<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                    FOR THE FISCAL YEAR ENDED MARCH 31, 1997

                [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) 
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                       For the Transition Period From         to
                                                       -------   --------
                         COMMISSION FILE NUMBER 0-21933

                         SUMMIT HOLDING SOUTHEAST, INC.
             (Exact name of Registrant as specified in its charter)

        FLORIDA                                             59-3409855
(State of incorporation)                                (I.R.S. Employer
                                                      Identification Number)

                   2310 A-Z PARK ROAD, LAKELAND, FLORIDA 33801
          (Address of principal executive offices, including zip code)

                                 (941) 665-6060
              (Registrant's telephone number, including area code)

                                  ------------

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

           Securities registered pursuant to Section 12(g) of the Act:
                          COMMON STOCK, $.01 PAR VALUE

                                  ------------

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 
                                       ---      ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the 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 market value of the Registrant's outstanding Common Stock held by
non-affiliates of the Registrant on June 24, 1997 was approximately $97,389,750.
There were 5,750,000 shares of Common Stock outstanding as of June 24, 1997.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE


<PAGE>   2



                         SUMMIT HOLDING SOUTHEAST, INC.
                           ANNUAL REPORT ON FORM 10-K
                    FOR THE FISCAL YEAR ENDED MARCH 31, 1997

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item                                                                                                            Page
Number                                                                                                         Number
------                                                                                                         ------
                                                      PART I

  <S>    <C>                                                                                                    <C>
   1.    Business.........................................................................................        3

   2.    Properties.......................................................................................       28

   3.    Legal Proceedings................................................................................       28

   4.    Submission of Matters to a Vote of Security Holders..............................................       29


                                                      PART II

   5.    Market for Registrant's Common Equity and Related Stockholder Matters............................       29

   6.    Selected Financial Data..........................................................................       30

   7.    Management's Discussion and Analysis of Financial Condition and Results of Operations............       32

   7A.   Quantitative and Qualitative Disclosures About Market Risk.......................................       40

   8.    Financial Statements and Supplementary Data......................................................       40

   9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............       40

                                                     PART III

  10.    Directors and Executive Officers of the Registrant...............................................       41

  11.    Executive Compensation...........................................................................       44

  12.    Security Ownership of Certain Beneficial Owners and Management...................................       49

  13.    Certain Relationships and Related Transactions...................................................       50

                                                      PART IV

  14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................       51

                                       SIGNATURES.........................................................       55

                                       INDEX OF FINANCIAL STATEMENTS .....................................      F-1
                                                                                                               
                                       INDEX OF FINANCIAL STATEMENT SCHEDULES.............................      S-1
</TABLE>

                                     -2-
<PAGE>   3



                                     PART I

ITEM 1. BUSINESS

OVERVIEW

         Please carefully consider and evaluate all of the information provided
in this report. In addition to historical information, this report includes
forward-looking statements and information that are based on management's
beliefs, plans, expectations and assumptions and on information currently
available to management. The words "may," "should," "expect," "anticipate,"
"intend," "plan," "continue," "believe," "seek," "estimate" and similar
expressions used in this report that do not relate to historical facts are
intended to identify forward-looking statements. The forward-looking statements
in this report are not guarantees of future performance and involve certain
risks, uncertainties and assumptions, including but not limited to those
described in "Item 1. BUSINESS" and "ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." Many of such factors
are beyond the Company's ability to control or predict. As a result, the
Company's future actions, financial condition, results of operations and stock
price could differ materially from those expressed in any forward-looking
statements made by the Company, and undue reliance should not be placed on
forward-looking statements. The Company does not intend to publicly update any
forward-looking statements, whether as a result of new information, future
events or otherwise.

         Summit Holding Southeast, Inc. (the "Registrant," "Summit" or, together
with its subsidiaries unless the context requires otherwise, the "Company")
provides a variety of managed care workers' compensation products and
administrative services to employers and self-insured employer groups primarily
in Florida, as well as in Louisiana and Kentucky. Through the Company's
administrative group (the "Administrative Subsidiaries"), the Company provides
administrative services for four self-insurance funds, which are entities formed
to provide workers' compensation coverage for self-insured employer groups on a
pooled basis (the "Funds"), for the Company's two wholly owned workers'
compensation insurance companies (the "Insurance Subsidiaries") and for certain
municipalities. These administrative services include most aspects of the daily
operations of the Funds and the Insurance Subsidiaries, including sales and
marketing, underwriting, claims administration, loss control, policy
administration and financial management. These services are provided for a fee,
with the Company generally receiving a percentage of premiums. The
Administrative Subsidiaries do not assume any underwriting risk of the Funds.

         The Insurance Subsidiaries, which consist of Bridgefield Employers
Insurance Company ("Bridgefield") (formerly, Employers Self Insurers Fund or
"ESIF") and Bridgefield Casualty Insurance Company ("Bridgefield Casualty"),
underwrite and assume the underwriting risk with respect to workers'
compensation insurance policies for Florida employers of all sizes, primarily in
the construction, manufacturing, wholesale and retail and service industries. As
of March 31, 1997, in the aggregate, the Company's insurance products and
administrative services were provided to approximately 16,700 employers
representing approximately $212 million in premiums, including approximately $88
million in premiums attributable to the Funds and $124 million in premiums
attributable to the Insurance Subsidiaries.

         The Company's approach to managed care workers' compensation is to
select responsible employers for coverage, assist such employers in creating a
safe work place and proactively manage claims, thereby returning employees to
work promptly and minimizing losses. Employers' safety programs are monitored by
the Company's staff of approximately 25 loss control field 



                                       -3-
<PAGE>   4

representatives who visit an employer's work place on at least an annual basis.
Reported claims are proactively managed by the Company so that employees receive
prompt care by healthcare professionals which are part of the Company's provider
network. The Company's claims management professionals direct care through the
provider network, monitor employee treatment and progress toward returning to
work and perform utilization and peer review to control costs.

         The Company's business was started in 1977, when Summit Consulting,
Inc. ("SCI") was formed to establish and administer workers' compensation
self-insurance programs for group self-insurance funds that are sponsored and
formed by trade associations. The Company's primary Insurance Subsidiary,
Bridgefield (formerly ESIF), was formed in 1978 as a group self-insurance fund
under Florida law, and SCI became its administrator at that time. Between 1979
and 1982, SCI assisted with the formation and became the administrator of three
of the Funds located in Florida and Louisiana, and in 1995, SCI became the
administrator of the fourth Fund, located in Kentucky. None of the Funds are
related to the Company, except that certain of the directors of Summit are
trustees of certain of the Funds. See "Item 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS." Until January 16, 1996, Bridgefield was also unrelated to
SCI. Effective on that date, Bridgefield acquired SCI, its holding company,
Summit Holding Corporation ("SHC"), and all of their affiliates (the
"Acquisition").

         Summit was formed in November 1996 in connection with the conversion of
ESIF (the "Conversion") from a Florida group self-insurance fund to a Florida
stock insurance company, which is now Bridgefield. Pursuant to ESIF's Amended
Plan of Conversion and Recapitalization, which was approved by the policyholders
or members of ESIF, all of the membership interests in ESIF were extinguished
and, in exchange for such membership interests, Summit issued to each eligible
policyholder shares of Summit's Series A Preferred Stock and subscription rights
to purchase shares of Summit's Common Stock. On the date of the Conversion,
Summit issued a total of 1,639,701 shares of its Series A Preferred Stock to
eligible policyholders and sold 5,000,000 shares of its Common Stock to
subscribing eligible policyholders, to directors, officers and certain other
management employees of the Company (the "Management Group") and to purchasers
in Summit's initial public offering. Simultaneously, Bridgefield issued all of
its capital stock to Summit and thereby became a wholly owned subsidiary of
Summit. At the same time, in connection with a recapitalization to simplify the
Company's corporate structure, all of the capital stock of SHC, which had been
owned by ESIF prior to the Conversion, was acquired by Summit, and SHC also
became a wholly owned subsidiary of Summit. As a result, Summit conducts the
business of the Insurance Subsidiaries through Bridgefield and conducts the
business of the Administrative Subsidiaries through SHC. The Conversion and
related recapitalization became effective on May 28, 1997.

         The Company believes that the Conversion provides new opportunities for
improving its return on invested capital through growth in its core workers'
compensation business. Following the Conversion, the Company is able to offer
both self-insurance and traditional indemnity products, which improves its
ability to service its markets. In addition, as a stock corporation, the Company
now has an enhanced ability to raise capital through improved access to the
capital markets, and the Company's ability to issue stock also can help it
expand through acquisitions and diversify into new geographic markets and
business activities (subject to any necessary regulatory approvals).




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<PAGE>   5



INDUSTRY

         Workers' compensation benefits are state-mandated and regulated
programs that generally require employers to provide medical benefits and wage
replacement to employees injured at work, regardless of fault. In the event an
employee suffers a work-related injury, workers' compensation coverage will pay
the medical benefits associated with such injury, regardless of whether the
injured employee participates in any other health or medical benefits program.
Each individual state has a regulatory and adjudicatory system that quantifies
the level of wage replacement to be paid, determines the level of medical care
required to be provided and the cost of permanent impairment, and provides
whether the injured employee or the employer has certain options in selecting
healthcare providers. State laws generally require two types of benefits for
injured employees: (i) medical benefits that include expenses related to
diagnosis and treatment of the injury, as well as rehabilitation, if necessary,
and (ii) indemnity payments that consist of temporary wage replacement,
permanent disability payments or death benefits to surviving family members. To
fulfill this mandated financial obligation, virtually all employers are required
to either purchase workers' compensation insurance from a private insurance
carrier, a state-sanctioned assigned risk pool or a self-insurance fund (an
entity that allows employers to obtain workers' compensation coverage on a
pooled basis, typically subjecting each employer to joint and several liability
for the entire fund) or, if permitted by their state, to self-insure.

         The Florida workers' compensation market accounted for more than 90% of
the Company's total revenue for the fiscal year ended March 31, 1997. Florida is
the fourth largest state in terms of population behind California, New York and
Texas and, according to the Department of Insurance of the State of Florida (the
"Florida DOI"), the Florida workers' compensation market approximated $3.4
billion in premiums in 1996. Over half of Florida's employment is in the service
and wholesale/retail trade sectors, with manufacturing, construction and
agriculture following (in order of size) to make up the bulk of the remainder of
the state's employment base. Based upon data reported by the National
Association of Insurance Commissioners (the "NAIC"), had ESIF been a stock
insurance company on December 31, 1995, it would have been one of the five
largest workers' compensation insurers in Florida, based on the amount of direct
premiums earned. Because of the heavy concentration of the Company's business in
the State of Florida, the Company may be adversely affected by economic
downturns, significant unemployment, regulatory developments and other
conditions that may occur from time to time in Florida and which may not affect
the Company's more geographically diversified competitors.

MANAGED CARE

         Over the past eight years, the Company has implemented a managed care
approach to workers' compensation. The Company's managed care strategy reduces
costs through loss prevention, early intervention and proactive management of
claims. The Company's focus on loss prevention includes helping employers
establish workplace safety programs, making on-site visits to the workplace and
coordinating among the Company's underwriting, loss control, claims management
and sales and marketing groups. Once a claim occurs, the Company's early
intervention procedures enable the Company to identify injuries that have the
potential of resulting in significant expenses and controlling these expenses
from the outset. The Company generally uses a three-point contact system with
the goal of contacting each of the injured employee, the employer and the health
care provider within 24 hours after notification of an initial claim. The





                                      -5-
<PAGE>   6

Company's SMART(TM) (Summit Medical Alert Reaction Team) coordinates a medical
claim from inception to completion in order to provide quality health care to
the injured employee so that he or she may return to work as quickly as
possible. The Company believes returning an employee to the job quickly is an
effective means of controlling indemnity payments for lost wages, typically the
largest component of workers' compensation costs as well as medical expenses.

         The Company directs claimants to healthcare providers that are part of
the Company's managed care networks. These networks currently include healthcare
providers who have contracted with Heritage/Summit Healthcare of Florida, Inc.,
the Company's wholly owned provider network subsidiary, or with Vincam
Occupational Health Systems, Inc., an unaffiliated provider network. These
arrangements currently give the Company access to healthcare providers in every
county in Florida, including approximately 2,000 total practitioners and
hospitals. With such networks, the Company emphasizes the use of cost control
measures such as utilization review. The Company's total managed care approach,
including early intervention, proactive claims management and use of provider
networks, in combination with state-mandated fee schedules, has resulted in a
substantial reduction in the amount the Company pays for medical bills
submitted.

PRODUCTS AND SERVICES

         The Company's operations are comprised of two general types: (i)
administrative services provided by the Administrative Subsidiaries and (ii)
insurance coverage underwritten by the Insurance Subsidiaries.

         ADMINISTRATIVE SERVICES. The Company provides a full range of
management and administrative services for the Funds and for certain
municipalities. The Company's Administrative Subsidiaries also provide these
services for the Insurance Subsidiaries. The services include those needed to
manage an integrated workers' compensation program, including sales and
marketing, underwriting, claims management, loss control and policy
administration.

