<PAGE>

                                   FORM 10-K
                                 AMENDMENT NO. 2
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)

    [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
          EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the fiscal year ended ..........December 31, 1996

                                      OR

    [  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
          EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from _________  to ________________________________.

Commission File Number        0-16520
                      ----------------------------------------------------------

                            ARISTA INVESTORS CORP. 
--------------------------------------------------------------------------------
           (Exact name of registrant as specified in its charter)

            Delaware                                           13-2957684       
-------------------------------------                  ------------------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)


   116 John Street, New York, New York                           10038
-------------------------------------------            ------------------------
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code:  (212) 964-2150 
                                                   ----------------------------

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


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

                           Class A Common Stock, par value $0.01 per share

         Indicate by check mark whether the  registrant  (1) has filed all 
reports  required to be filed by Section 13 or 15(d) of the Securities  
Exchange Act of 1934 during the preceding 12 months (or for such shorter  
period that the  registrant was required to file such reports), and (2) has 
been subject to such filing requirements for the past 90 days.

                                              Yes: X    No: 
                                                  ---      ---

         The aggregate  market value of the voting stock (Class A Common 
Stock, par value $ .01 per share) held by  non-affiliates  of the registrant, 
computed by reference to the average of the closing bid and asked price, as 
of April 8, 1997 was $4,767,340.62.

         Indicate by check mark if disclosure of delinquent  filers  pursuant 
to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein,  and will not be contained,  to the best of  registrant's  knowledge, 
 in  definitive  proxy or  information statements incorporated by reference 
in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

         The aggregate  number of  registrant's  outstanding  shares on April 
8, 1997,  was 2,570,100  shares of Class A Common Stock, $0.01 par value 
(excluding 10,000 shares of treasury stock), and 47,400 shares of Class B 
Common Stock, $0.01 par value.

                   DOCUMENTS INCORPORATED BY REFERENCE:

                                 None.
<PAGE>

                                 PART I


ITEM 1.  BUSINESS

GENERAL

         Arista Investors Corp. (the "Registrant") through its wholly-owned 
subsidiary, Arista Insurance Company  ("Arista"), a New York corporation  
(Registrant and Arista are sometimes hereinafter  individually or 
collectively referred to as the "Company"),  has been engaged in the sale and 
 underwriting  of statutory, super statutory and voluntary  disability  
benefits insurance (collectively, the  "Insurance") in the State of New York 
since  1979.  The Registrant is a Delaware  corporation  incorporated  on 
August 19, 1986, which suceeded to the business of its  predecessor, Arista 
Investors Corp., a New York corporation organized in 1978. The Company's 
principal executive offices are located at 116 John Street, New York, New 
York 10038.  Its telephone number is (212) 964-2150.

         Arista was  licensed  to write  accident  and health  insurance  by 
the New York State Insurance  Department in October 1979,  and sells and  
underwrites  the  Insurance.  During the year ended December 31, 1993,  
Arista  amended its charter and became  licensed to write a line of property 
and casualty  insurance  in New York as well.  To date,  Arista has not 
written any property and casualty  insurance  business.  Such  licenses may 
continue in  perpetuity  unless suspended or terminated by an act of the 
regulator.

         The  following  table sets forth the gross,  ceded and net premiums  
earned by Arista, together with the Company's  investment income and realized 
investment gains (losses) for each of the three years of the period ended 
December 31, 1996.

                                  1994               1995               1996
                                  ----               ----               ----
Gross premiums earned         $26,188,858        $26,091,714        $23,160,258
Ceded premiums earned          13,094,429         13,045,857         11,580,129
                              -----------        -----------        -----------
  Net premiums earned         $13,094,429        $13,045,857        $11,580,129
                              -----------        -----------        -----------
                              -----------        -----------        -----------

Investment income             $   215,480        $   252,134        $   440,540
                              -----------        -----------        -----------
                              -----------        -----------        -----------
Realized investment gains
  (losses)                    $    (2,603)       $      (137)       $      (208)
                              -----------        -----------        -----------
                              -----------        -----------        -----------

         Under New York State law, all eligible  employees,  including  
full-time and part-time employees in New York State,  are required to be 
provided with  disability  insurance  coverage unless excluded by statute, 
e.g.,  government,  railroad,  maritime or farm workers.  Statutory 
disability  

                                       2
<PAGE>

benefits insurance presently provides for a payment to totally disabled 
employees in the amount of 50% of weekly salary to a maximum payment of $170 
per week, for a maximum of 26 weeks beginning with the eighth day of  
disability due to off-the-job accident or sickness.  On-the-job accident or 
sickness is covered by worker's compensation insurance, not statutory  
disability benefits insurance.  Arista charges a premium for the Insurance 
coverage based upon a rate structure approved by the New York State  
Insurance Department.  In order for an insurer to alter its rate structure it 
must obtain prior written approval from the New York State Insurance  
Department. Under New York law, an employer may require an employee to 
contribute 1/2 of 1% of covered payroll up to a maximum of $.60 per week  
towards the premium charge for statutory disability benefits insurance.

         In addition to standard  statutory  disability  benefits  insurance  
coverage,  Arista offers certain  augmented  benefits  which include the 
payment of the  disability  benefit from the first day of disability as 
opposed to the eighth day of disability,  increased  duration of benefits  
from 26 weeks up to 52 weeks,  benefits  increased  over the  maximum of $170 
 weekly benefit and an additional  multiple if related to  hospitalization  
(e.g.,  150% of the benefit if an  employee is  hospitalized).  Arista also 
offers  coverage  for  association  groups on a competitive  basis.  The  
underwriting  of these augmented  benefits and specialized  coverages 
currently does not represent a significant percentage of Arista's earned 
premiums.

         Pursuant to agreements  effective  July 1, 1993 and January 1, 1995, 
 Arista has acted as a third party  administrator for the statutory  
disability benefits books of business of The Guardian  Life  Insurance  
Company of America and the United States Life  Insurance  Company in the City 
of New York,  respectively.  The  administrative  services  fees  collected  
by Arista during the years ended  December 31, 1994,  1995 and 1996 were 
$50,976,  $165,801 and $234,176, respectively.

         During the  three-year  period ended  December  31, 1996,  Arista 
has entered into the following arrangements to acquire books of New York 
State disability insurance:

         1.       Arista acquired the right,  effective January 1, 1994, to 
offer the Insurance coverage to policyholders  previously  insured by The 
North Atlantic Life Insurance  Company of America ("NALIC").  For the period 
 October 1, 1991 through  December  31, 1993,  Arista had a third party 
administrative agreement with NALIC.

         2.       Pursuant  to an  agreement  with  Aetna  Life  Insurance  
Company  ("Aetna"), effective  April 1, 1994,  Arista  acquired  Aetna's  
entire  book of New York State  statutory non-experience   rated  state  cash 
 sickness   disability   insurance  through  an  assumption reinsurance  
treaty,  and issued  assumption  certificates  to those  policyholders  
previously insured with Aetna.

         3.       Effective  October 1, 1994,  Arista  entered  into an  
Indemnity  Reinsurance Agreement with American  Medical and Life  Insurance  
Company  ("American  Med") wherein Arista assumed a book of the Insurance 
that was ceded by American Med.


                                       3
<PAGE>

         4.       Effective January 1, 1995, Arista,  through an assumption 
reinsurance treaty, acquired the book of the  Insurance  that had been  
previously  ceded by American  Med.  Arista issued assumption certificates to 
all such American Med policyholders.

         5.       Effective April 1, 1996, Arista entered into assumption  
reinsurance treaties with  Greater  New York Mutual  Insurance  Company  
("GNYMIC")  and with  Insurance  Company of Greater  New York  ("ICGNY")  
which  authorized  Arista to assume all of  GNYMIC's  and ICGNY's Insurance 
and issue assumption  certificates to the  policyholders  then currently 
insured with GNYMIC and ICGNY.

         For the year ended December 31, 1996, one group, the  Federation of 
Jewish Philanthropies, accounted for approximately 11% of Arista's revenue.  
No other customer accounted for 10% or more of the Company's consolidated 
revenues in the year ended December 31, 1996.  For the years ended December 
31, 1994 and 1995, no one group  accounted for 10% or more of Arista's 
revenue, however,  Arista underwrites the Insurance for two large groups with 
combined earned premiums of approximately $4,496,000 in 1994, $3,692,000 in 
1995, and $3,810,000 in 1996.

         Effective  December 29, 1995, Arista issued a $3,000,000  surplus 
note to Cologne Life Underwriting  Management  Company  ("CLUMCO").  The 
surplus note bears  interest at the rate of 10.5% per annum,  and provides 
for the  principal to be repaid in eight equal  installments  in years three 
through ten,  together  with any accrued  interest.  These  repayments of 
principal and accrued  interest shall only be made out of the free and 
divisible  surplus of Arista,  and are  subject to the prior  approval  of 
the  Superintendent  of  Insurance  of the State of New York.  If the  
principal  and interest are not repaid in full at the end of the ten years,  
the surplus note renews  annually for additional  one-year  terms until the 
balance is repaid.  The surplus note permits  prepayment  subject to the 
prior approval of the New York State Insurance Department.  In  addition,  
the  Registrant  issued a ten year warrant to CLUMCO to purchase up to 
150,000 shares of the Company's Class A Common Stock,  subject to certain 
conditions,  at an exercise price of $3.50 per share.  See "Reinsurance 
Ceded."

         Arista  submitted  an  application  for  admission as a reinsurer to 
the Office of the Commissioner  of Insurance of the  Commonwealth  of Puerto 
Rico during  1989.  In 1991,  Arista requested that the  Commissioner  hold 
its  application  in abeyance  pending the conclusion of certain  
negotiations  regarding a reinsurance  arrangement in the  Commonwealth.  
Negotiations regarding this arrangement are still ongoing.

         In 1994,  Arista  submitted an application to the  Commissioner of 
Insurance in Hawaii (the  "Commissioner")  to become licensed in the State of 
Hawaii to write Temporary  Disability Insurance.  In 1995, Arista completed 
all of the license  requirements and its submissions were in the process of 
being  reviewed by the  Commissioner.  In February,  1996,  Arista  concluded 
that it would withdraw its application in Hawaii.


                                       4
<PAGE>


MARKETING

         Arista  believes  that,  particularly  with  respect  to the  small  
and  medium-sized businesses on which it focuses its  marketing  efforts,  
business  owners  generally  rely upon agents in selecting an insurance  
company.  Consequently,  Arista  considers  the general agent to be its  
customer  and  stresses  prompt and  personal  service to its general  agents 
in all phases of underwriting, product delivery and claims processing 
functions.

         Arista  currently has under  contract 390 general  agents.  These 
general agents place the  Insurance  with other  insurance  companies in 
addition to Arista.  These  general  agents submit to Arista  insurance  
written through more than 6,900  insurance  brokers and soliciting agents.  
Arista enters into written  contracts  with general  agents who in turn 
engage brokers and  soliciting  agents.  Arista's  contract  with each 
general agent may be canceled by either party on 30 days' prior written  
notice.  The commissions  paid by Arista are competitive  with the  
commissions  paid by other  insurers in the  insurance  industry.  Each  
general  agent is responsible  for payment of any  commissions  due brokers 
or soliciting  agents  engaged by the general agent.

         In 1996,  based upon results as of December 31,  1995,  Arista  
received a rating of B (good) from A.M. Best Company,  Inc.  ("Best"),  the 
principal  organization  rating  insurance companies. Best's ratings are 
based upon factors of concern to policyholders.

CLAIMS

         Gross claims incurred by Arista  amounted to $17,752,698 in 1994,  
$16,588,801 in 1995 and $15,288,310 in 1996.

         The factors generally  affecting gross claims incurred are a 
function of the number of risks  covered  with either  part-time  or  
full-time  workers,  the wage level of each covered employee  to a maximum  
of $170 per week and the  duration  of  disability  to a maximum  of 26 
weeks.  The gross  amount  of claims  incurred  at any  point in time is also 
 affected  by the number of females covered since maternity is treated 
statutorily as any other disability.


                                       5
<PAGE>

         The Company's estimated-to-actual claims experience is as follows:

Calendar Year        Estimated Loss Ratio           Actual Loss Ratio
-------------        --------------------           -----------------

    1992                   65.7%                          67.6%
    1993                   65.5%                          64.9%
    1994                   66.5%                          65.0%
    1995                   62.2%                          61.8%
    1996                   62.4%*                            **

*   Experience is based on estimated  claim reserves  including  reinsurance  
assumed at December 31, 1996.

**  Fully  developed loss  information  for 1996 will not be available until 
after September 30, 1997.

         The  estimated  loss  ratio is  calculated  for each  year  based  
upon an  historical estimate of the claims  development  divided by the  
premiums  earned for a calendar  year.  It differs  from the actual  loss  
ratio  which  represents  the fully  developed  claims for that calendar year 
divided by the actual premiums earned for that calendar year.

REINSURANCE CEDED

         Arista  utilizes  reinsurance to reduce its net liability on 
business in force through risk  sharing.  The ceding of  insurance  does not  
discharge  the  original  insurer  from its primary  liability  to the  
policyholder.  The ceding  company is required to pay losses to the extent 
the assuming  company fails to meet its  obligations  under the  reinsurance  
agreement. The practice of insurers,  however,  subject to certain statutory  
limitations and as permitted by  regulatory  authorities,  is to account for  
reinsured  risks to the extent of  reinsurance ceded as though they are not 
risks for which the original insurer remains liable.

         From  October  1, 1992 to  September  30,  1993,  Arista had a  
stop-loss  reinsurance agreement  with its reinsurer.  The  reinsurance  
agreement  provided for Arista to cede 50% of its  disability  policies  
written to the  reinsurer  when  Arista's loss ratio was equal to or greater 
than 75%, up to but not to exceed 100% of earned  premiums.  The  reinsurer  
was paid a fee based on Arista's earned  premiums.  The reinsurance  
agreement was subject to cancellation by either party on 90 days prior 
written notice.

         From  October 1, 1993 to  September  30, 1995,  Arista had a  
quota-share  reinsurance agreement with its reinsurer,  Harbourton 
Reinsurance,  Inc. (formerly, NRG America Reassurance Corporation).  Under 
this  agreement,  Arista ceded by way of  reinsurance a 50% quota share of 
its liability  with respect to the Insurance  issued to various  
policyholders.  This agreement was subject to cancellation by either party on 
90 days prior written notice.


                                       6
<PAGE>


         Effective  October 1,  1995,  Arista  entered  into an  agreement  
with  Cologne  Life Reinsurance  Company  ("Cologne")  whereby Arista cedes 
by way of reinsurance a 50% quota share participation  in the Insurance,  
both for business in force as of October 1,  1995 and for new business   
written  or  acquired  after   October 1,   1995.   This  agreement  is  
subject  to cancellation by either party on 90 days prior written notice.

         Cologne had total assets of  approximately  $657,377,000  at 
December 31, 1996,  and a Best's  rating of A+ as of  December  31,  1996.  
Unlike  other  segments of the  accident  and health and property and 
casualty  industries,  there is no need to  facilitate a spread of risk 
pursuant  to any one  occurrence  as the  maximum  liability  for Arista on 
any one life cannot exceed $4,420.  The cost to Arista of obtaining  
reinsurance  has never exceeded  approximately 1.2% of its gross premiums 
received.  (See Note 12 of the Consolidated Financial Statements.)

         Effective April 1, 1994 Arista entered into a reinsurance  agreement 
with Allianz Life Insurance  Company  of North  America  ("Allianz")  wherein 
 Arista  assumed  Hawaii  Temporary Disability  Insurance  business  that was 
ceded by  Allianz  since  1994.  This  agreement  was terminated February 29, 
1996.

RESERVES

         Insurance  companies  are required to maintain  reserves for  
unearned  premiums,  and claim  reserves  for  unpaid  losses,  unpaid  loss  
adjustment  expenses  and New  York  State assessments  for this  line of  
business.  These  claim  reserves  are  intended  to cover  the probable  
ultimate cost of settling all losses  incurred and unpaid,  including  those 
incurred but  not  yet  reported.   Arista  establishes  these  claim  
reserves  based  upon  its  prior experience.  Gross claims liabilities were 
$4,912,446,  $4,526,315,  and $4,351,500 at December 31, 1994, 1995, and 
1996, respectively.

         Loss reserves are only estimates of what the insurer  expects to pay 
on claims,  based on facts and  circumstances  then known.  Although a degree 
of  variability is inherent in such estimates,  management  believes that the 
liabilities for unpaid claims and related  adjustment expenses are adequate.  
The estimates are continually  reviewed and adjusted as necessary,  and such 
adjustments are reflected in current operations.

         The following  table compares  Arista's gross reserves  (estimated) 
at the end of each of the last five  calendar  years  compared to the gross  
amounts  actually  paid against these estimated reserves.


                                       7
<PAGE>

<TABLE>
<CAPTION>
                  Reserve
                  at the End
                  of the
      Calendar    Calendar                          Amounts Paid During the Year and Incurred Prior Thereto
      Year        Year             ------------------------------------------------------------------------------------------
      --------    ----------             1993               1994               1995                  1996              1997
                                         ----               ----               ----                  ----              ----
      <S>         <C>                <C>                <C>                <C>                    <C>                 <C>
      1992        $4,040,000         $4,578,312

      1993        $3,870,000                            $4,420,104

      1994        $4,628,600                                                $4,667,005

      1995        $4,280,000                                                                      $4,384,003

      1996        $4,000,000                                                                                             (1)

      (1) Development is not yet complete.

</TABLE>

COMPETITION

         The writing of the Insurance is highly competitive and many insurers 
 write this line of insurance in New York.  These insurers vary in size and 
generally have longer operating histories, offer a broader range of coverages 
other than the  Insurance  and  generally  have greater  financial, marketing 
and management resources, than Arista.  In addition, the New York State 
Insurance Fund also offers statutory disability benefits.  Competition is 
primarily based upon service and, in certain classes of business,  rate 
structure.  Arista strives to keep its rates at the median of its  
competitors for groups of less than 50 lives.  For groups of 50 or more 
lives, rates are a function of the prior experience for each risk.  Arista's 
management believes that the services offered by Arista compare favorably 
with those offered by its competitors.

EMPLOYEES

         As of December  31,  1996,  the  Company  had  forty-one  (41)  
full-time  and two (2) part-time  employees.  Nine (9) of these  employees  
are executive  officers,  (two (2) of whom serve  part-time),  seven (7) 
provide claims  services as examiners,  one (1) provides  general and  
administrative  services  and  twenty-six  (26)  provide all other  services. 
The Company believes its relations with its employees are satisfactory.

INVESTMENT POLICY

         Arista  must  comply  with  the  insurance  laws of New  York  State 
 with  regard  to investments.  These laws prescribe the kind,  quality and  
concentration  of investments  which may be made by insurance  companies.  
The investment of Arista's funds  generally is subject to the direction and


                                       8
<PAGE>

control of its Board of  Directors;  investments  are reviewed on a quarterly 
 basis.  Arista's funds  generally are invested in federal,  state and  
municipal  obligations,  corporate  debt, preferred and common stocks and 
such other  investments  which are  specifically  prescribed by the New York 
State Insurance Law.

         The  following  table  contains   information   concerning  the  
Company's  investment portfolio as at December 31, 1996:

                                                                   Amount at
                                                                    which is
                                    Cost or                         shown in
                                   amortized         Market        the balance
   Type of Investment                cost            value            sheet   
   ------------------              ---------         ------        -----------
 Investment Securities:
 United States Treasuries          $2,642,618      $2,601,210      $2,642,618
Corporate Debt Securities              53,602          49,000          53,602
                                   ----------      ----------      ----------
                                   $2,696,220      $2,650,210      $2,696,220
                                   ----------      ----------      ----------
                                   ----------      ----------      ----------

         The following table  summarizes the Company's  investment  results 
before income taxes for the five years ended December 31, 1996:

<TABLE>
<CAPTION>
                                         1992          1993          1994          1995           1996
                                         ----          ----          ----          ----           ----
<S>                                   <C>            <C>           <C>            <C>            <C>

Net investment income                  $234,811      $188,200      $215,480       $252,134       $440,540
Average annual yield on
  total investments (1)                    5.29%         4.47%         5.54%          5.90%          5.69%
Net realized investment
  gains (losses)                      $(107,530)      $ 47,142       $(2,603)        $(137)         $(208)

</TABLE>

REGULATION

         The State of New York has statutory  authorization to enforce its 
laws and regulations through various administrative orders and enforcement 
proceedings.

