##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

|    |  |                                                                                         
|--- |  | ----------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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|    |  | For the quarterly period ended September 30, 2002                                       
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|    |  | Or                                                                                      
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|[ ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to ________________

Commission File Number: 000-25273

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|------------------------------------------------------
|INSURANCE MANAGEMENT SOLUTIONS GROUP, INC             
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|(Exact name of registrant as specified in its charter)

|                                |  |                    
|------------------------------- |  | -------------------
|Florida                         |  | 59-3422536         
|                                |  |                    
|(State or other jurisdiction of |  | (I.R.S. Employer   
|                               
|                               
|                               
|                               
|incorporation or organization)  |  | Identification No.)

|                                               |  |           
|---------------------------------------------- |  | ----------
|801 94th Avenue North, St. Petersburg, Florida |  | 33702     
|                                               |  |           
|(Address of Principal Executive Offices)       |  | (Zip Code)

|                                                  
|--------------------------------------------------
|(727) 803-2040                                    
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|Registrants telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]

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

|                                    |  |                                                
|----------------------------------- |  | -----------------------------------------------
|Class: Common Stock, $.01 par value |  | Outstanding as of November 12, 2002: 12,276,063





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##### 



TABLE OF CONTENTS

|                                                                                                              |  |       
|------------------------------------------------------------------------------------------------------------- |  | ------
|                                                                                                              |  | Page  
|                                                                                                              |  | Number
|                                                                                                              |  |       
|PART I. FINANCIAL INFORMATION                                                                                 |  | 1     
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Item 1. Financial Statements                                                                                  |  | 1     
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Consolidated Balance Sheets as of December 31, 2001 and September 30, 2002                                    |  | 1     
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Consolidated Statements of Operations for the three months and nine months ended September 30, 2001 and 2002  |  | 2     
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Consolidated Statement of Shareholders Equity for the year ended December 31, 2001 and the nine months ended |  |       
|September 30, 2002                                                                                            |  | 3     
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Consolidated Statements of Cash Flows for the nine months ended September 30, 2001 and 2002                   |  | 4     
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Notes to Consolidated Financial Statements                                                                    |  | 5     
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                 |  | 12    
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                                            |  | 17    
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Item 4. Controls and Procedures                                                                               |  | 18    
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|PART II. OTHER INFORMATION                                                                                    |  | 18    
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Item 1. Legal Proceedings                                                                                     |  | 18    
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Item 5. Other Information                                                                                     |  | 21    
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             
|Item 6. Exhibits and Reports on Form 8-K                                                                      |  | 23    

The statements contained in this report on Form 10-Q that are not purely
historical are forward-looking statements within the meaning of
Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding the Companys expectations, hopes,
beliefs, intentions, or strategies regarding the future. Words such as
expects, intends, variations of these words and similar expressions are
intended to identify forward-looking statements. Forward-looking statements
include statements regarding, among other things: (i) the Companys proposed
self-tender offer and a possible transaction with a third-party acquiror; (ii)
trends affecting the Companys financial condition or results of operations;
(iii) the Companys operating strategies; (iv) changes in the business and/or
financial condition of the Companys clients; (v) the ability of Bankers
Insurance Group, Inc. (BIG) and its affiliates to repay outstanding
obligations to the Company; (vi) the proposed transaction between BIG and
Fidelity National Financial, Inc. (FNF); (vii) potential increases in the
Companys costs; (viii) the impact of general economic conditions on the demand
for the Companys services; (ix) the impact of changes in existing service
agreements; (x) the outcome of certain litigation involving the Company; (xi)
the outcome of certain administrative proceedings involving the Companys
principal customer; (xii) the ability to achieve expected expense reductions as
a result of management initiatives; and (xiii) the Companys liquidity and
capital resources. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various
factors. All forward-looking statements included in this document are based on
information available to the Company on the date hereof and the Company assumes
no obligation to update any such forward-looking statement. Among the factors
that could cause actual results to differ materially are uncertainties
regarding economic conditions and the market as those affect both the Company
and BIG, other uncertainties regarding BIG (including its subsidiaries), its
business and financial condition, uncertainties relating to the proposed
self-tender offer, the Companys discussions with a potential third-party
acquiror and the proposed transaction between BIG and FNF, uncertainties
relating to litigation pertaining to the proposed self-tender offer, the
factors detailed in Part I, Item 2, and Part II, Item 5 of this report and the
risk factors set forth under the caption Item 1. Business  Risk Factors in
the
Companys Annual

-i-



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##### 



Report on Form 10-K for the year ended December 31, 2001, as
filed with the Securities and Exchange Commission on April 1, 2002. Prospective
investors should also consult the risks described from time to time in the
Companys Reports on Form 10-Q, 8-K and 10-K.

-ii-



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##### 



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Unaudited)

|                            |                                                                                                                                                                 |                                            |           |              |            |               |           |            |            | 
|--------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | ------------ | ---------- | ------------- | --------- | ---------- | ---------- | 
|                            |                                                                                                                                                                 |                                            |           | December 31, |            | September 30,
|                            |                                                                                                                                                                 |                                            |           | 2001         |            | 2002         
|                            |                                                                                                                                                                 |                                            |           |              |            |               |           |            |           
|                            |                                                                                                                                                                 | ASSETS                                     |           |              |            |               |           |            |            | 
|                           
|                           
|                           
|                           
|CURRENT ASSETS              |                                                                                                                                                                 |                                            |           |              |            |               |           |           
|                           
|                           
|                           
|                           
|                            | Cash and cash equivalents                                                                                                                                       |                                            | $         | 20,095,808   |            |               | $         | 14,383,352 |           
|                           
|                           
|                           
|                           
|                            | Accounts receivable, trade  affiliates                                                                                                                         |                                            |           | 4,716,172    |            |               |           | 4,135,101  |           
|                           
|                           
|                           
|                           
|                            | Accounts receivable, trade  net                                                                                                                                |                                            |           | 875,297      |            |               |           | 1,034,772  |           
|                           
|                           
|                           
|                           
|                            | Prepaid expenses and other assets                                                                                                                               |                                            |           | 883,729      |            |               |           | 887,598    |           
|                           
|                           
|                           
|                           
|                            | Note receivable  affiliate                                                                                                                                     |                                            |           | 5,026,541    |            |               |           | 6,655,812  |           
|                           
|                           
|                           
|                           
|                            | Income taxes recoverable                                                                                                                                        |                                            |           |             |            |               |           | 1,675,287  |           
|                           
|                           
|                           
|                           
|                            |                                                                                                                                                                 |                                            |           |              |            |               |           |            |           
|                           
|                           
|                           
|                           
|                            |                                                                                                                                                                 | Total current assets                       |           |              | 31,597,547 |               |           |            | 28,771,922 | 
|                           
|                           
|                           
|                           
|PROPERTY AND EQUIPMENT, NET |                                                                                                                                                                 |                                            | 3,942,712 |              |            |               | 2,751,210 |           
|                           
|                           
|                           
|                           
|OTHER ASSETS                |                                                                                                                                                                 |                                            |           |              |            |               |           |           
|                           
|                           
|                           
|                           
|                            | Goodwill, net                                                                                                                                                   |                                            |           | 2,250,409    |            |               |           | 2,250,409  |           
|                           
|                           
|                           
|                           
|                            | Service contract                                                                                                                                                |                                            |           | 2,189,090    |            |               |           | 1,932,742  |           
|                           
|                           
|                           
|                           
|                            | Capitalized software costs, net                                                                                                                                 |                                            |           | 564,793      |            |               |           | 236,828    |           
|                           
|                           
|                           
|                           
|                            | Deferred tax assets                                                                                                                                             |                                            |           | 429,329      |            |               |           | 404,229    |           
|                           
|                           
|                           
|                           
|                            | Other                                                                                                                                                           |                                            |           | 25,600       |            |               |           | 18,100     |           
|                            |                                                                                                                                                                 |                                            |           |              |            |               |           |            |           
|                           
|                           
|                           
|                           
|                            |                                                                                                                                                                 | Total assets                               |           | $            | 40,999,480 |               |           | $          | 36,365,440 | 
|                           
|                           
|                           
|                           
|                            |                                                                                                                                                                 |                                            |           |              |            |               |           |            |           
|                           
|                           
|                           
|                           
|                            |                                                                                                                                                                 | LIABILITIES AND SHAREHOLDERS EQUITY       |           |              |            |               |           |            |            | 
|                           
|                           
|                           
|                           
|CURRENT LIABILITIES         |                                                                                                                                                                 |                                            |           |              |            |               |           |           
|                           
|                           
|                           
|                           
|                            | Accounts payable, trade                                                                                                                                         |                                            | $         | 1,272,921    |            |               | $         | 675,182    |           
|                           
|                           
|                           
|                           
|                            | Employee related accrued expenses                                                                                                                               |                                            |           | 1,546,078    |            |               |           | 1,373,283  |           
|                           
|                           
|                           
|                           
|                            | Other accrued expenses                                                                                                                                          |                                            |           | 2,352,487    |            |               |           | 2,295,103  |           
|                           
|                           
|                           
|                           
|                            | Income taxes payable                                                                                                                                            |                                            |           | 1,418,415    |            |               |           |           |           
|                           
|                           
|                           
|                           
|                            |                                                                                                                                                                 |                                            |           |              |            |               |           |            |           
|                           
|                           
|                           
|                           
|                            |                                                                                                                                                                 | Total current liabilities                  |           |              | 6,589,901  |               |           |            | 4,343,568  | 
|                           
|                           
|                           
|                           
|SHAREHOLDERS EQUITY        |                                                                                                                                                                 |                                            |           |              |            |               |           |           
|                           
|                           
|                           
|                           
|                            | Preferred Stock, $.01 par value; 20,000,000 shares
authorized, no shares issued and outstanding                                                                 |                                            |           |             |            |               |           |           |           
|                           
|                           
|                           
|                           
|                            | Common Stock, $.01 par value; 100,000,000 shares
authorized, 12,276,063 shares issued and
outstanding
at December 31, 2001 and September 30, 2002,
respectively |                                            |           | 122,760      |            |               |           | 122,760    |           
|                           
|                           
|                           
|                           
|                            | Additional paid-in capital                                                                                                                                      |                                            |           | 26,394,438   |            |               |           | 26,504,605 |           
|                           
|                           
|                           
|                           
|                            | Retained earnings                                                                                                                                               |                                            |           | 7,892,381    |            |               |           | 5,394,507  |           
|                            |                                                                                                                                                                 |                                            |           |              |            |               |           |            |           
|                            |                                                                                                                                                                 | Total shareholders equity                 |           |              | 34,409,579 |               |           |            | 32,021,872 | 
|                            |                                                                                                                                                                 |                                            |           |              |            |               |           |            |           
|                            |                                                                                                                                                                 | Total liabilities and shareholders equity |           | $            | 40,999,480 |               |           | $          | 36,365,440 | 
|                            |                                                                                                                                                                 |                                            |           |              |            |               |           |            |           

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

-1-



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##### 



INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                                                                        |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |            |            | 
|----------------------------------------------------------------------- | ----------------------------------- | ------------------ | ---------- | -------------------------------- | ---------- | ------------------------------- | ---------- | --------- | --------- | ---- | ---------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | 
|                                                                        |                                     |                    |            | Three Months Ended September 30, |            | Nine Months Ended September 30,
|                                                                        |                                     |                    |            |                                  |            |                                
|                                                                        |                                     |                    |            | 2001                             |            | 2002                            |            | 2001      |           | 2002
|                                                                        |                                     |                    |            |                                  |            |                                 |            |           |           |     
|REVENUES                                                                |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Outsourcing services-affiliated     |                    | $          | 9,494,164                        |            |                                 | $          | 4,134,223 |           |      | $          | 31,225,405 |            |   | $          | 18,116,331 |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Outsourcing services                |                    |            | 10,385,473                       |            |                                 |            | 2,963,934 |           |      |            | 15,322,563 |            |   |            | 7,464,990  |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |            |            | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                     | Total revenues     |            |                                  | 19,879,637 |                                 |            |           | 7,098,157 |      |            |            | 46,547,968 |   |            |            | 25,581,321 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|EXPENSES                                                                |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Cost of outsourcing services        |                    |            | 14,644,604                       |            |                                 |            | 5,281,080 |           |      |            | 32,166,645 |            |   |            | 21,414,604 |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Selling, general and administrative |                    |            | 2,004,974                        |            |                                 |            | 2,373,719 |           |      |            | 5,297,453  |            |   |            | 6,035,864  |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Management services from parent     |                    |            | 490,981                          |            |                                 |            | 92,839    |           |      |            | 1,142,984  |            |   |            | 400,023    |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Depreciation and amortization       |                    |            | 719,011                          |            |                                 |            | 752,554   |           |      |            | 2,258,495  |            |   |            | 2,120,860  |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |            |            | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                     | Total expenses     |            |                                  | 17,859,570 |                                 |            |           | 8,500,192 |      |            |            | 40,865,577 |   |            |            | 29,971,351 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |            |            | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|OPERATING INCOME/(LOSS)                                                 |                                     |                    | 2,020,067  |                                  |            |                                 | (1,402,035 | )         |           |      | 5,682,391  |            |            |   | (4,390,030 | )         
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|OTHER INCOME/(EXPENSE):                                                 |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Interest income                     |                    |            | 99,963                           |            |                                 |            | 147,782   |           |      |            | 182,054    |            |   |            | 422,056    |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Interest expense                    |                    |            | (2,481                           | )          |                                 |            |          |           |      |            | (5,736     | )          |   |            |           |           
|                                                                        |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |            |            | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                     | Total other income |            |                                  | 97,482     |                                 |            |           | 147,782   |      |            |            | 176,318    |   |            |            | 422,056    | 
|                                                                        |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |            |            | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|INCOME/(LOSS) FROM CONTINUING OPERATIONS
BEFORE DISCONTINUED OPERATIONS |                                     |                    | 2,117,549  |                                  |            |                                 | (1,254,253 | )         |           |      | 5,858,709  |            |            |   | (3,967,974 | )         
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|PROVISIONS/(BENEFIT) FOR INCOME TAXES                                   |                                     |                    | 532,782    |                                  |            |                                 | (458,700   | )         |           |      | 1,977,182  |            |            |   | (1,470,100 | )         
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |            |            | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|INCOME/(LOSS) FROM CONTINUING OPERATIONS
BEFORE DISCONTINUED OPERATIONS |                                     |                    | 1,584,767  |                                  |            |                                 | (795,553   | )         |           |      | 3,881,527  |            |            |   | (2,497,874 | )         
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|INCOME FROM OPERATIONS OF DISCONTINUED
OPERATIONS, NET OF TAX           |                                     |                    | 196,217    |                                  |            |                                 |           |           |           |      | 1,539,460  |            |            |   |           |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |            |            | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|NET INCOME/(LOSS)                                                       |                                     | $                  | 1,780,984  |                                  |            | $                               | (795,553   | )         |           | $    | 5,420,987  |            |            | $ | (2,497,874 | )         
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |            |            | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Earnings/(loss)
per common share:                                       |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Income/(loss) from continuing operations                                |                                     | $                  | .12        |                                  |            | $                               | (.06       | )         |           | $    | .30        |            |            | $ | (.20       | )         
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Income from discontinued operations |                    |            | .02                              |            |                                 |            |          |           |      |            | .12        |            |   |            |           |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |            |            | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|NET INCOME/(LOSS) PER COMMON SHARE                                      |                                     | $                  | .14        |                                  |            | $                               | (.06       | )         |           | $    | .42        |            |            | $ | (.20       | )         
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |            |            | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Weighted average common shares outstanding                              |                                     |                    | 12,800,261 |                                  |            |                                 | 12,276,063 |           |           |      | 12,800,261 |            |            |   | 12,276,063 |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                     |                    |            |                                  |            |                                 |            |           |           |      |            |            |            |   |            |            |            | 

