver"), North East Insurance Company ("North East") and its subsidiary American Colonial Insurance Company ("American Colonial") are collectively referred to as the "Insurance Companies". All material intercompany items and transactions have been eliminated in consolidation. With respect to North East, certain accounts have been reclassified in the financial statements to conform to the Company's presentation.

(b) Nature of Operations:

The Company is a New Jersey corporation which owns the Insurance Companies. The Company acquired North East and its subsidiaries on September 24, 1999; see Note B for more information on this transaction. The Insurance Companies engage in property and casualty insurance, principally private passenger automobile, small commercial and homeowners insurance, produced by independent agents. The Company generates substantially all of its revenues from its insurance operations.

Motor Club and Preserver's operations are in the State of New Jersey. North East's operations are in the State of Maine. American Colonial, which has not written any business since March 1990, plans to recommence operations in the State of New York in 2000.

Insurance premiums are credited to income by the monthly pro rata method over the terms of the contracts. Beginning July 1, 1998, Motor Club began converting its contracts for private passenger automobile insurance from six month to twelve month policies ("Policy Term Conversion"). While the Policy Term Conversion temporarily increased, for a one year period commencing July 1, 1998, the amount of premiums written by Motor Club, it did not effect the amount of premiums earned. Insurance contracts for policies other than private passenger automobile are for terms of twelve months.

(d) Investments:

All of the Company's fixed maturity and equity securities are classified as available-for-sale securities, and are therefore reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of shareholders' equity, net of applicable deferred taxes.

The Company does not invest in, hold or issue any derivative financial instruments.

Premium and discount amounts are amortized into income based on the stated contractual life of the securities. The Company recognizes income for the mortgage-backed and asset-backed bond portion of its fixed maturity securities portfolio using the constant effective yield method.

When actual prepayments differ from this assumption, the effective yield is recalculated to reflect actual payments to date. The net investment in the security is adjusted to the amount that would have existed had the new effective yield been applied since the acquisition of the security. That adjustment is included in net investment income.

Gains and losses on investments are recognized when investments are sold or redeemed on a specific certificate basis.

(e) Other Revenues:

Other revenues consist principally of interest on mortgage loans and servicing fees from motor club membership fees.

(f) Losses and Loss Expenses:

The estimated liability for losses is based on (1) the accumulation of cost estimates for unpaid losses reported prior to the close of the accounting period; and (2) estimates of incurred but not reported losses based upon past experience; less (3) estimates of anticipated salvage and subrogation recoveries. In the normal course of business, the Company seeks to reduce the loss that may arise from catastrophes or other events that cause unfavorable underwriting results by reinsuring certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers.

Changes to the estimated liabilities are reflected in the results of operations currently.

The liability for loss expenses is based on estimates of expenses to be incurred in the settlement of claims.

(g) Deferred Policy Acquisition Costs:

Deferred policy acquisition costs are costs that vary with and are primarily related to the production of new and renewal business. Such costs include commissions, premium taxes, certain State mandated assessments and certain underwriting and policy issuance costs which are deferred when incurred (subject to a maximum) and amortized to income as the related written premiums are earned. Investment income is anticipated in determining whether a premium deficiency relating to these costs exists.

(h) Fixed Assets:

Depreciation on leasehold improvements is computed by the straight–line method over the remaining lease term. Depreciation on furniture and fixtures, data processing and other equipment, is computed by the straight–line method over the estimated useful lives, ranging from three to twenty years.

Expenditures for major renewals and betterments are capitalized, and expenditures for maintenance and repairs are charged to income as incurred. When property units are retired, or otherwise disposed of, the cost thereof and related accumulated depreciation are eliminated from the accounts. Any gain or loss on disposal is credited or charged to operations.

(i) Federal Income Taxes:

Deferred Federal income taxes are provided for temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates expected to apply in the years in which the differences are expected to reverse.

(j) Goodwill:

Under the purchase method of accounting for business combinations, the total purchase price is allocated to the acquired assets and liabilities based on their fair values. Any differences between the excess of the cost of the transaction and the fair value of net assets acquired is recorded as goodwill, which will be amortized on a straight-line basis over twenty years after the merger.

(k) Statement of Cash Flows:

For purposes of the statement of cash flows, the Company considers demand deposits held with financial institutions and money market mutual fund holdings to be cash equivalents.

(l) Per Share Data:

Basic earnings per share are computed based upon the weighted average number of common shares outstanding during each year. Diluted earnings per share are computed based upon the weighted average number of common shares outstanding including outstanding stock options. See Note P for more information on outstanding stock options and Note R for more information on the computation of Earnings per Share.

(m) Comprehensive Income:

In 1998, the Company adopted SFAS No. 130 ("Comprehensive Income"), which established standards for the reporting and disclosure of comprehensive income and its components. Comprehensive income consists of net income, the unfunded accumulated benefit obligation in excess of plan assets and net unrealized investment gains or losses and is presented separately. The adoption of SFAS No. 130 had no impact on shareholders’ equity. Prior year financial statements have been reclassified to conform to these requirements. These amounts are reported net of deferred Federal income taxes.

Note B - Acquisition of North East:

On September 24, 1999, the Company acquired North East, headquartered in Scarborough, Maine, through a merger of a wholly-owned subsidiary of the Company with and into North East.

Under the terms of the merger, certain North East shareholders elected and received 7,958 shares of the Company's common stock representing 41,781 shares of North East common stock; the remaining shareholders and holders of North East stock options elected and were paid $10,409,678 in cash. The aggregate purchase price for the transaction was $10,482,796.

The acquisition has been accounted for using the purchase method of accounting and, based on the fair value of the net assets acquired at September 24, 1999, the Company recorded $1,614,957 of goodwill associated with the purchase which is being amortized on a straight-line basis over twenty years. The consolidated results of operations include the results of operations of North East for the three months ended December 31, 1999. The amount of goodwill amortization expense recorded in 1999 was $21,174.

The following unaudited pro forma consolidated results of operation for the years ended December 31, 1999 and 1998 assume the North East acquisition occurred as of January 1, 1998:

	1999			1998
	(Restated)			(Restated)
Insurance premiums	$	66,002,646		$	65,756,095
Net investment income	5,695,332			5,175,055
Realized gains on sales of investments (net)	3,102			82,817
Other revenue	143,410			171,171
Total revenues	71,844,490			71,185,138
Losses and loss expenses incurred	47,398,423			44,837,264
Other operating expenses	25,860,049			21,339,295
Total losses and expenses	73,258,472			66,176,559
Income (loss) before federal income taxes	(1,413,982		)	5,008,579
Benefit (provision) for federal income taxes	488,475			(1,687,859		)
Net income	$	(925,507	)	$	3,320,720
Earnings per share:
Basic	(.44		)	1.57
Diluted	(.44		)	1.40

Note C – Investments:

(a) The amortized cost and estimated fair value of investments in fixed maturity securities at December 31, 1999 were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized				Fair
	Cost		Gains		Losses				Value
U.S. Government securities	$	20,031,827	$	128,984	$	(239,128		)	$	19,921,683
Mortgage-backed securities	10,678,363		29,476		(301,482			)	10,406,357
Asset-backed securities	10,454,886		-		(216,034			)	10,238,852
Corporate securities	39,689,688		9,436		(2,023,694			)	37,675,430
Total	$	80,854,764	$	167,896	$		(2,780,338	)	$	78,242,322

The amortized cost and estimated fair value of investments in fixed maturity securities at December 31, 1998 were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
U.S. Government securities	$	22,027,700	$	1,128,251	$	(10,320	)	$	23,145,631
Mortgage-backed securities	11,053,686		165,978		(6,075		)	11,213,589
Asset-backed securities	10,698,352		107,618		-			10,805,970
Corporate securities	23,896,673		558,555		(25,514		)	24,429,714
Total	$	67,676,411	$	1,960,402	$	(41,909	)	$	69,594,904

The amortized cost and fair value of investments in fixed maturity securities at December 31, 1999, by contractual maturity, were as follows:

	Amortized		Fair
	Cost		Value
Due in one year or less	$	4,943,415	$	4,928,712
Due after one year through five years	21,037,686		20,953,774
Due after five years through ten years	30,933,494		29,040,693
Due after ten years	23,940,169		23,319,143
	$	80,854,764	$	78,242,322

The above maturity tables include $20,645,209 (at fair value) of mortgage-backed and asset-backed securities, which were classified as due after ten years based on the contractual life of the securities.