         Arista and, under certain circumstances,  the Registrant, are 
subject to regulation by the New York State  Insurance  Department.  Such  
regulation is principally for the benefit and protection of policyholders  
and not stockholders.  Regulation  extends to, among other things, the  
setting of rates to be  charged,  the  granting  and  revocation  of  
licenses to transact business,  the  licensing  of general  agents,  the  
approval of policy  forms and the form and content of statutorily mandated 
financial statements.

         The Company is also  regulated  under New York State  Insurance  
Law,  Article 15, the "Holding  Companies"  statute.  The  regulations  
promulgated  under  the  "Holding  Companies" statute

---------------------------------------
(1)  Calculated on the mean of total investments on the first day and last 
day of each quarter.


                                       9
<PAGE>

require  prior  regulatory  agency  approval  of  changes  in  control  of an 
 insurer  and  of transactions  within the  holding  company  structure.  
Arista  was  examined  during  calendar years  1990-1991  for the three year  
period  ended  December  31,  1989.  In  accordance  with applicable  
regulations  promulgated by the New York State Insurance  Department,  a 
report for the  three-year  period  ended  December  31,  1989 was  issued.  
Arista's  Board of  Directors reviewed and approved the  recommendations  
contained therein,  and the report was filed by the New York  State  
Insurance  Department  on  December  17,  1992.  In 1996,  the New York  
State Insurance  Department  examined  Arista for the five-year  period ended 
 December 31, 1994. The examination has been completed and Arista is 
currently awaiting a report.

         The New York State  Insurance  Law provides  that no  corporation  
or other person may acquire  control of the  Registrant  and thus indirect  
control of Arista,  unless it has given notice to Arista and obtained  prior 
written  approval of the  Superintendent  of Insurance for such  acquisition. 
 Under said law,  any  purchaser  of ten percent or more of the  outstanding 
Common Stock of the  Registrant  would be presumed to have acquired  control 
of Arista,  unless such presumption is rebutted.

         The  declaration  and  payment  of  dividends  by the  Registrant  
is  subject  to the discretion of its Board of Directors and is dependent  
upon any  dividends the  Registrant  may receive as the sole  shareholder  of 
Arista.  Under New York State  Insurance  Law,  Arista may pay dividends  
only out of its  statutory  earned  surplus.  Generally,  the maximum  amount 
of dividends that Arista may pay without  regulatory  approval in any  
twelve-month  period is the lesser of adjusted net  investment  income or ten 
percent (10%) of statutory  surplus.  In 1996 and 1994,  Arista's  Board of 
Directors  authorized the payment of a dividend to the Registrant in the 
amount of $111,654 and  $224,799,  respectively.  The  dividends  were paid 
on April 11, 1996 and May 21, 1994.

         Arista  is not aware of any  current  proposed  changes  in  either  
federal  or state regulations with respect to the Insurance.

THE COLLECTION GROUP

         The Collection  Group,  Inc., a wholly-owned  subsidiary of the 
Registrant,  commenced operations  during July 1991. The  Collection  Group,  
Inc.,  provides  collection  services to Arista.

AMERICAN ACCIDENT AND HEALTH INSURANCE COMPANY

         On December 20, 1995,  Arista sold all of the  outstanding  shares 
of capital stock of its wholly-owned  subsidiary,  American Accident and 
Health Insurance Company ("American"),  to American  Travellers  Life  
Insurance  Company  for  $764,675,  resulting  in a pretax  gain of $320,192.


                                       10
<PAGE>

                                   PART II
                                   -------   


ITEM 6.  SELECTED FINANCIAL DATA

         The following information should be read in conjunction with, and 
is qualified in its entirety by reference to, the Consolidated Financial
Statements of the Company and the notes thereto appearing elsewhere in this 
Form 10-K.

         The  financial  statements  of the  Company  have been  prepared  in 
accordance  with generally  accepted  accounting  principles,  which  differ 
in  certain  respects  from  those followed in financial  statements  
prepared  for  regulatory  authorities.  (See Note 14 to the accompanying 
Consolidated Financial Statements.)










                                       11
<PAGE>
ITEM 6. CONSOLIDATED SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
                                                                      YEARS ENDED DECEMBER 31,
                                                   ---------------------------------------------------------------
<S>                                                <C>          <C>          <C>          <C>          <C>
                                                      1996         1995         1994         1993         1992
                                                   -----------  -----------  -----------  -----------  -----------
 
<CAPTION>
                                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                <C>          <C>          <C>          <C>          <C>
Statement of operations data:
  Revenue:
    Gross premiums earned........................  $    23,160  $    26,092  $    26,189  $    24,219  $    25,274
                                                   -----------  -----------  -----------  -----------  -----------
                                                   -----------  -----------  -----------  -----------  -----------
    Net premiums earned..........................  $    11,580  $    13,046  $    13,094  $    21,329  $    15,789
    Investment income............................          440          252          209          182          227
    Realized investment gains (losses)...........      --           --                (3)          47         (108)
    Other income.................................          299          333          280          130          204
  Expenses:
    Net underwriting expenses....................       (8,291)      (8,464)      (9,114)     (16,979)     (10,928)
    General and administrative expenses..........       (5,678)      (5,016)      (4,788)      (3,728)      (3,796)
                                                   -----------  -----------  -----------  -----------  -----------
      Income (loss) from continuing operations
        before provision for income taxes........       (1,650)         151         (322)         981        1,388
                                                   -----------  -----------  -----------  -----------  -----------
  Provision for income taxes and tax benefit of
    net operating loss carryforward:
    Provision for income taxes...................           81           92          126          541          698
    Tax benefit of net operating loss
      carryforward...............................         (555)     --              (207)     --           --
                                                   -----------  -----------  -----------  -----------  -----------
    Net provision (benefit)......................         (474)          92          (79)         541          698
                                                   -----------  -----------  -----------  -----------  -----------
  Net income (loss) from continuing operations...       (1,176)          59         (241)         440          690
                                                   -----------  -----------  -----------  -----------  -----------
  Discontinued operations:
    Income from operations of disposed segment
      (net of taxes of $3).......................      --                 6      --                 2            7
    Gain on disposal of segment (net of income
      taxes of $128).............................      --               192      --           --           --
                                                   -----------  -----------  -----------  -----------  -----------
      Net income from discontinued operations....      --               198      --                 2            7
                                                   -----------  -----------  -----------  -----------  -----------
      Net income (loss)..........................  $    (1,176) $       257  $      (241) $       442  $       697
                                                   -----------  -----------  -----------  -----------  -----------
                                                   -----------  -----------  -----------  -----------  -----------
  Per common share:
    Primary:
      Income (loss) from continuing operations...  $      (.45) $      0.02  $     (0.11) $      0.20  $      0.31
      Income from discontinued operations........  $   --       $      0.09  $   --       $   --       $      0.01
    Fully diluted:
      Income (loss) from continuing operations...  $      (.45) $      0.02  $     (0.11) $      0.20  $      0.31
      Income from discontinued operations........  $   --       $      0.08  $   --       $   --       $      0.01
  Weighted average number of common shares:
    Primary......................................    2,617,500    2,251,400    2,229,900    2,254,147    2,221,900
                                                   -----------  -----------  -----------  -----------  -----------
                                                   -----------  -----------  -----------  -----------  -----------
    Fully diluted................................    2,617,500    2,374,660    2,299,900    2,254,147    2,221,900
                                                   -----------  -----------  -----------  -----------  -----------
                                                   -----------  -----------  -----------  -----------  -----------
Balance sheet data:
  Short-term investments.........................  $   --       $   --       $       208  $       726  $       492
  Cash and equivalents...........................        7,077        6,777        2,725        2,355        2,870
  Premiums receivable............................        4,304        5,131        6,328        3,326*       6,400*
  Total assets...................................       17,110       17,640       15,083       10,457       13,495
  Payable to reinsurer...........................           93          161           80           62           97
  Claims liabilities.............................        4,351        4,526        4,921        2,084*       4,322*
  Unearned premiums..............................        1,397        1,328        1,358          480*         937*
  Commissions payable............................          766          942        1,343          440*       1,219*
  Total stockholders' equity.....................        6,397        6,436        6,011        6,268        5,709
</TABLE>
 
------------------------
*   Reported on a net basis only.

                                       12
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND 
         RESULTS OF OPERATIONS                                
         -----------------------------------------------------------------

    The following discussion and analysis should be read in conjunction with 
the Consolidated Financial Statements of the Company and the notes thereto
appearing elsewhere in this Form 10-K. Except for the historical information
contained herein, the following discussion contains forward-looking statements
that involve risks and uncertainties. The Company's actual results could differ
materially from those projected in the forward-looking statements discussed 
herein. Factors that could cause or contribute to such differences include, but
are not limited to, those discussed in this section, as well as in other 
sections herein.

RESULTS OF OPERATIONS

YEAR-ENDED DECEMBER 31, 1996 VS. DECEMBER 31, 1995

         The Company's net loss for the year 1996 was approximately  
$1,176,000  (approximately $0.45  per  share)  compared  with  a net  income  
of  approximately  $59,000  from  continuing operations  (approximately  
$0.02 per share) for 1995.  The loss,  before  provision  (benefit) for 
income taxes for 1996, was approximately  $1,650,000  compared with a gain 
before provision for income taxes and tax benefit,  of  approximately  
$151,000 for 1995. The Company's loss for 1996  included  approximately   
$757,000   (approximately  $0.29  per  share)  attributable  to additional 
compensation expenses incurred from the exercise of warrants and options.

         Arista's gross premiums earned for the year 1996 were  approximately 
 $23.2 million as compared with  approximately  $26.1 million for 1995.  The 
reduction in gross  premiums  earned was the result of Arista's  termination  
of its  assumption  reinsurance  agreement  during the first  quarter of 1996 
wherein  Arista  had  assumed  Hawaii  Temporary  Disability  Insurance 
Business that had been ceded by Allianz Life Insurance  Company of North 
America  together with a continuation  of the net loss of covered lives and 
of  policyholders.  The continued net loss of covered  lives is a function of 
increased  competition  for  experience  rated groups and a lower  
competitive  rate structure for  non-experience  rated groups.  The Company 
expects this trend to continue.

         Arista's gross claims incurred for 1996 were approximately $15.3 
million or 66.0% of gross premiums  earned.  For the year 1995,  gross claims 
incurred were $16.6 million or 63.6% of gross premiums earned.

         Consolidated  investment  income for 1996 was approximately  
$441,000  representing an increase of $189,000  over 1995.  The increase was 
due mainly to income  earned on the proceeds received  by  Arista  upon  the  
issuance  of  the  surplus  note.   In  addition   Arista  had insignificant 
net realized and net unrealized investment losses for 1996 and 1995.

         Other  income,  including  income  from Third  Party  Administrative 
operations,  was approximately $299,000 as compared to approximately 
$333,000 for 1995.

         Arista's gross commissions  incurred for 1996 were approximately 
$4.2 million or 18.2% of gross premiums  earned.  For the year 1995,  gross  
commission  incurred were  approximately 


                                       13
<PAGE>

$4.6 million  or 17.7% of gross  premiums  earned.  This  increase  was due 
in part to a larger portion of more recently  issued policies  acquired from 
other insurers,  requiring the payment of slightly higher average commissions.

         The consolidated  general and  administrative  expenses  increased 
from  approximately $5.0 million  for the year 1995 to $5.7  million  for the 
year  1996.  This  change  was mainly attributable to an aggregate  increase 
in compensation  expense of $757,000  resulting from the exercise  of  
options  and  warrants,   as  well  as  decreases  in  payroll  and  benefits 
of approximately  $266,000,  amortization  of intangible  expenses of  
approximately  $249,000 and reinsurance  costs  of  approximately  $116,000  
related  to  assumed  business;  offset  by an increase in  professional  
fees of  approximately  $220,000 and interest on the surplus note of $330,000.

         YEAR-ENDED DECEMBER 31, 1995 VS. DECEMBER 31, 1994

         The Company's net income for the year 1995 was approximately  
$257,000,  compared with a net loss of  approximately  $241,000  for 1994.  
The  Company's  net income of  approximately $257,000  consisted of  
approximately  $59,000 from  continuing  operations  and  approximately 
$198,000 from  discontinued  operations.  Net income from discontinued  
operations  represented the  gain  from  Arista's  sale  of  its  
wholly-owned  subsidiary,   American,  together  with American's  net income 
from  operations  incurred  prior to the sale.  Income  from  continuing 
operations  before provision for income taxes for 1995 was  approximately  
$151,000 as compared with a loss, before provision for income taxes and tax 
benefit,  of approximately  $321,000 for 1994.

         Arista's gross premiums earned for the year 1995 were  approximately 
$26.1 million as compared with  approximately  $26.2 million for 1994. This 
decrease  reflects a continuation of the net loss of covered lives and 
policyholders.

         Arista's gross claims incurred for 1995 were  approximately  $16.6 
million or 63.6% of gross premiums  earned.  For the year 1994,  gross claims 
incurred were $17.8 million or 67.8% of gross  premiums  earned.  This  
reduction in claims  incurred and in the loss ratio emanated substantially 
from improved claims management and underwriting techniques.

         Consolidated  investment income for 1995 was approximately  
$252,000,  representing an increase of $37,000 over 1994.  The increase was 
due mainly to slightly  higher  interest rates credited  during 1995. In 
addition,  Arista had  insignificant  net realized and net unrealized 
investment  losses  for  1995  as  compared  to a net  realized  investment  
loss  for  1994 of approximately $3,000.

         Other income,  including  income from TPA operations,  was  
approximately  $333,000 as compared to  approximately  $279,000 for 1994.  
The principal  reason for this increase was the continuing  income  derived  
from  Arista's  agreement  to act as a TPA for  another  insurer's statutory 
disability benefits book of business.


                                       14
<PAGE>

         Arista's gross commissions  incurred for 1995 were approximately 
$4.6 million or 17.7% of gross premiums earned.  For the year 1994,  gross  
commissions  incurred were  approximately $4.2  million or 16.0% of gross  
premiums  earned.  This  increase  was due in part to a larger portion of 
more recently  issued policies  acquired from other insurers,  requiring the 
payment of slightly higher average commissions.

         Consolidated  general and  administrative  expenses  increased from 
approximately $4.8 million  for the  year  1994  to $5.0  million  for the  
year  1995.  This  change  was  mainly attributable  to the  amortization  of 
the balance of the intangible  assets of American at the time of sale that 
had been  incurred in  connection  with the  acquisition  of American  and to 
increases  in  salaries  and  employee  benefits,  rent  and  reinsurance  
costs,  offset  by a reduction in professional fees.

                        LIQUIDITY AND CAPITAL RESOURCES

         Retained earnings decreased from $2,111,528 at December 31, 1995 to 
$935,665 at December 31, 1996 as a result of the Company's operating loss.

         At  present, management considers Arista's statutory capital and 
surplus of approximately $6.2 million at December 31, 1996 sufficient to 
support its current annual premium level, as well as providing capacity for 
additional premiums.

         Arista may pay dividends to the Registrant from its statutory  
earned surplus pursuant to statutory  restrictions  imposed under the New 
York State  Insurance Law. The maximum amount of dividends  that may be paid 
in any  twelve-month  period  without the prior  approval of the New York 
State Insurance  Department is the lesser of adjusted net investment  income 
or 10% of statutory  surplus as defined in the New York State  Insurance Law. 
In 1996 and 1994,  Arista's Board of  Directors  authorized  the payment of a 
dividend to the  Registrant  in the amount of $111,654 and  $224,799,  
respectively.  The  dividends  were paid on April 11, 1996 and May 16, 1994.  
See "Business-Regulation."

         Management  believes  that  neither  Arista's  premium  rates  nor  
claim  costs  have materially changed due to inflation.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The  response  to this item is  submitted  in Part IV of this Form 
10-K on page F-1 to S-6.


                                       15
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The  names of the  directors,  executive  officers,  their  ages,  
positions  with the Company,  Arista, and The Collection Group, Inc 
("Collection"),  and tenure as directors of the Company, are set forth below:

<TABLE>
<CAPTION>
                                                                                   Director of
                                                                                   the Company
Name                     Age       Position                                           Since
----                    -----      --------                                        -----------
<S>                      <C>       <C>                                                <C>

Bernard Kooper*          71        Chairman of the Boards of Directors                1978
                                   of the Company, Arista, and Collection,
                                   and President of the Company

Stanley S. Mandel**      62        Executive Vice President and                       1983
                                   Director of the Company, President
                                   and Director of Arista, and Director
                                   of Collection

Susan J. Hall            53        Senior Vice President and Treasurer                 --
                                   of the Company and Arista, and Controller
                                   and Director of Arista

Louis H. Saltzman*       46        Secretary and Director of the                      1981
                                   Company and Arista, and Director
                                   of Collection

Richard P. Farkas**      72        Director of the Company and Arista                 1991

J. Martin Feinman**      72        Director of the Company, Arista, and               1978
                                   Collection, and Secretary of Collection

Noah Fischman*           65        Director of the Company, Arista, and               1978
                                   Collection

Daniel Glassman*         68        Director of the Company and Arista                 1994

</TABLE>

*   Elected by the Class B Stockholder
**  Elected by the Class A Stockholders


                                       16
<PAGE>


              BERNARD KOOPER  has  served as  Chairman  of the Board of  
Directors  and President  of the Company  since its  inception,  Chairman of 
the Board of  Directors of Arista since June 1986, and Chairman of the Board 
of Directors of Collection  since June 1991.  Since 1971, he has served as 
President  and sole  stockholder  of Bernard  Kooper Life Agency,  Inc. and 
Bernard  Kooper  Associates,  Inc.,  life and accident and health general 
agents in New York,  New York.  Since 1968, he has also served as Vice 
President and a principal  stockholder of  Fischman-Kooper,  Inc., a 
multi-line  insurance  agency located  in Roslyn  Heights,  New York.  Mr.  
Kooper  is the  father-in-law  of Louis H. Saltzman.

              STANLEY S. MANDEL has served as Executive  Vice  President  and 
a Director of the Company,  and  President  and a Director of Arista since 
August 1983.  Since June 1991,  he  has  served  as  a  Director  of  
Collection.   He  is  also  a  director  of Micro-Medical Industries, Inc.

              SUSAN J. HALL has served as Senior Vice  President  and  
Treasurer  of the Company and Arista  since March 1988,  and a Director of 
Arista  since June 1987.  Since October 1986, she has served as Controller of 
Arista.

              LOUIS H. SALTZMAN has served as  Secretary  and a Director of 
the Company and  Arista  since  May  1981.  Since  June  1991,  he  has  
served  as  a  Director  of Collection.  Since  March  31,  1997,  Mr.  
Saltzman  has  served as Vice  President,  a Director and a principal 
stockholder of the  Saltzman-American  Business Agency, Inc., a life and 
health general agency in  Manhassett,  New York.  Since January 1989, he 
served as  President  and sole  stockholder  of The  Saltzman/Kooper  Agency, 
Inc., a life and accident  and health  general  agency in New York,  New 
York.  From May 1975 to December 1988,  he served as an insurance  broker and 
brokerage  manager for Bernard  Kooper Life Agency,  Inc., and Bernard Kooper 
Associates,  Inc.,  life and health general agents in New York, New York.  
Mr. Saltzman is the son-in-law of Bernard Kooper.