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

-2-



---



##### 



INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY

|                                          |                                                                            |   |         |   |         |   |            |         |       |   |           |            |   |   |            |            |  
|----------------------------------------- | -------------------------------------------------------------------------- | - | ------- | - | ------- | - | ---------- | ------- | ----- | - | --------- | ---------- | - | - | ---------- | ---------- | -
|                                          |                                                                            |   |         |   |         |   | Additional |         |       |   |           |            |   |   |           
|                                          |                                                                            |   | Common  |   | Paid-In |   | Retained   |         |       |   |          
|                                          |                                                                            |   | Stock   |   | Capital |   | Earnings   |         | Total
|                                          |                                                                            |   |         |   |         |   |            |         |      
|Balance at December 31, 2000              |                                                                            | $ | 128,002 |   |         | $ | 27,545,901 |         |       | $ | 5,438,685 |            |   | $ | 33,112,588 |           
|                                         
|                                         
|                                         
|                                         
|                                          | Compensation expense for
stock options issued to
non-employees             |   |         |  |         |   |            | 180,000 |       |   |           |           |   |   |            | 180,000    |  
|                                         
|                                         
|                                         
|                                         
|Common stock reacquired in
Geotrac        |                                                                            |   |         |   |         |   |            |         |       |   |           |            |   |   |            |           
|sale                                      |                                                                            |   | (5,242  | ) |         |   | (1,331,463 | )       |       |   |          |            |   |   | (1,336,705 | )         
|                                         
|                                         
|                                         
|                                         
|                                          | Net income                                                                 |   |         |  |         |   |            |        |       |   |           | 2,453,696  |   |   |            | 2,453,696  |  
|                                          |                                                                            |   |         |   |         |   |            |         |       |   |           |            |   |   |            |           
|Balance at December 31, 2001              |                                                                            |   | 122,760 |   |         |   | 26,394,438 |         |       |   | 7,892,381 |            |   |   | 34,409,579 |           
|                                          |                                                                            |   |         |   |         |   |            |         |       |   |           |            |   |   |            |           
|                                          |                                                                            |   |         |   |         |   |            |         |       |   |           |            |   |   |            |           
|                                          | Compensation expense for
stock options issued to
non-employees (unaudited) |   |         |  |         |   |            | 110,167 |       |   |           |           |   |   |            | 110,167    |  
|                                         
|                                         
|                                         
|                                         
|                                          | Net loss (unaudited)                                                       |   |         |  |         |   |            |        |       |   |           | (2,497,874 | ) |   |            | (2,497,874 | )
|                                          |                                                                            |   |         |   |         |   |            |         |       |   |           |            |   |   |            |           
|Balance at September 30, 2002
(unaudited) |                                                                            | $ | 122,760 |   |         | $ | 26,504,605 |         |       | $ | 5,394,507 |            |   | $ | 32,021,872 |           
|                                          |                                                                            |   |         |   |         |   |            |         |       |   |           |            |   |   |            |           

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

-3-



---



##### 



INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                 |                                                                                          |                                                            |                                                     |            |                                 |           |            |            |            |            |  
|------------------------------------------------ | ---------------------------------------------------------------------------------------- | ---------------------------------------------------------- | --------------------------------------------------- | ---------- | ------------------------------- | --------- | ---------- | ---------- | ---------- | ---------- | -
|                                                 |                                                                                          |                                                            |                                                     |            | Nine Months Ended September 30,
|                                                 |                                                                                          |                                                            |                                                     |            |                                
|                                                 |                                                                                          |                                                            |                                                     |            | 2001                            |           | 2002      
|                                                 |                                                                                          |                                                            |                                                     |            |                                 |           |           
|CASH FLOWS FROM OPERATING ACTIVITIES             |                                                                                          |                                                            |                                                     |            |                                 |           |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 | Income/(loss) from continuing operations                                                 |                                                            | $                                                   | 3,881,526  |                                 |           | $          | (2,497,874 | )         
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net income/(loss) to
net cash provided by operating activities: |                                                            |                                                     |            |                                 |           |            |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Depreciation and amortization                              |                                                     |            | 2,203,824                       |           |            |            | 2,120,860  |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Loss on disposal of property and equipment                 |                                                     |            | 19,334                          |           |            |            | 82,536     |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Compensation expense related to
non-employee stock options |                                                     |            | 135,000                         |           |            |            | 110,167    |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Deferred income taxes, net                                 |                                                     |            | (46,577                         | )         |            |            | 25,100     |           
|                                                
|                                                
|                                                
|                                                
|                                                 | Changes in assets and liabilities:                                                       |                                                            |                                                     |            |                                 |           |            |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Accounts receivable, trade                                 |                                                     |            | 98,353                          |           |            |            | (159,475   | )         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Accounts receivable, trade  Geotrac                       |                                                     |            | 692,806                         |           |            |            |           |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Accounts receivable, trade  affiliates                    |                                                     |            | (1,935,283                      | )         |            |            | 581,071    |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Income taxes recoverable                                   |                                                     |            |                                |           |            |            | (1,675,287 | )         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Prepaid expenses and other current assets                  |                                                     |            | 126,616                         |           |            |            | (3,869     | )         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Other assets                                               |                                                     |            |                                |           |            |            | 7,501      |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Accounts payable, trade                                    |                                                     |            | (629,080                        | )         |            |            | (597,739   | )         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Employee related accrued expense                           |                                                     |            | 134,072                         |           |            |            | (172,795   | )         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Other accrued expenses                                     |                                                     |            | 1,151,125                       |           |            |            | (57,384    | )         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Income taxes payable                                       |                                                     |            | 1,632,188                       |           |            |            | (1,418,415 | )         
|                                                 |                                                                                          |                                                            |                                                     |            |                                 |           |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          |                                                            | Net cash provided by/(used in)
operating activities |            |                                 | 7,463,904 |            |            |            | (3,655,603 | )
|                                                
|                                                
|                                                
|                                                
|CASH FLOWS FROM INVESTING ACTIVITIES:            |                                                                                          |                                                            |                                                     |            |                                 |           |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchases of property and equipment                                                      |                                                            |                                                     | (1,637,911 | )                               |           |            | (427,582   | )         
|                                                
|                                                
|                                                
|                                                
|                                                 | Issuance of notes receivable                                                             |                                                            |                                                     | (4,639,858 | )                               |           |            | (1,629,271 | )         
|                                                
|                                                
|                                                
|                                                
|                                                 | Collection of notes receivable  Geotrac                                                 |                                                            |                                                     | 1,198,929  |                                 |           |            |           |           
|                                                 | Dividend
received from Geotrac                                                           |                                                            |                                                     | 200,000    |                                 |           |            |           |           
|                                                 |                                                                                          |                                                            |                                                     |            |                                 |           |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Net
cash used in investing activities                      |                                                     |            | (4,878,840                      | )         |            |            | (2,056,853 | )         
|                                                
|                                                
|                                                
|                                                
|CASH FLOWS FROM FINANCING ACTIVITIES:            |                                                                                          |                                                            |                                                     |            |                                 |           |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 | Repayment of debt                                                                        |                                                            |                                                     | (185,289   | )                               |           |            |           |           
|                                                 |                                                                                          |                                                            |                                                     |            |                                 |           |            |           
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                          | Net cash used in financing activities                      |                                                     |            | (185,289                        | )         |            |            |           |           
|                                                 |                                                                                          |                                                            |                                                     |            |                                 |           |            |           
|                                                
|                                                
|                                                
|                                                
|INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                          |                                                            | 2,399,775                                           |            |                                 |           | (5,712,456 | )         
|                                                
|                                                
|                                                
|                                                
|CASH AND CASH EQUIVALENTS, beginning of period   |                                                                                          |                                                            | 2,391,103                                           |            |                                 |           | 20,095,808 |           
|                                                 |                                                                                          |                                                            |                                                     |            |                                 |           |            |           
|                                                
|                                                
|                                                
|                                                
|CASH AND CASH EQUIVALENTS, end of period         |                                                                                          | $                                                          | 4,790,878                                           |            |                                 | $         | 14,383,352 |           
|                                                 |                                                                                          |                                                            |                                                     |            |                                 |           |            |           

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

-4-



---



##### 



INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS

Insurance Management Solutions Group, Inc. (together with its subsidiaries, the
Company) is a holding company that was incorporated in the State of Florida
in December 1996 by its parent, Bankers Insurance Group, Inc. (BIG).
Historically, the Company has operated in two principal business segments:
providing outsourcing services to the property and casualty insurance industry,
with an emphasis on flood insurance; and providing flood zone determinations
primarily to insurance companies and financial institutions. The Companys
outsourcing services, which are provided by its wholly-owned subsidiaries,
Insurance Management Solutions, Inc. (IMS) and Colonial Claims Corporation
(Colonial), include for IMS: policy and claims administration (policy
issuance, billing and collection) and information technology (IT) services;
and for Colonial: claims adjusting and processing. The Companys flood zone
determination services had been provided by Geotrac of America, Inc.
(Geotrac), a wholly-owned subsidiary of the Company, until December 28, 2001,
when it was sold. With the disposition of Geotrac, which is reported as
discontinued operations herein, Colonial became a separate reportable segment
for financial statement reporting purposes (see Note 7).

The Company is substantially dependent on the business of its affiliated
insurance companies under the common control of BIG, as the Company derives a
substantial portion of its revenue from outsourcing services provided to these
affiliated companies and BIG. During the nine months ended September 30, 2002,
the Company experienced a reduction in outsourcing services revenue due
primarily to lack of storm related activity which often occurs during
the second and third quarters of the year. Through June 30, 2002, the Company
experienced reduced personal line premium production by BIG.
Consequently, the Company has focused on implementing cost reduction measures
and eliminating support or service expenses associated with the provision of
services to BIG.

In addition, the Company amended its existing Administration Services
Agreement, effective October 1, 2001, with BIG (the Service Agreement and, as
amended, the Amended Service Agreement), such that, as of July 1, 2002, the
Company no longer provides policy administration or claims processing services
for BIGs personal (i.e., automobile and homeowners) insurance lines of
business or claims processing for BIGs commercial insurance lines of business.
The Company will continue to provide policy administration, claims
administration and data processing services in connection with BIGs flood
insurance line of business, with no change in the existing fee structure. In
addition, pursuant to the Amended Service Agreement, the Company will continue
to provide BIG with IT hosting and support services for a fixed monthly fee.
The Company will also continue to provide BIG with various other back-office
support services, including cash office processing, records management, policy
assembly, and print and mail distribution services, in connection with all of
BIGs personal and commercial insurance lines of business. Also effective July
1, 2002, in connection with the foregoing modifications to the Service
Agreement, the Company terminated 98 employees, or approximately 28% of its
total workforce. Of these employees, 81 worked in claims processing and 17
worked in policy administration. The Company expects to realize savings of
approximately $5.1 million in annual payroll costs and related expenses as a
result of this reduction in its workforce. As part of the
foregoing transfer of certain policy administration and claims processing to BIG, the
Company agreed to pay BIG approximately $301,000 to cover estimated processing
costs for claims to be processed. BIG ceased writing new automobile insurance during the third quarter of 2002.

Effective August 12, 2002, the Company amended the Amended Service Agreement.
Pursuant to this amendment, the Company provides additional IT support services
to BIG. In return for providing these services, the Company will receive not
less than approximately $876,000 annually in fees from BIG, which is a minimum
amount based upon estimated IT usage of the Companys services. In addition,
the Company has agreed to hire eleven persons previously employed by BIG, at an
anticipated annualized cost of approximately $764,000.

Subsequent to July 1, 2002, the Company further reduced its staff by an
additional 38 employees. These staff reductions were primarily in the areas of
policy administration, claims processing and administration, and are expected
to save the Company approximately $1.4 million on an annual basis.

-5-



---



##### 



NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements of Insurance Management
Solutions Group, Inc. and subsidiaries (the Company) have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
disclosures required by accounting principles generally accepted in the United
States of America. In the opinion of management, the accompanying unaudited
consolidated financial statements include all adjustments, consisting of normal
and recurring adjustments, necessary for a fair presentation of the
consolidated financial position, results of operations and cash flows for the
periods presented. The accompanying consolidated financial statements should be
read in conjunction with the Companys Annual Report on Form 10-K for the year
ended December 31, 2001, as filed with the Securities and Exchange Commission
on April 1, 2002. The results of operations for the nine-month period ended
September 30, 2002 are not necessarily indicative of the results that should be
expected for a full fiscal year.

Discontinued Operations

Geotrac represents discontinued operations and, accordingly, the discontinued
segments net assets are recorded separately at September 30, 2001. Likewise,
the Geotrac results of operations are excluded from continuing operations for
all periods presented.

Reclassifications

Exclusive of the separate presentation of continuing and discontinued
operations, certain reclassifications have been made to the 2001 financial
statements to conform to the 2002 presentation.

New Accounting Policies

Effective as of January 1, 2002, the Company adopted Statements of Financial
Accounting Standards (SFAS) 142, Goodwill and Intangible Assets, and 144,
Accounting for the Impairment or Disposal of Long Lived Assets. In connection
with the adoption of SFAS 142, Goodwill and Intangible Assets, the Company
retained an independent third-party investment banking firm to conduct an
analysis of its goodwill valuation at January 1, 2002. Under SFAS 142, the
impact, exclusive of the non-amortization of goodwill, would have been
recognized as a January 1, 2002 cumulative effect change in accounting
principle. However, the valuation determined that no impairment of the
Companys goodwill existed as of January 1, 2002. As of
September 30, 2002, managements assessment of the
Companys goodwill is that no impairment exists.