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Gross gains of $6,213 and $50,099 were realized on proceeds of $546,789 and $10,434,411 in 1999 and 1998, respectively, on those sales and calls. Gross losses of $595 and $21,554 on fixed maturities were realized on proceeds of $250,000 and $5,391,130 in 1999 and 1998 on those sales and calls. There were no gross gains or gross losses in 1997.

(b) Net investment income by category of investments consisted of the following:

Category	1999		1998		1997
Fixed maturities	$	4,665,066	$	3,950,500	$	3,387,140
Other, principally short–term investments	593,366		498,253		431,932
Total investment income	5,258,432		4,448,753		3,819,072
Investment expenses	177,493		144,246		224,563
Net investment income	$	5,080,939	$	4,304,507	$	3,594,509

(c) At December 31, 1999 and 1998, fixed maturity investments (at fair value) deposited with the various states where the Insurance Companies conduct business amounted to $2,986,560 and $222,784, respectively.

(d) There were no investments in any persons and its affiliates in excess of ten percent of shareholders' equity.

(e) The change in net unrealized gains (losses) on investments are as follows:

	Years Ended December 31,
	1999			1998		1997
Fixed maturities	$	(4,517,228	)	$	1,012,666	$	635,790

(f) In the opinion of management there has been no permanent impairment in the carrying amount of investments.

Note D - Unpaid Losses and Loss Expenses:

(a) The following table provides a reconciliation of the beginning and ending balances for unpaid losses and loss expenses for 1999, 1998 and 1997:

	1999		1998		1997
Balance at January 1	$	58,335,143	$	50,246,778	$	47,666,856
Less: Reinsurance recoverables	18,520,866		17,363,319		19,553,223
Net balance at January 1	39,814,277		32,883,459		28,113,633
Acquired in 1999	8,820,265		-		-
Incurred losses and loss expenses:
Provision for current year claims	37,271,781		32,598,287		29,368,738
Increase in provision for prior years' claims	3,359,272		3,881,304		3,772,953
Total incurred losses and loss expenses	40,631,053		36,479,591		33,141,691
Payment for losses and loss expenses:
Payment on current year claims	16,447,458		12,038,000		12,169,000
Payment on prior years' claims	20,288,404		17,510,773		16,202,865
Total payments for losses and loss expenses	36,735,862		29,548,773		28,371,865
Net balance at December 31	52,529,733		39,814,277		32,883,459
Plus: Reinsurance recoverables	18,453,650		18,520,866		17,363,319
Balance at December 31	$	70,983,383	$	58,335,143	$	50,246,778

The reconciliation shows a 1999 deficiency of $3,359,272 in the liability recorded at December 31, 1998. The deficiency is primarily the result of initial adverse development of reserves at December 31, 1998 and 1997 which is consistent with the Company's loss development history.

(b) Losses incurred are reduced by salvage and subrogation approximating $3,144,175, $2,661,000 and $2,801,000 for the years ended December 31, 1999, 1998 and 1997, respectively.

Note E – Fixed Assets:

Fixed assets consist of the following:

	1999		1998
Leasehold improvements	$	202,275	$	191,937
Office furniture, fixtures and data processing equipment	3,984,231		3,287,546
	4,186,506		3,479,483
Less accumulated depreciation	2,327,885		1,807,581
	$	1,858,621	$	1,671,902

Note F – Reinsurance:

(a) Unearned premiums and unpaid loss and loss expenses are stated gross of the effects of reinsurance.

(b) Ceded premiums are earned in a manner consistent with the coverage provided. Amounts recoverable from reinsurers are estimated in a manner consistent with the claims liabilities associated with the reinsurance.

(c) Reinsurance contracts do not relieve the Insurance Companies from their obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Insurance Companies. Generally, for Motor Club and Preserver all risks in excess of $150,000 for liability lines and $100,000 for property lines are reinsured. Prior to July 1, 1997 the property retention was $75,000.

The Insurance Companies evaluate the financial condition of their reinsurers and monitor concentrations of credit risk arising from activities or economic characteristics of the reinsurers to minimize their exposure to significant losses from reinsurer insolvencies.

As referred to in Note A, Motor Club and Preserver's operations are presently located in the State of New Jersey, the laws of which require participation in certain reinsurance funds.

Reinsurance recoverable on paid and unpaid loss and loss expenses include amounts recoverable from the Unsatisfied Claim and Judgment Fund ("UCJF") of the State of New Jersey, which pertains to New Jersey Personal Injury Protection claims in excess of Motor Club’s statutory retention limit of $75,000. Reinsurance recoverable from the UCJF was $8,672,127 and $9,139,160 as of December 31, 1999 and 1998, respectively.

Motor Club is required to participate in the New Jersey Automobile Insurance Risk Exchange ("NJ AIRE"). NJ AIRE is designed to balance differences between Motor Club's bodily injury exposures and loss payments as compared to industry exposures and loss payments under New Jersey's dual tort threshold system.

Assessments paid to NJ AIRE based on subject bodily injury exposures are accounted for as ceded premiums written and totaled $1,805,185, $1,113,756 and $1,728,341 in 1999, 1998 and 1997, respectively. Reimbursements from NJ AIRE based on subject claim payment experience are accounted for as ceded losses incurred and totaled $1,347,565, $548,415 and $500,657 in 1999, 1998 and 1997, respectively.

Prepaid reinsurance premiums of $1,485,450 and $1,015,581 as of December 31, 1999 and 1998, respectively, are mainly attributable to Preserver's workers' compensation program and excess of loss reinsurance treaties.

The effect of reinsurance on premiums written and earned is as follows:

	1999						1998						1997
	Written			Earned			Written			Earned			Written			Earned
Direct	$	62,467,203		$	64,151,936		$	71,399,224		$	59,951,837		$	58,380,651		$	58,029,094
Assumed	46,946			14,340			-			-			-			-
Ceded	(8,005,934		)	(8,358,946		)	(7,096,511		)	(6,776,174		)	(6,700,505		)	(7,151,204		)
Net	$	54,508,215		$	55,807,330		$	64,302,713		$	53,175,663		$	51,680,146		$	50,877,890

Note G - Note Payable:

On September 14, 1998, the Company entered into a $3 million revolving credit facility (the "Loan") and drew on the entire amount of the Loan on September 30, 1998. The Loan was repaid in full on December 27, 1999. The weighted-average effective rate of interest on the loan was 7.28% and 7.0625% in 1999 and 1998, respectively. Interest paid on the loan in 1999 and 1998 was $216,017 and $54,146, respectively.