              RICHARD P. FARKAS  has  served  as  a  Director  of  the  
Company  since September  1991 and as a Director  of Arista  since  June  
1988.  From June 1988 to June 1990,  he also  served as a  Director  of the  
Company.  He is also  Chairman  and Chief Executive  Officer of IMC  
International  Management  Consultants,  Inc.,  a provider of business  and  
management  consulting  services.  Mr.  Farkas  is  also  a  director  of 
Integrated Food Technologies  Corporation,  Chairman of the Board of The 
BankHouse,  and the Chairman of the Board and Chief Executive Officer of 
Zemid Corp.

              J. MARTIN FEINMAN  has served as a  Director  of the  Company  
since its inception,  and has served as a Director of Arista since May 1981.  
Since June 1991,  he has served as a Director and Secretary of  Collection.  
From 1950 until  November  1992, he has served as President of Olde England 
Paint and Varnish Corporation,  a distributor of paint products, located in 
Brooklyn, New York.


                                       17
<PAGE>


              NOAH FISCHMAN  has  served  as  a  Director  of  the  Company  
since  its inception,  and served as Vice President of the Company from its 
inception to June 1987. He has served as a Director of Arista  since June 
1982.  Since June 1991,  he has served as a Director of  Collection.  Since 
1968,  he has served as  President  and a principal stockholder of  
Fischman-Kooper,  Inc., a multi-line  insurance agency located in Roslyn 
Heights, New York.

              DANIEL GLASSMAN  has served as a Director  of the Company  
since  October 1994 and has  served as a  Director  of Arista  since  June  
1982.  From 1971 to 1991 he served as Vice  President-Finance and Director of 
Lea Ronal, Inc, a chemical specialties manufacturer.  He is the  President  
and  sole  stockholder  of CSA,  Inc.,  a  clothing manufacturer, and a 
principal stockholder of JLT Corp., a clothing manufacturer.

              The terms of office of all  officers and  directors  expire at 
the time of the Annual Meeting of Stockholders.

              The  holder of the Class B Common  Stock has the right to elect 
a majority of the Registrant's  Board of Directors.  In addition,  the holder 
of the Class B Common Stock  has the  right  to vote as a  separate  class  
upon any  merger,  reorganization, recapitalization,   liquidation,   
dissolution,   or  winding-up,   sale,   transfer  or hypothecation  of all 
or a  substantial  portion of the assets of the Company,  and with regard to 
any amendment to the  certificate  of  incorporation  which affects the 
number or par value,  or  adversely  alters or changes  powers,  preferences, 
 voting  power or special rights of the shares of the Class B Common Stock.

ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

              The  following  table  shows,  for the three most  recently  
ended  fiscal years ended  December 31, the cash  compensation  paid or 
accrued for those years to the President  of the  Company  and to each of the 
four most  highly  compensated  executive officers of the Company and/or 
Arista other than the President  whose  aggregate  annual salary and bonus 
paid in  compensation  for services  rendered in all the  capacities in which 
they  served  exceeded  $100,000  for the  Company's  last fiscal year (the 
"Named Executives"):


                                       18
<PAGE>
<TABLE>
<CAPTION>
                                            SUMMARY COMPENSATION TABLE
                                                                               Long-Term Compensation
                                                                          ----------------------------------
                                              Annual Compensation                Awards                       Payouts 
                                      ----------------------------------  ----------------------     --------------------------
Name and                                                       Other      Restricted
Principal                                                      Annual        Stock      Options/      LTIP          All Other
Position                        Year  Salary($)  Bonus($)  Compensation($)  Awards($)     SARs (#)   Payouts($)    Compensation
--------                        ----  --------   --------  --------------  ---------    ---------    ----------    ------------
<S>                             <C>   <C>        <C>        <C>                 <C>        <C>        <C>             <C>
Bernard Kooper -
Chairman of the Boards of
Directors of the Company,
Arista and Collection and       1994  150,000    35,000           -0-           -0-         -0-       -0-             35,950
President of the Company        1995  150,000    35,000           -0-           -0-         -0-       -0-             35,950
   (1)(3)(4)                    1996  150,000    10,000      492,750(6)         -0-         -0-       -0-             35,950(5)

Stanley S. Mandel - Executive
Vice President and a Director
of the Company, President
and a Director of Arista        1994  208,750    35,000           -0-           -0-          -0-      -0-             27,196
and a Director of Collection    1995  208,750    35,000           -0-           -0-          -0-      -0-             28,363
(2)(3)(4)                       1996  208,750    26,000      264,600(6)         -0-          -0-      -0-             27,196(5)

</TABLE>

(1)  Effective  February  1993, the Company  entered into an employment  
agreement with Mr. Kooper which provides Mr.  Kooper a base salary of  
$150,000  per annum.  The  agreement  obliges Mr.  Kooper to devote such time 
as he deems  necessary  to perform his duties on behalf of the  Company  (but 
in no event less than 120 days per year). Mr. Kooper  continues to devote a 
substantial  amount of his time to the activities of Bernard Kooper Life 
Agency Inc., Bernard Kooper Associates,  Inc.,  Fischman-Kooper,  Inc. and 
other business activities during the year. In July 1994, the parties  amended 
the  employment  agreement,  which  amendment,  among other things,  extended 
Mr. Kooper's term of employment an additional  three years.  Mr.  Kooper's  
employment  agreement  will now expire in February 2001.

(2)  Effective  February  1993,  Arista  entered into an employment  
agreement with Mr. Mandel which provides Mr. Mandel a base salary of $208,750 
per annum.  In July 1994, the parties  amended the employment  agreement,  
which amendment,  among other  things,  extended Mr.  Mandel's  term of  
employment  an  additional  three  years.  Mr. Mandel's  employment  
agreement  will now  expire  in  February  2001.  Mr.  Mandel  also is  
entitled  to annual reimbursements  for automobile  expenses of up to $9,000 
and a non-accountable  expense allowance of up to $5,000 per annum.  Mr.  
Mandel's  employment  agreement  also provides  that Arista shall obtain a 
long-term  disability benefits policy with benefits of $5,000 per month for 
Mr. Mandel.

(3)  Each of Mr.  Kooper's  and Mr.  Mandel's  employment  agreements  were 
amended in July 1994 to provide for a split-dollar  insurance policy in the 
amount of $1,000,000 and $205,000,  respectively.  Under these  agreements, 
the Company  and Arista will pay the  premiums  on these  policies on behalf 
of Mr.  Kooper and Mr.  Mandel for a period of time  specified in each  
agreement.  The premium  payments are treated as loans to both Mr.  Kooper 
and Mr.  Mandel  and  are  collateralized  by the  underlying  policy  cash  
values.  At  December  31,  1996,  loans aggregating  $125,424 have been made 
to Mr. Kooper and loans  aggregating  $42,948 have been made to Mr.  Mandel. 
At December 31, 1996,  the cash  surrender  value of the insurance  policy 
owned by Mr. Kooper was  approximately $108,158 and the cash surrender value 
of the insurance policy owned by Mr. Mandel was approximately  $39,779.  In 
the event that Mr.  Kooper or Mr.  Mandel shall be living on February 16, 
2001,  each of them will be entitled to a lump sum  retirement  benefit  
equal to the amount of premiums paid by the Company or Arista,  attributable  
to the  cumulative  increase in the cash  surrender  value of the policies  
during the period ending  February 2001. The Company or Arista is required to 
make a lump sum  payment on behalf of Mr.  Kooper or Mr.  Mandel  sufficient 
to render their  respective  policy "paid up" upon (i) their death (if they  
predecease  their spouse),  (ii) one year from a physical or mental 
disability or (iii) a merger,  consolidation,  or sale of all or 
substantially all of the assets of the 

                                       19
<PAGE>

Company or Arista,  unless their  employment has been  terminated for "cause" 
(as defined in the employment agreements).

(4)  Each of Mr. Kooper's and Mr. Mandel's  employment  agreements  provide 
that in the event of a consolidation, merger,  or sale of all or 
substantially  all of the assets of the Company or Arista,  the employment  
agreements may be terminated, and upon such termination,  Mr. Kooper and/or 
Mr. Mandel,  respectively,  would be entitled to receive a lump sum payout.  
The payout  will be the  maximum  amount that will not trigger the excise tax 
payable in the event of an "excess  parachute  payment" as such term is 
defined in the Internal  Revenue Code of 1986, as amended.  Based upon their 
prior  remuneration,  it is estimated  that the payout  amounts  which would 
be due to each of Messrs.  Kooper  and Mandel  upon  termination  of their  
respective  agreements  would be  approximately $845,000 and $945,000, as at 
December 31, 1996, respectively.

(5)  Other  compensation  includes:  (a) insurance  premiums paid in fiscal 
1996 by, or on behalf of, the Company with  respect to certain  split  dollar 
life  insurance  policies as follows:  (i) Bernard  Kooper,  $35,950 (Mr. 
Kooper had taxable income in 1996 of $2,018 with regard to these premiums),  
and (ii) Stanley S. Mandel,  $11,313 (Mr.  Mandel had  taxable  income in 
1996 of $679 with  regard to these  premiums);  (b)  Stanley S.  Mandel also 
received  automobile  expenses of $8,250 and a  non-accountable  expenses of 
$4,583 and (c) long-term  disability premium payment of $3,050.

(6)  Value realized upon the exercise of warrants (market value on the date 
of exercise less exercise price).

STOCK OPTIONS

     There were no options  granted in fiscal 1996 and  warrants and options  
were  exercised by Named  Executive Officers in fiscal 1996.  The following  
table sets forth  information  concerning  each exercise of warrants and 
options  during fiscal 1996 by each of the Named  Executives at the fiscal  
year-end and the value of unexercised options at the fiscal year-end:


                                       20
<PAGE>

<TABLE>
<CAPTION>
                                 AGGREGATE   OPTIONS/SAR  EXERCISE IN LAST FISCAL YEAR
                                             AND FY-END OPTION/SAR VALUES
                                                                                                          Value of Unexercised
                                 Shares                              Number of Unexercised                    In-the-Money
                                Acquired                                 Option/SARs at                      Option/SARs at
                                   on              Value                   FY-End (#)                           FY-End($)           
                               Exercise(#)     Realized($)*       Exercisable     Unexercisable       Exercisable    Unexercisable
                               -----------     -----------        -----------     -------------       -----------    --------------
<S>                              <C>              <C>                     <C>                <C>               <C>             <C>
Bernard Kooper                   365,000          $492,750               -0-                -0-               -0-             -0-
Stanley S. Mandel                196,000          $264,600               -0-                -0-               -0-             -0-

</TABLE>


-------------------------------------
*Based on the fair market value per share of the  Company's  Class A Common  
Shares of $2.719 (the average of the "low ask" and "high bid" of the 
Company's Class A Common Shares on the Nasdaq on December 31, 1996).

 


                                       21
<PAGE>

                          COMPENSATION OF DIRECTORS


         Directors of the Company are usually  elected  annually.  Directors 
of the Company and Arista who are not full-time  employees of the Company or 
Arista,  were paid $1,125 per quarter for each Board on which the member  
served.  Directors  of the  Company  and Arista who are not full-time  
employees of the Company or Arista received $250 for each meeting actually  
attended and $250 for  each  committee  meeting  actually  attended.  
Directors  of  Collection  are not separately  compensated.  No  attendance  
fee for a committee  meeting is paid if a  Directors' meeting is held on the 
same day.

         In 1994,  1995 and 1996 the  Company  engaged a company  owned by  
Richard  Farkas,  a director of Arista and the Company,  to perform certain  
consulting  services.  Such consulting services  were  performed  throughout  
a two month  period  ended on May 23,  1994, a two month period  ended on May 
23,  1995  and a five  month  period  ended  on July  31,  1996.  For such 
consulting  services,  The  Company  paid this  company  $12,000  in 1994,  
$12,000 in 1995 and $30,000 in 1996.  See "Item 13 - Certain Transactions."

         In July 1993,  Arista entered into an agreement  with Richard  
Greenwald for specified services  to be  performed  for a fee of $500 per 
week.  Mr.  Greenwald  became a  director  of Arista in October  1994.  
Arista paid  $26,000  under this  Agreement  in 1996.  See "Item 13 -Certain 
Transactions."

                  EMPLOYMENT CONTRACTS AND TERMINATIONS OF
                EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS

         The Company's employment  agreements with Mr. Bernard Kooper and Mr. 
Stanley S. Mandel are  described  in the  footnotes  to the Summary  
Compensation  Table on pages 3 and 4 of this Part III.


                                       22
<PAGE>

           COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         During the twelve month period ended  December 31, 1996,  the  
Compensation  Committee consisted  of Noah  Fischman  and J. Martin  Feinman. 
 Effective  March 28,  1996,  Mr.  Kooper resigned from the Compensation 
Committee.

          Mr. Fischman,  a former Vice President of the Company,  is a 
Director of the Company, Arista, and Collection,  is also a principal  
shareholder of Fischman-Kooper,  Inc. Mr. Kooper, President of the Company 
and Chairman of the Boards of  Directors of the Company,  Arista,  and 
Collection,  owns Bernard  Kooper Life Agency,  Inc., a general agent of 
Arista.  Mr. Kooper is also a  principal  shareholder  of  Fischman-Kooper,  
Inc.,  an  insurance  broker.  During the calendar  years  1994,  1995  and  
1996,  Arista  paid  approximately  $244,000,  $224,000  and $223,000,  
respectively,  in gross  commissions  to  Bernard  Kooper  Life  Agency,  
Inc.  Such commissions  relate to  approximately  5.5%,  5.0% and 5.4% of 
gross premiums  earned by Arista during the years ended  December 31, 1994,  
1995,  and 1996,  respectively.  Of these  amounts, Bernard Kooper Life 
Agency,  Inc. paid  approximately  $177,000 in 1994,  $143,000 in 1995, and 
$159,000  in 1996 to  brokers,  including  approximately  $22,000 in 1994,  
$23,000 in 1995 and $26,000 in 1996 to  members of the Board of  Directors  
of Arista  who are  licensed  insurance brokers.   Furthermore,   the  
commissions  paid  to   director/brokers   include  payments  to 
Fischman-Kooper,  Inc. of approximately  $17,000 in 1994,  $18,000 in 1995 
and $22,000 in 1996, and payments to Louis D. Krasner,  Inc. of  
approximately  $5,000 in 1994,  $4,000 in 1995, and $4,000 in 1996.  Michael  
B.  Krasner,  a  Director  of Arista,  is the  President  of Louis D. 
Krasner,  Inc. Bernard Kooper Life Agency,  Inc.,  Fischman-Kooper,  Inc. and 
Louis D. Krasner, Inc. are compensated on the same basis as Arista's other 
general agents and brokers.

         In  addition,  members of the Board of  Directors  of the Company 
and Arista  received commissions  paid by third  parties  of  approximately  
$15,000 in 1994,  $19,000 in 1995,  and $25,000 in 1996,  for the  placement  
of the  Company's or Arista's  life and health  insurance coverage,  
directors'  and  officers'  liability  insurance  and  fidelity  bond  and  
casualty insurance   coverage   with   other   insurers.   Furthermore,   
such   commissions   paid   to director/brokers  include  approximately  
$11,000 in 1994, $11,000 in 1995 and $14,000 in 1996, paid to Noah  Fischman  
for the  placement  of the  Company's  or  Arista's  life,  health  and 
long-term  disability  insurance coverages with other insurers;  
approximately  $4,000 in 1994, $6,000  in 1995  and  $10,000  in 1996,  paid 
to Louis D.  Krasner,  Inc.  for  directors' and officers' liability   
insurance, fidelity  bond  and casualty insurance   coverages  and 
approximately  $1,000 in 1995 and $1,000 in 1996 paid to Louis H. Saltzman 
for life  insurance coverages.

         In June,  1996,  the Company  issued  365,000  shares of Class A 
Common Stock ("Kooper Warrant  Shares"),  upon the exercise of a  previously  
granted  warrant to purchase  shares of Class A Common  Stock at an  exercise 
price  of  $1.40  per  share,  to  Bernard  Kooper.  The warrant was granted 
to Mr.  Kooper in June,  1986.  As  consideration  for the  issuance of the 
Kooper Warrant Shares,  Mr. Kooper  delivered  $11,000 in cash and a $500,000 
principal amount interest-bearing  promissory  note (the  "Kooper  Note") to 
the Company and granted the Company an option (the  "Class B Repurchase  


                                       23
<PAGE>

Option") to acquire the 47,400 shares of Class B Common Stock owned by Mr.  
Kooper.  The Kooper  Note bears  interest at the rate of LIBOR plus 1 1/4% per
annum and matures on June 14, 2001.  Interest  payments  are payable  
quarterly on the last day of  September,  December,  March  and June.  
Additionally,  to secure  the  performance  of his obligations  under the 
Kooper Note, Mr. Kooper  pledged  365,000 shares of Class A Common Stock 
owned by him to the Company.  The Class B Repurchase  Option,  which  expires 
on June 14, 2001, has an exercise price equal to the  cancellation of the 
$500,000  outstanding  under the Kooper Note plus  delivery by the Company,  
at its option,  of either  47,400 shares of Class A Common Stock or the fair 
market value of such shares to Mr. Kooper.


                                       24
<PAGE>


ITEM 12.  PRINCIPAL STOCKHOLDERS; SHARES HELD BY MANAGEMENT

         On March 31, 1997, the Company had 2,570,100 Class A Common Shares  
(excluding  10,000 shares of  treasury  stock) and  47,400  Class B Common  
Shares  issued  and  outstanding.  The following  table sets  forth the 
number of shares of the  Company's  common  stock  owned as of April 17, 1997 
by (i) owners of more than 5% of the Company's  outstanding  common stock,  
(ii) each  director  of the  Company,  (iii) each of the Named  Executives,  
and (iv) all  executive officers and directors of the Company as a group.  
Except as otherwise  indicated,  each person or entity  named in the table 
has sole  investment  power and sole voting power with respect to the shares 
of the Company's common stock set forth opposite his name.

<TABLE>
<CAPTION>
                                          Number of Shares of
                                          Class A and Class B                   Percentage of Ownership (1)
Name and Address of                           Common Stock                      ---------------------------
Beneficial Owner                           Beneficially Owned             Class A            Class B        Class A and Class B
-------------------                       -------------------             -------            -------        -------------------
<S>                                           <C>                          <C>                 <C>                  <C>       
Bernard Kooper (2)(4)                         572,600                      20.4%               100%                 21.9%
116 John Street
New York, New York  10038


Stanley S. Mandel(3)(7)                       105,400                       4.1%                --                   4.0%
116 John Street
New York, New York  10038

Louis H. Saltzman(4)                           70,000                       2.7%                --                   2.7%
116 John Street
New York, New York  10038

Richard P. Farkas                                  --                        --                 --                    --
500 Route 36
Navesink, New Jersey 07752

Noah Fischman(5)                               71,600                       2.8%                --                   2.7%
99 Powerhouse Road
Roslyn Heights, New York  11577

J. Martin Feinman(6)                           51,200                       2.0%                --                   2.0%
270-07 E Grand Central Parkway
Floral Park, New York  11005

Daniel Glassman                                38,600                       1.5%                --                   1.5%
4 Magnolia Lane
Woodbury, New York 11797

Dr. Keith E. Mandel(7)                        178,400                       6.9%                 --                  6.8%
3135 Katewood Court
Baltimore, MD 21209

Old Lyme Holding Corporation(8)               205,000                       8.0%                --                   7.8%
122 East 42nd Street
New York, NY 10168

All officers and directors                    920,600                      33.8%               100%                 35.0%
as a group (8 persons)
(2)(3)(5)(6)

</TABLE>
________________________________________
         Footnotes follow on next page.


                                       25
<PAGE>


(1)      Based upon 2,570,100  shares of Class A Common Stock  outstanding 
         and 47,400 shares of Class B Common Stock  outstanding.  Includes  
         shares which said persons have the right to obtain beneficial  
         ownership of within sixty (60) days from the date hereof through the 
         exercise of outstanding  options.  Does not reflect 3,100 shares of 
         Class A Common Stock reserved for issuance  pursuant to the 1986  
         Incentive  Stock Option Plan ("1986 Plan").