Proforma results of operations for the three-month and nine-month periods ended
September 30, 2002 for the non-amortization provisions of SFAS 142 in those
periods compared to the same periods for 2001 as follows:

|                                                                                                                                            |  |                                  |           |                                 |  |            |          |      |  |   |           |  |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | --------- | ------------------------------- |  | ---------- | -------- | ---- |  | - | --------- |  |  | - | ---------- | -
|                                                                                                                                            |  | Three Months Ended September 30, |           | Nine Months Ended September 30,
|                                                                                                                                            |  |                                  |           |                                
|                                                                                                                                            |  | 2001                             |           | 2002                            |  | 2001       |          | 2002
|                                                                                                                                            |  | (Proforma)                       |           |                                 |  | (Proforma) |          |     
|                                                                                                                                            |  |                                  |           |                                 |  |            |          |     
|Reported income/(loss) from continuing
operations                                                                                           |  | $                                | 1,584,767 |                                 |  | $          | (795,553 | )    |  | $ | 3,881,527 |  |  | $ | (2,497,874 | )
|Add: Goodwill amortization, net of tax, $0                                                                                                  |  |                                  | 33,094    |                                 |  |            |         |      |  |   | 99,283    |  |  |   |           |  
|                                                                                                                                            |  |                                  |           |                                 |  |            |          |      |  |   |           |  |  |   |           
|Adjusted income/(loss) from
continuing operations                                                                                           |  | $                                | 1,617,861 |                                 |  | $          | (795,553 | )    |  | $ | 3,980,810 |  |  | $ | (2,497,874 | )
|                                                                                                                                            |  |                                  |           |                                 |  |            |          |      |  |   |           |  |  |   |           
|Reported net income/(loss)                                                                                                                  |  | $                                | 1,780,984 |                                 |  | $          | (795,553 | )    |  | $ | 5,420,987 |  |  | $ | (2,497,874 | )
|                                                                                                                                           
|                                                                                                                                           
|                                                                                                                                           
|                                                                                                                                           
|Add: Goodwill amortization
(including $243,321 and
$729,964 pre-tax related to
discontinued operations, net of tax of
$90,000 and $270,000) |  |                                  | 186,415   |                                 |  |            |         |      |  |   | 559,247   |  |  |   |           |  
|                                                                                                                                            |  |                                  |           |                                 |  |            |          |      |  |   |           |  |  |   |           
|Adjusted net income/(loss)                                                                                                                  |  | $                                | 1,967,399 |                                 |  | $          | (795,553 | )    |  | $ | 5,980,234 |  |  | $ | (2,497,874 | )
|                                                                                                                                            |  |                                  |           |                                 |  |            |          |      |  |   |           |  |  |   |           

-6-



---



##### 



|                                                                                                                        |  |                                  |            |                                 |  |            |            |      |  |   |            |  |  |   |            |  
|----------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------- | ------------------------------- |  | ---------- | ---------- | ---- |  | - | ---------- |  |  | - | ---------- | -
|                                                                                                                        |  | Three Months Ended September 30, |            | Nine Months Ended September 30,
|                                                                                                                        |  |                                  |            |                                
|                                                                                                                        |  | 2001                             |            | 2002                            |  | 2001       |            | 2002
|                                                                                                                        |  | (Proforma)                       |            |                                 |  | (Proforma) |            |     
|                                                                                                                        |  |                                  |            |                                 |  |            |            |     
|Reported income/(loss)
from continuing
operations per share                                                             |  | $                                | .12        |                                 |  | $          | (.06       | )    |  | $ | .30        |  |  | $ | (.20       | )
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|Add: Goodwill
amortization per share                                                                                    |  |                                  |           |                                 |  |            |           |      |  |   | .01        |  |  |   |           |  
|                                                                                                                        |  |                                  |            |                                 |  |            |            |      |  |   |            |  |  |   |           
|Adjusted income/(loss)
from continuing
operations per share                                                             |  | $                                | .12        |                                 |  | $          | (.06       | )    |  | $ | .31        |  |  | $ | (.20       | )
|                                                                                                                        |  |                                  |            |                                 |  |            |            |      |  |   |            |  |  |   |           
|Reported net income/(loss)
per share                                                                                    |  | $                                | .14        |                                 |  | $          | (.06       | )    |  | $ | .42        |  |  | $ | (.20       | )
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|Add: Goodwill
amortization per share
(including $.01 and $.04
per share related to
discontinued operations,
net of tax) |  |                                  | .01        |                                 |  |            |           |      |  |   | .04        |  |  |   |           |  
|                                                                                                                        |  |                                  |            |                                 |  |            |            |      |  |   |            |  |  |   |           
|Adjusted net
income/(loss) per share                                                                                    |  | $                                | .15        |                                 |  | $          | (.06       | )    |  | $ | .46        |  |  | $ | (.20       | )
|                                                                                                                        |  |                                  |            |                                 |  |            |            |      |  |   |            |  |  |   |           
|Weighted average common
shares outstanding                                                                              |  |                                  | 12,800,261 |                                 |  |            | 12,276,063 |      |  |   | 12,800,261 |  |  |   | 12,276,063 |  
|                                                                                                                        |  |                                  |            |                                 |  |            |            |      |  |   |            |  |  |   |           

In addition, effective January 1, 2002, the Company adopted SFAS 144,
Accounting for the Impairment or Disposal of Long Lived Assets. The adoption of
SFAS 144 had no impact on the Companys results of operations or financial
condition for the nine-month period ended September 30, 2002.

Net Income/(Loss) Per Common Share

Net income/(loss) per common share, which represents both basic and diluted
earnings per share (EPS), is computed by dividing net income/(loss) by the
weighted average common shares outstanding. The following table reconciles the
numerator and denominator of the basic and dilutive EPS computation:

|                                                                                                 |  |                                  |            |                                 |  |            |            |      |  |   |            |  |  |   |            |  
|------------------------------------------------------------------------------------------------ |  | -------------------------------- | ---------- | ------------------------------- |  | ---------- | ---------- | ---- |  | - | ---------- |  |  | - | ---------- | -
|                                                                                                 |  | Three Months Ended September 30, |            | Nine Months Ended September 30,
|                                                                                                 |  |                                  |            |                                
|                                                                                                 |  | 2001                             |            | 2002                            |  | 2001       |            | 2002
|                                                                                                 |  | (Proforma)                       |            |                                 |  | (Proforma) |            |     
|                                                                                                 |  |                                  |            |                                 |  |            |            |     
|Numerator:                                                                                       |  |                                  |            |                                 |  |            |            |      |  |   |            |  |  |   |            |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Net income/(loss)                                                                                |  | $                                | 1,780,984  |                                 |  | $          | (795,553   | )    |  | $ | 5,420,987  |  |  | $ | (2,497,874 | )
|                                                                                                 |  |                                  |            |                                 |  |            |            |      |  |   |            |  |  |   |           
|Denominator:                                                                                     |  |                                  |            |                                 |  |            |            |      |  |   |            |  |  |   |            |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Weighted average
number of common
Shares used in basic
EPS                                       |  |                                  | 12,800,261 |                                 |  |            | 12,276,063 |      |  |   | 12,800,261 |  |  |   | 12,276,063 |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Diluted stock options                                                                            |  |                                  |           |                                 |  |            |           |      |  |   |           |  |  |   |           |  
|                                                                                                 |  |                                  |            |                                 |  |            |            |      |  |   |            |  |  |   |           
|Weighted average
number of common
shares and diluted
potential common
shares used in
diluted EPS |  |                                  | 12,800,261 |                                 |  |            | 12,276,063 |      |  |   | 12,800,261 |  |  |   | 12,276,063 |  
|                                                                                                 |  |                                  |            |                                 |  |            |            |      |  |   |            |  |  |   |           

As of September 30, 2001 and 2002, options to purchase 548,500 and 306,000
shares, respectively, of Common Stock were outstanding but were not included in
the computation of diluted earnings per share, as the inclusion of such shares
would have an anti-dilutive effect.

NOTE 3. DISCONTINUED OPERATIONS

Effective December 28, 2001 and with shareholder approval, the Company sold
Geotrac pursuant to a Stock Purchase Agreement dated September 30, 2001, as
amended December 26, 2001, to Geotrac Holdings, Inc.

-7-



---



##### 



(Holdings). Holdings is a corporation formed
by Geotracs President and his spouse. The consideration received by the
Company included $19.0 million in cash and 524,198 shares of the Companys
Common Stock (valued at $1,336,705 based on a quoted market price of the
Companys Common Stock of $2.55 per share as of December 27, 2001) beneficially
held by Geotracs President and his spouse. In addition, the Company entered
into a Flood Zone Determination Service Agreement with Geotrac pursuant to
which Geotrac will provide the Company with flood zone determination services
for up to ten years at pricing management of the Company currently believes is
favorable. The Company valued the Flood Zone Determination Service Agreement at
approximately $2,189,090, as supported by an independent third-party investment
banking firms valuation. As a result of this sale, the Company has no
restricted net assets that affect retained earnings for the period ended
September 30, 2002.

GEOTRACS CONDENSED STATEMENT OF INCOME

|                                             |                |   |                    |           |                    |   |            |            | 
|-------------------------------------------- | -------------- | - | ------------------ | --------- | ------------------ | - | ---------- | ---------- | 
|                                             |                |   | Three Months Ended |           | Nine Months Ended 
|                                             |                |   | September 30, 2001 |           | September 30, 2001
|                                             |                |   |                    |           |                   
|Flood zone determination services            |                | $ | 4,927,464          |           |                    | $ | 14,754,429 |           
|                                            
|                                            
|                                            
|                                            
|Flood zone determination services-affiliated |                |   | 339,659            |           |                    |   | 892,804    |           
|                                             |                |   |                    |           |                    |   |            |           
|                                             | Total revenues |   |                    | 5,267,123 |                    |   |            | 15,647,233 | 
|                                             |               
|Cost of flood zone determination services    |                |   | 2,606,756          |           |                    |   | 7,167,450  |           
|                                            
|                                            
|                                            
|                                            
|Selling, general and administrative          |                |   | 1,260,030          |           |                    |   | 3,510,723  |           
|                                            
|                                            
|                                            
|                                            
|Management services from Parent              |                |   | 8,008              |           |                    |   | 44,522     |           
|                                            
|                                            
|                                            
|                                            
|Depreciation and amortization                |                |   | 583,104            |           |                    |   | 1,768,239  |           
|                                             |                |   |                    |           |                    |   |            |           
|                                             | Total expenses |   |                    | 4,457,898 |                    |   |            | 12,490,934 | 
|                                             |                |   |                    |           |                    |   |            |           
|                                             |               
|Operating income                             |                |   | 809,225            |           |                    |   | 3,156,299  |           
|                                            
|                                            
|                                            
|                                            
|Other income/(expense), net                  |                |   | 1,624              |           |                    |   | 6,189      |           
|                                            
|                                            
|                                            
|                                            
|Provision for income taxes                   |                |   | 614,632            |           |                    |   | 1,623,028  |           
|                                             |                |   |                    |           |                    |   |            |           
|Income from discontinued operations          |                | $ | 196,217            |           |                    | $ | 1,539,460  |           
|                                             |                |   |                    |           |                    |   |            |           

SUPPLEMENTAL DISCLOSURE OF GEOTRACS CASH FLOW INFORMATION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001

|                                  |                      |  |  |  |  |   |           |            |  
|--------------------------------- | -------------------- |  |  |  |  | - | --------- | ---------- | -
|Operating activities:             |                      |  |  |  |  |   |           |           
|                                 
|                                 
|                                 
|                                 
|                                  | Net cash provided by |  |  |  |  |   | $         | 4,773,682  |  
|                                 
|                                 
|                                 
|                                 
|Investing activities:             |                      |  |  |  |  |   |           |           
|                                 
|                                 
|                                 
|                                 
|                                  | Net
cash used in     |  |  |  |  |   |           | (2,953,666 | )
|                                 
|                                 
|                                 
|                                 
|Financing activities:             |                      |  |  |  |  |   |           |           
|                                 
|                                 
|                                 
|                                 
|                                  | Net
cash used in     |  |  |  |  |   |           | (992,351   | )
|                                  |                      |  |  |  |  |   |           |           
|                                 
|                                 
|                                 
|                                 
|Net increase in cash              |                      |  |  |  |  |   | 827,665   |           
|                                 
|                                 
|                                 
|                                 
|Cash at beginning of period       |                      |  |  |  |  |   | 2,801,058 |           
|                                  |                      |  |  |  |  |   |           |           
|Cash at end of period before sale |                      |  |  |  |  | $ | 3,628,723 |           

NOTE 4. COMMITMENTS AND CONTINGENCIES

Since the announcement in August 2002 of the Companys intention to commence a
cash tender offer for all presently outstanding publicly-held shares of its
Common Stock, $.01 par value (Common Stock), at a price of $3.08 per share,
net to the Seller in cash (the Offer), three alleged shareholders of the
Company, each on behalf of a putative class consisting of the Companys current
public shareholders, have filed lawsuits against, among others, the Company and
the Companys current directors challenging the proposed Offer. Although the
Company believes these lawsuits are without merit and intends to vigorously
defend them, no assurances can be given with respect to the outcomes thereof.
Moreover, such litigation could have a material adverse effect on the Companys
business, financial condition and results of operation and could adversely
affect the Companys ability to consummate the Offer or any
other transaction. See Part
II    Item 1. Legal Proceedings.

On September 28, 2000, October 25, 2000 and October 30, 2000,
three alleged shareholders of the Company filed three nearly identical lawsuits
in the United States District Court for the Middle District of Florida, each on
behalf of a putative class of all persons who purchased
shares of the Companys Common Stock pursuant and/or traceable to the
registration statement for the Companys February

-8-



---



##### 



1999 initial public offering
(the IPO). The lawsuits were consolidated on December 1, 2000, and the
consolidated action is proceeding under Case No. 8:00-CV-2013-T-26MAP. The
plaintiffs Consolidated Amended Class Action Complaint, filed February 7,
2001, names as defendants the following parties: the Company; BIG, Venture
Capital Corporation, a selling shareholder in the IPO; the five inside
directors of the Company at the time of the IPO; and Raymond James &
Associates, Inc. and Keefe, Bruyette & Woods, Inc., the underwriters for the
IPO. The complaint alleges, among other things, that the defendants violated
Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, by
making certain false and misleading statements in the roadshow presentations,
registration statement and prospectus relating to the IPO. More specifically,
the complaint alleges that, in connection with the IPO, the defendants made
various material misrepresentations and/or omissions relating to: (i) the
Companys ability to integrate Geotracs flood zone determination business with
the Companys own flood zone determination business and with its insurance
outsourcing services business; (ii) actual and anticipated synergies between
the Companys flood zone determination and outsourcing services business lines;
and (iii) the Companys use of the IPO proceeds. The complaint seeks
unspecified damages, including interest, and equitable relief, including a
rescission remedy. On March 26, 2001, the Company, BIG and the five inside
director defendants filed a motion to dismiss the plaintiffs complaint for,
among other things, failure to allege material misstatements and/or omissions
in the roadshow presentations, registration statement and/or prospectus
relating to the IPO. On July 11, 2001, U.S. District Judge Richard A. Lazzara
denied all of the defendants motions to dismiss the complaint.