         Claims Management. The Company's claims management group consists of
approximately 170 claims adjusters based at the Company's headquarters and 12
field claims adjusters. The Company believes that it has developed a
sophisticated, efficient claims management system which facilitates the prompt
resolution of claims. On average, each claims adjuster has a case load of 125
outstanding claims, which the Company believes is a contributing factor in
reducing and controlling claims costs. Claims adjusters electronically track the
progress of claims filed and issue regular reviews on the status of cases. On a
bi-monthly basis, claims personnel review selected cases for changes in status
and adjustments to case-specific reserves. In order to provide consistent
service and build customer relationships, the Company assigns claims adjusters
by geographic territory. However, given the special considerations related to
medical claims, the Company has established a designated medical claims
management group which is utilized for medical related claims in all
territories.

         Underwriting and Loss Control. The Company's services include assisting
the Funds, the Insurance Subsidiaries and other clients with formulating their
underwriting guidelines and then implementing those guidelines on behalf of the
client. Management believes that one of the Company's most valuable services for
its clients, and one of the ways that the Company is able to minimize its own
insurance risks, is the Company's general practice of recommending for



                                      -6-
<PAGE>   7

membership in a Fund, or for issuance of a policy, those employers who fit the
Company's underwriting criteria. Prior to recommending that the client or the
Insurance Subsidiaries accept a risk, the Company's underwriters review the
employer's prior loss experience and safety record, premium payment and credit
history, employment classifications and physical operation. As part of the
Company's ongoing loss control efforts, each employer undergoes a periodic
review (not less than annually) of its coverage.

         After accepting an employer for workers' compensation coverage, the
second phase is to help the employer manage its safety risks. The Company
employs a staff of approximately 25 loss control field representatives whose
goals include visiting new employees within 90 days of coverage. Loss control
professionals complete training programs upon joining the Company, and many come
with certifications and professional designations for loss control and safety.
Loss control representatives assist employers in developing and monitoring
safety programs to reduce work related injuries and health hazards. After
evaluating an employer's loss profile, a loss control field representative will
help develop a loss control program and establish accident reporting and claims
investigation protocol. A primary objective for field representatives is to
educate employers on necessary safety systems and health issues which will
enable the employers to manage their own risk.

         In an effort to evaluate the underwriting process and provide an early
warning system, the underwriting department, in cooperation with the loss
control department, produces a monthly computer-generated report identifying
specific employers where excessive losses have occurred. Triggered by these
reports, loss control representatives inspect the employer's operations and
issue recommendations based on their findings. Further, loss control
representatives conduct periodic spot checks to determine the effectiveness of
specific recommendations.

         Sales and Marketing. The Company's products and the Fund memberships
are sold through more than 1,000 independent insurance agencies. As of March 31,
1997, the Company's top ten independent agencies accounted for approximately 17%
of the Company's direct in-force premiums, with the top independent insurance
agency accounting for approximately 3%. These agencies offer and sell
competitors' products, as well as the Company's products. As a result, the
Company's business depends in part on the marketing efforts of these agencies
and on the Company's ability to offer workers' compensation insurance products
and services that meet the requirements of these agencies and their customers.
In addition, if the Company expands into additional states, it must establish a
network of independent agencies in such states if it is to successfully market
its products. Failure of independent insurance agencies to market the Company's
products and services successfully could have a material adverse effect on the
Company's business, financial condition and results of operations.

         The Company's sales and agency relations department and telemarketing
department work with the more than 1,000 independent insurance agencies that
sell the Company's products. The Company's agency executives are sales
professionals who work closely with the larger agencies, maintaining regular
communications with the agencies and keeping them up to date on the Company's
products and services, as well as developments and trends in workers'
compensation insurance. The Company's telemarketing representatives maintain
contact with the smaller agencies by telephone, keeping those agencies informed
about products, services and trends. Often, the Company's agency executives work
with the independent agents in making presentations to potential clients. The
sales department is responsible for maintaining the record 




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<PAGE>   8

of accounts for each agent and ensuring that proper commissions are paid in a
timely manner. Sales conferences and seminars are held regularly for agents and
their staffs.

         The Company's creative services department supports the sales and
agency relations functions. This seven-person department functions as an
in-house advertising agency to produce brochures, newsletters, posters, videos
and other visual presentations to assist the independent agents, and in turn
their clients, in understanding how the Company's products and services can
satisfy an employer's workers' compensation insurance needs. The creative
services department also provides a service to members of the Funds by informing
them about developments in safety, claims and other areas of workers'
compensation through internally generated newsletters and articles in trade
publications.

         Policy Administration. It is an objective of the Company to provide
every insured and Fund member and their employees with timely and quality
service. The Company maintains a group of approximately 30 client service
personnel who answer all incoming client telephone calls and handle other
requests for customer support. These personnel coordinate with the sales force
and field personnel, and they are responsible for maintaining a client database.
In addition, the Company has a group of approximately 20 persons who perform
premium audits, working both internally at the Company's headquarters and in the
field at client sites. These auditors are responsible for making certain that
the payrolls and job classifications for each insured and Fund member are
accurately reflected in the premium amounts charged for coverage. The field
auditors generally conduct a premium audit for every insured and Fund member on
an annual basis. Separately, the Company has a team of approximately 15
individuals who handle collections and disputes related to premiums.

         Primary Customers. The Company's primary customers for its
administrative services are its own Insurance Subsidiaries and the four Funds,
including the Florida Retail Federation Self Insurers Fund ("FRF"), the
Louisiana Employers Safety Association Self Insurers Fund ("LESA"), the
Louisiana Retailers Association Self Insurers Fund ("LRA"), and the Kentucky
Retail Federation Self Insurers Fund ("KRF"). SCI assisted with the formation of
and became the administrator for FRF, LRA and LESA in 1979, 1980 and 1982,
respectively. SCI became the administrator of KRF in 1995. Each of the Funds was
formed at the direction of a particular trade association, and each is a trust
organized and operated under provisions of applicable state law. Each Fund has a
board of trustees, but no officers or employees, and the board of trustees of
each Fund has contracted with SCI to perform most aspects of the daily
operations of such Fund.

         Each Fund has executed a written administrator's contract with SCI
which defines the services to be performed by SCI and the fee to be paid by the
Fund. These contracts are intended to be (i) long-term in nature, with initial
terms of between two and five years and provisions for automatic renewal, and
(ii) terminable by the Funds for "good cause," which is generally defined to
mean a failure by SCI to perform its obligations under the contract or SCI's
fraud or bankruptcy, with such default by SCI not being cured within a 90-180
day period after notice from the Fund. For these reasons and because the Funds
have no employees and the Company manages all aspects of their relationships
with agents and members, the Company believes that it would be difficult for the
Funds to cancel their contracts with the Company or move the business to a new
administrator.



                                      -8-
<PAGE>   9

         The following table presents the Company's annual administrative fee
revenues received from each Fund:

<TABLE>
<CAPTION>
                                                                      YEAR ENDED MARCH 31,
                                                       ----------------------------------------------------
                                                             1995             1996              1997
                                                             ----             ----              ----
                                                                         (IN THOUSANDS)
<S>                                                          <C>             <C>               <C>    
FRF................................................          $30,544         $27,749           $24,524
LESA...............................................          $ 7,828         $ 5,508           $ 4,112
LRA................................................          $ 4,520         $ 3,609           $ 3,122
KRF................................................          $     -         $   489           $   981

     Total                                                   $42,892         $37,355           $32,739
</TABLE>

         Such annual administrative fee revenues are generally a contractually
agreed upon percentage of each Fund's premiums. Out of such annual
administrative fees, the Company is required to pay certain direct expenses,
including agents commissions, premium taxes and reinsurance premiums.

         The following describes certain information about each of the four
Funds:

                  Florida Retail Federation Self Insurers Fund. FRF was
         established in 1979 as a workers' compensation self-insurance fund
         targeted specifically to retailers, service providers, wholesalers and
         retail-related businesses in Florida. As of March 31, 1997, FRF had
         approximately 6,900 member employers and annual premiums in excess of
         $63.8 million. FRF memberships renew each year on January 1.

                  Louisiana Employers Safety Association Self Insurers Fund.
         LESA was established in 1982 and currently provides coverage to over
         800 member employers in Louisiana. As of March 31, 1997, LESA had
         annual premiums of approximately $12.0 million. LESA memberships renew
         each year on April 1. LESA's members have voted in favor of converting
         the Fund to a nonassessable mutual insurance company. If such
         conversion is approved by the applicable insurance regulators and
         effected, upon the approval of SCI, LESA would replace its current
         administrator's agreement with a managing general agent agreement,
         pursuant to which SCI would continue without interruption to manage the
         day-to-day operations of LESA, as converted to an insurance company.

                  Louisiana Retailers Association Self Insurers Fund. LRA was
         established in 1980 as a workers' compensation self-insurance fund
         targeting specifically wholesalers and retail-related businesses in
         Louisiana. As of March 31, 1997, LRA had over 1,300 retail member
         employers and annual premiums of approximately $9.0 million. LRA
         memberships renew each year on July 1.

                  Kentucky Retail Federation Self Insurers Fund. KRF is a
         workers' compensation self-insurance fund for selected Kentucky retail
         businesses, and SCI assumed administration of KRF in August 1995. As of
         March 31, 1997, KRF had over 1,200 members and annual premiums of
         approximately $3.0 million. KRF memberships renew each year on January
         1.



                                      -9-
<PAGE>   10

         INSURANCE OPERATIONS. Prior to the Conversion, ESIF was one of the
largest workers' compensation self-insurance funds in Florida, with
approximately 5,400 member employers and approximately $110.0 million in annual
premiums as of March 31, 1997. ESIF's policies renew each year on April 1.

         ESIF has maintained a relatively steady risk distribution of business
groups. A breakdown of all business segments is shown below:

                            ESIF'S RISK DISTRIBUTION
                              AS OF MARCH 31, 1997

<TABLE>
<CAPTION>
                                                       APPROXIMATE % OF TOTAL
INDUSTRY                                                 PREMIUMS WRITTEN
--------                                                 ----------------

<S>                                                            <C>
Construction.......................................             45%
Manufacturing......................................             17%
Wholesale and retail...............................             13%
Service............................................             14%
Transportation.....................................              6%
Agriculture........................................              5%

         Total                                                 100%
                                                               ===

</TABLE>

         During 1995, in an effort to compete with those workers' compensation
insurers who issue non-assessable policies, the Company formed Bridgefield
Casualty, which is licensed to underwrite property/casualty insurance in Florida
and is capitalized with $7.7 million of cash and invested assets. Bridgefield
Casualty began offering a non-assessable workers' compensation policy in Florida
effective January 1, 1996, and as of March 31, 1997 had written approximately
1,500 such policies representing approximately $14.0 million of annual premiums.
Subject to receipt of licensing approvals, Bridgefield Casualty intends to begin
selling non-assessable workers' compensation policies in Louisiana. Future plans
also include possible workers' compensation offerings in other states as well as
other property/casualty products offered to members of the Funds.

         The Company's products and rating plans encompass a continuum of
options designed to fit the needs of its insured employers and employer groups.
The basic product, accounting for approximately 69% of the Insurance
Subsidiaries' premiums in force at March 31, 1997, is a guaranteed cost
contract, in which the premium for each employer is set in advance and varies
based upon changes in the client's operations, payroll and safety and drug-free
workplace programs. In return, the Company agrees to assume statutorily imposed
obligations of the employer to provide workers' compensation benefits to its
employees. The premium for such a policy depends upon the type of work performed
by the employees and the general business of the insured. An employer large
enough to qualify, typically those paying more than $25,000 in annual premiums,
may choose a different product, having its premium based on its loss experience
relative to its peers as determined over a one-year period. A client who desires
to assume a certain amount of financial risk may elect a deductible which makes
the client responsible for the first portion of any claim. In exchange for the
deductible election, the employer receives a




                                      -10-
<PAGE>   11

premium reduction. The Company also offers a loss sensitive plan (retrospective
rated plan) to employers paying more than $25,000 in annual premiums. Under this
plan, final premium for a period is determined on the basis of the insured's
actual losses during that period. If a client's losses during a claims period
are better than expected, the Company may be required to refund a portion of the
premium previously paid. Throughout the fiscal years ended March 31, 1995, 1996
and 1997, the Company established and maintained gross aggregate accruals for
retrospective refunds in amounts of $9.2 million, $10.6 million and $11.4
million, respectively. Retrospective rated policies accounted for 32%, 30% and
31%, respectively of total premiums during the fiscal years ended March 31,
1995, 1996 and 1997. The Company secures substantially all of its retrospective
liability through a combination of letters of credit, cash deposits and other
instruments.

REINSURANCE

         The Company obtains reinsurance principally to reduce its net liability
on individual risks, to provide protection for catastrophic losses, to stabilize
its underwriting results and to increase its underwriting capacity. In exchange
for reinsurance, the Company pays to its reinsurers a portion of the premiums
that the Company receives.

         Bridgefield currently maintains specific excess of loss policies
("Excess Reinsurance") with several reinsurers, under which the reinsurers have
agreed to pay claims and claims expenses over a specific dollar amount per
occurrence. Bridgefield currently maintains Excess Reinsurance agreements with
John Hancock Mutual Life Insurance Company, Lincoln National Life Insurance
Company, Republic Western Mutual Insurance Company, Lloyds of London, and
National Union Fire Insurance Company, and policies providing coverage for prior
years with several other reinsurers, pursuant to which each of such reinsurers
agrees to pay claims and expenses above a certain amount and up to a specified
limit per claim. The aggregate effect of such agreements is that claims and
claims expenses in excess of $50,000 per claim and up to the statutory amount
per claim will be paid by one or more of such reinsurers in accordance with the
terms of such agreements.