(2)      Includes 47,400 shares of Class B Common Stock owned by Bernard  
         Kooper,  representing all of the issued and outstanding  shares of 
         Class B Common Stock of the Company,  and 30,400  shares  of Class A 
         Common  Stock  owned by  Arlyne  Kooper,  wife of  Bernard Kooper.  
         Mr. Kooper has pledged  365,000  shares of Class A Common Stock to 
         secure his performance on an interest-bearing  promissory note made 
         to the Company.  See "Item 13 - Certain Transactions."

(3)      Includes shares of Class A Common Stock held  individually by 
         Stanley S. Mandel and in the various retirement  accounts of Stanley 
         S. Mandel and Joy Mandel,  wife of Stanley S. Mandel.  Mr.  Mandel 
         has pledged  17,600 shares of Class A Common Stock with a bank to 
         secure a loan made to his son, Dr. Keith E. Mandel.

(4)      Bernard Kooper is the  father-in-law  of Louis  Saltzman.  Each  
         disclaims  beneficial ownership of the securities of the Company 
         owned by the other.

(5)      Includes 23,200 shares of Class A Common Stock owned by Barbara 
         Fischman,  the wife of Noah Fischman.

(6)      Includes  2,400  shares of Class A Common Stock owned by Carl  
         Feinman,  the son of J. Martin  Feinman,  2,400 shares of Class A 
         Common Stock owned by Lisa Feinman Baum, the daughter of J. Martin 
         Feinman,  and 2,400 shares of Class A Common Stock owned by Jane 
         Feinman Kendes,  the daughter of J. Martin Feinman.  Mr. Feinman 
         disclaims  beneficial ownership of the shares of Class A Common 
         Stock owned by his children.

(7)      Dr.  Keith E.  Mandel is the son of  Stanley  S.  Mandel.  Each  
         disclaims  beneficial ownership of the securities of the Company 
         owned by the other.

(8)      According  to the Schedule  13D,  Amendment  No. 1, dated April 4, 
         1995,  filed by Old Lyme Holding Corporation on behalf of itself and 
         certain reporting persons.

 
                                       26
<PAGE>

  ITEM 13.  CERTAIN TRANSACTIONS

           Effective  January 1, 1993, The  Saltzman/Kooper  Agency,  Inc., a 
life and health insurance  agency  controlled by Louis H. Saltzman,  a 
Director and the Secretary of the Company and Arista,  and a Director of 
Collection,  orally entered into an arrangement with the Company to sublease 
the space which was  previously  rented to Bernard  Kooper  Associates,  Inc. 
 The sublease  between the Company and The Saltzman/Kooper  Agency, Inc. was 
on similar terms as the Company's lease with its landlord,  and The 
Saltzman/Kooper Agency, Inc. was responsible for its proportionate share of 
all rental charges.  The arrangement terminated on May 31, 1995.

           In 1994,  1995 and 1996 the Company  engaged a company  owned by 
Richard  Farkas,  a director of Arista and the Company,  to perform 
consulting services with respect to proposed transactions and related 
activities of the Company,  including,  but not limited to, evaluating 
various business  strategies.  Such consulting services were performed  
throughout a two month period ended on May 23, 1994, a two month period ended 
on May 23, 1995 and a five month period  ended on July 31, 1996.  For such  
consulting  services,  the Company paid this company $12,000 in 1994, $12,000 
in 1995 and $30,000 in 1996.

           In July 1993, Arista entered into an agreement with Richard  
Greenwald for consulting  services to be performed for a fee of $500 per 
week.  Mr.  Greenwald has provided  consulting  services  with respect to 
proposed  transactions  and related  activities of Arista,  including,  but 
not limited to, identifying available books of business and negotiating the 
terms of such acquisitions.  Mr. Greenwald became a director of Arista in 
October 1994. Arista paid $26,000 under this Agreement in 1995 and in 1996.

           See "Compensation  Committee Interlocks and Insider  
Participation" for related transactions  involving Bernard Kooper, Noah 
Fischman, Louis Saltzman and Michael Krasner.


                                       27
<PAGE>




                                                                 PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
          FORM 8-K                                               
          -------------------------------------------------------
<TABLE>
<CAPTION>
                              (a)(1) and (2) Financial Statements and Financial Statement Schedules.
                                                                                                 Page
                                                                                                 ----

                              I.    Financial Statements of the Registrant                        F-1

                              II.   Financial Statement Schedules

                                    A.      Schedule I - Summary of Investments-
                                            Other Than Investments in Related
                                            Parties                                               S-1

                                    B.      Schedule II - Condensed Financial
                                            Information of Registrant                             S-2

                                    C.      Schedule III - Supplemental Segment                   S-5
                                            Information

                                    D.      Schedule IV - Reinsurance                             S-6

 <S>                    <C>             
 Exhibit No.            (a)(3) Exhibits.
 -----------            ----------------
   3.1                        --    Certificate of Incorporation of the Company (1)
   3.2                        --    By-Laws of the Company (1)
   4.2                        --    Form of Class A Common Stock Certificate (1)
   4.5                        --    Form of Class B Common Stock Certificate (1)
  10.4                        --    Incentive Stock Option Plan 1985, as supplemented (1)
  10.5                        --    Incentive Stock Option Plan 1986 (1)
  10.6                        --    Non-qualified Stock Option issued to Stanley S. Mandel (1)
  10.7                        --    Warrant issued to Bernard Kooper (1)
  10.8                        --    Lease between the Company and Hacienda Intercontinental
                                    Realty, N.V. (1)
  10.8.1                      --    Lease dated November 29, 1990 between the Company
                                    and Hacienda Intercontinental Realty, N.V. (2)
  10.8.2                      --    Letter dated December 7, 1992 from Williamson,
                                    Picket & Gross, Inc. addressed to the Company,
                                    incorporated by reference to Exhibit 10.8.2 to
                                    the Company's Form 10-K for the year ended
                                    December 31, 1992
  10.9                        --    Sublease between the Company and Arista (1)
  10.9.1                      --    Sublease dated January 1, 1991, between the Company and Arista (2)
  10.11                       --    Reinsurance Agreement with NRG Reinsurance
                                    Company, as amended (1)
  10.11.1                     --    Amendment to  Reinsurance  Agreement  with NRG  Reinsurance  Company,
                                    dated July 16, 1990 (2)
</TABLE>


                                       28
<PAGE>
<TABLE>
<CAPTION>

  Exhibit No.
  -----------
  <S>              <C>

  10.11.2          --  Reinsurance  Agreement with NRG  Reinsurance  Company,  dated January
                       29,  1993,  incorporated  by  reference  to  Exhibit  10.11.2 to the
                       Company's Form 10-K for the year ended December 31, 1992

  10.11.3          --  Reinsurance Agreement with NRG America Life Reassurance  Corporation,
                       effective  October 1, 1993,  incorporated  by  reference  to Exhibit
                       10.11.3 to the Company's 10-K for the year ended December 31, 1993
  10.12            --  Agreement for Statutory Disability Benefits General Agents (1)
  10.12(a)         --  Rider to Statutory Disability Benefits General Agents Agreement (1)
  10.14            --  Lease of  Additional  Space  (Room  1101)  between  the  Company  and
                       Hacienda Intercontinental Realty, N.V.(1)
  10.15            --  Agreement    between   Arista   Insurance    Company   and   American
                       International Life Assurance Company of New York (1)
  10.16            --  Sublease (Room 1101) between the Company and Arista (1)
  10.17            --  Lease of  Additional  Space  (Room  1201)  between  the  Company  and
                       Hacienda Intercontinental Realty, N.V. (1)
  10.18            --  Sublease (Room 1201) between the Company and Arista,  incorporated by
                       reference  to  Exhibit  No.  1 to the  Company's  10-K  for the year
                       ended December 31, 1988
  10.19            --  Agreement  between  Arista  and First  International  Life  Insurance
                       Company,   incorporated  by  reference  to  Exhibit  No.  2  to  the
                       Company's 10-K for the year ended December 31, 1988.
  10.21            --  Statutory Disability Benefits  Administration  Agreement Effective as
                       of October  1, 1991,  between  Arista  and The North  Atlantic  Life
                       Insurance  Company,  incorporated  by reference to Exhibit  10.21 to
                       the Company's Form 10-K for the year ended December 31, 1992
  10.22            --  Employment  Agreement  between the Company and Bernard Kooper,  dated
                       February 17,  1993,  incorporated  by reference to Exhibit  10.22 to
                       the Company's 10-K for the year ended December 31, 1993
  10.22.1          --  Amendment  No.  1 to the  Employment  Agreement  between  Arista  and
                       Bernard Kooper dated July 20, 1994 (3)
  10.23            --  Employment   Agreement  between  Arista  and  Stanley  Mandel,  dated
                       February 17,  1993,  incorporated  by reference to Exhibit  10.23 to
                       the Company's 10-K for the year ended December 31, 1993
  10.23.1          --  Amendment  No.  1 to the  Employment  Agreement  between  Arista  and
                       Stanley Mandel, dated July 20, 1994 (3)
  10.24            --  Consulting  Agreement  between  Arista and  International  Management
                       Consultants,  dated  May  1,  1993,  

</TABLE>


                                       29
<PAGE>
<TABLE>
<CAPTION>

  Exhibit No.
  -----------
  <S>              <C>

                       incorporated  by  reference  to Exhibit  10.24 to the  Company's 10-K
                       for the year  ended  December 31, 1993
  10.25            --  Split-Dollar  Insurance  Agreement  between Arista  Investors  Corp.,
                       Arlyne Kooper and Bernard Kooper, dated July 20, 1994 (3)
  10.26            --  Split-Dollar  Insurance Agreement between Arista,  Stanley Mandel and
                       Joy Mandel, dated July 20, 1994 (3)
  10.28            --  Collateral Assignment, dated July 20, 1994 (Joy Mandel) (3)
  10.29            --  Collateral  Assignment,  dated  July 20,  1994  (Bernard  Kooper  and
                       Arlyne Kooper) (3)
  10.30            --  Lease  Agreement,  dated  January 9, 1995  between  the  Company  and
                       Hacienda Intercontinental Realty, N.V. (3)
  10.30.1          --  Letter   dated  March  12,  1996  from  the  Company   addressed   to
                       Williamson, Picket & Gross, Inc. (4)
  10.30.2          --  Letter  dated March 13, 1996 from  Williamson,  Picket & Gross,  Inc.
                       addressed to the Company (4)
  10.31            --  Assumption  Reinsurance  Treaty,  dated  April 1,  1994  between  the
                       Company and Aetna Life Insurance Company (3)
  10.32            --  Reinsurance  Treaty,  dated  October  1,  1995,  between  Arista  and
                       Cologne Life Reinsurance Company (4)
  10.32.1          --  Surplus Note Agreement,  dated December 29, 1995,  between Arista and
                       Cologne Life Underwriting Management Company (4)
  10.32.2          --  Warrant issued to Cologne Life Underwriting Management Company (4)
  10.33            --  Lease  (Storage  space #7)  effective  January  1, 1996  between  the
                       Company and Hacienda Intercontinental Realty, N.V. (4)
  10.34            --  Sublease  (Storage  space #7)  effective  January 1, 1996 between the
                       Company and Arista (4)
  10.35            --  Sublease effective June 1, 1995 between the Company and Arista (4)
  10.36            --  Stock  Purchase  Agreement  dated as of July 13, 1995 between  Arista
                       and American Travellers Life Insurance Company (4)
  10.37            --  Secured  Promissory  note,  dated  June 14,  1996,  issued by Bernard
                       Kooper to Arista  Investors Corp. in the aggregate  principal amount
                       of $500,000 (5)
  10.38            --  Pledge  and  Escrow  Agreement,  dated  June 14,  1996,  by and among
                       Bernard Kooper,  as pledgor,  Arista Investors Corp., as pledgee and
                       Morrison Cohen Singer & Weinstein, LLP, as escrow agent (5)
  10.39            --  Letter  Agreement,  dated June 14, 1995,  between  Bernard Kooper and
                       Arista  Investors  Corp.,  granting Arista Investors Corp. an option
                       to  acquire  47,000  shares of its Class B common  stock,  par value
                       $.01 per share (5)
  10.40            --  Letter dated  October 31, 1996,  addressed  to  Williamson,  Picket &
                       Gross, Inc. (6)

</TABLE>


                                       30
<PAGE>
<TABLE>
<CAPTION>

  Exhibit No.
  -----------
  <S>              <C>


  10.41            --  Letter  Agreement,  dated  December  11, 1996,  terminating  sublease
                       between the Company and Arista (Storage Space #5) (6)
  21.1             --  List of  Subsidiaries,  incorporated  by reference to Exhibit 21.1 to
                       the Company's 10-K for the year ended December 31, 1993
  24.1             --  Powers of Attorney,  incorporated by reference to Exhibit 25.1 to the
                       Company's  Registration  Statement on Form S-1 (File No.  33-20101),
                       dated  February  11,  1988,  as  amended  on May 6,  1988,  declared
                       effective on May 16, 1988, and amended by  Post-Effective  Amendment
                       No. 1 dated April 27, 1989.
  27               --  Financial Data Schedule

</TABLE>


                                       31
<PAGE>


(1)      Filed as same numbered  Exhibit to the Company's  Registration  
         Statement on Form S-1 (File No. 33-20101) on February  11, 1988,  as 
         amended on May 6, 1988,  declared  effective  on May 16, 1988,  and 
         amended by Post-Effective Amendment No. 1 dated April 27, 1989, and 
         incorporated herein by reference.

(2)      Filed as same  numbered  Exhibit to the  Company's  Form 10-K for 
         the year ended  December 31, 1990,  and incorporated herein by 
         reference.

(3)      Filed  as same  numbered  Exhibit  to the  Company's  Form  10-K for 
         the  year  ended  December  31,  1994,  and incorporated herein by 
         reference.

(4)      Filed  as same  numbered  Exhibit  to the  Company's  Form  10-K for 
         the  year  ended  December  31,  1995,  and incorporated herein by 
         reference.

(5)      Filed as the same  numbered  Exhibit to the  Company's  Form 10-Q 
         for the fiscal  quarter  ended June 30, 1996.

(6)      Filed herewith.

         (b)  Reports on Form 8-K
 
         None



                                       32
<PAGE>


 
SIGNATURE

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


                                     ARISTA INVESTORS CORP.


                                     By: /s/ Susan J. Hall
                                        ----------------------------------------
  Dated: July 9 , 1997               Name:   Susan J. Hall
                                     Title:  Senior Vice President and Treasurer




                                       33
<PAGE>



                                ARISTA INVESTORS CORP.

                            INDEX TO FINANCIAL STATEMENTS
                                    AND SCHEDULES


                                                                        PAGE

Independent Auditors' Reports                                            F-2

Financial Statements of the Registrant:

    Consolidated Balance Sheets                                       F-3 - F-4

    Consolidated Statements of Operations                             F-5 - F-6

    Consolidated Statements of Changes in
         Stockholders' Equity                                            F-7

    Consolidated Statements of Cash Flows                             F-8 - F-9

    Notes to Consolidated Financial Statements                      F-10 - F-35


Financial Statement Schedules of the Registrant:

    Schedule I - Summary of Investments - Other
         Than Investments in Related Parties                              S-1

    Schedule II - Condensed Financial Information of Registrant         S-2-4


    Schedule III - Supplemental Segment Information                       S-5

    Schedule IV - Reinsurance                                             S-6

    All other schedules are omitted since the required information is not
    present or is not present in amounts sufficient to require submission of
    the schedule, or because the information required is included in the
    Consolidated Financial Statements and notes thereto.

                                        F-1


<PAGE>




                             INDEPENDENT AUDITORS' REPORT




To the Board of Directors and Stockholders of
    Arista Investors Corp.:

We have audited the accompanying consolidated balance sheets of Arista 
Investors Corp. as of December 31, 1996 and 1995 and the related consolidated 
statements of operations, changes in stockholders' equity, and cash flows for 
each of the three years in the period ended December 31, 1996.  These 
financial statements are the responsibility of the Company's management.  Our 
responsibility is to express an opinion on these financial statements based 
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Arista Investors
Corp. at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years ended December 31,
1996, in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole.  The financial statement schedules on
pages S-1 to S-6 of this Form 10-K are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not a required part of
the basic financial statements.  These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein.




                               Rosen Seymour Shapss Martin & Company


New York, New York
March 12, 1997


                                        F-2


<PAGE>


                                ARISTA INVESTORS CORP.

                              CONSOLIDATED BALANCE SHEETS
                              DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>




                                         A S S E T S

                                                                      1996           1995   
                                                                   ----------     ----------
INVESTMENTS (Notes 2 and 13):

<S>                                                             <C>             <C>
  Held-to-maturity securities:
    Bonds and long-term U.S. Treasury obligations,
       at amortized cost (market value $2,650,210
       in 1996 and $2,692,276 in 1995)                             $  2,696,220   $  2,654,939

  Available-for-sale securities:
    Redeemable preferred stocks, at market value
       (amortized cost of $84,149 in 1996 and
       $141,344 in 1995)                                                 56,920        129,502

  Trading securities, at market value (cost
    of $1,279 in 1996)                                                      319            660
                                                                     ----------      ---------

       Total investments                                              2,753,459      2,785,101

CASH AND EQUIVALENTS (Note 13)                                        7,076,659      6,777,328

PREMIUMS RECEIVABLE, net (Notes 2 and 12)                             4,304,200      5,131,705

DEFERRED POLICY ACQUISITION COSTS, net (Notes 2 and 8)                  790,137      1,060,381

RECEIVABLES FROM RELATED PARTIES (Notes 4 and 8)                        182,787        129,060

FURNITURE AND EQUIPMENT, at cost, net of accumulated
  depreciation of $726,193 in 1996 and $661,552 in
  1995 (Note 2)                                                         138,552        193,549

PREPAID AND REFUNDABLE INCOME TAXES                                     757,548        765,877

OTHER ASSETS                                                          1,106,908        797,054
                                                                     ----------      ---------

       Total assets                                                 $17,110,250     $17,640,055
                                                                    -----------     -----------
                                                                    -----------     -----------
</TABLE>

                                         (Continued)

                                        F-3


<PAGE>




                               ARISTA INVESTORS CORP.

                             CONSOLIDATED BALANCE SHEETS
                                    (CONTINUED)
                             DECEMBER 31, 1996 AND 1995


<TABLE>
<CAPTION>



                         LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                         1996           1995
                                                                      ----------     ----------

LIABILITIES:

<S>                                                                <C>             <C>
  Payable to reinsurer (Note 12)                                   $     93,121   $    161,476
  Unpaid claims liabilities (Notes 2, 5 and 12)                       4,351,500      4,526,315
  Unearned premiums (Notes 2 and 12)                                  1,397,380      1,328,210
  Commissions payable (Notes 4 and 12)                                  766,575        942,478
  Accounts payable and accrued expenses                               1,160,765        772,969
  Deferred income taxes, net (Notes 2 and 11)                            78,329        622,427
  Surplus note payable, net (Note 6)                                  2,865,000      2,850,000
                                                                      ---------      ---------

       Total liabilities                                             10,712,670     11,203,875
                                                                     ----------     ----------

COMMITMENTS AND CONTINGENCIES (Notes 4, 8 and 12)

STOCKHOLDERS' EQUITY (Notes 6, 9 and 10):
  Class A common stock, $.01 par value; 9,950,000 shares
    authorized, 2,580,100 shares issued in 1996 and
    1,940,600 in 1995                                                    25,801         19,406

  Class B convertible common stock, $.01 par value; 50,000
    shares authorized, 47,400 shares issued and outstanding                 474            474

  Additional paid-in capital                                          5,839,609      4,193,354

  Paid-in capital attributed to detachable warrant (Note 6)             150,000        150,000

  Retained earnings                                                     935,665      2,111,528

  Net unrealized loss on investment securities                          (27,229)       (11,842)
                                                                      ----------      ---------
                                                                      6,924,320      6,462,920
  Secured promissory note from shareholder (Note 4)                    (500,000)             -
  Cost of 10,000 shares Class A common stock
    held in treasury                                                    (26,740)       (26,740)
                                                                      ----------      ---------

       Total stockholders' equity                                     6,397,580      6,436,180
                                                                     ----------      ---------

       Total liabilities and stockholders' equity                   $17,110,250    $17,640,055
                                                                    -----------    -----------
                                                                    -----------    -----------

</TABLE>


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

                                        F-4

<PAGE>

                                     ARISTA INVESTORS CORP.