The case had been set for trial during the trial term commencing May 5, 2003.
On August 6, 2002, the plaintiff offered to accept, in full settlement of the
litigation as to all defendants, payment of $2.1 million to the putative
plaintiff class. On August 14, 2002, the Companys Board of Directors voted to
accept this offer, and the issuer of the Companys applicable Directors and
Officers and Company Reimbursement insurance policy has agreed to pay this
amount to the plaintiff class. The settlement was also approved by BIG and by
the other defendants represented by the Companys law firm. The parties to the
litigation have negotiated and signed a Memorandum of Understanding (MOU) of
the principal material settlement terms. The Companys insurer will pay $2.1
million to the plaintiff class in full settlement of the litigation. In
addition, the settlement is contingent upon approval by Judge Lazzara,
following notice to the members of the plaintiff class of, and a hearing on,
the proposed settlement terms. The Company believes that the material
allegations of the complaint are without merit, but has elected to settle the
litigation to avoid the time, expense and risks associated with continuing the
litigation. No assurances can be given, if the settlement is not consummated,
with respect to the outcome of the litigation, and an adverse result could have
a material adverse effect on the Companys business, financial condition and
results of operations.

The Company has been informed by the underwriters for the IPO that the
underwriters will be seeking indemnification from the Company, BIG and/or
Venture Capital Corporation for the underwriters legal fees and expenses
incurred in the litigation, pursuant to the Underwriting Agreement between the
Company, BIG, Venture Capital Corporation and the underwriters. The Companys
insurer has taken the position that it is not responsible for the payment of
such monies. On August 6, 2002, the underwriters informed the Company that
their legal fees and expenses in the litigation to date were approximately
$110,000.

On November 19, 1999, the United States, on behalf of the Federal Emergency
Management Agency (FEMA), filed a civil action against Bankers Insurance
Company, a subsidiary of BIG (BIC), in the United States District Court for
the District of Maryland stemming from FEMAs investigation of certain cash
management and claims processing practices of BIC in connection with its
participation in the National Flood Insurance Program (NFIP). The complaint
alleges, among other things, that BIC knowingly failed to report and pay
interest income it had earned on NFIP funds to the United States in violation
of the False Claims Act. The complaint further alleges various common law
theories, including fraud, breach of contract, unjust enrichment and negligent
misrepresentation. The complaint seeks civil penalties of $1.08 million and
actual damages of approximately $1.1 million, as well as treble, punitive and
consequential damages, costs and interest. The suit is currently stayed pending
arbitration following a decision by the United States Court of Appeals for the
Fourth Circuit in favor of BIC on its motion to stay the litigation pending
arbitration. The government has not appealed the Fourth Circuit Court of Appeal
ruling requiring arbitration and the case is stayed pending arbitration. By
letter dated January 30, 2002, FEMA notified BIC that it intends to move
forward with arbitration and set forth proposed procedures. BIC has further
informed the Company that it intends to vigorously defend against the action,
but no assurances can be given as to the outcome thereof. However, BIG has
advised the Company that an adverse judgment in this action should not have a
material adverse affect on the business and/or operations of BIC, although no
assurances can be given in this regard.

FEMAs investigation of certain claims processing practices of BIC in
connection with its participation in the NFIP is continuing, and BIC has
produced documentation in connection therewith. If the
parties are either unable to reach agreement in these matters or resolve their
disagreement in arbitration, the United States could amend its complaint
against BIC to add additional claims under the False Claims Act and/or various
common law and equitable theories relating to such matters. In the event such
continuing investigation or any consequence thereof materially adversely
affects the business or operations of BIC, it could result in the loss of or
material decrease in the Companys business from BIC, which would have a
material adverse effect on the Companys business, financial condition and
results of operations.

-9-



---



##### 



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

The Company continues to review the adequacy of a reserve it established prior
to January 1, 2002 for a settlement accrual of $800,000 relating to an
unaffiliated third-party customer contract with a former customer that was terminated in 2000 and for
which no settlement has yet been reached with this former customer. No
discussions between the Company and this customer have taken place since
October 2000. On November 6, the Company received a letter from the
Deputy Insurance Commissioner of the Commonwealth of Pennsylvania, on
behalf of the former customer. This letter
notified the Company that the liquidator for this former customer disavows and terminates the
Insurance Administration Services Agreement between Insurance
Management Solutions, Inc. and this former customer. The Company
is currently evaluating the impact of this
correspondence, although no assurances can be given as to its
ultimate resolution or the terms thereof.

Except for the liability established
for severance payments to a former officer of the Company, which was
recorded as of September 30, 2002, the Company has no other
liabilities or reserves required to be recorded resulting from the
Companys cost reduction efforts.

NOTE 5. SUBSEQUENT EVENTS

On October 15, 2002, BIG and Fidelity National Financial, Inc. (FNF)
announced that they have entered into a definitive agreement pursuant to which
FNF is to acquire First Community Insurance Company, a subsidiary of BIG
and a fifty-state licensed insurance carrier (FCIC), and certain assets of
BIG, including the rights to issue new and renewal flood insurance policies
underwritten by BIG and its subsidiaries, BIC, Bankers Security Insurance
Company (BSIC) and FCIC. The transaction involves more than 360,000 flood
insurance policies originated through a nationwide network of 10,000
independent agents in conjunction with the National Flood Insurance Program
(NFIP). The closing of such transaction is subject to certain regulatory
approvals and other conditions, including certain revisions to the existing
Insurance Administration Services Agreement between the Company and BIG, BIC,
BSIC and FCIC. The Company will continue to provide flood policy
administration and claim services to FNF upon the closing of such transaction.

In late October 2002, the Company was
contacted by a third party potentially interested in acquiring the
Company or its business. Thereafter, the Special
Committee of the Companys Board of Directors determined that it is appropriate
to further investigate this possibility prior to proceeding with the Companys
previously announced intent to commence the Offer. (The Offer would be
conditioned upon at least a majority of the shares of Common Stock not held by
two subsidiaries of BIG, BIC and BSIC (collectively with BIG, the BIG Group),
being tendered and other closing conditions typical for this type of
transaction.) Discussions between the Company and this third party are
ongoing. No assurances can be given, however, as to whether the discussions
with this third party will result in an acceptable offer for the Company or its
business.

As part of its evaluation of the potential third-party transaction, the Company
also intends to further consider the implications of the aforementioned
announced agreement between FNF and BIG. The closing of such transaction is
subject to certain regulatory approvals and other conditions, including certain
revisions to the existing Insurance Administration Services Agreement between
the Company and BIG (including certain of its subsidiaries). As mentioned
above, the Company will continue to provide flood policy administration and
claim services to FNF upon the closing of such transaction.

On October 30, 2002, the Company
entered into a Settlement Agreement and Release with a former
shareholder who exercised dissenters rights under applicable
Florida law in connection with the sale of Geotrac in December 2001.
Pursuant to this agreement, the Company paid the dissenting
shareholder $97,500, or $3.25 per share, for the 30,000 shares of
Common Stock formerly owned thereby.

NOTE 6. LIQUIDITY AND CAPITAL RESOURCES

The Companys principal sources of liquidity consist of cash on-hand, cash
flows from operations, and cash proceeds from the sale of the Companys Geotrac
subsidiary in late December 2001. The Company received net cash proceeds of
approximately $18.2 million as a result of the sale of its Geotrac subsidiary
in late December 2001.

On April 13, 2001, the Company entered into a Commitment Letter with BIG
pursuant to which BIG has agreed to advance to the Company, beginning June 1,
2001, up to $1.5 million per month as a prepayment of service fees due by BIG
and its affiliates under their service agreements with the Company. Such
advances are available to the Company beginning June 1, 2001 continuing through
December 1, 2002 and shall be payable upon demand by the Company. Any funds
advanced by BIG to the Company under the Commitment Letter shall constitute a
prepayment of, and shall be credited toward, the service fees charged to BIG by
the Company during the month following such advance. The Company has not drawn
upon this advance in 2002, and this has not been, nor does the Company expect
this to be, a viable source of funds.

-10-



---



##### 



During the nine-month period ended September 30, 2002, the Company experienced
an after-tax loss of $2.5 million. Consequently, it has not had a positive
cash flow from operations during such period. The Company is substantially
dependent on the business of affiliated insurance companies under the
common control of BIG, as the Company derives a substantial portion of its
revenue from outsourcing services provided to these affiliated
companies of BIG. During the nine months ended September 30, 2002, the Company experienced a
reduction in outsourcing services revenue due primarily to continued reduced
premium production by BIG and its affiliated insurance companies,
coupled with a lack of storm-related activity which often
occurs during the second and third quarters of each year. The Company
anticipates that the downward trend will continue for the remainder of 2002. As a
result, based upon currently forecasted results of operations, the Company does
not expect positive cash flows from operations for the remainder of 2002.

In August 2002 the Company announced an intention to
commence the Offer at a
price of $3.08 per share, net to the seller in cash. The Offer will be
conditioned upon at least a majority of the shares of Common Stock not held by
the BIG Group being tendered and other closing conditions typical for this type
of transaction. The Offer is to be made pursuant to an Agreement and Plan of
Merger, dated August 15, 2002 (the BIG Agreement), by and among the Company,
BIG, BIC, BSIC and Bankers Management Corporation (Acquisition Corp.). BIC is
a wholly-owned subsidiary of BIG and BSIC is a jointly-owned subsidiary of BIG
and BIC. BIG, BIC and BSIC constitute the BIG Group. Acquisition Corp. is a
Florida corporation wholly-owned by BIC and BSIC and formed solely for purposes
of consummating the Merger (as hereinafter defined). As of the date hereof, the
members of the BIG Group collectively own approximately 68.0% of the
outstanding shares of Common Stock. Pursuant to the BIG Agreement, the members
of the BIG Group have agreed not to tender the shares of Common Stock owned
thereby pursuant to the Offer. Pursuant to the BIG Agreement, the Company is
obligated to loan BIG and/or Bankers Underwriters, Inc., a wholly-owned
subsidiary of BIG (BUI), up to $7.0 million under a revolving line of credit
(the Line of Credit), secured by the insurance flood book of BUI. At
September 30, 2002 the amount drawn on this Line of Credit was $6.6 million.
All amounts due under the Line of Credit will be due July 31, 2003; monthly
interest-only payments will be due prior to maturity.

In late October 2002, the Company was
contacted by a third party potentially interested in acquiring the
Company or its business. Thereafter, the Special Committee of the
Companys Board of Directors determined that it is appropriate to
further investigate this possibility. (The
Offer would be conditioned upon at least a majority of the shares of
Common Stock not held by two subsidiaries of BIG, BIC and BSIC
(collectively with BIG, the BIG Group), being tendered and other
closing conditions typical for this type of transaction.) Discussions
between the Company and this third party are ongoing. No assurances
can be given, however, as to whether the discussions with this third
party will result in an acceptable offer for the Company or its
business.

Based on the foregoing, as well as the
actions of the Special Committee of the Board of Directors of the
Company as described in Part II  Item 5. Other
Information, the Company expects cash on hand and cash from
operations to be adequate to support its operating cash needs for the
foreseeable future, although no assurances can be given in this
regard. The foregoing assumes BIG and its affiliates will make timely
payment of amounts due the Company under the terms of the Amended
Service Agreement. As of the date of this report, BIG owes the
Company a past due total of $2.4 million under the Amended Service
Agreement. If such payments are not brought current and BIG does not
thereafter continue to pay amounts due under the Amended Service
Agreement on a timely basis, it could have a material adverse effect
on the Companys business, financial condition, and results of
operations, and could adversely impact the Companys ability to
commence the Offer.