Note H – Convertible Subordinated Debentures:

In connection with its acquisition of North East, on September 23, 1999, the Company issued $10 million of Convertible Subordinated Debentures ("Debentures"), in one series, under a plan previously approved by its shareholders.

The Debentures are due on September 23, 2009 and bear an interest rate of 8.44%, which is 2.5% over the London Interbank Offered Rate, fixed as of September 23, 1999, the date the series was issued.

At each holder's option, the Debenture is convertible at any time, in whole or in part, into 645,578 of the Company's common shares ($10 million divided by 130% of the average trading price of the Company's common stock over the twenty day period immediately prior to September 23, 1999 ("Conversion Price")). The applicable Conversion Price is $15.49.

Three of the Company's directors ("Ownership Group") purchased $9,253,785 of the $10 million in Debentures issued. If the members of the Ownership Group convert those Debentures, their percentage ownership in the Company's common stock will substantially increase. Based on the Company's common shares outstanding as of December 31, 1999, the Ownership Group could increase its collective percentage stock ownership from the current 42.0% to 53.8%.

Interest paid on the Debentures was $232,100 in 1999.

Note I – Taxes:

(a) The Company and its subsidiaries (including MCA Insurance Company in Liquidation and its subsidiaries (“MCAIC”), former affiliates) file a consolidated Federal income tax return, and participate in a Tax Sharing Agreement.

Despite being declared insolvent in 1992, MCAIC is required to continue to be included in the Company’s consolidated tax return filed with the Internal Revenue Service. Since that time, MCAIC has generally continued to generate taxable losses included in the consolidated tax return.

Under the applicable rules, the Company is entitled to, and has taken current tax benefits for net operating losses that MCAIC and its subsidiaries have generated since 1992. However, to the extent that the Company does not have positive basis (as defined by the Internal Revenue Code), it may also be required to pay future tax liabilities (which may offset the current tax benefit) subject to certain events which may trigger such payments. Accordingly, when such current tax benefits are recognized, a corresponding deferred tax liability is recorded.

In March, 2001, the Company’s management determined that certain tax benefits should not have been recognized and that certain deferred tax liabilities had not been recorded. In addition, deferred tax assets were not recorded that should have been for the tax effects of the minimum pension liability that is presented as a component of other comprehensive income. As a result, the 1998 and 1999 Consolidated Financial Statements have been restated from amounts previously reported and are discussed in Note V.

At the time of its insolvency, MCAIC realized approximately $150 million in losses, which generated a net operating loss (“NOL”) that could not be utilized at that time by either the Company or MCAIC under applicable IRS regulations and which expire in 2006. Additional net operating losses have been experienced by MCAIC since 1992, some of which were utilized by the Company at a time when it had no tax basis in MCAIC, thus creating a deferred tax liability represented by the $910,664 “Excess Loss Account” item (for the yearended December 31, 1999) as shown in the deferred tax reconciliation of this Note. The $150 million of NOL’s generated in 1992 will likely increase the Company’s excess loss account at the time they expire in 2006.

An excess loss account in a subsidiary generally creates taxable income at the time of the sale, liquidation or other disposition of the subsidiary.

Management expects that the liquidation or other disposition of MCAIC will take place prior to the expiration of these NOL’s in 2006 and prior to the corresponding increase in the Company’s excess loss account. As the control of the liquidation process rests with the Insurance Department of the State of Oklahoma (the “Receiver”) and not with management, there is a potential risk that such tax liability could be incurred by the Company after 2006 when the1992 generated NOL’s will have been converted into the Company’s excess loss account. Management believes it is unlikely that such risk will occur, as the liquidation of MCAIC is probable before the expiration of the NOL. However, the tax effects of these transactions are subject to the circumstances of the liquidation process itself and tax-planning strategies exist which could mitigate the impact of such a tax exposure.

With respect to the Company’s excess loss account created by the Company’s utilization of MCAIC’s post 1992 NOL’s, these excess losses will likely result in the Company recognizing taxable income in the year MCAIC is liquidated or otherwise disposed of. The effect of the deferred taxes attributable to such income has been reflected in the Consolidated Financial Statements.

(b) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows:

	December 31,
	1999			1998
	(Restated)			(Restated)
Deferred tax assets:
Net operating loss ("NOL") carryforward	$	2,969,144		$	429,513
Unpaid losses and loss expenses	2,046,251			1,637,930
Unearned premium	2,530,457			2,020,794
Unrealized loss on debt securities	888,230			-
Minimum pension liability	1,111,120			1,594,090
Alternative minimum tax and general business credit carry forwards	300,611			328,942
Other deferred tax assets	313,353			-
Total deferred tax assets	10,159,166			6,011,269
Deferred tax liabilities:
Deferred acquisition costs	(3,590,659		)	(2,960,832		)
Excess loss account	(910,664		)	(710,916		)
Unrealized gain on debt securities	-			(652,288		)
Prepaid pension cost	(1,181,989		)	(1,173,680		)
Other deferred tax liabilities	(223,447		)	(166,071		)
Total deferred tax liabilities	(5,906,759		)	(5,663,787		)
Less: valuation allowance for deferred tax assets	(614,856		)	(300,857		)
Net deferred tax asset	$	3,637,551		$	46,625

The NOL carryforward of $8,732,775 expires beginning in 2009. The NOL carryforward includes $6,327,667 of attributable to North East, which expire in 2014. Under the prevailing tax laws, these losses must be used to offset taxable income of North East only, are not available to offset taxable income of other operations and are subject to an annual limitation of $587,000.

The Company believes it is more likely than not that it will generate future taxable income to realize the benefits of the net deferred tax asset, including those net deferred tax assets attributable to North East only. The Company has provided a valuation allowance at December 31, 1999 for those deferred tax assets related to NOL carryforwards of MCAIC and its subsidiaries as a percentage of the total NOL carryforward in the Consolidated return and the capital loss carryforward of North East, including the temporary difference. The ultimate amounts realized, however, could be reduced if actual amounts of future taxable income differ from projected future taxable income.

(c) The provision for Federal income taxes resulted in effective tax rates lower than the statutory Federal income tax rates, as follows:

	1999			1998			1997
	(Restated)			(Restated)			(Restated)
Tax provision computed at statutory federal income tax rates	$	(34,730	)	$	(1,944,598	)	$	(1,574,359	)
Goodwill	(7,199		)	-			-
Other-net	31,119			3,576			300,291
Benefit (provision)	$	(10,810	)	$	(1,941,022	)	$	(1,274,068	)

(d) The Consolidated Statements of operations for the years ended December 31, 1999, 1998 and 1997 include state taxes based on insurance premiums of $230,606, $189,346 and $153,333.

Note J – Shareholders' Equity:

(a) The Insurance Companies prepare their statutory financial statements in accordance with accounting practices prescribed or permitted by the respective Departments of Insurance in which they are domiciled ("SAP").

Prescribed statutory accounting practices include a variety of publications of the National Association of Insurance Commissioners, as well as state laws, regulations and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed.

The maximum amount of dividends which the Motor Club and Preserver can pay to shareholders without approval of the Insurance Commissioner of the State of New Jersey is subject to restrictions. To the extent that surplus as defined is available, the maximum amount distributable is limited to the greater of: (1) ten percent of statutory surplus as regards policyholders; or (2) net income, excluding realized capital gains. Accordingly, the maximum dividend which may be paid to the Company without prior approval in 2000 is $1.2 million and $1.3 million for Motor Club and Preserver, respectively. Motor Club paid $250,000 and $1 million in dividends to the Company in 1999 and 1998, respectively.