         Further, Bridgefield has entered into Quota Share Reinsurance
agreements, effective April 1, 1997, with American Re-Insurance Company ("Am
Re"), St. Paul Fire and Marine Insurance, Constitution Reinsurance Corp. and
Transatlantic Reinsurance Co. under which Bridgefield has ceded to such
reinsurers, in the various proportions taken by each of them, an aggregate of
75% of the net premiums on workers' compensation policies written during such
period, and such insurers, in the respective proportions taken by each of them,
have assumed that same percentage of risks under such policies. The portions
taken by each of such reinsurers is as follows: Am Re--35%; St. Paul Fire and
Marine Insurance--15%; Constitution Reinsurance Corporation--20%; and
Transatlantic Reinsurance Company--5%.

         Bridgefield Casualty has an Excess Reinsurance agreement with
Continental Casualty Company under which that reinsurer has agreed to pay claims
and claims expenses up to statutory limits per claim, to the extent each claim
exceeds $0.5 million. In addition, Bridgefield Casualty has a Quota Share
Reinsurance agreement in effect with Am Re under which Bridgefield Casualty
cedes to Am Re a percentage (currently 80%) of all written workers' compensation
premiums and Am Re assumes that same percentage of risks.



                                      -11-
<PAGE>   12

         Quota Share Reinsurance allows an insurer to write, within regulatory
guidelines, a larger number of policies than it otherwise could write. With
regard to the Company, however, in the event that any or all Quota Share
Reinsurance agreements to which the Insurance Subsidiaries currently are party
are terminated for any reason and are not replaced by another Quota Share
Reinsurance arrangement, the Insurance Subsidiaries, based on their current
capital levels, would not be required to increase their capital or reduce their
level of workers' compensation premiums.

         Reinsurance does not legally relieve an insurer from its liability
under the workers' compensation policies it issues, but it does make the
assuming reinsurer liable to the insurer for the reinsurance ceded. Therefore,
the Company is subject to credit risk with respect to the obligations of its
reinsurers. The Company regularly performs internal reviews of the financial
strength of its reinsurers. However, if a reinsurer is unable to meet any of its
obligations to the Insurance Subsidiaries under the reinsurance agreements, the
Insurance Subsidiaries would be responsible for the payment of all claims and
claims expenses which the Company has ceded to such reinsurer. The Florida DOI
permits Bridgefield to cede reinsurance only to authorized reinsurers, unless
Bridgefield obtains the prior approval of the Florida DOI.

         All of the reinsurers that are party to the Excess Reinsurance
agreements or the Quota Share Reinsurance agreements are rated A or better by AM
Best Company ("A.M. Best"). Nevertheless, any failure on the part of the
Company's reinsurers, as well as any inability of the Company to obtain
reinsurance in the future or any significant increase in the cost of such
reinsurance, could have a material adverse effect on the Company's business,
financial condition and results of operations.

         Certain detailed information regarding the Company's total reinsurance
recoverable is set forth in Note 6 of Notes to Consolidated Financial Statements
contained in "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA."

         Under the terms of its administrative services contracts, the Company
advises the Funds regarding their reinsurance needs and places such reinsurance.
The Company currently has placed Excess Reinsurance on behalf of each Fund. The
Company pays the Funds' reinsurance premiums out of the Company's service fee
revenues.

         The Company brokers all of its reinsurance and the reinsurance
purchased for the Funds through a wholly owned reinsurance agency, which employs
one agent. The Company receives a brokerage fee from the Funds.

         The Company has not experienced any material difficulties in collecting
reinsurance recoverables from any of its reinsurers, including, without
limitation, Crossroads Insurance Company, Ltd. ("Crossroads") and Lloyds of
London. However, no assurance can be given as to the future ability of any of
the Company's reinsurers to meet their obligations. In recent years, Lloyds of
London has reported substantial aggregate losses which have had adverse effects
on it in general and on the underwriting capacity of its syndicates in
particular. These losses and other adverse developments could affect the ability
of certain Lloyds of London syndicates to continue to trade and the ability of
insureds to continue to place business with particular syndicates. To the
Company's knowledge, the Lloyds of London syndicates with which the Company has
contractual relationships have not experienced any inability to pay their
reinsurance obligations as and when due. However, it is not possible for the
Company to predict what effects the circumstances



                                      -12-
<PAGE>   13

described above may have on Lloyds of London and the Company's contractual
relationship with Lloyds of London syndicates in future years.

LOSSES AND LOSS ADJUSTMENT EXPENSES

         The Insurance Subsidiaries are required to maintain reserves to cover
their estimated liabilities for losses and for loss adjustment (claim
settlement) expenses ("LAE") with regard to reported and unreported claims. Such
loss reserves are estimates established by management based upon, among other
factors, (i) results of actuarial reviews which incorporate the Company's
experience with similar cases, estimates of future claim trends, and historical
trends such as recurring loss payment and reporting patterns, claim closures and
product mixes; (ii) facts known to the Company; and (iii) regulatory
requirements. Such reserve is continually reviewed and, as adjustments become
necessary, such adjustments are included in the results of current operations.

         The establishment of appropriate reserves is an inherently uncertain
process, particularly in the workers' compensation industry in which claims
payments can extend for lengthy periods of time. There can be no assurance that
ultimate losses will not materially exceed the Insurance Subsidiaries' loss
reserves. As discussed in greater detail below, the Company has experienced
considerable reserve deficiencies in years prior to 1993 and has adjusted its
reserves in response to development trends. Also described below are certain
accrual uncertainties and risks related to the Company's retrospectively rated
policies. There can be no assurance that there will not be deficiencies or
adjustments in the future, resulting from numerous factors including, for
example, any instability in the regulatory environment and loss data
inadequacies. To the extent that reserves prove to be inadequate in the future,
the Insurance Subsidiaries would have to increase such reserves and incur a
charge to earnings in the period such reserves are increased, which could cause
fluctuations in quarterly operating results and which could have a material
adverse effect on the Company's business, financial condition and results of
operations.

         The following table shows changes in the historical loss and LAE
reserve for ESIF for the ten fiscal years beginning with the year ended March
31, 1988. The top line shows the reserve recorded at each fiscal year end. Such
amount represents an estimate of unpaid losses and LAE occurring in that year as
well as future payments on claims occurring in prior years. The upper portion of
the table (cumulative paid) presents the cumulative amounts paid during
subsequent years on those losses for which reserves were carried as of each
specific year. The lower portion (reserves re-estimated) shows the re-estimated
amounts of the previously recorded reserve based on experience as of the end of
each succeeding year. The re-estimate changes as more information becomes known
about the actual losses for which the initial reserve was carried. An adjustment
to the carrying value of unpaid losses for a prior year will also be reflected
in the adjustments for each subsequent year. For example, an adjustment made in
the fiscal year ended March 31, 1996 for loss reserves in the fiscal year ended
March 31, 1993 will be reflected in the re-estimated ultimate net loss for each
of the fiscal years ended March 31, 1993 through March 31, 1996. The cumulative
redundancy (deficiency) line represents the cumulative change in estimates since
the initial reserve was established. It is equal to the difference between the
initial reserve and the latest re-estimated reserve amount.




                                      -13-
<PAGE>   14



            ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE DEVELOPMENT

<TABLE>
<CAPTION>
                                                          FISCAL YEAR ENDED MARCH 31,
                           --------------------------------------------------------------------------------------------------------
                              1988      1989     1990        1991      1992       1993       1994        1995      1996      1997
                              ----      ----     ----        ----      ----       ----       ----        ----      ----      ----
<S>                        <C>       <C>       <C>        <C>       <C>         <C>        <C>        <C>        <C>       <C>     
Reserve for losses and
  LAE at end of period...  $ 57,488  $125,065  $169,004   $209,601  $169,474    $257,307   $274,102   $259,085   $277,995  $269,670
Cumulative paid as of
   One year later........  $ 40,028  $ 57,482  $ 74,481   $ 88,815  $ 71,364    $ 73,839   $ 71,915   $ 64,882   $ 72,976
   Two years later.......    70,077   100,883   133,064    138,546   118,326     122,411    114,097    102,227
   Three years later.....    92,466   135,490   160,896    170,259   149,424     149,175    136,646
   Four years later......   110,856   146,825   176,483    190,179   165,628     163,261
   Five years later......   119,024   151,683   185,759    199,556   175,079
   Six years later.......   123,810   154,668   189,948    205,762
   Seven years later.....   126,776   158,802   193,066
   Eight years later.....   130,904   161,815
   Nine years later......   133,906
Reserves re-estimated
  as of end of year
   One year later........  $101,593  $141,132  $184,334   $202,489  $233,631    $237,318   $247,737   $267,885   $276,437
   Two years later.......   112,663   156,080   178,786    237,767   214,381     238,014    257,002    271,738
   Three years later.....   126,297   161,652   214,630    231,823   225,238     247,328    264,364
   Four years later......   132,163   182,010   209,894    239,113   235,163     255,854
   Five years later......   148,221   178,810   209,196    248,352   244,113
   Six years later.......   145,937   178,042   215,984    255,232
   Seven years later.....   143,905   184,986   219,629
   Eight years later.....   148,783   188,622
   Nine years later......   149,419
Cumulative redundancy
  (deficiency)
   Dollars...............  $(91,931) $(63,557) $(50,625)  $(45,627) $(74,639)   $  1,453   $  9,738   $(12,653)  $  1,558
   Percentage............   -159.91%   -50.82%   -29.95%    -21.77%   -44.04%       0.56%      3.55%     -4.88%      0.56%
</TABLE>



<TABLE>
<S>                                                                                    <C>        <C>         <C>          <C>    
Net reserves....................................................................       274,102    259,085     277,995      269,670
Ceded reserves..................................................................        93,898    108,306     109,637       89,074
                                                                                       -------    -------     -------      -------
Gross reserves..................................................................       368,000    367,391     387,632      358,744
Net reserves re-estimated.......................................................       264,364    271,738     276,437           --
Ceded reserves re-estimated.....................................................       100,989     76,224      92,972           --
                                                                                       -------    -------     -------      -------
Gross reserves re-estimated.....................................................       365,353    347,962     369,409           --
Gross cumulative redundancy (deficiency)
   Dollars......................................................................         2,647     19,429      18,223
   Percentage...................................................................          0.72%      5.29%       4.70%
</TABLE>


        As seen in the above table, ESIF's reserve estimates for fiscal years
ended March 31, 1992 and earlier had a history of increasing (or "adversely
developing") as those years matured and more data became available. In addition,
for the fiscal year ended March 31, 1995, ESIF reduced its net reserve by
approximately 5.5% and subsequently increased the net reserve in fiscal 1996 by
approximately 8.3%. The adverse development trend and the recent reserve
adjustments are due to several internal and external factors, as discussed
below.

        Although ESIF began operations in 1979, prior to 1985 management
believed that it was not necessary for ESIF to maintain detailed claims data for
the purpose of projecting ultimate loss reserves because its losses over a
specified amount were fully reinsured. Also, at that time self-insurance funds
in Florida, including ESIF, were regulated by the Florida Department of Labor
(the "DOL"), which did not require actuarial verification or the recording of
incurred but not reported claims reserves. Beginning in 1985, due primarily to
changes in the reinsurance 



                                      -14-
<PAGE>   15

market, ESIF no longer had access to full reinsurance, and ESIF for the first
time engaged an independent actuary to assist it in computing ultimate reserve
estimates.

         Prior to 1989, ESIF's claims were adjusted and managed by Adjustco,
Inc. ("Adjustco"), an independent claims adjusting company, under contract to
SCI. Adjustco was responsible for establishing, monitoring and updating
case-based loss reserves used to set the reserves for ESIF's financial
statements. In January 1989, SCI discontinued the contract with Adjustco and
began performing such claims management functions through its wholly owned
subsidiary, Summit Claims Management, Inc. ("SCM"). This change has increased
ESIF's control over the handling of each claim and has permitted ESIF to collect
detailed claims data. Also, due to improved data collection and computer
databases, ESIF is now able to sort the data into smaller subsets that support
more individualized actuarial assumptions, and ESIF is able to perform more
sophisticated analysis of the data.

         In 1985, when ESIF first began establishing meaningful loss and LAE
reserves, there was not a substantial volume of company-specific claims data
available. The actuaries relied more heavily on industry data and assumptions.
Management elected to record ESIF's reserves each year at an amount in excess of
the actuarial estimates, a practice which proved to result in a more accurate
reserve amount. As reflected in the table above, even with management increasing
reserves over the actuarial estimates, ESIF's total reserves still experienced
adverse development until 1993.

         By 1993, ESIF's business had grown significantly, and it was beginning
to accumulate a much larger volume of company-specific data. Also, the data
regarding claims incurred in prior years and paid in later years was becoming
more reliable as this data aged and matured. The use of this data enabled ESIF's
actuaries to begin estimating more accurate reserve amounts.

         In addition, in or around 1994, several external changes occurred which
have improved ESIF's ability to establish more accurate reserve estimates. In
January 1994, the New Florida Law (as such term is defined in "--Regulation"
below) went into effect. For ESIF, one of the most important reforms implemented
by this law was that it permitted workers' compensation insurers in Florida to
settle and close all portions of outstanding claims, whereas previously they had
been permitted to settle and close only the wage loss portions. This has
significantly improved ESIF's ability to predict the ultimate loss on a claim.
Also, because ESIF has been able to settle and close claims that were still
outstanding from prior years, it has been able to reduce the adverse development
of prior years as those years continue to mature. ESIF's loss ratios have
declined over the years and have become more stable.