-11-



---



##### 



NOTE 7. SEGMENT INFORMATION

|                                      |  |                |            |            |  |              |           |              |  |   |            |   |  |   |            |  
|------------------------------------- |  | -------------- | ---------- | ---------- |  | ------------ | --------- | ------------ |  | - | ---------- | - |  | - | ---------- | -
|                                      |  | Outsourcing    |            | Services - |  | Intercompany |           |              |  |  
|                                      |  | Services -     |            | Claims     |  | Eliminations |           | Consolidated
|                                      |  | Administration |            | Adjusting  |  | And Other    |           | Totals      
|                                      |  |                |            |            |  |              |           |             
|Three Months Ended September 30, 2001 |  |                |            |            |  |              |           |              |  |   |            |   |  |   |            |  
|                                     
|                                     
|                                     
|                                     
|Operating revenues-affiliated         |  | $              | 9,491,564  |            |  |              |          |              |  | $ | 2,600      |   |  | $ | 9,494,164  |  
|                                     
|                                     
|                                     
|                                     
|Operating revenues-unaffiliated       |  | $              | 2,256,156  |            |  | $            | 8,129,317 |              |  |   |           |   |  | $ | 10,385,473 |  
|                                     
|                                     
|                                     
|                                     
|Operating income/(loss)               |  | $              | 124,741    |            |  | $            | 1,895,326 |              |  |   |           |   |  | $ | 2,020,067  |  
|                                     
|                                     
|                                     
|                                     
|Interest expense                      |  | $              | 2,481      |            |  |              |          |              |  |   |           |   |  | $ | 2,481      |  
|                                     
|                                     
|                                     
|                                     
|Depreciation and amortization         |  | $              | 675,373    |            |  | $            | 43,638    |              |  |   |           |   |  | $ | 719,011    |  
|                                     
|                                     
|                                     
|                                     
|Identifiable assets                   |  | $              | 46,685,948 |            |  | $            | 6,106,867 |              |  | $ | (4,359,819 | ) |  | $ | 48,432,996 |  
|                                     
|                                     
|                                     
|                                     
|Three Months Ended September 30, 2002 |  |                |            |            |  |              |           |              |  |   |            |   |  |   |            |  
|                                     
|                                     
|                                     
|                                     
|Operating revenues-affiliated         |  | $              | 4,134,223  |            |  |              |          |              |  |   |           |   |  | $ | 4,134,223  |  
|                                     
|                                     
|                                     
|                                     
|Operating revenues-unaffiliated       |  | $              | 1,552,281  |            |  | $            | 1,411,653 |              |  |   |           |   |  | $ | 2,963,934  |  
|                                     
|                                     
|                                     
|                                     
|Operating income/(loss)               |  | $              | (1,606,991 | )          |  | $            | 204,956   |              |  |   |           |   |  | $ | (1,402,035 | )
|                                     
|                                     
|                                     
|                                     
|Interest expense                      |  |                |           |            |  |              |          |              |  |   |           |   |  |   |           |  
|                                     
|                                     
|                                     
|                                     
|Depreciation and amortization         |  | $              | 743,445    |            |  | $            | 9,109     |              |  |   |           |   |  | $ | 752,554    |  
|                                     
|                                     
|                                     
|                                     
|Identifiable assets                   |  | $              | 35,809,895 |            |  | $            | 5,652,342 |              |  | $ | (5,096,797 | ) |  | $ | 36,365,440 |  
|                                     
|                                     
|                                     
|                                     
|Nine Months Ended September 30, 2001  |  |                |            |            |  |              |           |              |  |   |            |   |  |   |            |  
|                                     
|                                     
|                                     
|                                     
|Operating revenues-affiliated         |  | $              | 31,225,405 |            |  |              |          |              |  |   |           |   |  | $ | 31,225,405 |  
|                                     
|                                     
|                                     
|                                     
|Operating revenues-unaffiliated       |  | $              | 5,778,030  |            |  | $            | 9,544,533 |              |  |   |           |   |  | $ | 15,322,563 |  
|                                     
|                                     
|                                     
|                                     
|Operating income/(loss)               |  | $              | 4,203,405  |            |  | $            | 1,478,986 |              |  |   |           |   |  | $ | 5,682,391  |  
|                                     
|                                     
|                                     
|                                     
|Interest expense                      |  | $              | 5,736      |            |  |              |          |              |  |   |           |   |  | $ | 5,736      |  
|                                     
|                                     
|                                     
|                                     
|Depreciation and amortization         |  | $              | 2,129,995  |            |  | $            | 128,500   |              |  |   |           |   |  | $ | 2,258,495  |  
|                                     
|                                     
|                                     
|                                     
|Identifiable assets                   |  | $              | 46,685,948 |            |  | $            | 6,106,867 |              |  | $ | (4,359,819 | ) |  | $ | 48,432,996 |  
|                                     
|                                     
|                                     
|                                     
|Nine Months Ended September 30, 2002  |  |                |            |            |  |              |           |              |  |   |            |   |  |   |            |  
|                                     
|                                     
|                                     
|                                     
|Operating revenues-affiliated         |  | $              | 18,116,331 |            |  |              |          |              |  |   |           |   |  | $ | 18,116,331 |  
|                                     
|                                     
|                                     
|                                     
|Operating revenues-unaffiliated       |  | $              | 3,986,636  |            |  | $            | 3,478,354 |              |  |   |           |   |  | $ | 7,464,990  |  
|                                     
|                                     
|                                     
|                                     
|Operating income/(loss)               |  | $              | (4,629,223 | )          |  | $            | 239,193   |              |  |   |           |   |  | $ | (4,390,030 | )
|                                     
|                                     
|                                     
|                                     
|Interest expense                      |  |                |           |            |  |              |          |              |  |   |           |   |  |   |           |  
|                                     
|                                     
|                                     
|                                     
|Depreciation and amortization         |  | $              | 2,090,633  |            |  | $            | 30,227    |              |  |   |           |   |  | $ | 2,120,860  |  
|                                     
|                                     
|                                     
|                                     
|Identifiable assets                   |  | $              | 35,809,895 |            |  | $            | 5,652,342 |              |  | $ | (5,096,797 | ) |  | $ | 36,365,440 |  

Outsourcing Services  Administration.Identifiable assets at September 30,
2001 include net assets of discontinued operations of $22,097,996.

Outsourcing Services  Claims Adjusting.Identifiable assets at September 30,
2002 and 2001 include goodwill, net of $2,250,409 and $2,283,504.

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

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

RESULTS OF OPERATIONS

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

-12-



---



##### 



|                                                              |                                     |                |      |                                  |       |                                 |       |       |       |      |      |       |       |  |       |       |       | 
|------------------------------------------------------------- | ----------------------------------- | -------------- | ---- | -------------------------------- | ----- | ------------------------------- | ----- | ----- | ----- | ---- | ---- | ----- | ----- |  | ----- | ----- | ----- | 
|                                                              |                                     |                |      | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                                                              |                                     |                |      |                                  |       |                                
|                                                              |                                     |                |      | 2001                             |       | 2002                            |       | 2001  |       | 2002
|                                                              |                                     |                |      |                                  |       |                                 |       |       |       |     
|REVENUES                                                      |                                     |                |      |                                  |       |                                 |       |       |       |      |      |       |       |  |       |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Outsourcing services                |                |      | 100.0                            | %     |                                 |       | 100.0 | %     |      |      | 100.0 | %     |  |       | 100.0 | %    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                     |                |      |                                  |       |                                 |       |       |       |      |      |       |       |  |       |       |       | 
|                                                              |                                     | Total revenues |      |                                  | 100.0 |                                 |       |       | 100.0 |      |      |       | 100.0 |  |       |       | 100.0 | 
|                                                             
|                                                             
|                                                             
|                                                             
|EXPENSES                                                      |                                     |                |      |                                  |       |                                 |       |       |       |      |      |       |       |  |       |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Cost of outsourcing services        |                |      | 73.6                             |       |                                 |       | 74.5  |       |      |      | 69.0  |       |  |       | 83.7  |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Selling, general and administrative |                |      | 10.1                             |       |                                 |       | 33.4  |       |      |      | 11.4  |       |  |       | 23.6  |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Management services from Parent     |                |      | 2.5                              |       |                                 |       | 1.3   |       |      |      | 2.5   |       |  |       | 1.6   |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Depreciation and amortization       |                |      | 3.6                              |       |                                 |       | 10.6  |       |      |      | 4.9   |       |  |       | 8.3   |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                     |                |      |                                  |       |                                 |       |       |       |      |      |       |       |  |       |       |       | 
|                                                              |                                     | Total expenses |      |                                  | 89.8  |                                 |       |       | 119.8 |      |      |       | 87.8  |  |       |       | 117.2 | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                     |                |      |                                  |       |                                 |       |       |       |      |      |       |       |  |       |       |       | 
|Operating income/(loss)                                       |                                     |                | 10.2 |                                  |       |                                 | (19.8 | )     |       |      | 12.2 |       |       |  | (17.2 | )    
|                                                             
|                                                             
|                                                             
|                                                             
|Interest income, net                                          |                                     |                | .5   |                                  |       |                                 | 2.1   |       |       |      | .4   |       |       |  | 1.6   |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                     |                |      |                                  |       |                                 |       |       |       |      |      |       |       |  |       |       |       | 
|Income/(loss) before income taxes and discontinued
operations |                                     |                | 10.7 |                                  |       |                                 | (17.7 | )     |       |      | 12.6 |       |       |  | (15.6 | )    
|                                                             
|                                                             
|                                                             
|                                                             
|Provision/(benefit) for income taxes                          |                                     |                | 2.7  |                                  |       |                                 | (6.5  | )     |       |      | 4.2  |       |       |  | (5.7  | )    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                     |                |      |                                  |       |                                 |       |       |       |      |      |       |       |  |       |       |       | 
|Income/(loss) before discontinued operations                  |                                     |                | 8.0  |                                  |       |                                 | (11.2 | )     |       |      | 8.4  |       |       |  | (9.9  | )    
|                                                             
|                                                             
|                                                             
|                                                             
|Income from discontinued operations                           |                                     |                | 1.0  |                                  |       |                                 |      |       |       |      | 3.3  |       |       |  |      |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                                     |                |      |                                  |       |                                 |       |       |       |      |      |       |       |  |       |       |       | 
|Net income/(loss)                                             |                                     |                | 9.0  | %                                |       |                                 | (11.2 | )%    |       |      | 11.7 | %     |       |  | (9.9  | )%   
|                                                              |                                     |                |      |                                  |       |                                 |       |       |       |      |      |       |       |  |       |       |       | 

OVERVIEW

During the nine months ended
September 30, 2002, the Company experienced a reduction in
outsourcing services revenue and related losses on an after-tax
basis, due in part to a lack of storm-related activity which often
occurs during the second and third quarters of the year. In addition,
the Company continued to experience a reduction in outsourcing
services revenue due to reduced personal line premium production by
BIG (including its insurance company affiliates), the Companys
principal customer, through the first six months of 2002, and the decrease in related service fees as
referenced below. The Company is currently focused on
implementing cost reduction measures and eliminating support or service
expenses associated with the provision of services to BIG. Effective
July 1, 2002, the Company amended its existing Administration
Services Agreement, effective October 1, 2001, with BIG and
certain of its insurance affiliates (the Service
Agreement and, as amended, the Amended Service
Agreement), such that, as of July 1, 2002, the Company no
longer provides policy administration or claims processing services
for BIGs personal (i.e., automobile and homeowners) insurance
lines of business or claims processing for BIGs commercial
insurance lines of business. However, the Company continues to
provide policy administration, claims administration and data
processing services in connection with BIGs flood insurance
line of business, with no change in the existing fee structure. In
addition, pursuant to the Amended Service Agreement, the Company
continues to provide BIG with IT hosting and support services for a
fixed monthly fee. The Company also continues to provide BIG with
various other back-office support services, including cash office
processing, records management, policy assembly, and print and mail
distribution services, in connection with all of BIGs personal
and commercial insurance lines of business. Notably, BIG ceased
writing new Automobile insurance during the third quarter of 2002.

For the foregoing services, BIG pays the Company a monthly fee based upon a
percentage of the direct written premium (DWP) for each line of business (except if
provided in connection with BIGs flood insurance line, whereby
the Company is paid based upon DWP volumes and incurred
losses). With respect to the service fees payable
in connection with BIGs personal (i.e., automobile and homeowners) and
commercial insurance lines of business, the applicable percentage of
DWP being charged has been reduced to reflect the reduction in the
services being provided in connection with such lines of business. If the
Amended Service Agreement had been in effect as of January 1, 2002, the
Companys affiliated outsourcing services revenues for the nine months ended
September 30, 2002, which were $18.1 million on an actual basis, would have
been $10.6 million.

Also effective July 1, 2002, in connection with the foregoing modifications to
the Service Agreement, the Company terminated 98 employees, or approximately
28% of its total workforce. Of these employees, 81 worked in claims processing
and 17 worked in policy administration. The Company expects to realize savings
of approximately $5.1 million in annual payroll costs and related expenses as a
result of this reduction in its workforce. Moreover, as
previously reported, the Company has recently taken other actions designed to
improve the Companys cost structure, including terminating two facility
subleases with BIG and its affiliates effective as of August 28, 2002 and October 31, 2002, respectively. The Company expects to realize cost savings of
approximately $725,000 annually as a result of the termination of these two
subleases.

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Effective August 12, 2002, the
Company amended the Amended Service Agreement with BIG.
Pursuant to this amendment, the Company provides additional IT support services
to BIG. In return for providing these services, the Company will receive not
less than approximately $876,000 annually in fees from BIG, which is a minimum
amount based upon estimated IT usage of the Companys services. In addition,
the Company hired eleven persons previously employed by BIG, at an anticipated
annualized cost of approximately $764,000. The foregoing modifications to the
Amended Service Agreement, as well as the corresponding workforce additions,
were approved by the Audit Committee of the Board of Directors of the Company
on August 14, 2002.

During the quarter ended September 30, 2002, the Company implemented additional
staffing cuts that further reduced its workforce by 38 employees. These
staff reductions occurred primarily in the areas of policy administration,
claims processing and administration, and are expected to save the Company an
additional $1.4 million annually.

Management of the Company believes that the foregoing actions, including the
implementation of the Amended Service Agreement, are necessary to ensure the
Companys long-term financial viability in light of the anticipated continued
downward trend in the amount of DWP generated by BIGs
personal (i.e., automobile and homeowners) and commercial insurance lines of
business. Except for the liability established for severance payments
to a former officer of the Company, which was recorded as of
September 30, 2002, the Company has no other liabilities or
reserves required to be recorded resulting from the Companys
cost reduction efforts.
No assurances can be given, however, as to the future financial
performance of the Company.

On October 15, 2002, BIG and Fidelity National Financial, Inc. (FNF)
announced that they have entered into a definitive agreement, pursuant to which
FNF is to acquire First Community Insurance Company, a subsidiary of BIG and a fifty-state licensed
insurance carrier (FCIC), and certain assets of BIG, including the rights to issue new
and renewal flood insurance policies underwritten by BIG and its subsidiaries,
BIC, BSIC and FCIC. The transaction involves more than 360,000 flood insurance
policies originated through a nationwide network of 10,000 independent agents
in conjunction with the National Flood Insurance Program
(NFIP). The closing of such transaction is subject to
certain regulatory approvals and other provisions, including certain revisions
to the existing Insurance Administration Services Agreement between the Company
and each of BIG, BIC, BSIC and FCIC. The Company will continue to provide
flood policy administration and claims services to FNF upon the closing of such
transaction.

In late October 2002, the Company was contacted by a third party potentially
interested in acquiring the Company or its business. Thereafter, the Special
Committee of the Companys Board of Directors determined that it is appropriate
to further investigate this possibility prior to proceeding with the Companys
previously announced intent to commence the Offer (see Part
IIItem 5. Other Information). Discussions with this third
party are ongoing. No assurances can be given, however, as to whether these
discussions will result in an acceptable offer for the Company or its business.
As part of its evaluation of the potential third-party transaction, the
Company also intends to further consider the potential implications of the
aforementioned agreement between FNF and BIG.

COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2002

Continuing Operations

Outsourcing Services Revenues.Outsourcing services revenues decreased $12.8
million, or 64.3%, to $7.1 million for the three months ended September 30,
2002 from $19.9 million for the corresponding period in 2001. The decrease
during this period was primarily attributable to decreased claims processing
revenue resulting from the absence of substantial tropical storm activity as
compared with 2001, coupled with reduced affiliated homeowner and automobile
revenue resulting from the implementation of the Amended Service Agreement with BIG effective July 1,
2002 (see Overview above). Tropical Storm Allison, which storm occurred in
June 2001, generated approximately $7.0 million in revenue for the quarter
ended September 30, 2001, whereas during the corresponding period of 2002 no
major storm activity occurred.