                              CONSOLIDATED STATEMENTS OF OPERATIONS
                          YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


<TABLE>
<CAPTION>


                                                              1996            1995           1994
                                                          -----------    -----------    -----------

<S>                                                     <C>            <C>            <C>
REVENUE (Notes 2, 4, and 16):
  Gross premiums earned                                   $23,160,259    $26,091,714    $26,188,858
  Ceded premiums earned (Note 12)                          11,580,129     13,045,857     13,094,429
                                                           -----------    -----------    -----------

       Net premiums earned                                 11,580,130     13,045,857     13,094,429

  Net realized investment losses                                 (208)          (137)        (2,603)
  Net unrealized investment loss                                 (159)          (358)          (269)
  Net Investment income (Note 13)                             440,539        252,134        215,480
  Other income                                                299,324        333,205        279,805
                                                           -----------    -----------    -----------

       Total revenue                                       12,319,626     13,630,701     13,586,842
                                                           -----------    -----------    -----------

EXPENSES:
  Underwriting:
    Gross claims incurred (Note 2)                         15,288,310     16,588,801     17,752,700
    Ceded claims incurred (Note 12)                         7,644,155      8,294,400      8,876,350
                                                           -----------    -----------    -----------

       Net claims incurred                                  7,644,155      8,294,401      8,876,350
                                                           -----------    -----------    -----------

    Gross commissions incurred (Note 4)                     4,206,730      4,616,807      4,193,570
    Ceded commissions incurred (Note 12)                    3,559,620      4,447,545      3,956,192
                                                           -----------    -----------    -----------

       Net commissions incurred                               647,110        169,262        237,378
                                                           -----------    -----------    -----------

       Total underwriting expenses                          8,291,265      8,463,663      9,113,728

  General and administrative expenses                       4,920,536      5,015,558      4,794,201
                                                           -----------    -----------    -----------

       Total expenses before charge for
         compensation expense resulting
         from the exercise of options and
         warrants                                          13,211,801     13,479,221     13,907,929

  Compensation expense resulting from the
    exercise of options and warrants (Note 18)                757,350              -              -
                                                           -----------    -----------    -----------

       Total expenses                                      13,969,151     13,479,221     13,907,929
                                                           -----------    -----------    -----------

       Income (loss) from continuing
       operations before income tax
       provision (benefit)                                 (1,649,525)       151,480       (321,087)

</TABLE>

                                                 (Continued)

                                        F-5

<PAGE>

                                       ARISTA INVESTORS CORP.

                               CONSOLIDATED STATEMENTS OF OPERATIONS
                            YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>


                                                               1996           1995          1994
                                                           -----------    -----------    -----------

<S>                                                       <C>             <C>             <C>
PROVISION (BENEFIT) FOR INCOME TAXES (Note 11):
  Provision for income taxes                              $    81,176    $    92,900    $   126,900

  Net operating loss benefit                                 (554,838)             -       (206,858)
                                                           -----------    -----------    -----------

  Net provision (benefit)                                    (473,662)        92,900        (79,958)
                                                           -----------    -----------    -----------

       Net income (loss) from
         continuing operations                             (1,175,863)        58,580       (241,129)
                                                           -----------    -----------    -----------

DISCONTINUED OPERATIONS:
  Income from operations of disposed segment
    (net of income taxes of $3,887) (Note 3)                        -          5,643              -

  Gain on disposal of segment (net of income
    taxes of $127,891) (Note 3)                                     -        192,300              -
                                                           -----------    -----------    -----------

                                                                    -        197,943              -
                                                           -----------    -----------    -----------

       Net income (loss)                                  $(1,175,863)   $   256,523    $  (241,129)
                                                           -----------    -----------    -----------
                                                           -----------    -----------    -----------

NET INCOME (LOSS) PER COMMON SHARE:
  Primary:
    Continuing operations (Note 18)                       $      (.45)   $      0.02    $     (0.11)
    Discontinued operations                                         -           0.09              -
                                                           -----------    -----------    -----------

                                                          $      (.45)   $      0.11    $     (0.11)
                                                           -----------    -----------    -----------
                                                           -----------    -----------    -----------
  Fully diluted:
    Continuing operations (Note 18)                       $      (.45)   $      0.02    $     (0.11)
    Discontinued operations                                         -           0.08              -
                                                           -----------    -----------    -----------

                                                          $      (.45)   $      0.10    $     (0.11)
                                                           -----------    -----------    -----------
                                                           -----------    -----------    -----------

WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
  Primary                                                   2,617,500      2,251,400      2,229,900
                                                            ---------      ---------      ---------
                                                            ---------      ---------      ---------


  Fully diluted                                             2,617,500      2,374,660      2,229,900
                                                            ---------      ---------      ---------
                                                            ---------      ---------      ---------
</TABLE>



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

                                        F-6


<PAGE>
<TABLE>
<CAPTION>

                                                         ARISTA INVESTORS CORP.

                                       CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                                              YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

                                                                                                                               
                                                   COMMON STOCK                                                                
                                  -----------------------------------------------
                                          CLASS A             CONVERTIBLE CLASS B                                     
                                  ----------------------      -------------------                                     SECURED  
                                   NUMBER           PAR         NUMBER      PAR      ADDITIONAL                      PROMISSORY
                                     OF            VALUE          OF       VALUE      PAID-IN       RETAINED            NOTE   
                                   SHARES           $.01        SHARES      $.01      CAPITAL       EARNINGS         RECEIVABLE
                                 ---------        -------      -------     ------    ---------     ----------       -----------

<S>                              <C>               <C>         <C>         <C>         <C>         <C>               <C>       
Balance - January 1, 1994        1,940,600        $19,406       47,400      $474     $4,193,354     $2,096,134       $         
  Net loss                                                                                            (241,129)                
  Net investment loss                                                                                                          
                                 ---------       --------      -------     -----     ----------     ----------       ----------
Balance - December 31, 1994      1,940,600         19,406       47,400       474      4,193,354      1,855,005                 
  Net income                                                                                           256,523                 
  Net investment gains                                                                                                         
  Issuance of surplus note 
    (Note 4)                                                                                                                   
                                 ---------       --------      -------     -----     ----------     ----------       ----------

Balance - December 31, 1995      1,940,600         19,406       47,400       474      4,193,354      2,111,528                 
  Net loss                                                                                          (1,175,863)                
  Net investment loss                                                                                                          
  Issuance of shares of Class A
    common stock under the
    Incentive Stock Option Plan,
    from a Warrant, and from a
    Non-qualified Stock Option
    (Notes 4 and  9)               639,500          6,395                             1,646,255                       (500,000)
                                 ---------       --------      -------     -----     ----------     ----------       ----------

Balance - December 31, 1996      2,580,100        $25,801       47,400      $474    $ 5,839,609     $  935,665       $(500,000)
                                 ---------       --------      -------     -----     ----------     ----------       ----------
                                 ---------       --------      -------     -----     ----------     ----------       ----------

<CAPTION>

                                       PAID-IN                                            
                                       CAPITAL                    CLASS A                  
                                      ATTRIBUTED       NET        COMMON                   
                                          TO       UNREALIZED      STOCK                   
                                      DETACHABLE  GAIN (LOSS) ON  HELD IN                  
                                       WARRANTS    INVESTMENTS    TREASURY        TOTAL    
                                    -------------  -----------   ----------     ---------  
                                                                                          
                                      <C>          <C>          <C>           <C>         
Balance - January 1, 1994              $            $(14,863)    $(26,740)     $6,267,765 
  Net loss                                                                       (241,129)
  Net investment loss                                (15,415)                     (15,415)
                                      -----------   --------     --------      ---------- 
Balance - December 31, 1994                          (30,278)     (26,740)      6,011,221 
  Net income                                                                      256,523 
  Net investment gains                                18,436                       18,436 
  Issuance of surplus note                                                                
    (Note 4)                            150,000                                   150,000 
                                      -----------   --------     --------      ---------- 
                                                                                          
Balance - December 31, 1995             150,000      (11,842)     (26,740)      6,436,180 
  Net loss                                                                     (1,175,863)
  Net investment loss                                (15,387)                     (15,387)
  Issuance of shares of Class A                                                           
    common stock under the                                                                
    Incentive Stock Option Plan,                                                          
    from a Warrant, and from a                                                            
    Non-qualified Stock Option                                                            
    (Notes 4 and  9)                                                            1,152,650 
                                      -----------   --------     --------      ---------- 
                                                                                          
Balance - December 31, 1996            $150,000     $(27,229)    $(26,740)     $6,397,580 
                                      -----------   --------     --------      ---------- 
                                      -----------   --------     --------      ---------- 

</TABLE>

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

                                        F-7

<PAGE>

                                     ARISTA INVESTORS CORP.


                              CONSOLIDATED STATEMENTS OF CASH FLOWS

                           YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


<TABLE>
<CAPTION>


                                                          1996           1995           1994
                                                      -----------     ----------     ----------
<S>                                                  <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                  $(1,175,863)    $  256,523     $ (241,129)
  Adjustments to reconcile net income to net
    cash provided by (used in) operating
    activities:
    Depreciation                                          64,641         57,321         66,533
    Amortization of deferred acquisition costs           332,633        323,202        266,833
    Amortization of discount on surplus note              15,000              -              -
    Loss on sale of investments                              208            137              -
    Amortization of intangible assets                          -        248,957        189,865
    Gain on sale of subsidiary                                 -       (320,192)             -
    Deferred income taxes                               (544,098)       343,385       (206,858)
    Unrealized loss on trading securities                    341            358              -
    Compensation arising from exercise of
       options and warrants                              757,350              -              -
    (Increase) decrease in operating assets
      excluding effects of divestiture:
       Premiums receivable, net                          827,505      1,196,795        161,250
       Prepaid and refundable income taxes                 8,329         51,412       (554,442)
       Other assets                                     (363,581)         9,026       (194,243)
    Increase (decrease) in operating liabilities
      excluding effects of divestiture:
       Payable to reinsurer                              (68,355)        81,083         18,122
       Unpaid claims liabilities                        (174,815)      (395,131)       376,723
       Unearned premiums                                  69,170        (30,155)       198,798
       Commissions payable                              (175,903)      (401,078)       878,907
       Accounts payable and accrued expenses             387,796       (316,273)       453,072
                                                       ----------     ----------     ----------
         Net cash provided by (used in)
           operating activities                          (39,642)     1,105,370      1,413,431
                                                       ----------     ----------     ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Furniture and equipment acquired                        (9,644)      (130,228)       (29,801)
  Proceeds from sale of securities                        56,987        222,239      1,003,885
  Purchases of securities                                (41,281)             -     (1,189,774)
  Proceeds from sale of subsidiary                             -        764,675              -
  Payments and costs associated with
    acquired business                                    (62,389)      (588,595)      (827,774)
  Divestiture of subsidiary                                    -       (320,997)             -
                                                       ----------     ----------     ----------

       Net cash used in investing activities             (56,327)       (52,906)    (1,043,464)
                                                       ----------     ----------     ----------

</TABLE>

                                          (Continued)

                                        F-8


<PAGE>


                                          ARISTA INVESTORS CORP.

                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (CONTINUED)
                                YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>



                                                         1996             1995           1994
                                                      ----------       -----------     ----------

<S>                                                   <C>              <C>             <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase in surplus note payable (Note 6)           $        -       $ 3,000,000     $        -
  Increase in note discount (Note 6)                           -          (150,000)             -
  Proceeds attributed to stock warrants (Note 6)               -           150,000              -
  Issuance of Class A common stock                       395,300                 -              -
                                                      ----------       -----------     ----------

       Net cash provided by financing
        activities                                       395,300         3,000,000              -
                                                      ----------       -----------     ----------

    Net increase in cash and equivalents                 299,331         4,052,464        369,967
                                                      ----------       -----------     ----------

CASH AND EQUIVALENTS:
  Beginning of year                                    6,777,328         2,724,864      2,354,897
                                                      ----------       -----------     ----------

  End of year                                         $7,076,659       $ 6,777,328     $2,724,864
                                                      ----------       -----------     ----------
                                                      ----------       -----------     ----------

SUPPLEMENTAL CASH FLOW DISCLOSURE:
  Cash paid during the year for:
    Income taxes                                      $  296,847        $  327,231     $  495,366
                                                      ----------       -----------     ----------
                                                      ----------       -----------     ----------

    Interest                                          $        -        $        -     $        -
                                                      ----------       -----------     ----------
                                                      ----------       -----------     ----------

SUPPLEMENTAL DISCLOSURES OF NONCASH
  FINANCING ACTIVITIES:
  The Company received a note and issued
    Class A common stock as follows:
    Secured promissory note from shareholder
       (Note 4)                                       $ (500,000)       $        -     $        -
    Compensation expense                                (757,350)                -              -
    Issuance of Class A common stock                   1,652,650                 -              -
                                                      ----------       -----------     ----------

       Cash received                                  $  395,300        $        -     $        -
                                                      ----------       -----------     ----------
                                                      ----------       -----------     ----------

</TABLE>


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

                                        F-9


<PAGE>


                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994





1.   ORGANIZATION AND NATURE OF BUSINESS

       ORGANIZATION

          Arista Investors Corp. (the "Company") was incorporated in the State
of New York on September 28, 1978 and reincorporated in the State of Delaware in
October 1986.  The Company is principally a holding company with respect to its
wholly-owned subsidiaries, Arista Insurance Company ("Arista"), The Collection
Group, Inc. ("Collection") and Arista Administrative Services, Inc.
("Administrative").  Arista was incorporated in the State of New York on May 21,
1979, and was licensed on October 11, 1979 by the New York State Insurance
Department ("NYSID").  Arista's principal line of business is the writing of
disability insurance policies including super statutory and voluntary disability
benefits insurance, in New York State.  Effective September 1, 1993 Arista
amended its charter and license and now has the authority to write glass
insurance as well as disability insurance.  To date, Arista has not written any
glass insurance.  Collection was incorporated in August 1989 and commenced
operations in July 1991.  Collection's principal line of business is to provide
accounts receivable collection services to companies including Arista. 
Effective December 31, 1991 Arista purchased all of the outstanding shares of
capital stock of American Accident and Health Insurance Company ("American")
(see Note 15).  American was organized in April 1987 and licensed by the NYSID
on June 24, 1987, and is also authorized to write disability insurance.  Arista
sold all of the outstanding shares of capital stock of American in December
1995, which had been inactive since its acquisition in 1991 (see Note 3). 
Administrative is an inactive company.


2.   SIGNIFICANT ACCOUNTING POLICIES

       BASIS OF PRESENTATION

          The accompanying consolidated financial statements are prepared in
accordance with generally accepted accounting principles ("GAAP").  GAAP differs
from Statutory Accounting Principles ("SAP") used by insurance companies in
reporting to state regulatory and industry agencies as explained in Note 14.

       USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

          The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.


                                                                     (Continued)

                                        F-10


<PAGE>

                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994


2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

       PRINCIPLES OF CONSOLIDATION

          The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Arista, Collection,
and Administrative.  All significant intercompany balances and transactions have
been eliminated.  Revenues and expenses for the year ended December 31, 1994
have been restated to exclude American which was disposed of during 1995 (see
Note 3).

       REVENUE RECOGNITION, PREMIUMS RECEIVABLE AND CLAIMS LIABILITIES

          Premium revenue is recognized evenly over the term of the policy. 
Estimates of premiums which have been earned but not collected are accrued since
customers generally report and pay such premiums after the earning period based
on the number of employees on their payroll during the period of coverage. 
Customer payrolls are sensitive to the general business cycle, and sudden
business upturns or downturns could have a significant impact on the revenues
the Company receives.  Such estimates are continually reviewed and updated by
management, and any resulting adjustments are reflected in current operating
results.

          Unearned premiums represent that portion of premiums applicable to the
unexpired terms of policies in force.

          Third party administrative fees are recognized in the period in which
the subject premiums are collected and earned.  Such fees are determined in
accordance with prescribed schedules based on the service performed.

          Claims liabilities and claims adjustment expense accruals, which are
based on the estimated ultimate cost of settling claims, include estimates for
unreported claims and claims adjustment expenses based upon past experience,
modified for current trends.  Such estimates are continually reviewed and
updated by management and any resulting adjustments are reflected in current
operating results.

       REINSURANCE

          In the normal course of business, the Company seeks to reduce the loss
that may arise from events that cause unfavorable underwriting results by
reinsuring risk with reinsurers.  Amounts recoverable from reinsurer(s) for
commissions, losses or any other amount(s) due are deducted from ceded premiums
earned.  Settlements are made quarterly by net cash payments to the
reinsurer(s).


                                                                     (Continued)

                                        F-11


<PAGE>


                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994



2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

       FURNITURE AND EQUIPMENT

          Furniture and equipment are carried at cost.  Depreciation is computed
using the straight-line method over the estimated useful lives of the assets. 
Depreciation expense for each of the years in the three-year period ended
December 31, 1996, was $64,641, $57,321 and $66,533,  respectively.


       INVESTMENTS

          In 1993, the Company adopted SFAS 115, "Accounting for Certain
Investments in Debt and Equity Investments" (see Note 13).  Pursuant to the
requirements of SFAS 115, the Company determines the appropriate classification
of its investments in debt and equity securities at the time of purchase and
reevaluates such determination at each balance sheet date.  Debt securities that
the Company has the positive intent and ability to hold to maturity are
classified as "held-to-maturity securities" and reported at amortized cost; debt
and equity securities that are bought and held principally for the purpose of
selling them in the near future are classified as "trading securities," and
reported at fair value, with unrealized gains and losses included in earnings;
debt and equity securities not classified as either held-to-maturity securities
or trading securities are classified as "available-for-sale securities" and
reported at fair value, with unrealized gains and losses reported as a separate
component of stockholders' equity.

       DEFERRED POLICY ACQUISITION COSTS

          Policy acquisition costs include fees paid and certain other costs in
connection with acquiring new business.  These costs are deferred and charged to
income over the future periods in which the related premiums are earned.

       CONCENTRATION OF CREDIT RISK

          Financial instruments that potentially subject the Company to credit
risk consist principally of premiums receivable and reinsurance contracts.  The
Company grants credit terms to its customers in the normal course of business. 
Credit risk with respect to these receivables is considered minimal due to the
Company's diverse customer base throughout the New York area.  As part of its
ongoing control procedures, the Company monitors the creditworthiness of its
customers.  Bad debts have been minimal.


                                                                     (Continued)


                                        F-12


<PAGE>

                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994



2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

       CONCENTRATION OF CREDIT RISK (CONTINUED)

          Reinsurance contracts do not relieve the Company from its obligations
to policyholders.  Failure of the reinsurer to honor its obligations could
result in losses to the Company.  The Company evaluates the financial condition
of its reinsurer and monitors concentrations of credit risk arising from
activities to minimize its exposure to significant losses from reinsurer
default.