         Another factor that has contributed to ESIF's improved actuarial
estimates is the lessening of medical cost inflation. Prior to 1994, ESIF's
experience showed significant annual inflation in medical expenses, which made
estimating loss reserves with respect to medical costs uncertain. However, with
managed care and other actual or proposed healthcare reforms limiting this rate
of inflation in medical expenses, ESIF has been better able to estimate loss
reserves with respect to such costs.

         Also in 1994, the Florida legislature transferred regulatory oversight
of self-insurance funds from the DOL to the Florida DOI. The Florida DOI placed
substantially more emphasis on 



                                      -15-
<PAGE>   16

the actuarial reports and requested that self-insurance funds record reserves
only at amounts that had been agreed upon by the funds' actuaries.

         As a consequence of these factors that had been taking place in the
early 1990s, in 1995 ESIF determined that it no longer needed to increase
reserves above the actuarial estimates. ESIF's management believed that the
actuarial estimates were beginning to show a trend of redundancy or only small
deficiencies, as reflected in the table above. As a result, for the fiscal year
ended March 31, 1995, ESIF reduced the aggregate loss and LAE reserve by
approximately $25.4 million, or 9.8% of net reserves. The following table, which
presents the development of actuarial net loss ratios for the same ten-year
period that is set forth above, illustrates how the actuarial estimates have
improved over time. This table shows net loss ratios that have been computed
using only the actuarially estimated reserve amounts, and excludes any
management reserves. The top line of the table shows the net loss ratio for each
year, and each succeeding line shows how that ratio has developed with each
succeeding year. The ratios for each succeeding year are for only that original
accident year and are not cumulative.

                   DEVELOPMENT OF ACTUARIAL NET LOSS RATIOS(1)

<TABLE>
<CAPTION>
                                                             YEAR ENDED MARCH 31,
                              ------------------------------------------------------------------------------------------
                              1988       1989     1990     1991      1992     1993     1994       1995    1996      1997
                              ----       ----     ----     ----      ----     ----     ----       ----    ----      ----
<S>                          <C>      <C>         <C>       <C>      <C>      <C>     <C>        <C>      <C>      <C>  
Actuarial loss & loss
  adjustment expense
  ratios                      86.0%    89.8%      77.0%     66.8%    67.0%    59.8%   55.8%      59.8%    60.4%    56.7%
One year later                89.4     85.8       77.0      67.1     64.8     56.2    53.8       58.7     56.7
Two years later               98.9     91.5       77.2      66.9     61.6     61.0    54.3       56.5
Three years later             97.8     93.4       84.5      70.3     64.2     60.7    53.1
Four years later             100.9    103.1       87.2      75.3     64.7     60.5
Five years later             110.7    103.1       89.9      76.8     66.2
Six years later              110.7    104.3       92.5      78.7
Seven years later            110.8    106.2       94.6
Eight years later            111.7    109.0
Nine years later             113.4
</TABLE>

--------------

(1)      Actuarial net loss ratios are estimated billable premium regardless of
         the payment plan net of specific reinsurance. This table does not
         reflect the impact of aggregate reinsurance.

         As shown in this table, the net loss ratios for fiscal years prior to
1992 have steadily increased as those accident years have developed. The net
loss ratios for years 1992 and later have remained relatively stable. These
trends correlate to the trend of the actuarially estimated reserves for years
prior to 1992 to develop adversely as those years mature, and for years 1992 and
later to be more accurate and experience less adverse development. By 1995, when
management of ESIF determined that it would not need to record reserves in
excess of the actuarial estimates, these net loss ratios had begun to evidence
the trend toward less adverse development. For example, the net loss ratio for
1988 was 86.0% in that year, and by the end of 1995 the 1988 year net loss ratio
had developed to 110.8%. In contrast, the net loss ratio for



                                      -16-
<PAGE>   17

fiscal year 1992 was 67.0% in that year, but it had positively developed to
61.6% by the end of 1994. Years subsequent to fiscal year 1992 continued to
evidence this trend.

         The improved quality and quantity of ESIF's claims data also resulted
in two adjustments in fiscal 1996, an increase of the loss and LAE reserve and a
decrease of accrued billable premiums relating to ESIF's retrospective rated
insurance policies (the "Retro Plans"). For the fiscal year ended March 31,
1996, the loss and LAE reserve was increased consistent with revised actuarial
indications. ESIF's independent actuaries determined that the reserve provision
for claims occurring in prior years should be increased by approximately $10.8
million, which was 4.4% of reserves at the beginning of the year and 3.9% of net
reserves.

         An in-depth review of this increase was undertaken by the Company's
consulting actuaries. Specifically, data for the indemnity, medical and expense
components of the Company's experience were separately reviewed to better
understand the underlying patterns. This review confirmed the need to
re-evaluate the loss development tail factors supporting the reserve estimates.

         As noted above, the Company wrote only a limited amount of business in
its early years of operations. The development patterns that emerged from the
actual loss experience in these early years define the development factors that
are applied to all subsequent years. Consequently, as the experience matures,
changes to the pattern will have a leveraged effect on the actuarial reserve
estimates. At the same time the estimates, over time, rely more heavily on the
Company's actual experience.

         In light of this new experience, the actuaries adjusted the development
patterns to reflect these higher levels of expected development. Given the
limited number of claims remaining open for these early years, it is expected
that no additional adjustment in the development pattern will be necessary as
these claims are settled, and reviews made subsequent to March 31, 1996 support
this expectation.

         With respect to retrospective premiums, the actuaries reduced the
estimate of accrued retrospective premiums by approximately $9.3 million. The
establishment of an estimate of accrued retrospective premiums requires an
analysis of both the overall losses for all Retro Plan participants (the mean
loss ratio) as well as an estimate of the dispersion of individual participant
loss ratios around the overall mean (the variance of the loss ratios). Prior to
March 31, 1996, the actuaries had developed an estimate of the variance using
only a limited amount of information about the individual participants' actual
loss experience. To a large extent, the model was based on industry information
regarding the dispersion of workers' compensation loss ratios around the mean.
The annual review of the amount of accrued retrospective premiums reflected
revised estimates of the participants' mean loss ratio, but did not re-estimate
the variance assumption.

         During 1995, ESIF's actuaries reviewed the aggregate information for
participants in the Retro Plans. For years 1986 through 1988, a majority of the
losses had already been paid so that the actuaries were able to evaluate the
actual dispersion of individual participants' losses around the mean. The
actuaries concluded from this review that the earlier assumption of the variance
tended to underestimate the proportion of the insureds that would experience
losses in excess of the Retro Plans cap. The estimate of the variance was
revised to better match the actual experience of the Retro Plans participants
for these earlier years and applied the same assumptions 



                                      -17-
<PAGE>   18

to more recent years. Thus, although the reserving model remain unchanged,
revised assumptions regarding variance using more individualized data caused the
estimates of retrospective premiums receivable to be reduced.

         Based on actuarial and management review for the year ended March 31,
1997, a release of $3.9 million in reserve redundancy and a decrease in
retrospective plan premiums receivable of $4.2 million had no material effect on
Net Income for the period.

         The following table contains summary reconciliations of the beginning
and ending insurance reserves, displayed individually for each of the three most
recent fiscal years.





















                                      -18-
<PAGE>   19




<TABLE>
<CAPTION>
                                                      YEAR ENDED MARCH 31,
                                             -------------------------------------
                                             1995            1996             1997
                                             ----            ----             ----
                                                       (IN THOUSANDS)
<S>                                         <C>             <C>             <C>
Net reserves for losses
  and LAE at beginning of
  year                                      $274,102        $259,085        $277,995
                                            --------        --------        --------
Less: Recoverable from
  Florida SDTF(1)                             (9,929)        (15,879)        (20,060)
                                            --------        --------        --------
Net reserves for losses
  and LAE less SDTF
  recoverable assets at
  beginning of year                          264,173         243,206         257,935
Add provision for claims
  occurring in:
   The current year                           94,520          84,058          69,014
   Prior years                               (25,404)         10,786        (  3,862)
                                            --------        --------        --------
Incurred losses during
  the current year                            69,116          94,844          65,152
Deduct payments for 
  claims occurring in:
   The current year                           16,857          15,432          14,131
   Prior years                                73,226          64,683          60,265
                                            --------        --------        --------
Claim payments during
  the current year                            90,083          80,115          74,396
Net reserves for losses
  and LAE less SDTF
  recoverable assets at
  end of period                              243,206         257,935         248,691
Add: Recoverable from
  Florida SDTF(1)                             15,879          20,060          20,979
                                            --------        --------        --------
Net reserves for losses
  and LAE at end of period                   259,085         277,995         269,670
Add: Reinsurance recoverables
  (exclusive of recoverables
  on paid losses)                            108,306         109,637          89,074
Gross reserves for losses
  and LAE at end of period
  (GAAP basis)                              $367,391        $387,632        $358,744
                                            ========        ========        ========
</TABLE>

---------------

(1)      Florida operates a Special Disability Trust Fund (the "SDTF") that
         reimburses insurance carriers, self-insurance funds and self-insured
         employers in Florida for certain workers' compensation benefits paid to
         injured employees. The SDTF is managed by the State of Florida and is
         funded through assessments against Florida insurers and self-insurers.
         The




                                      -19-
<PAGE>   20

         change in the SDTF recoverable asset is included in incurred losses in
         the Statement of Income.

         A reconciliation of the loss and LAE reserves determined on the basis
of generally accepted accounting principles ("GAAP") with the reserves recorded
on the statutory basis financial statements provided to state regulatory
authorities is as follows:

<TABLE>
<CAPTION>
                                                     MARCH 31,
                                        -----------------------------------
                                        1995           1996            1997
                                        ----           ----            ----
                                                 (IN THOUSANDS)

<S>                                   <C>            <C>              <C>     
GAAP basis loss and LAE
  reserves                            $367,391       $ 387,632        $358,744
Reinsurance recoverables
  included in GAAP loss
  and LAE reserves                    (108,440)       (106,812)        (86,338)
Adjustment for the effect
  of computing GAAP basis
  loss reserves using paid
  losses gross of SDTF
  recoveries                           (24,836)        (31,376)        (25,965)
Discounting of indemnity
  portion of permanent
  disability claims                      4,875           4,667           4,367
                                      --------        --------          ------
Statutory basis loss and
  LAE Reserves                        $238,990        $254,111        $250,808
                                      ========        ========        ========
</TABLE>

         The Company's GAAP basis balance sheet also includes the following
amounts related to the SDTF:

<TABLE>
<CAPTION>
                                                    MARCH 31,
                                       ------------------------------------
                                       1995            1996             1997
                                       ----            ----             ----
                                                (IN THOUSANDS)

<S>                                   <C>             <C>             <C>    
Recoverable from SDTF                 $15,878         $20,060         $20,979
Reinsurance recoverable
  related to SDTF                      10,317          11,781           5,737
</TABLE>

         The recoverable from SDTF asset has been recorded based on ESIF's
historical collection experience and the amount of claims identified as subject
to SDTF recovery. The SDTF reinsurance recoverable results from calculating such
recoverables using loss and LAE reserves computed using paid losses gross of
SDTF recoveries and in consideration of expected recoveries from SDTF. Certain
of the claims used in the determination of the SDTF recoverable are of an amount
which will pierce reinsurance layers. The Company will pursue recovery of such
claims under the provisions of its reinsurance agreements. Subsequently, as the
Company remits the claims to the SDTF, and ultimately collects these claims from
SDTF, the Company will remit to the reinsurers their portion of the SDTF
recoveries. The aggregate recoverable from SDTF asset and the SDTF related
reinsurance recoverable, which approximates the amount of the increase in 




                                      -20-
<PAGE>   21

loss reserves resulting from determining the GAAP basis loss reserves using paid
loss data gross of SDTF recoveries, represents management's best estimate of the
aggregate amounts that will be recovered.

         The Company received $5.6 million from SDTF for the fiscal year ended
March 31, 1996 and $7.5 million for the fiscal year ended March 31, 1997. In
order to quantify the amounts recoverable from the SDTF, which are management's
best estimates of the amounts that will be recovered, ESIF reviewed its claims
that have been identified as subject to SDTF recovery considering ESIF's
historical recovery experience on claims submitted to the SDTF. In addition,
ESIF estimated the amount of claims it expects to recover over the next four
years based on actual collection experience and discounted the expected
recoveries using an appropriate interest rate. The amounts reflected as
recoverables from the SDTF were based on the discounted expected collection
amounts rather than on the total claims identified as subject to SDTF recovery.
ESIF believes it will be reimbursed over a number of years.

         For additional information regarding the SDTF, see
"--Regulation-Special Disability Trust Fund."

INVESTMENT PORTFOLIO

         In general, the Company's investment policy focuses on: (i) safety of
principal; (ii) timing of maturities to match assets and liabilities; and (iii)
diversification. The Company's investment portfolio is managed by First Union
Capital Management, Smith Barney Capital Management and Invesco Capital
Management. These managers have certain discretion to make investments on behalf
of the Company, subject to regulatory restrictions and the Company's investment
policy and guidelines.