Cost of Outsourcing Services.Cost of outsourcing services decreased $9.3
million, or 63.7%, to $5.3 million for the three months ended September 30,
2002 from $14.6 million for the corresponding period in 2001. As a percentage
of outsourcing services revenues, cost of outsourcing services increased
slightly to 74.4% for the three-month period ended September 30, 2002 from
73.7% for the corresponding period in 2001. The decrease in the dollar amount
of cost of outsourcing services was due primarily to: (i) a $4.8 million
decrease in adjuster expense directly resulting from substantially
lower revenue generated by the Companys Colonial Claims
subsidiary due to the lack of tropical storm activity during 2002; (ii) a $1.9
million decrease in salary expense due to reductions in IT, Claims,
Policy

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Administration and Cash Office staff; (iii) a decrease in telephone
expenses due to a change of service provider effective in October 2001; and
(iv) a decrease in postage expense due primarily to lower auto and homeowner
volumes.

Selling, General and Administrative Expense.Selling, general and
administrative expenses increased $400,000, or 20.0%, to $2.4 million for the
three months ended September 30, 2002 from $2.0 million for the corresponding
period in 2001. This increase consisted primarily of increased spending of
$517,000 on director fees and professional fees and expenses arising from
ongoing actions of the Special Committee of the Board of Directors relating to
the contemplated Offer and the consideration of other strategic alternatives
for the Company. This increase was partially offset by reduced administrative
salary expense of approximately $114,000.

Management Services from Parent.Management Services from Parent decreased
$398,000, or 81.0%, to $93,000 for the three months ended September 30, 2002
from $491,000 for the corresponding period in 2001. The decrease was related to
reduced office lease expense under the new sublease agreement with Bankers
Financial Corporation, the parent company of BIG, that took effect in late
December 2001, combined with the staffing reductions effective July 1, 2002,
which led to reduced leased space expense for the Company.

Interest Income.Interest Income increased 48.0% to $148,000 for the three
months ended September 30, 2002 from $100,000 for the corresponding period in
2001. The increase reflected investment income earned on the net cash proceeds
from the sale of the Companys Geotrac of America, Inc.
(Geotrac) subsidiary in late December 2001, as well as interest earned on
the Companys line of credit with BIG (see Liquidity and Capital Resources
below).

Provision/(Benefit) for Income Taxes.The Companys effective income
tax/(benefit) rates were (36.6%) and 25.2% for the three months ended September
30, 2002 and 2001, respectively. The 2001 rate is lower due to the
allocation between discontinued operations and other interim
adjustments. For additional information on the
reconciliation of the Companys effective income tax rate to the federal
statutory income tax rate, see Note 10  Income Taxes in the Notes to the
Consolidated Financial Statements of the Company for the year ended December
31, 2001, included in the Companys Form 10-K filed with the Securities and
Exchange Commission on April 1, 2002.

Discontinued Operations

As a consequence of the sale of Geotrac on December 28, 2001, net income from
discontinued operations was $0 for the quarter ended September 30, 2002 as
compared to $196,217 for the corresponding period in 2001. For selected
financial information on discontinued operations, see Note 3. Discontinued
Operations in the Notes to the Consolidated Financial Statements (unaudited)
of the Company included in Item 1. Financial Statements above.

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2002

Continuing Operations

Outsourcing Services Revenues.Outsourcing services revenues decreased $20.9
million, or 44.9%, to $25.6 million for the nine months ended September 30,
2002 from $46.5 million for the corresponding period in 2001. The decrease
during this period was primarily attributable to decreased claims processing
revenue resulting from the absence of substantial tropical storm activity as
compared with 2001, coupled with reduced affiliated homeowner and automobile
revenue resulting from (i) reduced affiliated homeowner and automobile direct
written premium (DWP) during the first nine months of 2002 as compared to the
corresponding period of 2001 and (ii) the implementation of the Amended Service
Agreement with BIG effective July 1, 2002 (see Overview). Affiliated
homeowner DWP volumes decreased 45.8% and affiliated automobile DWP volumes
decreased 48.9% during the nine-month period ended September 30, 2002 as
compared to the corresponding period of 2001. In addition, Tropical Storm
Allison, which storm occurred in June 2001, generated approximately $10.5
million in revenue for the period ended September 30, 2001, whereas during the
corresponding period of 2002 no major storm activity occurred.

Cost of Outsourcing Services.Cost of outsourcing services decreased $10.8
million, or 33.5%, to $21.4 million for the nine months ended September 30,
2002 from $32.2 million for the corresponding period in 2001. As a percentage
of outsourcing services revenues, cost of outsourcing services increased to
83.7% for the nine months ended September 30, 2002 from 69.1% for the
corresponding period in 2001. The decrease in the dollar amount of cost of
outsourcing services from 2001 to 2002 was primarily due to: (i) a $4.7 million
decrease in adjuster expense resulting from substantially lower revenue
generated by the Companys Colonial Claims subsidiary due to
lack of tropical storm activity during 2002; (ii) a $3.1 million decrease in salary expense due
to a 46.4% reduction in IT, Claims and Cash
Office staff;

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##### 



(iii)  a decrease in telephone expenses due to a change of service
provider effective October 2001; (iv) a decrease in postage expense due to
lower auto and homeowner volumes; and (v) decreased office supply expense due
to tighter purchasing controls.

Selling, General and Administrative Expense.Selling, general and
administrative expenses increased $700,000, or 13.2%, to $6.0 million for the
nine months ended September 30, 2002 from $5.3 million for the corresponding
period in 2001. This increase was attributable to (i) director and professional
fees and expenses (primarily legal and investment banking fees and expenses) of
$1.0 million arising from ongoing actions of the Special Committee of the Board
of Directors relating to the contemplated Offer and the consideration of other
strategic alternatives for the Company and (ii) to a much lesser extent, an
increase of $100,000 in bad debt expense related to the Companys Colonial
Claims subsidiary. The increase was partially offset by decreased
administrative salary expense of approximately $400,000.

Management Services from Parent.Management Services from Parent decreased
$700,000, or 52.9%, to $400,000 for the nine months ended September 30, 2002
from $1.1 million for the corresponding period in 2001. The decrease relates
primarily to reduced office lease expense under the new sublease agreement with
Bankers Financial Corporation that took effect in late December 2001, combined
with staffing reductions effective July 1, 2002, which resulted in
reduced leased space expense for the Company.

Interest Income.Interest Income increased 132% to $422,000 for the nine months
ended September 30, 2002 from $182,000 for the corresponding period in 2001.
The increase reflected interest earned on the Companys line of credit with BIG
(see Liquidity and Capital Resources below), coupled with investment income
earned on the net cash proceeds from the sale of Geotrac in late December 2001.

Provision/(Benefit) for Income Taxes.The Companys effective income
tax/(benefit) rates were (37.0%) and 33.7% for the nine months ended September
30, 2002 and 2001, respectively. For additional information on the
reconciliation of the Companys effective income tax rate to the federal
statutory income tax rate, see Note 10  Income Taxes in the Notes to the
Consolidated Financial Statements of the Company for the year ended December
31, 2001, included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2001, as filed with the Securities and Exchange Commission
on April 1, 2002.

Discontinued Operations

As a consequence of the sale of Geotrac on December 28, 2001, net income from
discontinued operations was $0 for the nine months ended September 30, 2002 as
compared to $1.5 million for the corresponding period in 2001. For selected
financial information on discontinued operations, see Note 3. Discontinued
Operations in the Notes to the Consolidated Financial Statements (unaudited)
of the Company included in Item 1. Financial Statements above.

NEW ACCOUNTING POLICIES

Effective as of January 1, 2002, the Company adopted Statements of Financial
Accounting Standards (SFAS) 142, Goodwill and Intangible Assets, and 144,
Accounting for the Impairment or Disposal of Long Lived Assets. The Company
retained an independent third-party investment banking firm to conduct an
analysis of its goodwill valuation at January 1, 2002. Based on this valuation
the adoption of the new standards had no impact on the Companys results of
operations or financial condition for the nine-month period ended September 30,
2002, except that goodwill is no longer amortized.

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

LIQUIDITY AND CAPITAL RESOURCES

The Companys principal sources of liquidity consist of cash on hand, cash
flows from operations, and cash proceeds from the sale of the Companys Geotrac
subsidiary in late December 2001. The Company received net cash proceeds of
approximately $18.2 million as a result of the sale of Geotrac. Prior to the
consummation of the sale of Geotrac, the Company was party to a Corporate
Governance Agreement, dated July 31, 1998, with Geotrac and Daniel J. White
(Mr. White), setting forth certain terms and conditions pertaining to the
operation of Geotrac. Pursuant to this Corporate Governance Agreement, Mr.
White could impede the Companys ability to access excess cash balances
retained by its Geotrac subsidiary.

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##### 



On April 13, 2001, the Company entered into a Commitment Letter with BIG
pursuant to which BIG agreed to advance to the Company, beginning June 1, 2001,
up to $1.5 million per month as a prepayment of service fees due by BIG and its
affiliates under their service agreements with the Company. Such advances are
available to the Company beginning June 1, 2001 continuing through December 1,
2002 and shall be payable upon demand by the Company. Any funds advanced by BIG
to the Company under the Commitment Letter shall constitute a prepayment of,
and shall be credited toward, the service fees charged to BIG by the Company
during the month following such advance. The Company has not drawn upon this
advance in 2002, and this has not been, nor does the Company expect this to be,
a viable source of funds.

During the nine-month period ended September 30, 2002, the Company experienced
an after-tax loss of $2.5 million. Consequently, it did not have positive cash
flows from operations during such period. The Company is substantially
dependent on the business of affiliated insurance companies under the
common control of BIG, as the Company derives a substantial portion of its
revenue from outsourcing services provided to these affiliated companies of
BIG. During the nine months ended September 30, 2002, the Company experienced a
reduction in outsourcing services revenue due in part to continued reduced personal insurance lines
premium production by BIG. The Company anticipates that this trend will
continue for the remainder of 2002. As a result, based upon currently
forecasted results of operations, the Company does not expect positive cash
flows from operations for the remainder of 2002. Moreover, the Company is historically
dependent, to a large extent, on storm activity impacting its outsourcing
revenues. To this point in 2002 the positive impact on the Companys
outsourcing revenues from storm activity has been minimal, and the Company does
not expect to generate material storm activity revenue for the
remainder of 2002.

In August 2002, the Company announced an intention to commence the Offer for
all of the presently outstanding shares of its Common Stock at a price of $3.08
per share, net to the seller in cash. The Offer will be conditioned upon at
least a majority of the shares of Common Stock not held by BIG, BIC and BSIC
being tendered and other closing conditions typical for this type of
transaction. The Offer is to be made pursuant to an Agreement and Plan of
Merger, dated August 15, 2002 (the BIG Agreement), by and among the Company,
BIG, BIC, BSIC and Bankers Management Corporation (Acquisition Corp.). BIC is
a wholly-owned subsidiary of BIG and BSIC is a jointly-owned subsidiary of BIG
and BIC. BIG, BIC and BSIC constitute the BIG Group. Acquisition Corp. is a
Florida corporation wholly-owned by BIC and BSIC and formed solely for purposes
of consummating the Merger (as hereinafter defined). As of the date hereof, the
members of the BIG Group collectively own approximately 68.0% of the
outstanding shares of Common Stock. Pursuant to the BIG Agreement, the members
of the BIG Group have agreed not to tender the shares of Common Stock owned
thereby pursuant to the Offer. Also pursuant to the BIG Agreement, the Company
is obligated to loan BIG and/or Bankers Underwriters, Inc., a wholly-owned
subsidiary of BIG (BUI), up to $7.0 million under a revolving line of credit
(the Line of Credit), secured by the insurance flood book of BUI. At
September 30, 2002 the amount drawn on this Line of Credit was $6.6 million.
All amounts due under the Line of Credit will be due July 31, 2003; monthly
interest-only payments will be due prior to maturity.

In late October 2002, a third party potentially interested in acquiring the
Company or its business contacted the Company. Thereafter, the Special
Committee of the Companys Board of Directors determined that it is appropriate
to further investigate this possibility prior to proceeding with the Offer. No
assurances can be given, however, as to whether discussions with the third
party will result in an acceptable offer for the Company or its business. As
part of its evaluation of the potential third-party transaction, the Company
also intends to further consider the implications of the aforementioned
agreement between FNF and BIG. The closing of such transaction is subject to
certain regulatory approvals and other conditions, including certain revisions
to the existing Insurance Administration Services Agreement between the Company
and BIG (including certain of its subsidiaries). As discussed above, the
Company will continue to provide flood policy administration and claim services
to FNF upon the closing of such transaction.

Based on the foregoing, as well as the
actions of the Special Committee of the Board of Directors of the
Company as described in Part IIItem 5. Other
Information, the Company expects cash on hand and cash from
operations to be adequate to support its operating cash needs for the
foreseeable future, although no assurances can be given in this
regard. The foregoing assumes BIG and its affiliates will make timely
payment of amounts due the Company under the terms of the Amended
Service Agreement. As of the date of this report, BIG owes the
Company a past due total of $2.4 million under the Amended Service
Agreement. If such payments are not brought current and BIG does not
thereafter continue to pay amounts due under the Amended Service
Agreement on a timely basis, it could have a material adverse effect
on the Companys business, financial condition, and results of
operations, and could adversely impact the Companys ability to
commence the Offer.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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ITEM 4. CONTROLS AND PROCEDURES

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

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Since the announcement in August 2002 of the Companys intention to commence
the Offer, three alleged shareholders of the Company, each on behalf of a
putative class consisting of the Companys current public shareholders, have
filed lawsuits against, among others, the Company and the Companys current
directors, challenging the proposed Offer. The lawsuits are styled Pennapacker
v. Insurance Management Solutions Group, Inc., et al., Case No. 02-6636 CI-011
and Karcich v. Insurance Management Solutions Group, Inc., et al., Case No.
02-6712 CI-008 (collectively, the Pennapacker/Karcich Litigation), and Short
v. Insurance Management Solutions Group, Inc., et al., Case No. 02-6964 CI-013
(the Short Litigation).

The complaints in the Pennapacker/Karcich Litigation, pending in the Circuit
Court of the Sixth Judicial Circuit in and for Pinellas County, Florida, are
essentially identical. Those complaints name as defendants the Company, BIG,
the Companys seven current directors and one of the Companys former
directors. The complaint in the Short Litigation, pending in the U.S. District
Court for the Middle District of Florida, names as defendants the Company and
the Companys seven current directors.