       FAIR VALUE OF FINANCIAL INSTRUMENTS

          The carrying amounts and related fair values of financial instruments
at December 31, 1996 and 1995 are summarized as follows:

                                   1996                          1995 
                         ------------------------      ------------------------
                           CARRYING          FAIR      CARRYING         FAIR
                            AMOUNT          VALUE        AMOUNT         VALUE
                         ----------     ----------     ----------    ----------
Cash and equivalents     $7,076,659     $7,076,659     $6,777,328    $6,777,328
Investments:
   Held-to-maturity 
     securities           2,696,220      2,650,210      2,654,939     2,692,276
   Available for sale 
     securities              56,920         56,920        129,502       129,502
Trading securities              319            319            660           660
Premiums receivable       4,304,200      4,304,200      5,131,705     5,131,705
Payable to reinsurer        (93,121)       (93,121)      (161,476)     (161,476)
Unpaid claims liabilities 4,351,500      4,351,500      4,526,315     4,526,315
Unearned premiums         1,397,380      1,397,380      1,328,210     1,328,210
Surplus note payable, 
  net                    (2,865,000)    (3,000,000)    (2,850,000)   (3,000,000)

            The methods and assumptions used to estimate the fair value of
financial instruments are as follows:

            (i) The carrying amounts of cash and equivalents approximate their
fair value.  Investments in available-for-sale securities and trading securities
are carried at their fair values based on quoted market prices.  The fair values
of held-to-maturity securities are based on quoted market prices.

            (ii) The carrying values of premiums receivable, amounts payable 
to the reinsurer, unpaid claims liabilities and unearned premiums approximate 
fair value because of their short-term maturities.

                                                                     (Continued)

                                        F-13

<PAGE>

                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994


2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

       FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

            (iii) The fair value of the surplus note payable is estimated
assuming the note will be repaid from free and divisible surplus of Arista in
the near term with the prior approval of the Superintendent of Insurance of the
State of New York.

       INCOME TAXES

          The Company and its subsidiaries file a consolidated federal income
tax return.  Tax returns are prepared using Statutory Accounting Principles
("SAP") (see Note 14).  Deferred income taxes reflect the future tax
consequences of differences between the tax basis of assets and liabilities and
their financial reporting amounts at each year-end (see Note 11).

       NET INCOME PER SHARE OF COMMON STOCK

          Primary and fully diluted income per share of common stock (Class A
and Class B) are computed on the weighted average number of shares of common
stock and common stock equivalents outstanding during each year.  However,
common stock equivalents (incentive stock options and stock warrants) are not
included in the computation if their inclusion would have an anti-dilutive
effect on earnings per share.

       CONSOLIDATED STATEMENT OF CASH FLOWS

          For purposes of this statement, cash equivalents represent highly
liquid financial instruments with a maturity date of three months or less.  At
December 31, 1996 cash equivalents represent certificates of deposits,
commercial paper, and money market accounts.


3.   SALE OF SUBSIDIARY AND INSURANCE BUSINESS

       SALE OF SUBSIDIARY

          In December 1995, Arista sold its investment in its wholly-owned
subsidiary, American, excluding its book of insurance, for $764,675 in cash. 
The sale resulted in a pretax gain of $320,192.  American was an inactive
company (see Note 15).  Except for the effects of the gain, the sale did not
have a significant impact on the Company's operating results.

                                                                     (Continued)

                                        F-14


<PAGE>

                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994


4.   TRANSACTIONS WITH RELATED PARTIES

       AGENTS

          Bernard Kooper ("Kooper"), Chairman of the Board of the Company and
Arista, and owner of 19.1% (1996) and 10.4% (1995) of the Company's outstanding
Class A and 100% of the Company's Class B common stock, is one of the general
agents under contract with Arista.  Kooper's agency, Bernard Kooper Life Agency,
Inc. (the "Agency"), received approximately $223,000, $224,000 and $244,000, in
commissions from Arista during 1996, 1995 and 1994, respectively, for premiums
on policies placed by the Agency.  Such premiums represented approximately 5.4%,
5.0% and 5.5% of the consolidated gross premiums earned during the years ended
December 31, 1996, 1995, and 1994, respectively.  The Agency, in turn, paid
approximately $159,000, $143,000 and $177,000 during 1996, 1995 and 1994,
respectively, to other brokers, including approximately $26,000, $23,000 and
$22,000, respectively, to brokers who are members of the Board of Directors of
Arista.  Commissions payable to the related agencies at December 31, 1996 and
1995 were $13,268 and $11,271, respectively.

       EMPLOYMENT AGREEMENT

          The Company has an employment agreement with Kooper which expires in
February 2001 and provides for annual compensation of $150,000 (see Notes 3 and
8a).

       CONSULTING AGREEMENTS

          Arista had a consulting agreement from May 1993 through September 1993
with an entity  principally owned by a director of both Arista and the Company. 
Arista paid $5,000 under this agreement in 1993 and the Company paid $30,000 in
1996, $12,000 in 1995, and $12,000 in 1994 to this entity.  In July 1993 Arista
entered into an agreement with a consultant for specified services to be
performed for a fee of $500 per week.  The consultant became a director of
Arista in October 1994.  Arista paid $26,000 per year under this agreement in
1996 and 1995.

       SECURED PROMISSORY NOTE

          In June 1996 Kooper exercised a warrant granted in 1986 to acquire
365,000 shares of the Company's Class A common stock.  In partial payment for
the shares, Kooper issued his secured promissory note (the "Note") to the
Company for $500,000.  The Note bears interest at the one-year London Interbank
Offered Rate (LIBOR) plus 1.25% and is adjusted on the first day of every
October,

                                                                     (Continued)

                                        F-15


<PAGE>

                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994


4.   TRANSACTIONS WITH RELATED PARTIES (CONTINUED)

       SECURED PROMISSORY NOTE (CONTINUED)

January, April and July commencing October 1, 1996.  The terms of the Note
provide for quarterly payments of interest only at the above determined rate. 
The principal balance outstanding and accrued but unpaid interest is due and
payable on June 14, 2001.  The Note will be canceled and extinguished if the
Company exercises the option to obtain Kooper's 47,400 shares of Class B common
stock (Note 9).  The Note is secured by the 365,000 shares of Class A common
stock.


5.   UNPAID CLAIMS LIABILITIES

       Unpaid claims liabilities include insured claims and claim adjustment
expenses.  Changes in unpaid claims liabilities for the years ended December 31,
1996 and 1995 are  summarized as follows:

                                                     1996           1995
                                                  -----------    -----------

       Balance at January 1                       $ 4,526,316    $ 4,921,446
          Less reinsurance recoverables             2,263,158      2,460,723
                                                  -----------    -----------

            Net claims liabilities                  2,263,158      2,460,723
                                                  -----------    -----------

       Claims incurred:
          Current year                             15,007,646     16,565,377
          Prior years                                 280,664         23,424
                                                  -----------    -----------

            Total claims incurred                  15,288,310     16,588,801
                                                  -----------    -----------

       Claims paid:
          Current year                             10,656,146     12,039,061
          Prior years                               4,806,980      4,944,870
                                                  -----------    -----------

            Total claims paid                      15,463,126     16,983,931
                                                  -----------    -----------

       Balance at December 31:
          Net claims liabilities                    2,175,750      2,263,158
          Plus reinsurance recoverables             2,175,750      2,263,158
                                                  -----------    -----------

            Total liability                       $ 4,351,500    $ 4,526,316
                                                  -----------    -----------
                                                  -----------    -----------



                                                                     (Continued)

                                        F-16


<PAGE>

                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994



6.   SURPLUS NOTE AND WARRANT

       On December 29, 1995 Arista issued a $3,000,000 surplus note (the
"Note") to The Cologne Life Underwriting Management Company ("CLUMCO") in
conjunction with an assumption reinsurance agreement which became effective
retroactive to October 1, 1995 (see Note 12).  The Note bears interest at 10.5%
per annum and provides for interest only payable for the first and second year
with the principal to be repaid one-eighth each year from the third to the tenth
year, from the date of closing.  Repayments of principal and interest can only
be made out of any free and divisible surplus of Arista, and are each subject to
the prior approval of the Superintendent of Insurance of the State of New York,
if in his judgment, the financial condition of Arista warrants such payments. 
If the principal and interest are not repaid in full at the end of ten years,
the Note renews annually for additional one-year terms until the principal and
interest are repaid.  Interest expense for the year ended December 31, 1996
totaled $315,000.

       In connection with the issuance of the Note, and as an inducement to
enter into the transaction with Arista, the Company issued a warrant certificate
to purchase 150,000 shares (subject to adjustment for stock dividends or stock
splits and prepayment of the Note) of its Class A common stock to CLUMCO.  The
certificate is exercisable after October 1996 at an exercise price of $3.50 per
share and expires in December 2005.  The aggregate value of the warrant of
$150,000, based on an independent appraisal of $1.00 per underlying share, has
been reflected in stockholders' equity with the corresponding discount charged
to surplus note discount.  The discount is being amortized to operations over
the option period of 10 years using the interest method.  Amortization for the
year ended December 31, 1996 was $15,000.

       In the event of liquidation of Arista, repayment of the balance of the
Note and accrued interest thereon shall be paid out of any assets remaining
after the payment of all policy obligations and all other liabilities, but
before distribution of assets to stockholders.  In the event of a Corporate
Event (see Note 8), the balance of the Note and accrued interest thereon is to
be paid on demand prior to closing of such sale provided, however, that any such
payment or repayment shall be paid out of the free and divisible surplus of
Arista, and with the prior approval of the Superintendent of Insurance of the
State of New York, if in his judgment, the financial condition of such insurer
merits it.

                                                                     (Continued)

                                        F-17


<PAGE>

                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994


7.   LEASE COMMITMENTS

       Pursuant to a sublease agreement between the Company and Arista, Arista
reimbursed the Company for 80.26% of the Company's lease obligations through May
31, 1995, and 97.90% thereafter.  Under an agreement effective January 1, 1993,
the Company paid monthly rent at an annual base rate of $141,696 until a new
lease was executed.  On January 9, 1995, the Company entered into a five-year
lease for its new principal executive office space, effective June 1, 1995.  The
lease requires monthly base rental payments of $16,925 plus utilities and a
proportionate share of various operating expenses.  The Company rents additional
storage space on a month-to-month basis.

       The minimum rental commitments under the operating leases for office
space for the four-year period ending May 31, 2000 are as follows:

               1997                              $208,821
               1998                               218,635
               1999                               228,450
               2000                                96,892
                                                  -------

                                                 $752,798
                                                 --------
                                                 --------

       The Company has the option to terminate the lease provided it notifies
the landlord ninety (90) days prior to the termination date, and reimburses the
landlord for the unamortized portion of the landlord's contribution of
approximately $200,000 for leasehold improvements in June 1995.

       Under a separate sublease, the Company was reimbursed by The
Saltzman/Kooper Agency, Inc., an affiliate controlled by a director of the
Company, for a percentage (16.45%) of the lease costs.  The sublease arrangement
expired May 31, 1995.

       Consolidated rent expense, net of sublease income of approximately
$11,000 in 1995, was $252,171 in 1996, $205,080 in 1995 and $137,550 in 1994.

       In December 1990 American entered into a five-year noncancellable lease
agreement which called for an effective annual base rent of $44,866 plus
utilities and cost of living adjustments.  In December 1991 American abandoned
this space and entered into an agreement which would release it from future
obligations under the lease, if certain conditions specified in the agreement
were met.  These conditions were not met.  The financial statements have not
been adjusted for the effect of these events.


                                                                     (Continued)

                                        F-18


<PAGE>

                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994



8.   COMMITMENTS AND CONTINGENCIES

     (a)  EMPLOYMENT AGREEMENTS

            In July 1994, Arista entered into a five-year employment agreement
with a vice president which provides for annual compensation of $125,000, annual
reimbursement of automobile expenses up to $6,000 and a nonaccountable expense
allowance of up to $3,600 per annum.  In addition, Arista may, but is not
obligated to, pay a year-end bonus as may be determined by the Board of
Directors of Arista.  The agreement provides that in the event of termination of
the agreement by Arista, Arista would provide severance pay in an amount ranging
from 100% to 60% of annual compensation of the vice president.  The agreement
also provides for a one-year covenant not to compete predicated upon the payment
of $75,000 by Arista.

            Kooper and the Company have entered into an employment contract
(the "Kooper Agreement") which expires in February, 2001 and provides for an
annual base salary of $150,000.

            Arista and Stanley Mandel have entered into an employment contract
(the "Mandel Agreement") which expires in February, 2001 and provides for an
annual base salary of $208,750 in each of the eight years plus annual
reimbursement of automobile expenses up to $9,000 and a nonaccountable expense
allowance of up to $5,000 per annum.

            The Kooper and Mandel agreements provide that, in the event of a
consolidation, merger or sale of all or substantially all of the assets of the
Company or Arista (a "Corporate Event") the employment agreements will
terminate, and upon such termination, Kooper and Mandel shall each be entitled
to receive a lump sum payout.  The payout would be the maximum amount that would
not trigger the excise tax payable in the event of an "excess parachute
payment," as such term is defined in the Internal Revenue Code of 1986, as
amended for the purpose of calculating the maximum parachute payment.  In
addition, Arista and the Company have also provided split-dollar life insurance
policies in which both Kooper and Mandel participate.  Under these agreements,
the Company and Arista will pay the premiums on these policies for a period of
time specified in each agreement, on behalf of Kooper and Mandel.  The premium
payments are to be treated as loans to both Kooper and Mandel and are
collateralized by the underlying policy.  Insurance loans to Kooper and Mandel
aggregated $168,372 and $123,806 at December 31, 1996 and 1995, respectively,
and are included in receivables from related parties in the accompanying balance
sheet.  Additionally, Kooper and Mandel have the right to receive a lump sum
retirement benefit equal to the amount of premiums paid by Arista and the
Company attributable to the cumulative increase in cash value of the policies
during

                                                                     (Continued)

                                        F-19

<PAGE>


                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994


8.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

     (a)  EMPLOYMENT AGREEMENTS (CONTINUED)

the specified period of the policies.  Each of Kooper's and Mandel's employment
agreements provides that, upon the occurrence of a Corporate Event, the Company
and Arista must pay to the insurance carrier such sums so as to render as "paid
up" the premiums for the split-dollar life insurance provided to each of Kooper
and Mandel under their respective employment agreements.  At December 31, 1996
the estimated amount needed to render as paid up the premium is approximately
$165,000.

     (b)  UNINSURED RISK

            At December 31, 1996 and 1995 cash and equivalents on deposit with
financial institutions exceeded federal deposit insurance coverage by
approximately $2,108,613 and $2,551,107, respectively.

     (c)  POLICY ACQUISITIONS

            Arista incurred costs under various agreements it entered into to
acquire the right to offer New York State statutory disability benefits coverage
to former policyholders of other disability carriers. The costs included
professional fees and finder's fees as well as fees paid directly to the former
disability carriers for such rights which have been capitalized and are being
amortized on the straight-line basis over five to seven years.  Such costs
amounted to $62,389 and $588,595 for the years ended December 31, 1996 and 1995,
respectively.  Amortization of deferred acquisition costs charged to operations
for all acquisitions were $332,633, $323,202 and $266,833 for the years ended
December 31, 1996, 1995 and 1994, respectively.  Accumulated amortization was
$1,540,746 and $1,205,751 at December 31, 1996 and 1995, respectively.

            AMERICAN LIFE INSURANCE COMPANY OF NEW YORK.  Effective July 1,
1993, Arista acquired the right to offer New York State statutory disability
benefits coverage to policyholders previously covered by The American Life
Insurance Company of New York under the terms of an assumption reinsurance
treaty dated August 30, 1993.  In consideration for this right, Arista paid a
fee based on premiums earned and collected during the two-year period ended June
30, 1994.  During 1995, Arista paid $14,383, and at December 31, 1995, $28  was
accrued under this arrangement.


                                                                     (Continued)

                                        F-20


<PAGE>

                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994



8.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

     (c)  POLICY ACQUISITIONS (CONTINUED)

            NALIC AND AETNA.  Effective January 1, 1994 Arista acquired the
entire book of New York State statutory disability benefit insurance previously
written by The North Atlantic Life Insurance Company of America ("NALIC") and on
April 1, 1994, acquired under the terms of an assumption reinsurance treaty
dated February 10, 1994, the entire book of New York State statutory
nonexperience-rated state cash sickness disability insurance previously written
by Aetna Life Insurance Company ("Aetna").  NALIC, with whom Arista, through
December 31, 1993, had a third party administrative agreement, received a fee
based on premiums paid and earned for the period January 1,  1994 through
December 31, 1994.  During 1995 and 1994 Arista paid $23,712 and $32,826,
respectively, and at December 31, 1995, $924 was accrued under this arrangement.
Aetna received a fee based on annualized premiums in force at March 31, 1994 and
on premiums paid and earned for the period April 1, 1994 through March 31, 1995.
During 1996, 1995 and 1994 Arista paid $7,102, $241,951 and $527,425,
respectively, and at December 31, 1995, $7,102 was accrued under this
arrangement.

            AMERICAN MEDICAL AND LIFE.  Effective October 1, 1994, Arista
entered into an indemnity reinsurance agreement with American Medical and Life
Insurance Company ("American Med") dated December 29, 1994 wherein Arista
assumed the  book of New York State statutory disability insurance that was
ceded by American Med.  In addition, effective January 1, 1995, Arista, through
an assumption reinsurance treaty, acquired the book of New York State statutory
disability insurance that had been previously ceded by American Med.  American
Med received a fee based on premiums paid which were earned during the year
ended September 30, 1994 and is receiving a fee based on premiums paid which
will be earned for the period January 1, 1995 through June 30, 1996.  During
1996 and 1995 Arista paid acquisition costs of $170,831 and $121,850,
respectively, and at December 31, 1996 and 1995 $5,000 and $124,492,
respectively, was accrued under this arrangement.

            COLOGNE LIFE REINSURANCE COMPANY.  Effective October 1, 1995, in
conjunction with a Surplus Note Agreement between Arista and CLUMCO (see Note
6), Arista and Cologne Life Reinsurance Company ("The Cologne") entered into a
quota-share assumption reinsurance agreement under which Arista will cede to The
Cologne 50% of its New York State statutory disability insurance in force as of
October 1, 1995 as well as any new business written or acquired after October 1,
1995.

                                                                     (Continued)

                                        F-21

<PAGE>

                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994



8.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

     (c)  POLICY ACQUISITIONS (CONTINUED)

            INSURANCE COMPANY OF GREATER NEW YORK AND GREATER NEW YORK MUTUAL
INSURANCE COMPANY.  In April 1996 Arista entered into an agreement with the
Insurance Company of Greater New York and Greater New York Mutual Insurance
Company (the "Ceding Group") which provided that effective April 1, 1996, Arista
assumed the Ceding Group's New York State statutory disability business and
issued assumption certificates to the policyholders of the Ceding Group.  The
agreement calls for Arista to pay a fee based on premiums received which will be
earned during the year ending March 31, 1997.  The acquisition has been
accounted for under the purchase method of accounting.  During 1996 Arista paid
acquisition costs of $62,325, and at December 31, 1996 $23,132 was receivable
from the Ceding Group under this arrangement.

     (d)  OTHER MATTERS

          (1)  Effective July 1, 1993, Arista entered into an agreement to
               perform certain administrative services for The Guardian.  Fees
               for these services are determined in accordance with a prescribed
               schedule based on the type of service provided.  The agreement
               will remain in effect until terminated by either party upon 180
               days prior written notice.

          (2)  Effective January 1, 1995, Arista entered into an agreement to
               perform certain administrative services for the United States
               Life Insurance Company in the City of New York, a competitor in
               the business of writing statutory disability benefits insurance. 
               Fees for these services are determined in accordance with a
               prescribed schedule based on the type of service provided.  The
               agreement will remain in effect until terminated by either party
               upon 180 days prior written notice.

          (3)  Effective April 1, 1995, the Company entered into an agreement to
               perform certain administrative services for the American Bankers
               Insurance Company of Florida.  Fees for these services are
               determined in accordance with a prescribed schedule based on the
               type of service provided.  The agreement will remain in effect
               until terminated by either party upon 180 days prior written
               notice.

                                                                     (Continued)

                                        F-22


<PAGE>

                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994


8.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

     (d)  OTHER MATTERS (CONTINUED)


          (4)  Effective March 1, 1996, Arista entered into an agreement to
               perform certain administrative services for Hartford Life and
               Accident Insurance Company's ("Hartford") Temporary Disability
               Insurance ("TDI") policies.  Fees for these services are
               determined in accordance with a prescribed schedule based on the
               type of service provided.  The agreement will remain in effect
               until terminated by either party upon 180 days prior written
               notice.