         The Company's primary investment objective is to minimize risk while
matching portfolio and liabilities duration. The average fixed-income duration
of the portfolio is approximately four years. This duration, when coupled with
the Company's cash and cash equivalents, matches the historical claims liability
duration of three years. A secondary objective is to maximize total return,
within the regulatory constraints of the insurance laws of the State of Florida
(together with all applicable regulations (the "Florida Insurance Code") and
quality constraints of NAIC Class I requirements.

         In the fiscal year ended March 31, 1996, the Company's investment
portfolio turnover rate was approximately 40% due primarily to maturing
investment securities and the restructuring of certain fixed income securities,
consisting primarily of government bonds which decreased from 32,5% to 25.5% of
such portfolio, while the Company's investments in municipal bonds increased
from 31.5% to 38.5% of the total portfolio.

         Stockholder equity will continue to fluctuate in accordance with
interest rates due to the implementation of Statement of Financial Accounting
Standards No. 115 ("SFAS 115"). In accordance with SFAS 115, the Company has
reclassified all of its investments in debt securities at march 31, 1997, as
available-for-sale, which resulted in a decrease of stockholder equity by $0.5
million in the year ended March 31, 1996.



                                      -21-
<PAGE>   22

         As of March 31, 1997, approximately 73.0% of the bonds in the Company's
investment portfolio were rated AA or above by Standard & Poor's ("S&P") and
approximately 98.0% were either rated A- or better by S&P or are considered
Class I under the NAIC's classification system. The composition of the portfolio
as of March 31, 1996 and 1997 is depicted in the following table.

<TABLE>
<CAPTION>
                                                    AS OF MARCH 31,
                                      --------------------------------------
                                             1996                  1997
                                             ----                  ----
                                               (DOLLARS IN THOUSANDS)

<S>                                   <C>          <C>     <C>         <C>  
Government bonds                      $ 71,633     32.5%   $ 55,246    25.5%
Municipal bonds                       $ 69,361     31.5%   $ 83,317    38.5%
Corporate bonds                       $ 37,824     17.2%   $ 41,512    19.2%
Preferred stock                       $  3,156      1.4%   $  4,547     2.1%
Common stock                          $ 11,095      5.0%   $ 13,739     6.3%
Short-term investments                $ 19,770      9.0%   $ 14,733     6.8%
Cash and cash equivalents             $  7,427      3.4%   $  3,578     1.6%
                                      --------    -----    --------   -----

   Total cash and invested assets     $220,266    100.0%   $216,672   100.0%
                                      ========    =====    ========   =====
</TABLE>

COMPETITION

         The markets for workers' compensation insurance products and services
are highly competitive. The Company's competitors include, among others,
insurance companies, specialized provider groups, in-house benefits
administrators, state insurance pools and other significant providers of
workers' compensation, administration and insurance services. A number of the
Company's current and potential competitors are significantly larger, with
greater financial and operating resources than those of the Company, and can
offer their services nationwide. The Insurance Subsidiaries do not offer
multi-line insurance products that are offered by some of such competitors. In
addition, after a period of absence from the market in Florida, traditional
national insurance companies have re-entered that market, thereby increasing
competition. Their presence in the Company's current market, and in markets into
which the Company might consider for expansion, will likely create greater
competition for acquisitions of workers' compensation businesses, making it more
difficult for the Company to grow by acquisition.

         Competitive factors in the workers' compensation insurance field
include premium rates (in some states), levels of service, A.M. Best ratings,
levels of capitalization, quality of managed care services, the ability to
reduce loss ratios and the ability to reduce claims expenses. The Company
believes that its products and services are competitively priced. In addition,
the Company believes its premium rates are typically lower than those for
clients assigned to the state-sponsored risk pools, allowing the Company to
provide a viable alternative for employers in such pools. The Company also
believes that its level of service and its ability to reduce claims are strong
competitive factors that have enabled it to retain existing clients and attract
new clients. Competitive factors relating to the Company's administrative
service products are primarily based upon pricing, service and reputation. See
"--A.M. Best Rating" below.

A.M. BEST RATING



                                      -22-
<PAGE>   23

         A.M. Best is a rating agency that reports on the financial condition of
insurance companies. Neither of the Insurance Subsidiaries has been assigned a
rating by A.M. Best because neither company has accumulated the required five
consecutive years of operating experience. Management has met with
representatives of A.M. Best to discuss whether ESIF's prior operations might be
considered in assigning a rating to Bridgefield, but there can be no assurance
that any rating will be assigned to either Insurance Subsidiary in the near
future or that any such rating will be favorable. The absence of a rating, or an
unfavorable rating in the future, may be a competitive disadvantage in some
markets, especially regarding larger customers with in-house risk managers. See
"--Competition" above.

REGULATION

         General. Workers' compensation and managed healthcare programs are
subject to various laws and regulations. Both the nature and degree of
applicable government regulation vary greatly depending upon the specific
activities involved. Generally, parties that actually provide or arrange for the
provision of managed care workers' compensation programs, assume financial risk
related to the provision of those programs or undertake direct responsibility
for making payment or payment decisions for those services are subject to a
number of complex regulatory schemes that govern many aspects of their conduct
and operations. The managed healthcare field is a rapidly expanding and changing
industry; it is possible that the applicable regulatory frameworks will expand
to have an even greater impact upon the conduct and operation of the Company's
business.

         The Company's business is subject to state-by-state regulation of
workers' compensation insurance and workers' compensation insurance management
services (which in some instances includes rate regulation and mandatory fee
schedules). Under the workers' compensation system, employer insurance or
self-funded coverage is governed by individual laws in each of the fifty states
and by certain federal laws. Such regulation is primarily for the benefit and
protection of covered employees and policyholders and not for the benefit of
workers' compensation insurance companies, administrators or shareholders. State
regulatory agencies have discretionary power with respect to most aspects of the
Company's business, including premium rates, capital surplus requirements,
reserve requirements and investment criteria. Changes in individual state
regulation of workers' compensation or managed healthcare may create a greater
or lesser demand for some or all of the Company's products and services, or
require the Company to develop new or modified services in order to meet the
needs of the marketplace and compete effectively in that marketplace. Changes in
workers' compensation insurance laws or regulations or their interpretation or
administration could have a material adverse effect on the Company's business,
financial condition and results of operations. In particular, decreases in
Florida workers' compensation rates, such as the 11.2% overall insurance rate
reduction effective January 1, 1997, could have a material adverse effect upon
the Company. In addition, many states limit the maximum amount of dividends and
other distributions that may be paid in any year by insurance companies. This
may limit the amount of distributions that may be made by the Company's
Insurance Subsidiaries to Summit, which in turn may limit the amount of capital
available to Summit for debt service, expansion, dividend payments to
shareholders and other purposes.

         Premium Rate Restrictions. In general, state regulations governing the
workers' compensation systems and insurance business impose restrictions and
limitations on the Company's business operations that are not imposed on
unregulated businesses. Among other 




                                      -23-
<PAGE>   24

matters, state laws regulate not only the amounts and types of workers'
compensation benefits that must be paid to injured workers, but also the premium
rates that may be charged by the Company to insure employers for those
liabilities. As a consequence, the Company's ability to pay insured workers'
compensation claims out of the premium revenue generated from the Company's sale
of such insurance is dependent upon the level of premium rates permitted by
state laws. In this regard, it is significant that the state regulatory agency
that regulates workers' compensation may not be the same agency that regulates
workers' compensation insurance premium rates.

         In Florida, the Florida DOI approves "manual" rates for each of the
approximately 650 employment classification codes prepared and filed by the
National Council on Compensation Insurance ("NCCI"). The carriers operating in
Florida are not permitted to deviate from these approved rates, and competition
is, therefore, primarily related to service and the ability to improve insureds'
experience ratings through loss prevention and effective claims management.
Levels of benefit payments, however, are regulated by the Florida Department of
Labor and Employment Security. Sometimes, mandated benefit changes will be
coupled with permission for appropriate rate changes, but not always. If Florida
were to adopt an "open rating" system in which premium rates would be
established with little or no regulatory intervention, the Company's business,
financial condition and results of operations could be materially adversely
affected.

         Unlike Florida, Louisiana is not an NCCI-rated state but instead is
"open rated," meaning that carriers can apply for, and may receive, approval to
sell workers' compensation coverages at varying rates. However, since Louisiana
established a competitive state-run fund, rates have generally followed those of
the state-run fund.

         In both Florida and Louisiana, the legislatures have recently abolished
systems that required carriers doing business in those states to pay residual
market assessments to support the involuntary workers' compensation markets. The
Company believes that such action will have the effect of increasing competition
in both states.

         Statutory Accounting and Solvency Regulations. State regulation of
insurance company financial transactions and financial condition are based on
statutory accounting principles ("SAP"). Such statutory accounting principles
differ in a number of ways from GAAP, which govern the financial reporting of
most other businesses. In general, SAP financial reports are more conservative
than GAAP financial reports, reflecting lower asset values, higher liability
values and lower equity.

         State insurance regulators closely monitor the financial condition of
insurance companies reflected in SAP financial statements and can impose
significant financial and operating restrictions on an insurance company that
becomes financially impaired. Regulators generally have the power to impose
restrictions or conditions on the following kinds of activities of a financially
impaired insurance company: transfer or disposition of assets; withdrawal of
funds from bank accounts; extension of credit or making loans; and investment of
funds.

         Financial and Investment Restrictions. Insurance company operations are
subject to financial restrictions that are not imposed on other businesses.
State laws require insurance companies to maintain minimum surplus balances and
place limits on the amount of insurance a company may write based on the amount
of the company's surplus. These limitations may restrict




                                      -24-
<PAGE>   25

the rate at which the Company's insurance operations can grow. Immediately
following the Conversion, the Company meets relevant state minimum capital and
surplus requirements.

         State laws also require insurance companies to establish reserves for
payment of policyholder liabilities and impose restrictions on the kinds of
assets in which insurance companies may invest. These restrictions may require
the Company to invest its assets more conservatively than it would if it were
not subject to the state law restrictions and may prevent the Company from
obtaining as high a return on its assets as it might otherwise be able to
realize. See "--Investment Portfolio." In addition, in connection with the
Conversion, Bridgefield is required to maintain a deposit with the Florida DOI
of $5.0 million. All net investment income on such deposit is for the account of
Bridgefield.

         In addition, under Florida law, an insurance company may not, without
regulatory approval, pay to its shareholders within a 12-month period dividends
or other distributions of cash or property, the total fair market value of which
exceeds generally the lesser of 10% of surplus or net income, not including
realized capital gains. In connection with the Conversion, the Florida DOI
requires that all dividends proposed to be paid by the Insurance Subsidiaries be
approved in advance by the Florida DOI. However, the Florida DOI has agreed to
approve a request for any dividend that complies with the Florida Insurance
Code. This may limit the amount of dividends that may be paid by the Insurance
Subsidiaries to Summit, which in turn may limit the amount of capital available
to Summit for debt service, expansion, dividend payments to shareholders and
other purposes.

         The NAIC has recently adopted risk-based capital standards to determine
the capital requirements of an insurance carrier based upon the risks inherent
in its operations. These standards require the computation of a risk-based
capital amount which is then compared to a carrier's actual total adjusted
capital. The computation involves applying factors to various financial factors
to address four primary risks: asset risk, insurance underwriting risk, credit
risk and off-balance sheet risk. These standards provide for regulatory
intervention when the percentage of total adjusted capital to authorized control
level risk-based capital is below certain levels. The Company exceeds such
risk-based capitalization levels, as recommended by the NAIC.

         Special Disability Trust Fund. Florida operates a special disability
trust fund that reimburses Florida insurance carriers, self-insurance funds and
self-insured employers for certain workers' compensation benefits paid to an
employee when he or she is injured on the job and the injury merges with,
aggravates, or accelerates a preexisting injury or physical condition of that
employee. The SDTF is managed by the State of Florida and is funded through
assessments against insurance carriers, self-insurance funds and self-insured
employers providing workers' compensation coverage in Florida. The Company's
SDTF recoveries, recorded as a reduction to losses and LAE incurred, were
approximately $5.7 million, $5.6 million and $7.5 million for the fiscal years
ended March 31, 1995, 1996 and 1997, respectively. The Company's SDTF
assessments were approximately $4.7 million, $5.6 million and $5.1 million for
the fiscal years ended March 31, 1995, 1996 and 1997, respectively. In addition,
the Company's consolidated balance sheet as of March 31, 1997 included an asset
of approximately $21.0 million, representing SDTF recoveries that the Company
estimated at that time it would be entitled to receive, based on claims
identified as subject to SDTF recovery and considering the Company's recovery
experience.



                                      -25-
<PAGE>   26

         The SDTF has not prefunded its claims liability, and no reserves
currently exist to satisfy future claims. Under Florida law, the SDTF is
currently scheduled to expire in the year 2000, unless it is re-created by the
Florida legislature. The SDTF recently underwent legislative review. Under a
recent enactment of the Florida legislature, the SDTF law has been amended so
that claims arising from accidents occurring on or after January 1, 1998 will
not be accepted for reimbursement by the SDTF. The bill states the SDTF will be
liable for reimbursement for subsequent injuries that occur prior to January 1,
1998 and that assessments are to continue for funding purposes.