In the Pennapacker/Karcich Litigation, the plaintiffs allege that each
defendant has breached its or his fiduciary duties to the Companys
shareholders other than the members of the BIG Group (the Public
Shareholders) in connection with the Companys decision to commence the Offer
(the Going-Private Transaction). The plaintiffs allege that the individual
defendants have violated their fiduciary duties (including their duties of
loyalty, care, good faith, candor and independence) by, among other things,
allegedly: (i) only negotiating with BIG for the acquisition of the shares of
Common Stock held by the Public Shareholders of the Company (the Public
Shares); (ii) attempting to discourage other offers for the Public Shares;
(iii) falsely conditioning the Companys Public Shareholders to believe that
the Companys value is impaired by a purported foreseeable decline in demand by
BIG, the Companys largest customer, for the Companys services; (iv)
attempting to entrench themselves in lucrative positions as the Companys
managers; and (v) attempting to usurp benefits of the Company for themselves as
a result of the Going-Private Transaction. The plaintiffs further allege that:
(i) BIG has conspired with the other defendants to allow BIG to acquire the
Company for inadequate consideration, while at the same time providing BIG with
the funds to consummate the Going-Private Transaction; and (ii) the Company and
the Individual Defendants aided and abetted the breach of the other defendants
fiduciary duties to the Public Shareholders.

In addition, the plaintiffs allege that some or all of the defendants breached
their fiduciary duties to the Companys Public Shareholders by allegedly, among
other things: (i) causing the Company to loan $5.0 million to BIG in 2001 and
later extending the repayment date for this loan without the Companys receipt
of consideration for this extension; (ii) causing the Company to amend its
existing Insurance Administration Services Agreement with BIG, effective July
1, 2002, so that the Company no longer provides certain policy administration
services or claims processing services to BIG, which services now are provided
to BIG by certain of the Companys former employees; (iii) using funds raised
by the Company in its February 1999 initial public offering of Common Stock at
the price of $11.00 per share, and the Companys 2001 sale of its Geotrac
subsidiary, to fund the Going-Private Transaction; (iv) allowing BIG to
recapture such monies through the Going-Private Transaction; (v) causing the
Company to loan up to $7.0 million to BIG or to a BIG subsidiary in connection
with the Going-Private Transaction; (vi) managing the Company to poor operating
results and a low stock price with the intention of restoring the
Company to its
true value following the Going-Private Transaction; (vii) failing to timely
file the Companys Form 10-Q for the quarter ending June 30, 2002; and (viii)
failing to replace prior directors of the Company with independent directors.

-18-



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##### 



The plaintiffs complaints in the Pennapacker/Karcich Litigation seek as
relief: (i) unspecified damages (including costs, attorneys fees and expert
witness fees); (ii) equitable relief directing the individual defendants to
exercise their fiduciary duties to properly negotiate a fair transaction with
BIG which properly and adequately compensates the Public Shareholders for their
Public Shares, or any other transaction which is in the best interests of the
Public Shareholders; and (iii) equitable relief rescinding any impediments to
additional offers by third parties for the Public Shares.

On October 3, 2002, pursuant to the applicable court rules, the judge assigned
to the Karcich case transferred that case to the judge assigned to the
Pennapacker case. On November 4, 2002, the Pennapacker case and the Karcich
case were consolidated. The plaintiffs deadline for filing a Consolidated
Amended Complaint in the Pennapacker/Karcich Litigation is November 25, 2002.
Following such action, the defendants to the consolidated case will file their
responses to the claims asserted in the Pennapacker/Karcich Litigation.

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

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

On September 25, 2002, the Company and three other defendants to the Short
litigation removed the Short litigation, which originally was filed in the
Circuit Court of the Sixth Judicial Circuit in and for Pinellas County,
Florida, to the U.S. District Court for the Middle District of Florida on the
ground that the plaintiffs challenge to the adequacy of the disclosures to be
made in the Companys Offer is governed exclusively by the federal Williams
Act, 15 U.S.C. § 78n(e), and that the federal courts have exclusive
jurisdiction over claims under the Williams Act and the regulations promulgated
thereunder. The Company also filed in the U.S. District Court a Motion to
Dismiss the complaint, and an Answer and Affirmative Defenses, denying the
plaintiffs claims. On September 27, 2002, the plaintiff filed a Motion to
Remand the Short litigation to state court, contending that the plaintiffs
claims are not subject to federal jurisdiction. On October 11, 2002, the
Company filed a Memorandum in Opposition to the Motion to Remand, which motion
now is awaiting determination by the court.

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

In addition, on September 28, 2000, October 25, 2000 and October 30, 2000,
three alleged shareholders of the Company filed three nearly identical lawsuits
in the United States District Court for the Middle District of Florida, each on
behalf of a putative class of all persons who purchased shares of the Companys
Common

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##### 



Stock pursuant and/or traceable to the registration statement for the
Companys February 1999 initial public offering (the IPO). The lawsuits were
consolidated on December 1, 2000, and the consolidated action is proceeding
under Case No. 8:00-CV-2013-T-26MAP (the IPO Litigation). The plaintiffs
Consolidated Amended Class Action Complaint, filed February 7, 2001, names as
defendant the following parties: the Company; BIG, Venture Capital Corporation,
a selling shareholder in the IPO; the five inside directors of the Company at
the time of the IPO; and Raymond James & Associates, Inc. and Keefe, Bruyette &
Woods, Inc., the underwriters for the IPO. The complaint alleges, among other
things, that the defendants violated Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, as amended, by making certain false and misleading
statements in the roadshow presentations, registration statement and prospectus
relating to the IPO. More specifically, the complaint alleges that, in
connection with the IPO, the defendants made various material
misrepresentations and/or omissions relating to: (i) the Companys ability to
integrate Geotracs flood zone determination business with the Companys own
flood zone determination business and with its insurance outsourcing services
business; (ii) actual and anticipated synergies between the Companys flood
zone determination and outsourcing services business lines; and (iii) the
Companys use of the IPO proceeds. The complaint seeks unspecified damages,
including interest, and equitable relief, including a rescission remedy. On
March 26, 2001, the Company, BIG and the five inside director defendants filed
a motion to dismiss the plaintiffs complaint for, among other things, failure
to allege material misstatements and/or omissions in the roadshow
presentations, registration statement and/or prospectus relating to the IPO. On
July 11, 2001, U.S. District Judge Richard A. Lazzara denied all of the
defendants motions to dismiss the complaint.

The case had been set for trial during the trial term commencing May 5, 2003.
On August 6, 2002, the plaintiff offered to accept, in full settlement of the
IPO Litigation as to all defendants, payment of $2.1 million to the putative
plaintiff class. On August 14, 2002, the Companys Board of Directors voted to
accept this offer, and the issuer of the Companys applicable Directors and
Officers and Company Reimbursement insurance policy has agreed to pay $2.1
million to the plaintiff class. The settlement was also approved by BIG and by
the other defendants represented by Company counsel. The parties to the IPO
Litigation have negotiated and signed a Memorandum of Understanding (MOU) of
the principal material settlement terms. The settlement is contingent upon
approval by Judge Lazzara, following notice to the members of the plaintiff
class of, and a hearing on, the proposed settlement terms. The Company believes
that the material allegations of the complaint are without merit, but has
elected to settle the IPO Litigation to avoid the time, expense and risks
associated with continuing the IPO Litigation. No assurances can be given, if
the settlement is not consummated, with respect to the outcome of the IPO
Litigation, and an adverse result could have a material adverse effect on the
Companys business, financial condition and results of operations.

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

On November 19, 1999, the United States, on behalf of the Federal Emergency
Management Agency (FEMA), filed a civil action against Bankers Insurance
Company, a subsidiary of BIG (BIC), in the United States District Court for
the District of Maryland stemming from FEMAs investigation of certain cash
management and claims processing practices of BIC in connection with its
participation in the National Flood Insurance Program (NFIP). The complaint
alleges, among other things, that BIC knowingly failed to report and pay
interest income it had earned on NFIP funds to the United States in violation
of the False Claims Act. The complaint further alleges various common law
theories, including fraud, breach of contract, unjust enrichment and negligent
misrepresentation. The complaint seeks civil penalties of $1.08 million and
actual damages of approximately $1.1 million, as well as treble, punitive and
consequential damages, costs and interest. The suit is currently stayed pending
arbitration following a decision by the United States Court of Appeals for the
Fourth Circuit in favor of BIC on its motion to stay the litigation pending
arbitration. The government has not appealed the Fourth Circuit Court of Appeal
ruling requiring arbitration and the case is stayed pending arbitration. By
letter dated January 30, 2002, FEMA notified BIC that it intends to move
forward with arbitration and set forth proposed procedures. BIC has further
informed the Company that it intends to vigorously defend against the action,
but no assurances can be given as to the
outcome thereof. However, BIG has advised the Company that an adverse judgment
in this action should not have a material adverse affect on the business and/or
operations of BIC, although no assurances can be given in this regard.

-20-



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##### 



FEMAs investigation of certain claims processing practices of BIC in
connection with its participation in the NFIP is continuing, and BIC has
produced documentation in connection therewith. If the parties are either
unable to reach agreement in these matters or resolve their disagreement in
arbitration, the United States could amend its complaint against BIC to add
additional claims under the False Claims Act and/or various common law and
equitable theories relating to such matters. In the event such continuing
investigation or any consequence thereof materially adversely affects the
business or operations of BIC, it could result in the loss of or material
decrease in the Companys business from BIC, which would have a material
adverse effect on the Companys business, financial condition and results of
operations.

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

Except as set forth above, there have been no material changes to the
disclosures set forth under the caption Item 3. Legal Proceedings in the
Companys Annual Report on Form 10-K for the year ended December 31, 2001, as
filed with the Securities and Exchange Commission on April 1, 2002.

ITEM 5. OTHER INFORMATION

As previously reported, effective July 1, 2002, the Company amended its
existing Administration Services Agreement, effective October 1, 2001, with
BIG, BIC, BSIC and FCIC (the Service Agreement and, as amended, the Amended
Service Agreement), such that, as of July 1, 2002, the Company no longer
provides policy administration or claims processing services for BIGs personal
(i.e., automobile and homeowners) insurance lines of business or claims
processing for BIGs commercial insurance lines of business. With respect to
the service fees payable in connection with BIGs personal (i.e., automobile
and homeowners) and commercial insurance lines of business, the applicable
percentage of direct written premium (DWP) being charged has been reduced to
reflect the reduction in the services being provided in connection with such
lines of business. In connection with the implementation of the Amended Service
Agreement, BIG agreed to assume all pending claims relating to the lines of
business being serviced on a reduced basis by the Company. In exchange, the
Company agreed to pay BIG $301,000 to cover the estimated processing costs for
these claims. Notably, BIG ceased writing new automobile insurance during the third quarter of 2002.

Also effective July 1, 2002, in connection with the foregoing modifications to
the Service Agreement, the Company terminated 98 employees, or approximately
28% of its total workforce. Of these employees, 81 worked in claims processing
and 17 worked in policy administration. The Company expects to realize savings
of approximately $5.1 million in annual payroll costs and related expenses as a
result of this reduction in its workforce. The Audit Committee
of the Board of Directors of the Company approved the modifications to the
Companys existing Service Agreement with BIG and the corresponding reduction
in the Companys workforce on June 26, 2002.

Pursuant to the Amended Service Agreement, the Company continues to provide
policy administration, claims administration and data processing services in
connection with BIGs flood insurance line of business, with no change in the
existing fee structure. In addition, pursuant to the Amended Service Agreement,
the Company continues to provide BIG with IT hosting and support services for a
fixed monthly fee. The Company also continues to provide BIG with various other
back-office support services, including cash office processing, records
management, policy assembly, and print and mail distribution services, in
connection with all of BIGs personal and commercial insurance lines of
business. For the foregoing services, BIG pays the Company a monthly fee based
upon a percentage of the DWP for each line of business (except if provided in
connection with BIGs flood insurance line, where no additional fee will be
imposed over that mentioned above). With respect to the service fees payable in
connection with BIGs personal (i.e., automobile and homeowners) and commercial
insurance lines of business, the applicable percentage of DWP being charged has been reduced to reflect the reduction in the services
being provided in connection with such lines of business. If the Amended
Service Agreement had been in effect as of January 1, 2002, the Companys
affiliated outsourcing services revenues for the nine months ended September
30, 2002, which were $18.1 million on an actual basis, would have been $10.6
million. Moreover, as previously reported, the Company has recently taken other
actions designed to improve the Companys cost structure, including terminating
two facility subleases with BIG and its
affiliates effective as of August 28, 2002 and October 31, 2002, respectively.
The Company expects to realize cost savings of approximately $725,000 annually
as a result of the termination of these two subleases.

Effective August 12, 2002, the Company amended the Amended Service Agreement
with BIG. Pursuant to

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##### 



this amendment, the Company provides additional IT
support services to BIG. In return for providing these services, the Company
will receive not less than approximately $876,000 annually in fees from BIG,
which is a minimum amount based upon the estimated IT usage by BIG of the
Companys services. In addition, the Company has hired eleven persons
previously employed by BIG, at an anticipated annualized cost of approximately
$764,000. The Audit Committee of the Board of Directors of the Company approved
the foregoing modifications to the Amended Service Agreement, and the
corresponding workforce additions, on August 14, 2002.

During the quarter ended September 30, 2002, the Company implemented additional
staffing reductions totaling 38 employees. These staff reductions
occurred
primarily in the areas of policy administration, claims processing and
administration, and are expected to save the Company an additional $1.4 million
annually.

The foregoing description of the Amended Service Agreement is qualified in its
entirety by reference to (1) the Insurance Administration Services Agreement
previously filed as Exhibit 10.71 to the Annual Report on Form 10-K/A for the
year ended December 31, 2001 filed by the Company on April 9, 2002, (2) the
First Amendment to Insurance Administration Services Agreement, dated July 1,
2002, previously filed as Exhibit 10.1 to the Current Report on Form 8-K filed
by the Company on July 10, 2002, and (3) the Second Amendment to Insurance
Administration Services Agreement, effective August 12, 2002, previously filed
as Exhibit 10.3 to the Quarterly Report on Form 10-Q filed on August 19, 2002.