The maximum amount of dividends that North East can pay without the prior approval of the Superintendent of the Maine Bureau of Insurance is limited by Maine regulation to not more than the greater of: (a) 10% of its statutory surplus as reported on its last annual statement, or (b) 100% of its net investment income as reported on its last annual statement. North East is presently unable to pay dividends to the Company and did not pay any dividends in 1999.

The amount of dividends that North East's New York-domiciled subsidiary, American Colonial, can pay without the prior approval of the New York Superintendent of Insurance is limited to the lesser of:(a) 10% of its statutory surplus as reported on its last annual statement, or (b) 100% of its adjusted net investment income during such period. At December 31, 1999, the maximum dividend North East could receive from American Colonial was $453,000. American Colonial paid $499,000 in dividends to North East in 1999.

(b) The consolidated financial statements of the Company's insurance subsidiaries have been prepared in accordance with GAAP, which differ in certain respects from SAP.

The principal differences relate to (1) acquisition costs incurred in connection with acquiring new business which are charged to expense under SAP but under GAAP are deferred and amortized as the related premiums are earned; (2) anticipated salvage and subrogation recoveries which have not been credited to losses incurred for SAP; (3) net deferred tax assets created by the tax effects of temporary differences; (4) unpaid losses, unpaid loss adjustment expenses and unearned premium reserves are presented gross of reinsurance with a corresponding asset recorded; and (5) fixed maturity portfolios that qualify as available for sale are carried at fair value and changes in fair value are reflected directly in unassigned surplus, net of related deferred taxes.

The consolidated capital and surplus, shareholders' equity and income of the Insurance Companies on a statutory and GAAP basis were as follows:

	December 31,
	1999		1998
Capital and surplus – Statutory basis	$	30,211,579	$	24,886,388
Shareholders' equity – GAAP basis	$	47,647,953	$	42,143,091

	Years ended December 31,
	1999		1998			1997
Net income (loss):
Statutory basis	$	204,073	$	(762,471	)	$	3,719,782
GAAP basis	$	1,265,286	$	5,157,732		$	4,316,713

Distribution by the Insurance Companies of the excess of GAAP shareholders' equity over statutory capital and surplus to the Company is prohibited by law.

Note K – Contingencies:

The Company and its subsidiaries are parties to various legal actions and administrative proceedings and subject to various claims arising in the ordinary course of business. The Company believes that the disposition of these matters will not have a material adverse effect on the financial position, the results of operations or cash flows of the Company.

Note L – Pensions:

(a) The Company has a non–contributory defined benefit plan (the "Plan"). Eligible salaried and hourly employees of the Company participate in the Plan after twelve months of continuous employment with the Company when age 21 has been attained. Retirement benefits are based on each participant's average compensation and years of service. Vesting of benefits begins after five years of service commencing from the minimum age of 21 or date of hire, if later.

The Company's contributions are designed to fund the Plan’s normal costs on a current basis and to fund the unfunded prior service costs, including accrued benefits arising from qualifying employee service occurring prior to the establishment of the Plan, over 40 years.

On January 15, 1992, the Company suspended the accrual of benefits arising from participant service. The Company continues to fund the Plan for benefits earned through January 31, 1992.

The Plan maintained a significant amount of assets in group annuity contracts with Mutual Benefit Life Insurance Company ("Mutual"), which was placed in rehabilitation by the NJ DOBI on July 16, 1991.

In October 1994, MBLLAC approved and subsequently paid a "hardship withdrawal" of $2,666,204 (net of an administrative charge of $470,507) to the Plan.

The Plan also received $91,938, $183,876 and $183,876 in distributions from MBLLAC and Mutual in 1999, 1998 and 1997, respectively, under provisions of the Plan of Rehabilitation.

On June 1, 1999, $3,424,869 was received from MBLLAC and an additional $14,670 was received on August 27, 1999. The restructured contract has how been paid in full and the Plan no longer has any assets with MBLLAC.

(b) Pension expense for 1999, 1998 and 1997 included the following components:

	1999			1998			1997

Interest cost	$	784,400		$	813,900		$	837,900
Expected return on plan assets	(1,032,700		)	(946,800		)	(862,000		)
Recognized loss	342,100			312,500			277,900
Net periodic benefit cost benefit obligation	$	93,800		$	179,600		$	253,800

Measurement of the Company's benefit obligation and pension expense as of December 31 of each year used the following assumptions:

	1999		1998		1997

Discount rate	7.75	%	6.75	%	7.25	%
Expected return on plan assets	10.00	%	10.00	%	10.00	%
Rate of compensation increase	N/A		N/A		N/A

(c) A reconciliation of the changes in the Plan's benefit obligations and fair value of assets during 1999 and 1998 and a statement of the funded status of the Plan as of December 31 of each year is as follows:

	1999			1998
Change in benefit obligation:
Benefit obligation at January 1	$	11,968,900		$	11,605,700
Service cost	-			-
Interest Cost	784,400			813,900
Actuarial (gain)/loss	(886,400		)	568,000
Benefits paid	(1,022,000		)	(1,018,700			)
Benefit obligation at December 31	$	10,844,900		$	11,968,900
Change in plan assets:
Fair value of plan assets at January	$	10,618,700		$	9,340,000
Actual return on plan assets	1,325,700			1,165,300
Employer contribution	239,900			1,254,500
Benefits paid	(1,022,000		)	(1,018,700			)
Other	(101,000		)	(122,400			)
Fair value of plan assets at December 31	$	11,061,300		$	10,618,700
Funded Status at December 31	$	216,400		$		(1,350,200	)
Unrecognized loss	3,268,000			4,688,500
Net amount recognized at December 31	$	3,484,400		$	3,338,300

Following are the amounts recognized in the statement of financial position as of December 31 of each year:

Prepaid benefit cost	$	216,400		-
Accrued benefit liability	-			$		(1,350,200	)
Accumulated other comprehensive income	3,268,000			4,688,500
Deferred tax benefit, asrestated	(1,111,120		)	(1,594,090			)
Net amount recognized	$	2,373,280		$	1,744,210

The adjustment required to recognize the minimum liability is reflected as a component of accumulated comprehensive income (loss) as of December 31, 1999 and 1998, respectively.

(d) The Company maintains a defined contribution plan for substantially all employees. Employer contributions of a discretionary amount are made by the Company and its subsidiaries. Employer contributions in the amount of $124,458, $116,329 and $115,995 were made by the Company in 1999, 1998 and 1997, respectively, for its employees and charged to expense.

(e) In 1997, the Company established a non-qualified deferred compensation plan for certain employees. Employer contributions of a discretionary amount are made by the Company.

Note M – Post–retirement Benefits:

(a) The Company currently provides certain life and health benefits to retired employees who had twenty-five or more years of service, subject to certain eligibility restrictions. These benefits consist of the payment of medical, life and dental premiums for the retired employees. The Company’s funding policy is to pay for the premiums currently; any future increases in the cost of these benefits will be borne by the retirees and not the Company.