     (e)  REINSURANCE

            As discussed in Note 12, the Company is contingently liable with
respect to reinsurance ceded to The Cologne which would become a liability to
Arista in the event of default of The Cologne under the reinsurance agreements.

            Effective April 1, 1994 Arista entered into a reinsurance agreement
with Allianz Life Insurance Company of North America ("Allianz") wherein Arista
assumed Hawaii's TDI group policies ceded by Allianz during 1994.  This
agreement was terminated by Allianz on February 29, 1996.  Reinsurance
transactions for the years ended December 31, 1996, 1995 and 1994 were as
follows:

                                        GROSS          CEDED           NET
                                        AMOUNT         AMOUNT         AMOUNT
                                        ------         ------         ------

          1996
          ----
            Premium receivable     $          -   $          -   $          -
            Claims liabilities     $          -   $          -   $          -
            Unearned premiums      $          -   $          -   $          -

          1995
          ----
            Premium receivable     $    345,000   $    172,500   $    172,500
            Claims liabilities     $    160,000   $     80,000   $     80,000
            Unearned premiums      $     27,360   $     13,680   $     13,680

          1994
          ----
            Premium receivable     $    324,000   $    162,000   $    162,000
            Claims liabilities     $    111,200   $     55,600   $     55,600
            Unearned premiums      $          -   $          -   $          -

                                                                     (Continued)

                                        F-23

<PAGE>


                                 ARISTA INVESTORS CORP.

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996, 1995 AND 1994




8.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

     (e)  REINSURANCE (CONTINUED)

            Effective March 1, 1996 Arista ceded its entire assumption
reinsurance book of TDI to Hartford.  Arista will receive a fee based on
collected and earned premiums generated by this book of business for each of the
next four years.

9.   STOCK OPTIONS AND WARRANTS

       Transactions involving stock options and warrants in each of the years
ended December 31, 1996, 1995 and 1994 are summarized below:

<TABLE>
<CAPTION>

                                   INCENTIVE                   NON-QUALIFIED
                                   STOCK OPTIONS               STOCK OPTIONS                     WARRANTS     
                              ---------------------         ----------------------        ------------------------
                                             AGGREGATE                   AGGREGATE                       AGGREGATE
                              SHARES          AMOUNT        SHARES         AMOUNT         SHARES(1)        AMOUNT
                             --------        ----------     -------      ----------       ---------      ---------

<S>                         <C>             <C>            <C>           <C>              <C>           <C>
Options and warrants 
outstanding:
     January 1, 1992          296,400        $467,098       17,600         $24,640        450,000        $919,000
       1992 Expired                 -               -            -               -        (85,000)       (408,000)
       1992 Surrendered        (1,000)         (2,625)           -               -              -               -
                              -------        --------       ------         -------        -------        --------

     December 31, 1992, 1993
       and 1994               295,400         464,473       17,600          24,640        365,000         511,000
       1995 Issued (Note 6)         -              -             -               -        150,000         525,000
       1995 Expired           (10,000)        (21,250)           -               -              -               -
                              -------        --------       ------         -------        -------        --------

     December 31, 1995        285,400         443,223       17,600          24,640        515,000       1,036,000
       1996 Exercised        (256,900)       (359,660)     (17,600)        (24,640)      (365,000)       (511,000)
                              -------        --------       ------         -------        -------        --------

     December 31, 1996         28,500         $83,563            -         $     -        150,000       $ 525,000
                              -------        --------       ------         -------        -------        --------
                              -------        --------       ------         -------        -------        --------

</TABLE>


       (1)  Warrants to purchase 365,000 shares of Class A common stock at an
            exercise price of $1.40 per share were granted to Kooper in 1986. 
            Warrants to purchase 85,000 shares of Class A common stock at an
            exercise price of $4.80 per share were granted to the underwriter
            in connection with the IPO.  Warrants to purchase 150,000 shares of
            Class A common stock at an exercise price of $3.50 per share were
            granted to CLUMCO in December 1995, in connection with the issuance
            of a Surplus Note (see Note 6) and a new reinsurance agreement with
            Arista (see Notes 8 and 12), October 1995.  In June 1996 warrants
            to purchase 365,000 shares and options to purchase 274,500 shares
            of Class A common stock at $1.40 per share were exercised by
            Kooper, Mandel, an officer of the Company, and two officers of
            Arista.

       There were no transactions during 1994 and 1993 with respect to
outstanding options and warrants.
                                                                     (Continued)

                                        F-24

<PAGE>

                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994


9.   STOCK OPTIONS AND WARRANTS (CONTINUED)

       1985 PLAN

          The 1985 Incentive Stock Option Plan (the "1985 Plan") provides for
the grant of options, until May 14, 1995 (as amended), to purchase up to 200,000
shares of the Company's Class A common stock by key employees of the Company
upon terms and conditions determined by the Board of Directors of the Company
(the "Board").  Such options are exercisable over a five-year period, beginning
two years from the date of grant, subject to certain limited exceptions, at a
price not less than 100% of the fair market value at the time the option is
granted or, in the case of an incentive stock option granted to a stockholder
owning more than 10% of the shares of the Company's common stock at a price not
less than 110% of the fair market value at the date of grant.  In June 1986, the
1985 Plan was amended to increase the exercise period to ten years in the case
of an incentive stock option granted to a stockholder owning less than 10% of
the Company's common stock, and to permit the exercise of options at the date of
grant.  In June 1996 options to purchase 198,500 shares were exercised at $1.40
per share, resulting in additional compensation expense of $240,840 for the year
ended December 31, 1996.

       1986 PLAN

          The 1986 Incentive Stock Option Plan (the "1986 Plan") provides for
the grant of options, until November 15, 1997, to purchase up to 86,900 shares
of the Company's Class A common stock.  In June 1996 options to purchase 58,400
shares were exercised at $1.40 per share.  Ten thousand options granted on June
24, 1987 will expire on June 23, 1997, and 18,500 options granted on November
16, 1987 will expire on November 15, 1997.  The 1986 Plan is similar in all
other respects to the 1985 Plan, as amended.

       OTHER

          During June 1986, the Board granted to Kooper a warrant to purchase
365,000 shares of Class A common stock at an exercise price of $1.40 per share,
exercisable over a ten-year period ending June 15, 1996.  In connection
therewith, a non-qualified stock option previously granted to Kooper in 1978 was
surrendered.  Also in June 1986, the Board granted to Mandel non-qualified
options to purchase 17,600 shares of Class A common stock at an exercise price
of $1.40 per share, exercisable within the ten-year period following the date of
grant.  Such warrants and options were exercised in June.  In December 1996,
certain qualified options were sold, which triggered income to seller and
additional compensation expense to the Company.  Compensation expense aggregated
$757,350 in the year ended December 31, 1996.

                                                                     (Continued)

                                        F-25


<PAGE>

                                ARISTA INVESTORS CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1996, 1995 AND 1994


9.   STOCK OPTIONS AND WARRANTS (CONTINUED)

       OTHER (CONTINUED)

          The Company granted CLUMCO a warrant exercisable commencing in October
1996, for the purchase of up to 150,000 shares of the Company's Class A common
stock at an exercise price of $3.50 per share, exercisable over a ten-year
period ending in December 2005, subject to certain conditions (see Note 6).


10.  STOCKHOLDERS' EQUITY

       All shares of Class A and Class B common stock issued have equal rights
and privileges except that the holder of Class B shares has the added right to
elect a majority of the Board.  Additionally, the Class B common stock is
convertible at the option of the holder at any time, into an equal number of
shares of Class A common stock.  All shares of Class B common stock
automatically convert into an equal number of shares of Class A common stock if
Kooper sells, transfers, or in any manner conveys, one or more shares of Class B
common stock, or upon his death, whichever is earlier.

       In June 1996, Kooper and the Company entered into a letter agreement
under which the Company obtained an option to acquire the 47,400 issued and
outstanding shares of Class B common stock held by Kooper.  The option is
exercisable by a vote of the majority of Class A directors and by delivering to
Kooper, at the Company's option, either 47,400 shares of Class A common stock,
or cash equal to the fair market value of 47,400 shares of Class A common stock
at the date of exercise plus the cancellation and extinguishment of his Note
(see Note 4) upon payment of all accrued but unpaid interest.  The option
expires June 14, 2001 or terminates upon Kooper's death.

       In November 1987, the Company purchased 10,000 shares of Class A common
stock at a cost of $26,740, which are being held in treasury.

       At December 31, 1996 and 1995, 225,900 and 865,400 shares, respectively,
of Class A common stock were reserved for conversion of Class B common stock and
for the exercise of the options and warrants.

       On March 9, 1994 Arista's Board authorized the payment of a dividend to
the Company in the amount of $215,945 and rescinded such authorization on June
14, 1994.  In May 1994, as subsequently authorized by Arista's Board, Arista
paid a dividend of $224,799 to the Company.  In April 1996, as authorized by
Arista's Board, Arista paid a dividend of $111,684 to the Company.

                                                                     (Continued)

                                        F-26


<PAGE>
 


                             ARISTA INVESTORS CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       DECEMBER 31, 1996, 1995 AND 1994


11.  INCOME TAXES

       At December 31, 1996 and 1995 deferred tax assets aggregated $1,334,331
and $1,025,739, respectively, and deferred tax liability aggregated $1,401,922
and $1,648,166, respectively, as follows:

                                                      1996           1995
                                                  ----------     ----------
       Deferred tax asset:
          Commissions payable                       $281,713       $122,879
          Investment in securities                     9,832         59,933
          Reinsurance                                679,876        834,062
          Other                                        3,499          8,865
          NOL carryforward                           554,838              -
                                                  ----------     ----------

            Total deferred tax asset               1,529,758      1,025,739
                                                  ----------     ----------

       Deferred tax liability:
          Investment in securities                         -          4,026
          Deferred acquisition costs                 308,153        360,529
          Claims liabilities                         156,488        155,023
          Reinsurance due                          1,118,078      1,111,962
          Other                                       25,368         16,626
                                                  ----------     ----------

            Total deferred tax liability           1,608,087      1,648,166
                                                  ----------     ----------

            Net deferred tax liability            $   78,329     $  622,427
                                                  ----------     ----------
                                                  ----------     ----------

       The following is a reconciliation of the statutory U.S. Federal income
tax rate to the effective tax rate as reflected in the accompanying consolidated
statements of operations:

<TABLE>
<CAPTION>


                                                            1996                      1995                         1994 
                                                  ------------------------    -----------------------    -----------------------
                                                                PERCENTAGE                PERCENTAGE                 PERCENTAGE
                                                                OF PRETAX                 OF PRETAX                   OF PRETAX
                                                     AMOUNT       INCOME         AMOUNT     INCOME        AMOUNT        INCOME
                                                  -----------    ----------   ----------  -----------    ---------   -----------
<S>                                               <C>            <C>         <C>          <C>            <C>           <C>
Income (loss) before income taxes from
   continuing operations                          $(1,649,525)               $  151,480                  $(321,087)
                                                  -----------                ----------                  ---------
                                                  -----------                ----------                  ---------

Tax provision (benefit) at statutory rates        $  (560,839)   (34.0)      $   51,503      34.0        $(109,140)     (34.0)
Increase (decrease) in income taxes
   resulting from:
      Discontinued operations                               -                   131,778      87.0                -          -
      State franchise and local taxes, net
         of federal benefit                            46,615       2.8          41,397      27.3           43,175       13.4
      Other                                            40,562       2.5               -         -          (13,995)      (4.3)
                                                  -----------    ------       ---------      ----        ---------      -----


Income tax provision (benefit)                    $  (473,662)    (28.7)     $  224,678     148.3        $ (79,960)     (24.9)
                                                  -----------    ------      ----------     -----        ---------      -----
                                                  -----------    ------      ----------     -----        ---------      -----


</TABLE>

                                                                     (Continued)


                                        F-27


<PAGE>

                                 ARISTA INVESTORS CORP.

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996, 1995 AND 1994



11.  INCOME TAXES (CONTINUED)

       The provision (benefit) for income taxes consists of the following at
December 31, 1996, 1995, and 1994:

                                        1996             1995          1994
                                    ----------      -----------     ---------

       Currently payable (benefit):
          Federal                   $        -      $  (208,709)    $       -
          State and local               70,436           90,000       126,900
                                    ----------      -----------     ---------

                                        70,436         (118,709)      126,900
                                    ----------      -----------     ---------

       Deferred tax asset:
          January 1,                (1,025,739)         (11,476)      (11,102)
          December 31,                (974,920)      (1,025,739)      (11,476)
                                    ----------      -----------     ---------

                                        50,819       (1,014,263)         (374)
                                    ----------      -----------     ---------

       Deferred tax liability:
          January 1,                 1,648,166          290,516       290,142
          December 31,               1,608,087        1,648,166       290,516
                                    ----------      -----------     ---------

                                       (40,079)       1,357,650           374
                                    ----------      -----------     ---------

               Net deferred tax         10,740          343,387             -
                                    ----------      -----------     ---------

                                        81,176          224,678       126,900
       Net operating loss benefit     (554,838)               -      (206,858)
                                    ----------      -----------     ---------

               Net income tax 
       provision (benefit)         $  (473,662)      $  224,678     $ (79,958)
                                    ----------      -----------     ---------
                                    ----------      -----------     ---------

12.  REINSURANCE

       Effective October 1, 1993, Arista entered into a new agreement
("Agreement # 3") with Harbourton whereby Arista agreed to cede by way of
reinsurance, a 50% quota share of Arista's liability with respect to the
insurance business written to policyholders.  In 1994 and 1995 Harbourton
received a fee based on premiums ceded.  The agreement was terminated on
September 30, 1995.


                                                                     (Continued)

                                        F-28


<PAGE>


                                 ARISTA INVESTORS CORP.

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996, 1995 AND 1994


12.  REINSURANCE (CONTINUED)

       Effective October 1, 1995, Arista entered into a reinsurance agreement
with The Cologne (see Notes 6 and 8) whereby Arista ceded by way of reinsurance,
a 50% quota share participation in Arista's insurance business, both for
policies in force as of October 1, 1995 and for all new insurance business
written or acquired on or after October 1, 1995.  The agreement calls for Arista
to pay to The Cologne its proportionate share of the gross premium written less
a provisional ceding commission of 25%, which includes premium tax, less The
Cologne's proportionate share of the gross losses applicable to this business. 
The provisional ceding commission will be adjusted quarterly.  At December 31,
1996 and 1995, $88,260 and $111,783, respectively, was accrued by Arista under
this agreement.  The Cologne will also allow Arista an annual profit commission
of 2% of annual gross earned premiums ceded to The Cologne if a certain loss
ratio is achieved.  The agreement shall remain in force indefinitely, subject to
cancellation by The Cologne upon 90 days notice and subject to cancellation by
Arista five years after full repayment of the Surplus Note (Note 6) and upon 90
days prior notice.

       Ceded transactions for the years ended December 31, 1996, 1995 and 1994
were as follows:

                                      GROSS          CEDED          NET
                                      AMOUNT        AMOUNT         AMOUNT
                                   ----------     ----------     ----------
       1996
       ----
          Premium receivable       $4,304,200     $2,152,100     $2,152,100
          Claims liabilities       $4,351,500     $2,175,750     $2,175,750
          Unearned premiums        $1,397,380     $  698,690     $  698,690
          Commissions payable      $  766,575     $  722,340     $1,488,915

       1995
       ----
          Premium receivable       $5,131,705     $2,565,852     $2,565,853
          Claims liabilities       $4,526,315     $2,263,157     $2,263,158
          Unearned premiums        $1,328,210     $  664,105     $  664,105
          Commissions payable      $  942,478     $  361,410     $1,303,888

       1994
       ----
          Premium receivable       $6,328,500     $3,164,250     $3,164,250
          Claims liabilities       $4,921,446     $2,460,723     $2,460,723
          Unearned premiums        $1,358,365     $  679,182     $  679,183
          Commissions payable      $1,294,866     $   24,345     $1,319,211



                                                                     (Continued)

                                        F-29


<PAGE>

                                 ARISTA INVESTORS CORP.

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996, 1995 AND 1994


12.  REINSURANCE (CONTINUED)

       A contingent liability exists with respect to reinsurance ceded which
would become a liability of Arista and the Company in the event that The Cologne
is unable to meet the obligations assumed under the reinsurance agreement.


13.  INVESTMENTS

       Investments at December 31, 1996 and 1995 consisted of the following
types:

                                                      1996           1995  
                                                  -----------    -----------

            Held-to-maturity securities           $ 2,696,220    $ 2,654,939
            Available-for-sale securities              56,920        129,502
            Trading securities                            319            660
                                                  -----------    -----------

                                                  $ 2,753,459    $ 2,785,101
                                                  -----------    -----------
                                                  -----------    -----------


       Trading securities are adjusted to fair value and carried in the
accompanying financial statements.  The aggregate fair value, gross unrealized
holding gains, gross unrealized holding losses, and amortized cost for
available-for-sale and held-to-maturity securities by major security type at
December 31, 1996 and 1995 are as follows:

                                                                           
                                        AVAILABLE-FOR-SALE SECURITIES 
                              --------------------------------------------------
                                                GROSS         GROSS
                              AMORTIZED      UNREALIZED     UNREALIZED      FAIR
                                 COST           GAINS         LOSSES       VALUE
                              ---------      ----------     ----------     -----

DECEMBER 31, 1996:
-----------------

   Redeemable preferred 
    securities                $ 84,149       $        -     $  27,229   $ 56,920
                              --------       ----------     ---------   --------

                              $ 84,149       $        -     $  27,229   $ 56,920
                              --------       ----------     ---------   --------
                              --------       ----------     ---------   --------

DECEMBER 31, 1995:
-----------------

   Redeemable preferred 
    securities                $141,344       $        -     $  11,842   $129,502
                              --------       ----------     ---------   --------

                              $141,344       $        -     $  11,842   $129,502
                              --------       ----------     ---------   --------
                              --------       ----------     ---------   --------


                                                                     (Continued)

                                        F-30


<PAGE>

                                 ARISTA INVESTORS CORP.

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996, 1995 AND 1994



13.  INVESTMENTS (CONTINUED)


                                        HELD-TO-MATURITY SECURITIES
                         ------------------------------------------------------
                                         GROSS           GROSS
                         AMORTIZED    UNREALIZED       UNREALIZED        FAIR
                           COST          GAINS           LOSSES         VALUE
                         ---------    ----------       ----------      --------


DECEMBER 31, 1996:
-----------------
   Corporate debt 
     securities        $   53,601     $       -        $  4,601       $   49,000
   U.S. Treasury 
     securities         2,642,619         9,959          51,368        2,601,210
                       ----------     ---------        --------       ----------

                       $2,696,220     $   9,959        $ 55,969       $2,650,210
                       ----------     ---------        --------       ----------
                       ----------     ---------        --------       ----------

DECEMBER 31, 1995:
-----------------
   U.S. Treasury 
     securities        $2,654,939     $  37,337        $      -       $2,692,276
                       ----------     ---------        --------       ----------

                       $2,654,939     $  37,337        $      -       $2,692,276
                       ----------     ---------        --------       ----------
                       ----------     ---------        --------       ----------

       Securities with amortized costs (which approximate their fair value) of
$3,087,000 and $3,000,000 were reported as cash equivalents in 1996 and 1995,
respectively.

       Arista maintains a custodial investment account pursuant to the
requirements of the NYSID.   Net investment income for the years ended 1996,
1995 and 1994 consisted of the following:

                                        1996           1995           1994 
                                      --------       --------       --------

     Interest and dividends:
       Bonds and long-term 
          investments                 $161,812       $174,156       $174,707
       Short-term investments          258,391         77,978         40,773
                                      --------       --------       --------

            Total interest and 
              dividends                420,203        252,134        215,480

     Interest on note receivable 
       from related party               20,336              -              -
                                      --------       --------       --------

            Total investment 
              income                  $440,539       $252,134       $215,480
                                      --------       --------       --------
                                      --------       --------       --------


                                                                     (Continued)


                                        F-31


<PAGE>

                                 ARISTA INVESTORS CORP.