As previously reported, in August 2002 the Company announced an intention to
commence a cash tender offer for all of the presently outstanding shares of its
common stock, $0.01 per share (Common Stock), at a price of $3.08 per share,
net to the seller in cash (the Offer). The Offer will be conditioned upon at
least a majority of the shares of Common Stock not held by members of the BIG
Group (as hereinafter defined) being tendered and other closing conditions
typical for this type of transaction. The Offer is to be made pursuant to an
Agreement and Plan of Merger, dated August 15, 2002 (the BIG Agreement), by
and among the Company, BIG, BIC, BSIC and Bankers Management Corporation
(Acquisition Corp.). BIC is a wholly-owned subsidiary of BIG and BSIC is a
jointly-owned subsidiary of BIG and BIC. BIG, BIC and BSIC constitute the BIG
Group. Acquisition Corp. is a Florida corporation wholly-owned by BIC and BSIC
and formed solely for purposes of consummating a short-form merger
following the Offer. As of the date hereof, the members of the BIG Group collectively own
approximately 68.0% of the outstanding shares of Common Stock. Pursuant to the
BIG Agreement, the members of the BIG Group have agreed not to tender the
shares of Common Stock owned thereby in response to the Offer. Also pursuant
to the BIG Agreement, the Company has agreed to loan BIG and/or Bankers
Underwriters, Inc., a wholly-owned subsidiary of BIG (BUI), up to $7.0
million under a revolving line of credit (the Line of Credit), secured by the
insurance flood book of BUI. At September 30, 2002 the amount drawn on this
Line of Credit was $6.6 million. All amounts due under the Line of Credit will
be due July 31, 2003; monthly interest-only payments will be due prior to
maturity.

The foregoing discussion of the BIG Agreement is qualified in its entirety by
reference to (1) the BIG Agreement included as Exhibit 2.1 to
the Quarterly Report on Form 10-Q for the three months ended
June 30, 2002 filed by the Company on August 19, 2002, and
(2) the Credit and Security Agreement (and related financing
documents), dated August 15, 2002, between the Company, BIG and
BUI previously filed as Exhibits 10.4 to 10.7 to the Quarterly Report
on Form 10-Q for the three months ended June 30, 2002 filed by
the Company on August 19, 2002.

On October 15, 2002, BIG and Fidelity National Financial, Inc. (FNF)
announced that they have entered into a definitive agreement pursuant to which
FNF is to acquire First Community Insurance Company, a subsidiary of BIG and a
fifty-state licensed insurance company (FCIC), and certain assets of BIG,
including the rights to issue new and renewal flood insurance policies
underwritten by BIG and its subsidiaries, BIC, BSIC and FCIC. The transaction
involves more than 360,000 flood insurance policies originated through a
nationwide network of 10,000 independent agents in conjunction with
the National Flood Insurance Program (NFIP).
The Company will continue
to provide flood policy administration and claim servicing operations to FNF
upon the closing of this transaction.

In late October 2002, the Company was
contacted by a third party potentially interested in acquiring the
Company or its business. Thereafter, the Special
Committee of the Companys Board of Directors determined that it
is appropriate to further investigate

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##### 



this possibility. Discussions with this third
party are ongoing. No assurances can be given, however, as to whether these
discussions will result in an acceptable offer for the Company or its business.

As part of its evaluation of the potential third-party transaction, the Company
also intends to further consider the implications of the aforementioned
agreement between FNF and BIG. The closing of such transaction is subject to
certain regulatory approvals and other conditions, including certain revisions
to the existing Insurance Administration Services Agreement between the Company
and BIG (including certain of its subsidiaries). As discussed above, the
Company will continue to provide flood policy administration and claim services
to FNF upon the closing of such transaction.

In light of the foregoing
developments, as well as information not available
to the Special Committee at the time of its determination to
recommend approval of the Offer potentially affecting the analysis
employed by the Special Committee, the Special Committee has
determined that it is appropriate to undertake further due diligence
to confirm its previous conclusion as to the fairness of the proposed
Offer and to ask Houlihan, Lokey, Howard & Zukin, the Special
Committee's financial advisor, to undertake to again review the
fairness, from a financial point of view, of the Offer price to the
Companys shareholders (other than the BIG Group). In addition, the
Special Committee is monitoring the Companys current liquidity position
in order to determine whether, in light of, among other things, (i)
the decline in affiliated outsourcing revenues, (ii) the collectibility of amounts due from BIG and its affiliates
under the Amended Service Agreement and (iii) higher than anticipated
costs and expenses incurred in connection with the ongoing actions of
the Special Committee of the Board of Directors of the Company, the
Company still would have sufficient cash available in the event it
proceeded with the Offer. No assurances can be
given, however, that the Company has sufficient cash to commence the
Offer. See "Part I  Item 2. Managements Discussion
and Analysis of Financial Condition and Results of Operations 
Liquidity and Capital Resources."

The tender offer will be made only by an offer to purchase and other offering
documents, copies of which will be filed with the Securities and Exchange
Commission and mailed to Company shareholders. Investors and shareholders are
strongly advised to read the tender offer documents when they become available,
because they will contain important information about the Companys present and
future operations. Investors and security holders may obtain a free copy of
these documents (when available) and other documents filed by the Company at
the SECs web site at http://www.sec.gov. The tender offer documents and
related materials may be obtained for free by directing such requests to the
information agent to be designated for the tender offer.

Effective August 20, 2002, and
pursuant to the Agreement and Plan of Merger, the Company and its
executive officers and directors mutually agreed to the cancellation
of previously issued stock options under various plans. Also pursuant
to the Agreement and Plan of Merger, each respective optionee waived
all rights and benefits associated with such options and
relinquished any and all claims that the optionee may have had
against the Company related to such options or plans.

On August 23, 2002, the Company entered into a Release and Separation Agreement
with Robert G. Gantley. Mr. Gantley was the Companys Chief Operating Officer
and his position was eliminated primarily due to changes in the lines of
business the Company supports for its outsourcing operations. The Release and
Separation Agreement provides for severance payments of up to $180,000 to be
paid over a one-year period. The payments under the Release and Separation
Agreement are subject to limitations based upon Mr. Gantley securing future
employment.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a) Exhibits

|        |  |                                                                                                                                                                                                                                                                    
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                    
|Number  |  | Description                                                                                                                                                                                                                                                        
|2.1     |  | Agreement and Plan of Merger, dated as of August 15, 2002, by and among Bankers Insurance
Group, Inc., Bankers Insurance Company, Bankers Security Insurance Company, BIG Acquisition
Corporation and Insurance Management Solutions Group, Inc.*                  
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                    
|       
|       
|       
|       
|10.1    |  | First Amendment to Insurance Administration Services Agreement, effective July 1, 2002, by
and between Insurance Management Solutions, Inc. and each of Bankers Insurance Company,
Bankers Security Insurance Company and First Community Insurance Company.**     
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                    
|       
|       
|       
|       
|10.2    |  | Second Amendment to Insurance Administration Services Agreement, effective August 12, 2002,
by and between Insurance Management Solutions, Inc. and each of Bankers Insurance Company,
Bankers Security Insurance Company and First Community Insurance Company.***
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                    
|       
|       
|       
|       
|10.3    |  | Credit and Security Agreement, dated and effective August 15, 2002, between Insurance
Management Solutions Group, Inc., as Lender, and Bankers Insurance Group, Inc. and Bankers
Underwriters, Inc., as Borrower.****                                              
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                    
|       
|       
|       
|       
|10.4    |  | Revolving Line of Credit Master Promissory Note, dated August 15, 2002, by Bankers Insurance
Group, Inc. and Bankers Underwriters, Inc. in favor of Insurance Management Solutions Group,
Inc.*****                                                                
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                    
|       
|       
|       
|       
|10.5    |  | Collateral Assignment of Flood Book, dated and effective August 15, 2002, by Bankers
Underwriters, Inc. in favor of Insurance Management Solutions Group, Inc.******                                                                                               
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                    
|       
|       
|       
|       
|10.6    |  | Further Assurance and Compliance Agreement, dated August 15, 2002, between Bankers Insurance
Group, Inc., Bankers Underwriters, Inc. and Insurance Management Solutions Group, Inc.*******                                                                         
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                    
|       
|       
|       
|       
|99.1    |  | Written Statement of Chief Executive Officer Pursuant to 18 U.S.C. §1350.                                                                                                                                                                                          
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                    
|       
|       
|       
|       
|99.2    |  | Written Statement of Chief Financial Officer Pursuant to 18 U.S.C. §1350.                                                                                                                                                                                          
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                    
|       
|       
|       
|       
|99.3    |  | Certification of September 30, 2002 Form 10-Q Quarterly Report by Chief Executive Officer.                                                                                                                                                                         
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                    
|       
|       
|       
|       
|99.4    |  | Certification of September 30, 2002 Form 10-Q Quarterly Report by Chief Financial Officer.                                                                                                                                                                         

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##### 



|        |  |                                                                                                                                                                                             
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                             
|Number  |  | Description                                                                                                                                                                                 
|       
|       
|       
|       
|*       |  | Previously filed as Exhibit 2.1 to the Companys Quarterly Report on Form 10-Q for the three
months ended June 30, 2002, as filed on August 19, 2002, and incorporated by reference
herein. 
|       
|       
|       
|       
|        |  |                                                                                                                                                                                             
|       
|       
|       
|       
|**      |  | Previously filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed on July
10, 2002 and incorporated by reference herein.                                                   
|       
|       
|       
|       
|        |  |                                                                                                                                                                                             
|       
|       
|       
|       
|***     |  | Previously filed as Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the three
months ended June 30, 2002, as filed on August 19, 2002, and incorporated by reference
herein.
|       
|       
|       
|       
|        |  |                                                                                                                                                                                             
|       
|       
|       
|       
|****    |  | Previously filed as Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q for the three
months ended June 30, 2002, as filed on August 19, 2002, and incorporated by reference
herein.
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|       
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|       
|        |  |                                                                                                                                                                                             
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|*****   |  | Previously filed as Exhibit 10.5 to the Companys Quarterly Report on Form 10-Q for the three
months ended June 30, 2002, as filed on August 19, 2002, and incorporated by reference
herein.
|       
|       
|       
|       
|        |  |                                                                                                                                                                                             
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|******  |  | Previously filed as Exhibit 10.6 to the Companys Quarterly Report on Form 10-Q for the three
months ended June 30, 2002, as filed on August 19, 2002, and incorporated by reference
herein.
|       
|       
|       
|       
|        |  |                                                                                                                                                                                             
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|       
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|******* |  | Previously filed as Exhibit 10.7 to the Companys Quarterly Report on Form 10-Q for the three
months ended June 30, 2002, as filed on August 19, 2002, and incorporated by reference
herein.

b) Reports on Form 8-K

The Company filed one current report on Form 8-K during the three months ended
September 30, 2002:

On July 10, 2002, the Company filed a Current Report on Form 8-K to report: (i)
the resignation of David K. Meehan as Chairman of the Board of Directors of the
Company, effective as of July 1, 2002; (ii) the appointment of David M. Howard
as Chairman of the Board of Directors of the Company, effective July 1, 2002;
and (iii) the amendment, effective July 1, 2002, of the Companys existing
Insurance Administration Services Agreement, effective October 1, 2001, by and
between the Company and each of BIG, BIC, BSIC and FCIC.

-24-



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##### 



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                        |  |     |  |                                                                                                                
|----------------------- |  | --- |  | ---------------------------------------------------------------------------------------------------------------
|Date: November 14, 2002 |  |     |  | INSURANCE MANAGEMENT SOLUTIONS                                                                                 
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|                        |  |     |  | GROUP, INC                                                                                                     
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|                        |  |     |  | (Registrant)                                                                                                   
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|                        |  |     |  |                                                                                                                
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|                        |  | By: |  | /s/ DAVID M. HOWARD                                                                                            
|                       
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|                        |  |     |  | David M. Howard
Chairman, President and Chief
Executive Officer (Principal
Executive Officer)                  
|                       
|                       
|                       
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|                        |  |     |  |                                                                                                                
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|                       
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|                        |  | By: |  | /s/ ANTHONY R. MARANDO                                                                                         
|                       
|                       
|                       
|                       
|                        |  |     |  | Anthony R. Marando
Chief Financial Officer and
Corporate Secretary (Principal
Financial and Accounting Officer)

-25-



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##### 



EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                  
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                  
|Number  |  | Description                                                                                                                                                                                                                                                      
|2.1     |  | Agreement and Plan of Merger, dated as of August 15, 2002, by and among Bankers Insurance Group,
Inc., Bankers Insurance Company, Bankers Security Insurance Company, BIG Acquisition Corporation
and Insurance Management Solutions Group, Inc.*                
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                  
|       
|       
|       
|       
|10.1    |  | First Amendment to Insurance Administration Services Agreement, effective July 1, 2002, by and
between Insurance Management Solutions, Inc. and each of Bankers Insurance Company, Bankers
Security Insurance Company and First Community Insurance Company.*    
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                  
|       
|       
|       
|       
|10.2    |  | Second Amendment to Insurance Administration Services Agreement, effective August 12, 2002, by and
between Insurance Management Solutions, Inc. and each of Bankers Insurance Company, Bankers
Security Insurance Company and First Community Insurance Company.*
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                  
|       
|       
|       
|       
|10.3    |  | Credit and Security Agreement, dated and
effective August 15, 2002, between Insurance
Management Solutions Group, Inc., as Lender,
and Bankers Insurance Group, Inc. and Bankers
Underwriters, Inc., as Borrower.*                                               
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                  
|       
|       
|       
|       
|10.4    |  | Revolving Line of Credit Master Promissory
Note, dated August 15, 2002, by Bankers
Insurance Group, Inc. and Bankers
Underwriters, Inc. in favor of Insurance
Management Solutions Group, Inc.*                                                                  
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                  
|       
|       
|       
|       
|10.5    |  | Collateral Assignment of Flood Book, dated and
effective August 15, 2002, by Bankers
Underwriters, Inc. in favor of Insurance
Management Solutions Group, Inc.*                                                                                                  
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                  
|       
|       
|       
|       
|10.6    |  | Further Assurance and Compliance Agreement,
dated August 15, 2002, between Bankers
Insurance Group, Inc., Bankers Underwriters,
Inc. and Insurance Management Solutions Group, Inc.*                                                                             
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                  
|       
|       
|       
|       
|99.1    |  | Written Statement of Chief Executive Officer Pursuant to 18 U.S.C. §1350.                                                                                                                                                                                        
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                  
|       
|       
|       
|       
|99.2    |  | Written Statement of Chief Financial Officer Pursuant to 18 U.S.C. §1350.                                                                                                                                                                                        
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                  
|       
|       
|       
|       
|99.3    |  | Certification of September 30, 2002 Form 10-Q Quarterly Report by Chief Executive Officer.                                                                                                                                                                       
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                  
|       
|       
|       
|       
|99.4    |  | Certification of September 30, 2002 Form 10-Q Quarterly Report by Chief Financial Officer.                                                                                                                                                                       



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|* |  | Indicates document incorporated herein by reference.
|- |  | ----------------------------------------------------

E-1