         In addition, the Florida DOI participated with the Florida legislature
in the review of statutory accounting treatments of SDTF projected recoveries,
and with respect to how an insurer may include such estimated recoveries in its
admitted asset and loss reserve calculations in statutory financial statements.
Under the law referred to above, the anticipated SDTF recoveries that an insurer
can take into account when computing loss reserves in its statutory financial
statements will be limited to recoveries for which a claim has been accepted for
payment. Credit for all other anticipated recoveries will be capped at the total
SDTF recovery amount used by the insurer in 1996, and this capped amount will be
phased out over a five year period, commencing with statutory financial
statements filed in the year 2000 (20% per year reduction of 1996 capped
amount).

         While it is not possible to predict the outcome of this or any other
legislative or regulatory proposals affecting the SDTF, changes in the SDTF's
operations or funding which decrease the availability of recoveries or increase
assessments payable by the Company, or the discontinuation of the SDTF, could
have a material adverse effect on the Company's business, financial condition or
results of operations.

         Subject to the enactment set forth above, the SDTF recoverable recorded
on the Company's balance sheet is the amount the Company expects to recover from
the SDTF based on eligible claims. The Company has a dedicated claims unit that
handles the tracking, submission and collection process with the SDTF. In the
event that there are adverse developments in SDTF collection experience, the
recorded recoverable balance will accordingly be adjusted.

         With respect to collection patterns, the SDTF reviews reimbursement
requests on a claim by claim basis, with actual collection payments tied to the
paid loss development over a claim's life. The payments are not made ratably or
in any other predictable pattern. A prior actuarial review of the SDTF indicated
the average time frame for collection of a claim made to the SDTF is 6 to 8
years.

         Participation in State Guaranty Funds. Every state has established one
or more insurance guaranty funds or associations that are charged by state law
to pay claims of policyholders insured by a company that becomes insolvent. All
insurance companies must participate in the guaranty associations in the states
where they do business and are assessable for the associations' operating costs,
including the cost of paying policyholder claims against an insolvent insurer.
The Company's financial performance could be adversely affected by guaranty
association assessments as a consequence of the insolvency of other insurers
over which the Company has no control.



                                      -26-
<PAGE>   27

         Holding Company Act. In addition to the regulatory oversight of the
Insurance Subsidiaries, Summit also is subject to regulation under the
provisions of the Florida Insurance Code relating to insurance holding company
systems, defined as two or more companies, one or more of which is an insurance
company. Such provisions contain certain reporting requirements, including those
requiring the ultimate parent of a Florida insurance company to file information
relating to its capital structure, ownership and financial condition and the
general business operations of its insurance subsidiary. Such holding company
laws contain special reporting and prior approval requirements with respect to
transactions among affiliates.

         Possible Future Regulation. Numerous proposals have been debated in
Congress and in several state legislatures regarding healthcare legislation
intended to control the cost and availability of healthcare services. It is not
possible to determine what healthcare reform legislation will be adopted by
Congress or any state legislature, or if and when any such legislation will be
adopted and implemented. In the event that such legislation is adopted and
implemented, there can be no assurance that the Company will be able to adjust
effectively to any regulatory changes made by future healthcare reform
legislation and remain profitable. The Company is unable to predict accurately
the nature and effect, if any, that the adoption of healthcare legislation or
regulations or changing interpretations at the federal or state level would have
upon the Company.

         In recent years, the state insurance regulatory framework has come
under increased federal scrutiny, and certain state legislatures have considered
or have enacted laws that altered and, in many cases, increased state authority
to regulate insurance companies and insurance holding companies. Further, the
NAIC and state insurance regulators are re-examining laws and regulations,
specifically focusing on investment laws for insurers, modifications to holding
company regulations, codification of statutory accounting practices, risk-based
capital guidelines, interpretations of existing laws and the development of new
laws. In addition, Congress and certain federal agencies are investigating the
current condition of the insurance industry in the United States to determine
whether to impose federal regulation. The Company cannot predict with certainty
the effect any proposed or future legislation or NAIC initiatives may have on
the conduct of the Company's business or the financial condition or results of
operations of the Company.

DISPOSAL OF BUSINESS

         The Company has disposed of two subsidiaries whose businesses are
unrelated to workers' compensation and no longer fit within the Company's
overall business strategy. These two businesses are briefly described below:

         Meritec Solutions, Inc. In August 1995, the Company purchased Meritec,
a software company which was previously owned by New York Life Insurance
Company. The Company paid $1.0 million for the business, which had approximately
$0.3 million in cash at the time of the purchase. The Company was unable to find
a purchaser for this business and, effective October 31, 1996, the Company
terminated all employees and began winding down the operations. The Company has
sold all of Meritec's fixed assets for a nominal value, and the Company does not
believe this liquidation of Meritec has had a material effect on its financial
condition or results of operations.



                                      -27-
<PAGE>   28

         Carolina Summit Healthcare, Inc. Beginning in 1995, the Company formed
a health maintenance organization in North Carolina designed to provide managed
care for Medicaid recipients and, eventually, employer groups. The Company
capitalized Carolina Summit with $3.0 million, and the North Carolina Department
of Insurance granted Carolina Summit an HMO license, but Carolina Summit has
never conducted any business. The Company has liquidated Carolina Summit's
approximately $2.0 million of invested assets. The Company has also reached an
agreement to sell for cash all of the stock of Carolina Summit to an unrelated
third party for a price equal to the aggregate net book value of Carolina
Summit, approximately $745,000. The sale is expected to close in the second
quarter of 1997. The Company continues to own another North Carolina subsidiary,
Carolina Med Summit, Inc. ("Carolina Med"), which was formed in conjunction with
Carolina Summit and to facilitate its North Carolina licensing application.
Carolina Med has no assets or liabilities.

INFORMATION TECHNOLOGY SYSTEMS

         The Company's centralized information technology systems department
provides, maintains and manages the information resources for all of the
Company. The department currently has four IBM AS/400 mainframe computers
supporting approximately 430 terminals in the Company's Lakeland, Florida
headquarters and remote locations. Some 100 personal computers are used in
networks, as stand-alone units or as host-connected PCs. The Company also
maintains a number of laptop computers for field personnel. More than 80% of the
department's approximately 26 employees have been with the Company five or more
years. The department's programming staff averages 10 years of experience. The
department's personnel include full-time programmers, quality-control engineers
and operational support specialists.

         EMPLOYEES

         The Company employed approximately 428 full-time employees as of March
31, 1997. Approximately 397 employees are based in Florida, while 31 are based
in Louisiana and Kentucky.


ITEM 2.  PROPERTIES

         The Company is headquartered in Lakeland, Florida, where it leases
approximately 80,000 square feet of space in a campus of nine buildings. The
Company also leases office space including approximately 2,000 square feet in
Lexington, Kentucky; and approximately 1,000 square feet in Ft. Lauderdale,
Florida.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is periodically involved as plaintiff or defendant in
various legal actions incident to its business. Based upon information presently
available to it, management is not aware of any threatened or pending litigation
that is expected to have a material adverse effect on the Company or its
business.

         The Internal Revenue Service is currently conducting an audit of SHC.
The Company cannot predict the results of the audit, and no assurance can be
given that the results of the audit 



                                      -28-
<PAGE>   29

will not have a material adverse effect on the Company's business, financial
condition or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted by the Company to a vote of its stockholders
during the fourth quarter ended March 31, 1997.

                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER 
MATTERS

STOCK PRICE

         Since the Company's initial public offering (at $11.00 per share) on
May 22, 1997, the Common Stock has traded on the Nasdaq National Market under
the symbol "SHSE." The following table sets forth for the periods indicated the
high and low sale prices per share of the Common Stock as reported by the Nasdaq
National Market.

<TABLE>
<CAPTION>
         1997                                           HIGH             LOW
         ----                                           ----             ---
         <S>                                            <C>              <C>   
         May 22 - June 20........................       $19.25           $12.75
</TABLE>

SHAREHOLDERS

         As of May 31, 1997, the Company had approximately 1,100 beneficial
holders of the Common Stock. Of that total, 137 were shareholders of record.

DIVIDENDS

         Summit has no intention at present to pay dividends on the Common
Stock. Any payment of dividends on the Common Stock in the future would be
subject to determination and declaration by the Board of Directors of Summit and
the availability of funds therefor. Any future dividend payments by Summit would
depend upon the Company's debt and equity structure, earnings, need for capital
and other factors, including economic conditions, regulatory restrictions and
tax considerations.

         Should Summit consider paying dividends on the Common Stock in the
future, the source of funds for payment of such dividends would be dividends
from the Insurance Subsidiaries and the Administrative Subsidiaries to Summit,
dependent on such subsidiaries' earnings. Summit currently expects to cause the
Insurance Subsidiaries to retain all of their earnings to provide capital for
their operations and business. In addition, under the Florida Insurance Code and
conditions imposed by the Florida DOI in connection with the Conversion, the
Insurance Subsidiaries may not be permitted to pay cash dividends to Summit
generally in excess of 10% of the greater of surplus or net income without prior
approval of the Florida DOI. In addition, if any shares of the Company's Series
A Preferred Stock are outstanding, no dividends may be paid to the holders of
Common Stock so long as there are cumulated but unpaid dividends on the



                                      -29-
<PAGE>   30

Series A Preferred Stock. See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Liquidity and Capital Resources"
and "ITEM 1. BUSINESS--Regulation--Financial and Investment Restrictions."

RECENT SALES OF UNREGISTERED SECURITIES

         On November 15, 1996, Summit sold one share of Common Stock at a price
of $11.00 per share to each of the seven directors of Summit. These shares were
issued to accredited investors as defined in Regulation D in a transaction
exempt from the registration requirements of the Securities Act of 1933, as
amended, pursuant to Section 4(2) of the Securities Act of 1933, as amended, and
Regulation D thereunder. On the date of the Conversion, the seven shares were
redeemed by Summit for an amount equal to the original purchase price.


ITEM 6.  SELECTED FINANCIAL DATA

         The following selected financial data have been taken from, or derived
from, the Company's consolidated financial statements, including the related
notes thereto. The Company's consolidated financial statements as of March 31,
1996 and 1997, and for the two years ended March 31, 1997, have been audited by
Ernst & Young LLP, independent auditors, whose reports thereon appear elsewhere
in this report. ESIF's consolidated financial statements as of March 31, 1995
and for the fiscal years ended March 31, 1994 and 1995 have been audited by
Brinton & Mendez, certified public accountants, whose report thereon appears
elsewhere in this report. The selected financial data provided as of March 31,
1993 and 1994 and for the fiscal year ended March 31, 1993 are unaudited but in
the opinion of management contain all adjustments, consisting of only normal,
recurring accruals, for a fair presentation of the results of such periods. The
information set forth below is not necessarily indicative of the results of
future operations and should be read in conjunction with the consolidated
financial statements and notes thereto.











                                      -30-
<PAGE>   31





<TABLE>
<CAPTION>
                                                                       YEAR ENDED MARCH 31,
                                     ----------------------------------------------------------------------------
                                        1993            1994             1995            1996(1)          1997
                                        ----            ----             ----            -------          ----
                                     (UNAUDITED)                 (DOLLARS IN THOUSANDS)
<S>                                       <C>             <C>             <C>              <C>          <C>     
INCOME STATEMENT DATA:
   Premiums earned..............          $181,339        $148,441        $128,489         $114,893     $ 97,321
   Net investment income........            10,728          10,510          12,205           13,210       12,770
   Administrative fees..........                --                              --            7,665       33,303
  Realized investment gains.....                --                              --            4,354          687
  Other income..................                                               121              206          692
                                          --------        --------        --------         --------     --------
  Total revenue.................           192,067         158,951         140,815          140,328      144,773
   Losses and loss adjustment
     expenses...................           149,177         108,411          69,116           94,844       65,152
   Other underwriting, general
     and administrative
     expenses...................            40,145          37,121          41,546           43,657       60,675
   Interest expense.............                --              --              --              847        3,521
   Amortization and
     depreciation...............                                                              1,103        4,733
                                          --------        --------        --------         --------     --------
   Income (loss) from
     continuing operations
     before income taxes........             2,745          13,419          30,153             (123)      10,692
   Loss from discontinued
     operations.................                --              --              --             (197)    $ (1,250)
  Net income....................           $ 2,953        $  8,885        $ 19,163         $    185     $  4,240
                                           =======        ========        ========         ========     ========
OTHER DATA:(2)
   Net loss ratio(3)............              82.3%           73.0%           53.8%            82.5%        66.9%
   Expense ratio(4).............              22.1%           25.0%           32.3%            34.1%        35.1%
   Combined ratio(5)............             104.4%           98.0%           86.1%           116.6%       101.0%
</TABLE>


<TABLE>
<CAPTION>
                                                                       YEAR ENDED MARCH 31,
                                     ----------------------------------------------------------------------------
                                        1993            1994             1995            1996(1)          1997
                                        ----            ----             ----            -------          ----
                                     (UNAUDITED)                 (DOLLARS IN THOUSANDS)
<S>                                       <C>               <C>           <C>               <C>           <C>     
BALANCE SHEET DATA:
   Cash and invested assets.....          $176,931          $201,688      $224,956          $220,266      $216,672
   Premiums receivable..........            69,197            71,520        50,391            38,093        31,084
   Reinsurance recoverable......           105,541            95,851       110,141           111,519        94,009
   Recoverable from SDTF........             6,745             9,929        15,879            20,060        20,979
   Total assets.................           373,069           405,765       425,206           491,844       446,617
   Loss and loss adjustment
     expenses...................           360,425           368,000       367,391           387,632       358,744
   Debt.........................                --                --            --            44,000        32,675
   Total equity (deficit).......            (6,458)            2,480        20,065            23,154      $ 26,416
</TABLE>


-------------

(1)      Includes the Acquisition as of January 16, 1996.
(2)      Ratio for Insurance Subsidiaries
(3)      Net loss ratio is the ratio of losses and loss adjustment expenses
         incurred to premiums earned.