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996, 1995 AND 1994



13.  INVESTMENTS (CONTINUED)

       Details of realized and unrealized gains and losses on investments for
the years ended December 31, 1996 and 1995 were as follows:

                                                  1996           1995 
                                                  ----           ----
       REALIZED LOSSES
       ---------------
          Redeemable preferred securities         $(208)        $ 137
                                                  -----          ----

                                                   (208)          137
                                                  -----          ----

       UNREALIZED LOSSES
       -----------------
          Equity securities                        (159)         (358)
                                                  -----          ----

                                                   (159)         (358)
                                                  -----          ----

            Net losses                            $(367)        $(221)
                                                  -----         -----
                                                  -----         -----


       The following schedule sets forth the respective maturity dates as at
December 31, 1996:

                                                AVAILABLE-FOR-SALE SECURITIES
                                                -----------------------------
                                                    AMORTIZED      FAIR
                                                       COST        VALUE

       Due after one year through five years          $84,149     $56,920
                                                     --------     -------

            Total                                     $84,149     $56,920
                                                     --------     -------
                                                     --------     -------

                                                  HELD-TO-MATURITY SECURITIES
                                                  ---------------------------
                                                     AMORTIZED        FAIR
                                                       COST           VALUE
                                                     ---------     ---------

       Due in one year or less                      $  125,018   $   125,039
       Due after one year through five years         1,576,407     1,551,827
       Due after five years through ten years          941,194       924,344
       Due after ten years                              53,601        49,000
                                                     ---------   -----------

            Total                                   $2,696,220   $ 2,650,210
                                                    ----------   -----------
                                                    ----------   -----------


                                                                     (Continued)


                                        F-32


<PAGE>


                                 ARISTA INVESTORS CORP.

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996, 1995 AND 1994


14.  STATUTORY MATTERS

       The following summaries reconcile net stockholder's equity and net
income (loss) of Arista on the statutory basis of accounting ("SAP") with the
amount of such equity and net income (loss) included in the financial statements
of Arista prepared on the basis of generally accepted accounting principles for
each of the years ended December 31, 1996, 1995, and 1994:

<TABLE>
<CAPTION>



                                                            1996           1995           1994 
                                                       ----------       ----------    ----------

<S>                                                    <C>             <C>            <C>
Capital and surplus reported for SAP purposes          $6,175,568       $6,432,629    $3,651,842

Add (deduct):
     Inclusion of nonadmitted assets                    1,956,065        1,872,086     1,430,554
     Surplus notes payable                             (3,000,000)      (3,000,000)            -
     Deferred costs, net of tax                           205,689          441,221       194,776
     Claims reserves, net of tax                          509,495          559,193       433,848
     Intangible assets, net                                     -                -       616,168
     Unrealized depreciation on marketable securities     (31,425)         (16,038)      (30,278)
     Other, net of tax                                     18,427           70,330       209,094
     Adjustment to premiums receivable, net of tax        533,443          533,443      (110,841)
     Prior period tax over accrual                       (359,082)        (360,883)     (279,000)
     Realized gain on investments, net of tax             (27,720)         (33,853)      (24,998)
     NOL carryforward                                      34,500                -             -
                                                       ----------       ----------    -----------

          Stockholder's equity reported in
            Arista's financial statements              $6,014,960       $6,498,128    $6,091,165
                                                       ----------       ----------    ----------
                                                       ----------       ----------    ----------

Net income (loss) reported for SAP purposes            $  (61,398)      $  231,349    $  159,502
Add (deduct):
     Deferred costs, net of tax                          (235,532)         131,036        45,436
     Other                                                (51,902)         (48,427)       (8,098)
     Claims reserves, net of tax                          (49,698)         (20,922)       12,029
     Adjustment to premiums receivable, net of tax              -          504,752       (64,349)
     Realized loss on investments, net of tax               6,133                -         4,055
     Amortization of intangible asset, net of tax               -         (122,705)       (7,318)
       Gain on sale of subsidiary, net of tax                   -          (76,404)            -
     Income tax expense differences                         1,800         (210,152)      137,660
                                                       ----------      -----------     ---------

          Net income (loss) reported in Arista's
            financial statements                       $ (390,597)      $  388,527     $ 278,917
                                                       ----------       ----------     ---------
                                                       ----------       ----------     ---------

</TABLE>



                                                                     (Continued)

                                        F-33


<PAGE>

                                 ARISTA INVESTORS CORP.

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996, 1995 AND 1994



14.  STATUTORY MATTERS (CONTINUED)

       Arista was in compliance with the NYSID minimum statutory capital and
surplus requirement of $300,000 at December 31, 1996, 1995 and 1994.

       Under the New York State Insurance Law, Arista may pay dividends to the
Company only out of its statutory earned surplus.  In addition, the maximum 
amount of dividends that may be paid in any twelve-month period without
regulatory approval is the lesser of the adjusted net investment income or 10%
of its surplus.  During 1996 Arista paid a dividend of $111,684.  During 1994
Arista paid a dividend to the Company of $224,799.


15.  BUSINESS ACQUISITION

       STOCK PURCHASE AGREEMENT

          On December 31, 1991, Arista entered into an agreement to acquire all
the outstanding shares of American.  In December 1991 the NYSID approved the
assumption of American's disability business by Arista and approved the
acquisition of American in April 1992.  The acquisition was accounted for as a
purchase.  The purchase price was originally to consist of:  (1) a $175,000 cash
payment; (2) a credit against the purchase price of $898,973, which represented
American's statutory negative capital and surplus balance as of December 31,
1991; and (3) an amount equal to 7-1/2% of earned premiums, as defined, on
American policies renewed or rewritten during the period commencing January 1,
1992 and ending December 31, 1993.

          Arista had the right to make certain adjustments to the purchase price
for various income and expense items as mutually agreed upon.  All payments due
under the agreement were to be held in escrow until the final purchase price was
determined, prior to October 15, 1994.  Due to a shortfall in earned premiums
and certain agreed-upon adjustments to the purchase price no payments were due
to American.  Expenses incurred by the Company in connection therewith were
capitalized as part of the purchase price, and were written off in connection
with the sale of American as discussed in Note 3.

          Under the purchase method of accounting, the allocation of the
purchase price to the fair value of American's assets and liabilities is
required.  Such allocation was finalized in 1994 when the purchase price was
finally determined.  The excess of fair value of net assets acquired over the
purchase price of $216,740 was allocated to reduce the intangible asset.  The
intangible asset was written off in 1995 in connection with the sale of American
(see Note 3).  Amortization expense was $248,957 and $189,865, respectively, for
the years ended December 31, 1995 and 1994.

                                                                     (Continued)



                                        F-34


<PAGE>



                                 ARISTA INVESTORS CORP.

                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31, 1996, 1995 AND 1994


16.  INDUSTRY SEGMENTS

       The Company is engaged principally in the business of writing disability
insurance policies in New York State.  In 1993 the Company amended the charter
and license of Arista to write glass insurance which is part of the property and
casualty line of business.  The Company also provides third party administrative
services for other insurance companies, including competitor entities.  Except
for disability insurance segment, all other segments of the Company are
insignificant.  Revenues by segment for the years ended December 31, 1996, 1995
and 1994 was as follows:

                                        1996           1995           1994 
                                   -----------    -----------    -----------

          Disability insurance     $23,160,259    $26,091,714    $26,188,858
          Property and casualty              -              -              -
          Third party administrative   260,664        204,367        160,248
                                   -----------    -----------    -----------

            Total revenues         $23,420,923    $26,296,081    $26,349,106
                                   -----------    -----------    -----------
                                   -----------    -----------    -----------

17.  MAJOR CUSTOMER

       For the year ended December 31, 1996, one group, the Federation of
Jewish Philanthropies, accounted for approximately 11% of Arista's revenue.  No
other customer accounted for 10% or more of the Company's consolidated revenues
or Arista's revenues in the year ended December 31, 1996.  For the years ended
December 31, 1994 and 1995, no one group accounted for 10% or more of Arista's
revenues, however, Arista underwrites the Insurance for two large groups with
combined earned premiums of approximately $4,496,000 in 1994 and $3,692,000 in
1995.


18.  FOURTH QUARTER ADJUSTMENT

       During the fourth quarter of 1996, the Company recorded a charge to
operations of $757,350  ($0.29 per share), representing compensation resulting
from the exercise of stock warrants and options by certain officers of the
Company and Arista.


                                        F-35



<PAGE>


                                 ARISTA INVESTORS CORP.

                                       SCHEDULE I
                           SUMMARY OF INVESTMENTS - OTHER THAN
                             INVESTMENTS IN RELATED PARTIES

                                    DECEMBER 31, 1996





                                                                       AMOUNT
                                        COST OR                        SHOWN IN
                                        AMORTIZED        MARKET      THE BALANCE
       TYPE OF INVESTMENT                 COST           VALUE           SHEET
----------------------------------      ----------     ----------     ----------

HELD-TO-MATURITY SECURITIES:
---------------------------
     United States Government and 
       government
       agencies and authorities         $2,642,618     $2,601,210     $2,642,618
     Corporate debt securities              53,602         49,000         53,602
                                         ---------     ----------     ----------

            Total                        2,696,220      2,650,210      2,696,220

AVAILABLE FOR SALE:
------------------
     Redeemable preferred stocks            84,149         56,920         56,920

TRADING SECURITY:
----------------
     Common stock                            1,279            319            319
                                        ----------      ---------     ----------


                                        $2,781,648     $2,707,449     $2,753,459
                                        ----------     ----------     ----------
                                        ----------     ----------     ----------




                            See independent auditors' report.


                                           S-1


<PAGE>
                                 ARISTA INVESTORS CORP.
                                       SCHEDULE II
                      CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                  (PARENT COMPANY ONLY)
                                     BALANCE SHEETS
                                                            DECEMBER 31,
                                                  -----------------------------
                                                       1996             1995
                                                  ------------       ----------

                                       A S S E T S

Investment in subsidiaries                          $6,496,979       $7,051,662
Cash and equivalents                                   465,316          305,657
Prepaid expenses and other assets                      119,258          128,015
Deferred tax asset                                     447,597                -
                                                    ----------        ---------
          Total assets                              $7,529,150       $7,485,334
                                                    ----------       ----------
                                                    ----------       ----------

                          LIABILITIES AND STOCKHOLDERS' EQUITY
                          ------------------------------------
Liabilities:
     Accounts payable and accrued expenses          $  310,593       $  156,789
     Due to subsidiaries, net                          948,063        1,045,386
                                                     ---------       ----------
          Total liabilities                          1,258,656        1,202,175
Stockholders' equity                                 6,270,494        6,283,159
                                                     ---------       ----------
          Total liabilities and stockholders' 
     equity                                         $7,529,150       $7,485,334
                                                    ----------       ----------
                                                    ----------       ----------

                                 STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                             ---------------------------------
                                                            1996           1995           1994
                                                            ----           ----           ----

<S>                                                    <C>            <C>            <C>
Investment income                                     $    33,158      $  17,883     $  12,814
Corporate and administrative expenses                   1,337,158        464,340       737,580
                                                      -----------     ----------     ---------

          Loss from operations before income tax
            benefits and equity in net income (loss)
            of subsidiaries                            (1,304,000)      (446,457)     (724,766)
Income tax expense (benefits)                            (693,367)       256,411      (204,720)
                                                       -----------    ----------     ---------
          Loss from operations before equity in
            net income (loss) of subsidiaries            (610,633)      (702,868)     (520,046)
Equity in net income (loss) of subsidiaries              (565,230)       959,391       278,917
                                                       ----------     ----------     ---------

          Net income (loss)                           $(1,175,863)     $ 256,523     $(241,129)
                                                      -----------     ----------     ---------
                                                      -----------     ----------     ---------

</TABLE>

The accompanying condensed financial information should be read in conjunction
with the consolidated financial statements and notes thereto of Arista Investors
Corp. at December 31, 1996 and 1995 and for each of the three years in the
period ended December 31, 1996.
                                       (Continued)

                                           S-2
<PAGE>
<TABLE>
<CAPTION>

                                      ARISTA INVESTORS CORP.
                                      SCHEDULE II - CONTINUED

                           CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                        (PARENT COMPANY ONLY)
                                       STATEMENTS OF CASH FLOWS

                                                                      YEARS ENDED DECEMBER 31,
                                                                 ----------------------------------
                                                                 1996           1995           1994
                                                                 -----          ----           ----
CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                         <C>           <C>             <C>
     Net income (loss)                                      $(1,175,863)   $256,523       $(241,129)
     Adjustments to reconcile net income (loss) to
       net cash used in operating activities:
       Depreciation                                               1,629       1,039             450
       Equity in net (income) loss of subsidiaries              565,230    (959,391)       (278,917)
       Compensation arising from exercise of options
          and warrants                                          757,350           -               -
     Increase (decrease) in assets and liabilities:
       Due to subsidiaries                                      (97,323)    481,502         293,547
       Prepaid expenses and other assets                          7,128     215,838        (185,845)
       Deferred tax asset                                      (447,597)          -               -
       Accounts payable and accrued expenses                    153,804    (158,417)        284,578
                                                             ----------    --------       ---------
          Net cash used in operating activities                (235,641)   (162,906)       (127,316)
                                                             ----------    --------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of investments, net                                    -           -        (207,818)
     Proceeds from sale of investments                                -     207,818          12,604
     Dividend from subsidiary                                         -           -         224,799
                                                             ----------    --------       ---------
          Net cash provided by investing activities                   -     207,818          29,585
                                                             ----------    --------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Issuance of Class A common stock                           395,300           -               -
                                                             ----------    --------       ---------
          Net cash provided by financing activities             395,300           -               -
                                                             ----------    --------       ---------
          Increase in cash and equivalents                      159,659      44,912         (97,731)
CASH AND EQUIVALENTS:
     Beginning of year                                          305,657     260,745         358,476
                                                            -----------    --------       ---------
     End of year                                            $   465,316    $305,657       $ 260,745
                                                            -----------    --------       ---------
                                                            -----------    --------       ---------
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
  ACTIVITIES:
     The Company received a note and issued Class A
       common stock as follows:
          Secured promissory note receivable                $  (500,000)   $      -       $       -
          Compensation expense                                 (757,350)          -               -
          Issuance of Class A common stock                    1,652,650           -               -
                                                            -----------    --------       ---------
            Cash received                                   $   395,300    $      -       $       -
                                                            -----------    --------       ---------
                                                            -----------    --------       ---------

</TABLE>

The accompanying condensed financial information should be read in conjunction
with the consolidated financial statements and notes thereto of Arista Investors
Corp. at December 31, 1996 and 1995 and for each of the three years in the
period ended December 31, 1996.

                                       (Continued)

                                           S-3

<PAGE>

                                 ARISTA INVESTORS CORP.

                                 SCHEDULE II - CONTINUED

                      CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                  (PARENT COMPANY ONLY)

                        NOTES TO CONDENSED FINANCIAL INFORMATION
                            DECEMBER 31, 1996, 1995 AND 1994



1.   BASIS OF PRESENTATION

     Pursuant to the rules and regulations of the Securities and Exchange
     Commission, the Condensed Financial Information of the Registrant does not
     include all of the information and notes normally included with financial
     statements prepared in accordance with generally accepted accounting
     principles.  It is therefore suggested that these condensed financial
     statements be read in conjunction with the consolidated financial
     statements and notes thereto included in the Company's Annual Report as
     referenced in Form 10-K, Part II, Item 8, pages F-1 to F-35.


2.   CASH DIVIDENDS FROM SUBSIDIARY

     The following dividends were paid to the Company by its subsidiary, Arista
     Insurance Company:

                              April 1996     $ 111,684
                                             ---------
                                             ---------

                              May 1994       $ 224,799
                                             ---------
                                             ---------








                            See independent auditors' report.

                                           S-4


<PAGE>

<TABLE>
<CAPTION>

                                                           ARISTA INVESTORS CORP.

                                                                SCHEDULE III
                                                      SUPPLEMENTAL SEGMENT INFORMATION

                                                              DECEMBER 31, 1996



                                            FUTURE
                                            POLICY
                                           BENEFITS,                      OTHER                                     BENEFIT,  
                                            LOSSES,                       POLICY                                     CLAIMS,  
                             DEFERRED       CLAIMS                      CLAIMS AND                       NET       LOSSES AND 
                              POLICY       AND LOSS       UNEARNED       BENEFITS       PREMIUM      INVESTMENT    SETTLEMENT 
     SEGMENT                ACQUISITION    EXPENSES       PREMIUMS       PAYABLE        REVENUE        INCOME       EXPENSES  
     COLUMN A                 COLUMN B     COLUMN C       COLUMN D       COLUMN E       COLUMN F      COLUMN G      COLUMN H  
---------------------      ------------   ----------     ----------     ----------    -----------    ---------    ----------- 

<S>                         <C>           <C>            <C>            <C>            <C>            <C>         <C>         
Disability insurance          $790,137    $4,351,500     $1,397,380     $         -    $11,580,130    $440,539     $7,644,155 

Property and casualty                -             -              -               -              -           -              - 

Third party administrative
     service                         -             -              -               -        260,664           -              - 
                              --------    ----------     ----------     -----------    -----------    --------     ---------- 

                              $790,137    $4,351,500     $1,397,380     $         -    $11,840,794    $440,539     $7,644,155 
                              --------    ----------     ----------     -----------    -----------    --------     ---------- 
                              --------    ----------     ----------     -----------    -----------    --------     ---------- 


<CAPTION>


                               AMORTIZATION                               
                                OF DEFERRED                               
                                  POLICY         OTHER                    
                                ACQUISITION    OPERATING       PREMIUMS   
     SEGMENT                       COSTS        EXPENSES       WRITTEN    
     COLUMN A                     COLUMN I      COLUMN J       COLUMN K   
---------------------           -----------    ----------     ----------- 
                                                                          
<S>                              <C>         <C>            <C>           
Disability insurance              $332,633    $ 5,992,363    $ 23,229,429 
                                                                          
Property and casualty                    -              -               - 
                                                                          
Third party administrative                                                
     service                             -              -               - 
                                  --------    -----------    ------------ 
                                                                          
                                  $332,633    $ 5,992,363    $ 23,229,429 
                                  --------    -----------    ------------ 
                                  --------    -----------    ------------ 

</TABLE>


                                  See independent auditors' report.


                                                  S-5


<PAGE>

                                       ARISTA INVESTORS CORP.

                                            SCHEDULE IV
                                            REINSURANCE

                                    YEAR ENDED DECEMBER 31, 1996


<TABLE>
<CAPTION>


                                                                                     PERCENTAGE
                                          CEDED         ASSUMED                       OF AMOUNT
                             GROSS      TO OTHER        FROM OTHER          NET        ASSUMED
                            AMOUNT      COMPANIES(1)    COMPANIES          AMOUNT      TO NET
                         -----------    -----------     ----------      -----------    --------

<S>                     <C>            <C>             <C>             <C>             <C>
Life insurance
     in force            $         -    $         -     $       -       $         -          -%
                         -----------    -----------     ---------       -----------    --------
                         -----------    -----------     ---------       -----------    --------

Premiums:
     Life insurance      $         -    $         -     $       -       $         -          -%
     Accident and
       health             23,160,259     11,580,129             -        11,580,130          -
     Property and
       liability                   -              -             -                 -          -
     Title insurance               -              -             -                 -          -
                         -----------    -----------     ---------       -----------    --------

                         $23,160,259    $11,580,129     $       -       $11,580,130         -%
                         -----------    -----------     ---------       -----------    --------
                         -----------    -----------     ---------       -----------    --------

</TABLE>

(1)  No amounts of reinsurance or coinsurance income have been netted against
     premium ceded.






                            See independent auditors' report.


                                           S-6