(b) Net periodic post-retirement benefit cost for 1999, 1998 and 1997 included the following components:

	1999		1998		1997

Service cost	$	2,700	$	2,500	$	2,300
Interest cost	30,100		36,000		40,200
Amortization of transition obligation	28,000		28,000		28,000
Amortization of net loss	22,600		21,800		22,400
Net postretirement expense	$	83,400	$	88,300	$	92,900

Measurement of the Company’s benefit obligation and post-retirement benefit expense as of December 31 of each year used the following assumptions:

	1999		1998		1997

Discount Rate	7.75	%	6.75	%	7.25	%
Expected return on assets	N/A		N/A		N/A
Average rate of increase in compensation	N/A		N/A		N/A

(c) A reconciliation of the changes in the benefit obligations and fair value of assets during 1999 and 1998 and a statement of the funded status as of December 31 of each year is as follows:

	1999			1998
Change in Accumulated Postretirement
Benefit Obligation
Benefit Obligation at January 1	$	502,600		$	552,900
Service Cost	2,700			2,500
Interest Cost	30,100			36,000
Employee Contributions	45,700			12,400
Benefit Paid	(157,900		)	(125,100		)
Actuarial (gain) loss	(47,900		)	23,900
Benefit Obligation at December 31	$	375,300		$	502,600

Change in Plan Assets
Fair Value of Plan Assets at January 1	$	-		$	-
Company Contributions	112,200			112,700
Employee Contributions	45,700			12,400
Benefits Paid	(157,900		)	(125,100		)
Fair Value of Plan Assets at December 31	$	-		$	-

Funded Status of the Plan
Benefit obligation less than plan assets	$	(375,300	)	$	(502,600	)
Unamortized transition obligation	361,000			389,000
Unamortized net loss	187,100			257,600
Net prepaid asset	$	172,800		$	144,000

The following are the amounts recognized in the statement of financial position as of December 31 of each year:

	1999		1998

Prepaid benefit cost	$	172,800	$	144,000
Accumulated other comprehensive income	-		-
Net amount recognized	$	172,800	$	144,000

(d) It is the policy of the Company that any future increase in life and health care benefits will be borne by the retirees and not the Company; as a result, there will be no increase in either the accumulated post-retirement benefit obligation or the service and interest cost components of net periodic post-retirement benefit cost related to a 1% increase in the health care trend rate.

Note N - Selected Quarterly Financial Data (Unaudited):

(a) Year ended December 31, 1999 (Restated):

	1st		2nd		3rd			4th
	Quarter		Quarter		Quarter			Quarter*
Revenues	$	14,314,773	$	14,417,053	$	14,627,084		$	17,708,809

Losses and expenses	$	13,106,674	$	13,173,443	$	15,465,552		$	19,219,904

Net income (loss)	$	1,080,247	$	1,112,000	$	(749,734	)	$	(1,351,177	)

*Includes North East and subsidiaries

Net income (loss) per common share:

Basic		$	.51		$	.53		$	(.35	)	$	(.64	)
Diluted		$	.51		$	.52		$	(.35	)	$	(.64	)

Reconciliation of previously reported to restated net income and per share information:

Net income (loss):

	1st		2nd		3rd			4th
	Quarter		Quarter		Quarter			Quarter*
Previously reported	$	985,621	$	1,011,433	$	129,745		$	(849,866	)
Effect of tax adjustment	94,626		100,567		(879,479		)	(501,311		)
As restated	$	1,080,247	$	1,112,000	$	(747,734	)	$	(1,351,177	)

Per share information:
Basic:
Previously reported	$	.47	$	.48	$	.06		$	(.40	)
Effect of tax adjustment	.04		.05		(.41		)	(.24		)
As restated	$	.51	$	.53	$	(.35	)	$	(.64	)

Diluted:
Previously reported	$	.46	$	.48	$	.06		$	(.40	)
Effect of tax adjustment	.05		.04		(.41		)	(.24		)
As restated	$	.51	$	.52	$	(.35	)	$	(.64	)

*Includes North East and subsidiaries

(a) Year ended December 31, 1998 (Restated):

	1st		2nd		3rd		4th
	Quarter		Quarter		Quarter		Quarter
Revenues	$	14,122,238	$	14,196,905	$	14,481,138	$	14,879,605

Losses and expenses	$	12,689,535	$	12,629,606	$	13,140,836	$	13,500,503

Net income	$	946,480	$	1,035,397	$	885,437	$	911,070

Net income per common share:

Basic	$	.45	$	.49	$	.42	$	.43
Diluted	$	.45	$	.48	$	.42	$	.43

Reconciliation of previously reported to restated net income and per share information:

Net income (loss):

	1st			2nd			3rd			4th
	Quarter			Quarter			Quarter			Quarter*
Previously reported	$	1,024,531		$	1,134,939		$	1,015,460		$	1,080,861
Effect of tax adjustment	(78,051		)	(99,542		)	(229,565		)	(169,791		)
As restated	$	946,480		$	1,035,397		$	885,437		$	911,070

Per share information:

Basic:
Previously reported	$	.49		$	.54		$	.48		$	.51
Effect of tax adjustment	(.04		)	(.05		)	(.06		)	(.08		)
As restated	$	.45		$	.49		$	.42		$	.43

Diluted:
Previously reported	$	.48		$	.54		$	.48		$	.51
Effect of tax adjustment	(.03		)	(.06		)	(.06		)	(.08		)
As restated	$	.45		$	.48		$	.42		$	.43

Note O - Comprehensive Income (Restated):

Comprehensive income consisted of the following:

	1999			1998			1997
Net income	$	91,336		$	3,778,384		$	3,356,399
Other comprehensive income
Unrealized gains (losses) on securities:
Unrealized gains (losses) during period (net of taxes of ($1,536,862), $354,057 and $216,243	(2,982,797		)	687,149			327,721
Less: Reclassification adjustment for gains included in net income (net of taxes of $12,254, $9,705 and $0)	(23,786		)	(18,840		)	-
Net unrealized gains (losses)	(3,006,583		)	668,309			327,721
Minimum pension liability adjustment (net of taxes of $482,970, ($54,916) and $55,012)	937,530			(105,204		)	106,788
Other comprehensive income (loss)	(2,069,053		)	563,105			434,509
Comprehensive income (loss)	$	(1,977,717	)	$	4,341,489		$	3,790,908

Note P – Stock Option Plans:

The Motor Club of America 1987, 1992 and 1999 Stock Option Plans ("1987 Option Plan", "1992 Option Plan" and "1999 Option Plan", respectively) provide for the issuance of options to purchase 100,000 common shares, respectively, by key executives at the market price at date of grant.

Options under all Option Plans are exercisable for a five year period in twenty-five percent increments each year, commencing one year from the date of grant. As of December 31, 1999: (1) 5,125 shares under the 1987 Option Plan are available for grant; 57,000 shares were exercisable and 37,875 shares had been exercised as of that date; (2) 1,950 shares under the 1992 Option Plan are available for grant; 62,500 shares were exercisable and 35,550 shares had been exercised as of that date; and (3) 100,000 shares under the 1999 Option Plan are available for grant.