                                      -31-
<PAGE>   32


(4)      Expense ratio is the ratio of underwriting, general and administrative
         expenses to premiums earned.
(5)      Combined ratio is the sum of the net loss ratio and the expense ratio.


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

         The following analysis of the consolidated results of operations and
financial condition of the Company should be read in conjunction with "ITEM 6.
SELECTED FINANCIAL DATA," the Consolidated Financial Statements and the
accompanying Notes to the Consolidated Financial Statements included elsewhere
herein.

OVERVIEW

         As of May 22, 1997, the successor entity to ESIF, as described below,
became a wholly owned subsidiary to the Company. On such date ESIF completed a
conversion from a group self-insurance fund to a stock property and casualty
insurance company. Concurrent with this conversion ESIF's name was changed to
Bridgefield Employers Insurance Company and the Company, a new holding company,
issued $16.4 million of preferred stock to the former policyholders or members
of ESIF for the extinguishment of the membership interests. At the same time, in
connection with a recapitalization of the Company's corporate structure, all of
the capital stock of Summit Holding Corporation ("SHC"), which had been owned by
ESIF prior to the conversion, was acquired by the Company and SHC became a
wholly subsidiary of the Company.

         The conversion and recapitalization transactions described above are
considered to be similar to pooling of interests transactions. The historical
cost basis accounting of the predecessor companies has been retained and the
Company's financial statements have been presented using pooling of interest
basis accounting. The conversion and recapitalization transactions had no impact
previously reported net income of the consolidated entities.

         The Company's managed care workers' compensation insurance operations
are comprised primarily of the Administrative Subsidiaries and the Insurance
Subsidiaries. The Company's income is generated principally from three sources:
fees earned from the management of the Funds, underwriting profits derived from
premiums earned on insurance policies written by the Insurance Subsidiaries and
investment income generated by invested assets related to insurance
underwriting.

         All of the Company's insurance policies are written for entities
located in Florida, and a significant portion of the Company's administrative
services are provided to entities operating in Florida. Effective January 1,
1994 (with subsequent certain amendments), Florida enacted new legislation (the
"New Florida Law") that changed the underwriting environment for workers'
compensation by, among other things: (i) limiting certain benefits that must be
provided; (ii) eliminating wage loss benefits in favor of a system of benefits
based upon a schedule of impairment ratings plus supplemental benefits; (iii)
obligating employers to rehire injured workers; (iv) adopting new procedures for
dispute resolution designed to reduce litigation costs; and (v) redefining
permanent impairment.



                                      -32-
<PAGE>   33

         In addition, the New Florida Law authorized insurers and self-insured
groups to apply to the Florida DOI for permission to offer premium credits of up
to 10% from January 1, 1994 through December 31, 1996 to insured employers who
participated in approved managed care arrangements and, effective January 1,
1997, required insured employers to participate in managed care arrangements.
The New Florida Law also authorized premium credits for insured employers who
participate in safety and drug-free workplace programs. In response to the New
Florida Law, which was expected to result in savings to self-insured groups and
insurers, the Florida DOI ordered a 10.6% overall rate decrease, effective
January 1, 1994. In addition, the New Florida Law eliminated the residual market
assessment that was levied against insurance companies to support the
involuntary workers' compensation market and replaced it with a self-funded
joint underwriting association. As a result, the financial obligation of funding
deficits in the residual market mechanism was shifted from traditional insurance
entities to employers who are insured by the joint underwriting association.
While the long term impact of the New Florida Law cannot be determined, the
Company believes that it has resulted in: (i) a more competitive workers'
compensation market in Florida; (ii) conversions by some of the larger
self-insured groups to traditional insurance entities; and (iii) loss portfolio
transfers by self-insured groups to insurance companies.

         Based in part upon the elimination of the managed care premium credit
(10%) and upon other rate-making factors, the Florida DOI ordered an 11.2%
overall workers' compensation insurance rate reduction, which applies to new and
renewal policies written on and after January 1, 1997.

         The Company believes that it can improve its return on invested capital
following the Conversion through growth in its core workers' compensation
business. Key aspects of the Company's business strategy following the
Conversion include: (i) continued use of both self-insurance and indemnity
products; (ii) emphasis on profitable underwriting results; (iii) proactive
implementation of managed care; (iv) leveraging of administrative services
capabilities; and (v) emphasis on excellent customer service.

         The Insurance Subsidiaries have entered into certain Quota Share
Reinsurance agreements pursuant to which 75% of Bridgefield and 80% of
Bridgefield Casualty's net premiums have been ceded to the respective
reinsurers. While such reinsurance agreements will enable the Insurance
Subsidiaries to underwrite a larger number of policies than they could otherwise
write, the ceding of a percentage of the premiums of such policies to the
reinsurer will result in lower premium income to the Company than in prior
years. However, the Company will receive a ceding commission related to the
Quota Share Reinsurance agreements which will be reflected as a reduction of
operating expense. Management does not currently anticipate that the net income
of the Company will be adversely effected by such agreements.

         Historically, ESIF was not operated for the purpose of accumulating
profits, but it retained a portion of its earnings and profits to avoid making
assessments against its members. ESIF occasionally during its operating history
paid distributions of profits to its members, but it never made an assessment
against its members. ESIF's indemnity agreements indemnified the member
employers against loss or liability relating to workers' compensation insurance
risk.



                                      -33-
<PAGE>   34

         Prior to the Acquisition, ESIF and SHC were non-affiliated. Although
SHC (through its wholly owned subsidiary, SCI) had provided all administrative
and management services required to operate ESIF since ESIF's inception in 1978,
the two organizations had different financial objectives and reported historical
financial results independently. ESIF used a fiscal year ending on March 31, and
SHC used a fiscal year ending on December 31. As a result of the Acquisition,
SHC became a wholly owned subsidiary of ESIF, and management began to implement
an integrated strategic plan. The discussion below in "--Results of Operations"
includes SHC from and after the date of the Acquisition.

RESULTS OF OPERATIONS

COMPARISON OF FISCAL YEARS ENDED MARCH 31, 1995, 1996 AND 1997

         REVENUE. Revenue was $140.8 million, $140.3 million and $144.8 million
for the fiscal years ended March 31, 1995, 1996 and 1997, respectively. Revenue
declined by $0.5 million for the fiscal year ended March 31, 1996, primarily due
to a decrease in premiums earned of $13.6 million, which was offset by the
addition of $7.6 million in administrative fees as a result of the Acquisition
and an increase in realized investment gains of $4.4 million. Revenue increased
by $4.5 million for the fiscal year ended March 31, 1997 as a result of $33.3 in
administrative fees generated by SHC in the 1997 period compared to $7.7 million
in administrative fees generated by SHC in the 1996 period (January 16,
1996-March 31, 1996). Set forth below is a discussion of the composition of
revenues for the periods indicated.

<TABLE>
<CAPTION>
                                               YEAR ENDED MARCH 31,
                                 -------------------------------------------------
                                   1995               1996                  1997
                                   ----               ----                  ----
                                                 (IN THOUSANDS)
<S>                                <C>               <C>                 <C>     
REVENUES:
  Premiums earned                  $128,489          $114,893            $ 97,321
  Net investment income              12,205            13,210              12,770
  Realized investment gains              --             4,354                 687
  Administrative fees                    --             7,665              33,304
  Other income                          121               206                 692
                                   --------          --------                ----

         Total revenue             $140,815          $140,328            $144,774
                                   ========          ========            ========
</TABLE>

         Premiums Earned. Premiums earned decreased by $13.6 million, or 10.6%,
for the year ended March 31, 1996, and decreased by $17.6 million, or 15.3%, for
the year ended March 31, 1997. These declines in premiums resulted in large part
from: (i) lost accounts due to the market's increasing preference for
non-assessable products, which ESIF, as a Florida group self-insurance fund, was
unable to offer; (ii) increased competition; (iii) the effects of increasing
participation in the premium credit programs; (iv) an adjustment in estimation
of accrued retrospective premiums which reduced reported premiums for the fiscal
year ended March 31, 1996 by approximately $9.3 million; and (v) a rate decrease
of 11.2% effective January 1, 1997.

         As discussed in the table below, in the fiscal years ended March 31,
1995, 1996 and 1997, the premium credit programs in the aggregate accounted for
approximately $11.4 million, $14.1 million and $16.6 million, respectively, in
credits.



                                      -34-
<PAGE>   35

<TABLE>
<CAPTION>
                                             YEAR ENDED MARCH 31,
                                      ----------------------------------
                                      1995           1996         1997
                                      ----           ----         ----
                                               (IN THOUSANDS)

<S>                                   <C>           <C>          <C>    
Managed care credits                  $ 6,144       $ 8,811      $10,874
All other credits                       5,279         5,250        5,746
                                      -------       -------      -------

         Total premium credits        $11,423       $14,061      $16,620
                                      =======       =======      =======
</TABLE>

         The premium credits that ESIF has paid for managed care utilization
have been larger during the past three years than all other credits combined. In
January 1997, the 10% managed care premium credit was eliminated and a 11.2%
premium rate reduction for new and renewal policies became effective.

         Net Investment Income. Net investment income increased from $12.2
million for the fiscal year ended March 31, 1995, to $13.2 million for the
fiscal year ended March 31, 1996, and decreased to $12.8 million for the fiscal
year ended March 31, 1997. The increase for the fiscal year ended March 31, 1996
was due in part to an increase in yields on ESIF's investment portfolio. The
decrease in investment income for the fiscal year ended March 31, 1997 was due
in part to a reduction of invested assets and a larger portion of those assets
invested in municipal bonds. The investment income generated from the municipal
bond portion of the portfolio was $3.6 million for the fiscal year ended March
31, 1995 compared to $3.2 million for the fiscal year ended March 31, 1996. The
decrease for the fiscal year ended March 31, 1997 was primarily due to an
increase in assets invested in municipal bonds from 32% in 1996 to 38% in 1997.

         Realized Investment Gains. Realized investment gains increased from a
de minimis amount for the fiscal year ended March 31, 1995 to $4.4 million for
the fiscal year ended March 31, 1996. These gains resulted from the sale of
certain invested assets to finance the Acquisition. There were $0.7 million of
realized investment gains for the fiscal year ended March 31, 1997.

         Administrative Fees. The Administrative Subsidiaries generate
administrative fees primarily through contracts with the Funds, pursuant to
which the Administrative Subsidiaries provide marketing, underwriting, claims
administration, loss control and policy administration services. Fees are
generally based on a percentage of each Fund's premiums. For the period
beginning on the date of the Acquisition, January 16, 1996, and ending on March
31, 1996, the administrative fees were $7.7 million. For the fiscal year ended
March 31, 1997, the administrative fees were $33.3 million. Administrative fees
represented 23% of total revenue for the fiscal year ended March 31, 1997.

LOSSES AND EXPENSES. ESIF's losses and expenses increased from $110.7 million
for the fiscal year ended March 31, 1995 to $140.5 million for the fiscal year
ended March 31, 1996 and to $134.1 million for the fiscal year ended March 31,
1997. Set forth below is a breakdown of the total annual expenses.




                                      -35-
<PAGE>   36






<TABLE>
<CAPTION>
                                                              YEAR ENDED MARCH 31,
                                                  ---------------------------------------------
                                                  1995                1996                 1997
                                                  ----                ----                 ----
                                                                 (IN THOUSANDS)
<S>                                               <C>                 <C>               <C>
Losses and loss adjustment expenses               $ 69,116            $ 94,844          $ 65,152
Underwriting, general and administrative
  expenses                                          41,546              43,657            60,675
Interest expense                                        --                 847             3,521
Amortization and depreciation                           --               1,103             4,733
                                                  --------            --------          --------

         Total losses and expenses                $110,662            $140,451          $134,082
                                                  ========            ========          ========
</TABLE>

         Losses and Loss Adjustment Expenses. ESIF establishes reserves to cover
its estimated liabilities for losses from claims and for loss adjustment (claim
settlement) expenses ("LAE"). Such loss reserves are estimates established by
management based upon, among other factors: (i) results of actuarial reviews
which incorporate ESIF's experience with similar cases, estimates of future
claim trends, and historical trends such as recurring loss payment and reporting
patterns, claim closures, and product mixes; (ii) facts known to ESIF; and (iii)
regulatory requirements. Losses and LAE incurred for the fiscal year ended March
31, 1995 were $69.1 million compared to $94.8 million for the fiscal year ended
March 31, 1996 and $65.2 million for the fiscal year ended March 31, 1997.