Transactions during 1997, 1998 and 1999 relating to the 1987 Option Plan are as follows:

					Weighted
			Exercise		Average
	Number of		Price per		Aggregate
	Shares		Share		Amount

Options outstanding at December 31, 1996	34,500		$	2.625	$	90,562
Options exercised in 1997	(11,375	)	$	2.625	(29,859		)
Options lapsed in 1997	(1,125	)	$	2.625	(2,953		)
Options granted in 1997	62,000		$	12.75	790,500
Options outstanding at December 31, 1997	84,000		$	10.098	848,250
Options exercised in 1998	(22,000	)	$	2.625	(57,750		)
Options lapsed in 1998	(5,000	)	$	12.75	(63,750		)
Options outstanding at December 31, 1998 and 1999	57,000		$	12.75	$	726,750

Transactions during 1997, 1998 and 1999 relating to the 1992 Option Plan are as follows:

					Weighted
			Exercise		Average
	Number of		Price per		Aggregate
	Shares		Share		Amount

Options outstanding at December 31, 1996	51,000		$	6.00	$	306,000
Options exercised in 1997	(35,550	)	$	6.00	(213,300		)
Options lapsed in 1997	(15,450	)	$	6.00	(92,700		)
Options granted in 1997	3,000		$	12.75	38,250
Options outstanding at December 31, 1997	3,000		$	12.75	38,250
Options granted in 1998	28,500		$	11.75	334,875
Options outstanding at December 31, 1998 and	31,500		$	11.845	$	373,125
Options granted in 1999	31,000		$	12.875	399,125
Options outstanding at December 31, 1999	62,500		$	12.36	$	772,250

There were no transactions during 1999 relating to the 1999 Option Plan.

The Company has adopted the provision of SFAS No. 123 ("Accounting for Stock-Based Compensation"), which calls for companies to measure employee stock compensation expense based on the fair value method of accounting. However, as allowed by SFAS No. 123, the Company has elected the continued use of APB Opinion No. 25 ("Accounting for Stock Issued to Employees"), with pro forma disclosures of net income and earnings per share determined as if the fair value method had been applied in measuring compensation cost.

These calculations only take into consideration options issued since January 1, 1995. In 1999, 1998 and 1997, had the fair value method been applied, net income would have been reduced by $70,900, $21,100 and $10,200, $.03, $.01 and less than $.01 basic net earnings per share, respectively.

The average fair value of options granted during 1999, 1998 and 1997 was $6.34, $5.79 and $6.52, respectively. The fair value was estimated using the Black-Scholes option pricing model based on the following assumptions for 1999, 1998 and 1997: risk-free interest rate of 6.55%, 4.66% and 5.65%; volatility of 50.5%, 52.3% and 54.5%; and expected life of 4.5, 4.75 and 4.5 years. The Company does not pay a dividend on its common stock. The following table summarizes options outstanding and exercisable at December 31, 1999:

Options Outstanding			Options Exercisable
						Average
Exercise		Average	Exercise			Exercise
Price	Options	Life(a)	Price		Options	Price

$ 11.75	28,500	3.75	$	11.75	7,125	$	11.75
$ 12.75	60,000	2.25	$	12.75	30,000	12.75
$ 12.875	31,000	4.50	$	12.875	0	-
Total	119,500	3.19	$	12.54	37,125	$	12.56

(a) Average contractual life remaining years.

Note Q – Lease Obligations:

Effective January 1, 1996, the Company entered into a lease ("Paramus Lease") at 95 Route 17 South, Paramus, New Jersey. The Paramus Lease expires on December 31, 2005. The Company has an option to terminate the Paramus Lease after six years, and an option to extend the Paramus Lease for an additional five years after the initial lease term expires. The Company will pay a base annual rental of $371,745 through December 31, 2000 and $416,805 thereafter until the Paramus Lease expires. Additional charges for electricity and escalation of certain operating costs apply. Rent expense paid by the Company on the Paramus Lease was $410,000 in 1999, 1998 and 1997.

North East leases office space at 482 Payne Road, Scarborough, Maine. The lease expires on December 31, 2000. The minimum lease payment for 2000 is $144,823.

Note R - Earnings per Share ("EPS"):

In 1997, the Company adopted SFAS No. 128 ("Earnings Per Share") specifying the computation, presentation and disclosure requirements for EPS. The new standard defines "basic" and "diluted" earnings per share. Basic earnings per share are based on weighted average basic shares outstanding. Diluted earnings per share are based on weighted average diluted shares outstanding, which is calculated by adding shares contingently issuable under stock options and shares contingently issuable under the Debentures (if dilutive) to the average basic shares outstanding. The calculations of average basic and diluted common shares outstanding and net income per common share are as follows:

	1999		1998		1997
	(Restated)		(Restated)		(Restated)

Net income (numerator)	$	91,336	$	3,778,384	$	3,356,399
Weighted average basic common shares outstanding (denominator)	2,117,912		2,108,722		2,074,473
Shares contingently issuable under Stock Option plans	3,785		12,644		27,922
Average diluted common shares outstanding (denominator)	2,121,697		2,121,366		2,102,395

Net income per common share:
Basic	$	.04	$	1.79	$	1.62
Diluted	$	.04	$	1.78	$	1.60

Note S - Reportable Segments:

In 1998, the Company adopted SFAS No. 131 ("Disclosures about Segments of an Enterprise and Related Information"). Under this Statement, the Company does not have any reportable segments but is required to disclose certain enterprise-wide information.

The Company writes property and casualty insurance in the States of New Jersey and Maine only through independent producers, none of which generate more than 10% of the Company's insurance premiums. Products include private passenger automobile, homeowners and ancillary coverages ("Personal Property"), and small commercial lines insurance, including commercial auto. Insurance premiums generated by these products during 1999, 1998 and 1997 were as follows:

Product	1999	1998	1997

Private Passenger Automobile	$40,989,903	$39,872,261	$39,213,154
Commercial Lines	9,237,955	7,703,054	4,912,797
Personal Property	5,579,472	5,600,348	6,751,939
Total	$55,807,330	$53,175,663	$50,877,890

Note T - Subsequent Event (Unaudited):

On March 1, 2000 the Company completed its acquisition of Mountain Valley Indemnity Company ("Mountain Valley"), formerly known as White Mountains Insurance Company, from Unitrin Inc. for $7.5 million in cash.

Mountain Valley, formed in 1995, presently writes small and medium sized commercial lines business in New York and all of New England except Connecticut. Statutory surplus at December 31, 1999 was $7.3 million.

Under the terms of the purchase, Mountain Valley will run-off its present 100% intercompany quota share reinsurance agreement; thus at closing there are no net loss and loss expense reserves for claims occurring prior to closing, including those which develop subsequently.

Mountain Valley will be assuming the unearned premium at closing (subject to certain adjustments).

In connection with the acquisition of Mountain Valley, the Ownership Group extended unsecured debt financing in the amount of $11.5 million to finance the transaction and to provide additional working capital to the Company. This debt will mature in two years and pay interest quarterly at a rate of 10.605%. The Company will be pursuing longer-term financing options to replace this debt during that period. At the Company's election, if acceptable financing is not identified by Motor Club during the two-year period, the debt can be extended for up to five years utilizing successive one-year renewals, in exchange for an increased interest rate on the debt.

Note U – Related Party Transactions:

The Ownership Group owns 42% of the outstanding common stock of the Company at December 31, 1999. The Company paid directors fees' of $180,000 during 1999, 1998 and 1997 to the Ownership Group.

As noted, the Ownership Group's participation in the Debentures could potentially increase their share ownership of the Company from its present 42.0% to 53.8%. During 1999, the Ownership Group received $214,780 in interest payments on the Debentures.

Note V - Restatement:

As a result, the 1997, 1998 and 1999 Consolidated Financial Statements have been restated from amounts previously reported.

Finally, deferred tax assets were not recorded for the tax effects of the minimum pension liability that is presented as a component of other comprehensive income. Shareholders’ equity at December 31, 1996 increased by $1,594,906, representing the cumulative effect on prior periods’ results of revising the tax accrual.

These tax matters have no impact on the operations, cash flow or capital and surplus of the Company’s active insurance subsidiaries or on the consolidated income before Federal income taxes for the periods presented nor is the Company subject to penalties and interest in the recording of the deferred tax liabilities. The effect of these tax items on the accompanying are set forth below:

	Consolidated Balance Sheet as of
	December 31, 1999						December 31, 1998
	As						As
	previously			As			previously			As
	Reported			Restated			Reported			Restated
ASSETS
Investments:
Fixed maturity securities	$	78,242,322		$	78,242,322		$	69,594,904		$	69,594,904
Equity securities	57,053			57,053			0			0
Mortgage loans on real estate	153,616			153,616			361,038			361,038
Short-term investments	8,528,858			8,528,858			5,995,299			5,995,299
Total investments	86,981,849			86,981,849			75,951,241			75,951,241
Cash and cash equivalents	443,733			443,733			2,773,427			2,773,427
Premiums receivable	27,132,246			27,132,246			20,401,069			20,401,069
Reinsurance recoverable	21,163,574			21,163,574			19,234,277			19,234,277
Notes and accounts receivable	212,598			212,598			125,444			125,444
Deferred policy acquisition costs	10,560,763			10,560,763			8,708,329			8,708,329
Fixed assets	1,858,621			1,858,621			1,671,902			1,671,902
Federal income tax recoverable	54,026			47,100			26,724			12,993
Prepaid reinsurance premiums	1,485,450			1,485,450			1,015,581			1,015,581
Deferred tax asset	4,128,766			3,637,551			0			46,625
Goodwill	1,745,848			1,593,801			0			0
Other assets	1,470,744			1,470,744			1,104,782			1,104,782
Total Assets	$	157,238,218		$	156,588,030		$	131,012,776		$	131,045,670

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Losses and loss expenses	$	70,983,383		$	70,983,383		$	58,335,143		$	58,335,143
Unearned premiums	38,698,028			38,698,028			30,733,144			30,733,144
Commission payable	2,802,516			2,802,516			2,835,408			2,835,408
Accounts Payable	1,397,263			1,397,263			875,327			875,327
Accrued expenses	3,112,157			3,112,157			4,763,950			4,763,950
Drafts outstanding	2,685,423			2,685,423			1,688,835			1,688,835
Convertible subordinated debentures	10,000,000			10,000,000			0			0
Note payable	0			0			3,000,000			3,000,000
Deferred tax liability	0			0			957,440			0
Federal income tax payable	0			0			0			0
Other liabilities	0			0			0			0
Total liabilities	129,678,770			129,678,770			103,189,247			102,231,807
Shareholders' Equity:
Common stock	1,062,194			1,062,194			1,058,215			1,058,215
Paid in capital	2,066,089			2,066,089			1,996,954			1,996,954
Accumulated other comprehensive income	(5,036,515		)	(3,897,396		)	(3,422,387		)	(1,828,343		)
Retained earnings	29,467,680			27,678,373			28,190,747			27,587,037
Total Shareholders' Equity	27,559,448			26,909,260			27,823,529			28,813,863
Total Liabilities and Shareholders' Equity	$	157,238,218		$	156,588,030		$	131,012,776		$	131,045,670

	Consolidated Income Statements for the Years Ended December 31,
	1999					1998						1997
	As previously Reported		As Restated			As previously Reported			As Restated			As previously Reported			As Restated
Income before Federal income taxes	$	102,146	$	102,146		$	5,719,406		$	5,719,406		$	4,630,467		$	4,630,467

Benefit (provision) for Federal income taxes:
Current	21,865		28,331			(193,121		)	(179,661		)	(37,573		)	(37,573		)
Deferred	1,152,922		(39,141		)	(1,270,494		)	(1,761,361		)	(1,110,192		)	(1,236,495		)
Total Federal income tax	1,174,787		(10,810		)	(1,463,615		)	(1,941,022		)	(1,147,765		)	(1,274,068		)
Net income	$	1,276,933	$	91,336		$	4,255,791		$	3,778,384		$	3,482,702		$	3,356,399

Net income per common share:
Basic	$	0.60	$	0.04		$	2.02		$	1.79		$	1.68		$	1.62
Diluted	$	0.60	$	0.04		$	2.01		$	1.78		$	1.66		$	1.60

MOTOR CLUB OF AMERICA AND SUBSIDIARIES

SCHEDULE I. SUMMARY OF INVESTMENTS–

OTHER THAN INVESTMENTS IN RELATED PARTIES

at December 31, 1999

__________

Column A	Column B		Column C		Column D
	Cost(a)		Market		Amount at which shown in the balance sheet
Type of investment

Fixed maturity securities available-for-sale:
United States Government and government agencies and authorities	$	30,710,190	$	30,328,040	$	30,328,040
Industrial and miscellaneous	46,544,011		44,532,565		44,532,565
Public utilities	3,600,563		3,381,717		3,381,717

Total fixed maturities	80,854,764				78,242,322
Equity securities:
Common stock	43,346		57,053		57,053
Mortgage loans on real estate	153,616				153,616

Short–term investments, available-for-sale	8,528,858		8,528,858		8,528,858

Total investments	$	89,580,584			$	86,981,849

Note: (a) Represents original cost of investments reduced by repayment and as to fixed maturities, adjusted for amortization of premiums or accrual of discounts.

(Continued)

MOTOR CLUB OF AMERICA AND SUBSIDIARIES

SCHEDULE II. CONDENSED FINANCIAL INFORMATION

OF REGISTRANT (PARENT COMPANY)

__________

BALANCE SHEETS

	December 31,
	1999		1998
	(Restated)		(Restated)
Assets:

Cash and cash equivalents	$	-	$	1,238,530
Investments in subsidiaries	46,399,026		40,707,745
Insurance premiums receivable	18,896,067		19,587,908
Other assets	4,781,710		2,024,056
Total assets	$	70,076,803	$	63,558,239

Liabilities and shareholders' equity:
Indebtedness to subsidiaries	$	28,276,495	$	26,498,457
Convertible subordinated debentures	10,000,000		-
Note payable	-		3,000,000
Other liabilities	4,891,048		5,245,919
Total liabilities	43,167,543		34,744,376
Shareholders' equity	26,909,260		28,813,863
Total liabilities and shareholders' equity	$	70,076,803	$	63,558,239

Notes to Schedule

The Notes to Consolidated Financial Statements of Motor Club of America and Subsidiaries are incorporated by reference to this schedule.

The Statements of Shareholders' Equity are the same as those presented for Motor Club of America and Subsidiaries.

(Continued)

MOTOR CLUB OF AMERICA AND SUBSIDIARIES

SCHEDULE II. CONDENSED FINANCIAL INFORMATION

OF REGISTRANT (PARENT COMPANY)

__________

STATEMENTS OF OPERATIONS

	For the years ended December 31,
	1999			1998			1997
	(Restated)			(Restated)			(Restated)
Revenues:

Membership servicing fees	$	118,924		$	133,531		$	152,791
Commission income	-			-			1,595
Interest on mortgage loans	16,974			35,251			4,973
Other income (1)	168,222			204,640			216,161
Total revenues	304,120			373,422			375,520

Expenses:

Merger expenses	800,000			-			-
Interest expense	448,117			60,389			8,890
General and administrative expenses (1)	298,514			(248,636		)	(512,054		)
Total expenses	1,546,631			(188,247		)	(503,164		)

Income before Federal income taxes	(1,242,511		)	561,669			878,684
Benefit (provision) for Federal income taxes:
current	28,331			1,384,611			(37,573		)
deferred	40,230			(1,761,361		)	(1,236,495		)
Total Federal income tax	68,561			(376,750		)	(1,274,068		)

Income (loss) before item shown below	(1,173,950		)	184,919			(395,384		)
Equity in net income of subsidiaries	1,265,286			3,593,465			3,751,783
Net income	$	91,336		$	3,778,384		$	3,356,399

(1) Amount is net of $285,762 (1999), $296,810 (1998) and $535,816 (1996) of management fees charged to subsidiaries.

MOTOR CLUB OF AMERICA AND SUBSIDIARIES

SCHEDULE II. CONDENSED FINANCIAL INFORMATION

OF REGISTRANT (PARENT COMPANY)

__________

STATEMENTS OF CASH FLOWS

	For the years ended December 31,
	1999			1998			1997
	(Restated)			(Restated)			(Restated)
Net income	$	91,336		$	3,778,384		$	3,356,399
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	499,503			426,703			371,756
Deferred tax benefit	(40,230		)	1,761,361			1,274,068

Changes in:
Premiums receivable	691,841			(12,221,216		)	172,024
Investments in subsidiaries	340,204			(10,818,776		)	(2,676,923		)
Other assets	(7,716		)	125,831			229,053
Other liabilities	1,065,629			451,011			(305,577		)
Indebtedness to related parties	1,778,038			11,857,053			(922,446
Net cash provided by (utilized in) operating activities	4,418,605			(4,639,649		)	1,498,354

Investing activities:
Proceeds from:
Disposal of short–term investments	-			28,900,000			47,287,674
Payments received on mortgage loan principal	207,422			161,517			4,490
Purchase of:
Fixed maturities	-			-			-
Short–term investments	-			(25,750,000		)	(48,692,219		)
Acquisition of North East	(10,409,682		)	-			-
Fixed assets	(454,875		)	(491,088		)	(168,878		)
Mortgage loans from Finance Company	-			-			(527,045		)
Net cash provide by (utilized in) investing activities	(10,657,135		)	2,820,429			(2,095,978		)
Financing activities:
Convertible subordinated debentures	10,000,000			-			-
Note payable	(3,000,000		)	3,000,000			-
Capital contribution to subsidiary	(2,000,000		)	-			-
Common stock issued	-			57,750			243,159
Net cash provided by financing activities	5,000,000			3,057,750			243,159
Increase (decrease) in cash and cash equivalents	(1,238,530		)	1,238,530			(354,465		)
Cash and cash equivalents at beginning of year	1,238,530			-			354,465
Cash and cash equivalent at end of year	$	-		$	1,238,530		$	-

Supplemental Disclosures of Cash Flow Information

(1) Total interest paid was $448,782 (1999), $60,389 (1998) and $8,890 (1997).

(2) Total federal income taxes paid was $0 (1999), $212,738 (1998) and $50,691 (1997).

(Continued)

MOTOR CLUB OF AMERICA AND SUBSIDIARIES

SCHEDULE IV. REINSURANCE

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 and 1997

__________

Column A	Column B		Column C		Column D		Column E		Column F
	Gross Amount		Ceded to other Companies		Assumed from other Companies		Net Amount		% of Amount Assumed to Net
December 31, 1999:

Total property and casualty insurance premiums earned	$	64,151,936	$	8,358,946	$	14,340	$	55,807,330	0.03	%

December 31, 1998:

Total property and casualty insurance premiums earned	$	59,951,837	$	6,776,174	$	-	$	53,175,663	0.00	%

December 31, 1997:

Total property and casualty insurance premiums earned	$	58,029,094	$	7,151,204	$	-	$	50,877,890	0.00	%

(Continued)

MOTOR CLUB OF AMERICA AND SUBSIDIARIES

SCHEDULE V. VALUATION AND QUALIFYING

ACCOUNTS AND RESERVES

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 and 1997

__________

Column A	Column B		Column C				Column D		Column E
			Additions
Description	Balance at Beginning of Period		Charged to Cost and Expenses		Charged to Other Accounts		Deductions		Balance at end of Period
Allowance for doubtful receivables:

December 31, 1999	$	68,091	$	-	$	–	$	-	$	68,091

December 31, 1998	$	68,091	$	-	$	–	$	-	$	68,091

December 31, 1997	$	41,340	$	26,751	$	–	$	-	$	68,091

Valuation allowance for deferred taxes, as restated:

December 31, 1999	$	300,857	$	313,999	$	-	$	-	$	614,856

December 31, 1998	$	1,920,162	$	-	$	-	$	1,619,305	$	300,857

December 31, 1997	$	-	$	1,920,162	$	-	$	-	$	1,920,162

MOTOR CLUB OF AMERICA AND SUBSIDIARIES

SCHEDULE VI. SUPPLEMENTAL INFORMATION CONCERNING

PROPERTY/CASUALTY INSURANCE OPERATIONS

__________

For the years ended December 31, 1999, 1998 and 1997

Column A	Column B		Column C		Column D	Column E		Column F		Column G		Column H				Column I		Column J		Column K
	Deferred Policy Acquisition Costs		Reserves for Unpaid Claims and Claim Adjustment Expenses		Discount, if any, Deducted in Column C	Unearned Premiums		Claims and Claim				Adjustment Expenses Incurred Related to				Amortization of deferred policy acquisition Costs		Paid Claims and Claim Adjustment Expenses		Premium Written
	Deferred Policy Acquisition Costs				Discount, if any, Deducted in Column C	Unearned Premiums		Earned Premiums		Net Investment Income (a)		(1) Current Year		(2) Prior Years		Amortization of deferred policy acquisition Costs		Paid Claims and Claim Adjustment Expenses		Premium Written
Year ended December 31, 1999	$	10,560,763	$	70,983,383	–	$	38,698,028	$	55,807,330	$	4,920,229	$	37,271,781	$	3,359,272	$	14,305,501	$	36,735,862	$	54,508,215

Year ended December 31, 1998	$	8,708,329	$	58,335,143	–	$	30,733,144	$	53,175,663	$	4,102,255	$	32,598,287	$	3,881,304	$	13,375,221	$	29,548,773	$64,302,713

Year ended December 31, 1997	$	5,858,650	$	50,246,778	–	$	19,285,757	$	50,877,890	$	3,384,004	$	29,368,738	$	3,772,953	$	15,162,320	$	28,371,865	$51,680,146

Note: (a) Excludes non–insurance subsidiaries' investment income and realized investment gains.

AMENDMENT NO. 1

EXPLANATORY NOTE

MOTOR CLUB OF AMERICA

PART I

EXPECTED CASH FLOWS OF PRINCIPAL AMOUNTS

Direct Loss Ratio

56.7

%

69.2

%

Previously reported

$

985,621

$

1,011,433

$

129,745

$

(849,866

)

As restated

$

.51

$

.53

$

(.35

)

$

(.64

)

As restated

$

.51

$

.52

$

(.35

)

$

(.64

)

Previously reported

$

1,024,531

$

1,134,939

$

1,015,460

$

1,080,861

As restated

$

.45

$

.49

$

.42

$

.43

As restated

$

.45

$

.48

$

.42

$

.43