         Prior to the fiscal year ended March 31, 1995, management had recorded
reserves in excess of reserve levels required by actuarial reports because the
actuarial estimates for fund years 1991 and earlier had a history of increasing
(or "adversely developing") as the fund years matured and more actual loss data
became known. During the fiscal year ended March 31, 1995, ESIF began to record
reserves at levels primarily supported by actuarial reviews since the actuarial
estimates had by that time evidenced a trend of loss adverse development with
the maturity of the fund years. Management's determination that it was no longer
necessary to increase reserves over the actuarial estimates, together with a
reduction in premiums earned and a lower actuarial loss ratio, resulted in a
$39.3 million decrease in losses and LAE expenses for the fiscal year ended
March 31, 1995 as compared to fiscal year ended March 31, 1994. The subsequent
increase of $25.7 million in losses and LAE for the fiscal year ended March 31,
1996, was primarily the result of revised actuarial estimates for prior years.
In the fiscal year ended March 31, 1997, losses and LAE decreased by $29.7
million as compared to the fiscal year ended March 31, 1996 primarily as a
result of (i) the abnormally high losses and LAE in 1996 due to prior year
adjustments all recorded in that year, and (ii) a reduction in premiums earned.
The net loss ratio for the fiscal years ended March 31, 1995, 1996 and 1997 was
53.8%, 82.5%, and 66.9%, respectively, or an average of 67.8%.

         Underwriting, General and Administrative Expenses. The increase in
these expenses from $41.5 million to $43.7 million in the fiscal year ended
March 31, 1996 was primarily due to the inclusion of the Acquisition as of
January 16, 1996. The increase of $17.0 million in the fiscal year ended March
31, 1997 was primarily due to the inclusion of a full year of expenses for SHC.

         Interest Expense. For the fiscal year ended March 31, 1995, ESIF had no
interest expense. In connection with the Acquisition, SHC borrowed $44.0 million
from a commercial 



                                      -36-
<PAGE>   37

lender, and as a result, interest expense on a consolidated basis for the fiscal
years ended March 31, 1996 and 1997 was $0.8 million and $3.5 million,
respectively.

         Amortization and Depreciation. For the fiscal year ended March 31,
1995, ESIF had no amortization or depreciation expense. In connection with the
Acquisition, SHC recorded certain intangibles including software, noncompete
agreements, customer contracts and goodwill. For the fiscal years ended March
31, 1996 and 1997, amortization of these intangible assets was $1.1 million and
$3.8 million, respectively. The expense associated with amortization of these
intangible assets is not deductible for federal income tax purposes.

         NET INCOME. Income from continuing operations was $19.2 million, $0.4
million, and $7.0 million for the fiscal years ended March 31, 1995, 1996 and
1997, respectively. The $18.8 million decrease in income from continuing
operations for the fiscal year ended March 31, 1996 resulted from decreased
premiums as well as increased losses and LAE. The $6.6 million increase for the
fiscal year end March 31, 1997 resulted from the stability of the loss and LAE
expenses during that year and the depressed net income for the fiscal year ended
March 31, 1996 resulting from adjustments of loss reserves in that year.

         Losses from discontinued operations of $0.2 million and $1.2 million
were incurred for the years ended March 31, 1996 and 1997, respectively. In
addition, an extraordinary charge of $1.5 million was incurred during the year
ended March 31, 1997 related to the conversion of ESIF from a group of
self-insurance fund to a stock insurance company. After inclusion of these
nonrecurring items net income was $19.2 million, $0.2 million, and $4.2 million
for the years ended March 31, 1995, 1996 and 1997, respectively.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has historically met its cash requirements and financed its
growth principally through cash flows generated from operations. The Insurance
Subsidiaries' primary sources of cash flows are premiums earned, investment
income and the proceeds from the sale or maturity of invested assets. The
Administrative Subsidiaries' primary source of cash flow is service fees
generated from ESIF and the Funds. The cash requirements of the Insurance
Subsidiaries are primarily for the payment of claims, commissions, reinsurance
premiums and management fees to SCI and the purchase of investment securities.
The cash requirements of the Administrative Subsidiaries are primarily for the
payment of salaries, employees benefits, debt obligations and other operating
expenses. Due to the uncertainty regarding settlement of unpaid claims, the
liquidity requirements of the Company vary, and the Company has attempted to
structure its investment portfolio to take into account the historical payout
patterns. See "ITEM 1. BUSINESS--Investment Portfolio." The Company purchases
reinsurance to mitigate the effect of catastrophic claims and help stabilize
demands on its liquidity. See "ITEM 1. BUSINESS--Reinsurance."

         As part of the Acquisition, SHC incurred debt which, at March 31, 1997,
consisted of a term loan in the amount of $32.7 million, and no balance was
outstanding under the revolving line of credit. Scheduled quarterly payments for
the term loan began on September 30, 1996. On the date of the Conversion (May
28, 1997), the Company and First Union National Bank of North Carolina entered
into a new credit agreement pursuant to which, upon consummation of the
Conversion, the then-existing debt was restructured. Under such new credit
facility, the term loan 



                                      -37-
<PAGE>   38

is $32.7 million, the revolving line of credit is $5.0 million, and the interest
rate initially is the prime rate plus 1%. The annual principal payments (which
are payable in quarterly installments) will be approximately $2.0 million, $5.0
million, $5.6 million, $7.6 million, $9.1 million and $3.4 million in each of
calendar years 1997, 1998, 1999, 2000, 2001 and 2002, respectively. The Company
anticipates that its debt obligations will be satisfied from the cash flow
generated by the Administrative Subsidiaries.

         For the fiscal years ended March 31, 1996 and 1997, net cash provided
by operating activities was $10.8 million and $5.7 million, respectively, while
net cash used in investing activities was $47.1 million and $1.5 million,
respectively. In 1996, the increase in cash used in investing activities was
primarily related to the Acquisition and the assumption of debt in connection
therewith. In 1997, cash used to reduce debt was $11.3 million. The Company
expects to redeem the Series A Preferred Stock from future surpluses in excess
of statutorily required capital.

         The Company's balance sheets as of March 31, 1996 and March 31, 1997
reflect $20.1 million and $21.0 million, respectively, of recoverables from the
SDTF. The Company received $5.6 million and $7.5 million in actual recoveries
from the SDTF for the fiscal years ended March 31, 1996 and March 31, 1997,
respectively. The SDTF has not failed to make payments on accepted claims, and
the Company has no reason to believe that the SDTF will fail to meet its
obligations to pay accepted claims in the future, although there can be no
assurance. If the SDTF is discontinued, the Company believes that the existing
reimbursement obligations of the SDTF would become general obligations of the
State of Florida, although there is no assurance that a reviewing court would
adopt that view. The SDTF has made no acknowledgment with regard to the
enforceability of its reimbursement obligations to insurers such as the Company.
See "ITEM 1. BUSINESS--Regulation--Special Disability Trust Fund."

         As a self-insurance fund, ESIF recorded for statutory reporting an
asset of $47.3 million, $47.4 million and $44.4 million at March 31, 1995, March
31, 1996 and March 31, 1997, respectively, for future investment income
determined by discounting loss and loss adjustment expense reserves at a
statutorily prescribed rate. Following its conversion to a stock insurance
company, Bridgefield is permitted to record discounts only on permanent
disability cases. The amount of such discount is estimated at approximately $4.9
million, $4.7 million and $4.4 million at March 31, 1995, March 31, 1996 and
March 31, 1997, respectively. ESIF's statutory basis surplus as a self-insurance
fund was approximately $21.2 million at March 31, 1997. Following its conversion
to a stock insurance company and the related public offering of the Company's
Common Stock which resulted in net proceeds contributed to Bridgefield of
approximately $48 million, plus $7.1 million of additional statutory capital
which resulted from the simultaneous reorganization, Bridgefield's statutory
basis surplus as a stock insurance company was approximately $36.2 million at
May 31, 1997. Such capital and surplus is considered adequate to satisfy the
requirements of the Florida Insurance Code. From time to time, the Company may
be required to increase the capital surplus of the Insurance Subsidiaries to
remain in compliance with state regulatory requirements. If the Company is
unable to generate sufficient capital, either internally or from outside
sources, it could be required to reduce its growth. There can be no assurance
that capital will continue to be available when needed or, if available, will be
on terms acceptable to the Company.



                                      -38-
<PAGE>   39

         The NAIC has recently adopted risk-based capital standards to establish
the capital requirements of an insurance carrier based upon the risks inherent
in its operations. The standards, which have become effective in Florida under a
bill recently passed by the Florida legislature, require the computation of a
risk-based capital amount which is then compared to a carrier's actual total
adjusted capital. The computation involves applying various financial factors to
address four primary risks: asset risk, insurance underwriting risk, credit risk
and off-balance sheet risk. These standards provide for regulatory intervention
when the percentage of total adjusted capital to authorized control level
risk-based capital is below certain levels. The Company exceeds such risk-based
capitalization levels, as recommended by the NAIC.

         The Company's Insurance Subsidiaries are subject to state insurance
laws and regulations that limit the amount of dividends or distributions that
may be paid by an insurance company to its shareholders. Pursuant to the Florida
Insurance Code, the Insurance Subsidiaries may not, without the prior approval
of the Florida DOI, pay to their shareholders dividends or other distributions
of cash or property, the total fair market value of which exceeds generally the
lesser of 10% of surplus or net income, not including realized capital gains. In
addition, the conditions imposed by the Florida DOI in connection with the
Conversion require that all dividends or distributions by the Insurance
Subsidiaries be approved by the Florida DOI in advance, but provide that
approval will be given for any dividend or distribution otherwise complying with
the Florida Insurance Code. As a consequence of these legal restrictions and
other business considerations, the amount of dividends that may be paid by the
Insurance Subsidiaries to Summit may be limited, which may in turn limit the
amount of cash available to Summit for servicing its debt and other purposes.










                                      -39-
<PAGE>   40


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not applicable.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The following consolidated financial statements of the Company and the
reports of independent auditors thereon are set forth following the Index of
Financial Statements on page F--1 of this report:

         Consolidated Balance Sheets as of March 31, 1996 and 1997
         Consolidated Statements of Income for the years ended March 31, 1995,
         1996 and 1997 Consolidated Statements of Changes in Equity for the
         years ended March 31, 1995, 1996
              and 1997
         Consolidated Statements of Cash Flows for the years ended March 31, 
              1995, 1996 and 1997
         Notes to Consolidated Financial Statements

         The Company is not required to provide the supplementary financial
information contemplated by Item 302 of Regulation S-K.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         In June 1996, ESIF changed principal accountants from Brinton & Mendez
to Ernst & Young, LLP to audit its financial statements. Prior thereto, Brinton
& Mendez had served as ESIF's principal accountants. Prior to the Acquisition,
Ernst & Young, LLP had served as SHC's principal accountants. The decision by
ESIF to change principal accountants was made with the approval of the Board of
Trustees of ESIF as a result of the decision to pursue the Conversion.

         The Company believes, and has been advised by Brinton & Mendez that it
concurs in such belief, that, during the fiscal years ended March 31, 1994 and
1995 and subsequent thereto, the Company and Brinton & Mendez did not have any
disagreement on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreement, if not
resolved to the satisfaction of Brinton & Mendez, would have caused it to make
reference in connection with its report on the Company's financial statements to
the subject matter of the disagreement.

         No report of Brinton & Mendez on the Company's financial statements for
either of the fiscal years ended March 31, 1994 and 1995 contained an adverse
opinion, a disclaimer of opinion, or qualification or modification as to
uncertainty, audit scope or accounting principles. During such fiscal periods,
there were no "reportable events" within the meaning of Item 304(a)(1) of
Regulation S-K promulgated under the Securities Act



                                      -40-
<PAGE>   41


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         William B. Bull, age 48, has served as President and Chief Executive
Officer of SHC and its predecessors since 1987 and as President, Chief Executive
Officer and a director of Summit since November 1996. Mr. Bull joined SCI in
1984 as special assistant to the President and subsequently became Executive
Vice President in 1986 with operating responsibilities for such company. Mr.
Bull is a member of various insurance associations and serves on numerous boards
including the Florida Association of Self-Insurance, Florida Retail Federation,
Florida Group Risk Administrators Association and First Union National Bank of
Polk County. Mr. Bull's term as a director of Summit expires at the 1997 Annual
Meeting of Shareholders.

         Russell L. Wall, age 54, has served as Vice President of Finance of SHC
since 1988 and has served Summit in the same capacity since November 1996. Mr.
Wall is responsible for the Company's accounting and financial management
operations. Before joining SHC, Mr. Wall worked for three years as a Portfolio
Manager for Eickhoff & Pieper, Inc. Mr. Wall is a Chartered Financial Analyst
and holds an M.B.A. in Finance from the University of Santa Clara.

         Greg C. Branch, age 50, has served as Chairman of the Board and as a
Trustee of ESIF and its predecessors since 1980 and has served as Chairman of
the Board and a director of Summit since November 1996. Mr. Branch has served as
President of Branch Properties, Inc., a manufacturer, wholesaler and retailer of
animal feeds and fertilizer located in Ocala, Florida since 1973. Mr. Branch is
Vice Chairman and a founding director of American Feed Industry Insurance
Company, a property and casualty insurer domiciled in Iowa. Mr. Branch's term as
a director of the Company expires at the 1998 Annual Meeting of Shareholders.

         C.C. Dockery, age 64, founded and remained involved with SCI from 1977
until Alexander & Alexander, an insurance company, purchased SCI in 1984. Mr.
Dockery was first elected as a Trustee of ESIF and its predecessors in 1987 and
was elected as a director of Summit in November 1996. Since 1982, Mr. Dockery
has been the President, Chief Executive Officer and majority shareholder of
Crossroads Insurance Company, Ltd., a reinsurance company located in Bermuda.
For 21 years, Mr. Dockery served as a director for Cotton States Mutual
Insurance Company, and its affiliate Cotton States Life Insurance Company, a
publicly traded life insurance provider located in Atlanta, Georgia. Mr.
Dockery's term as a director of the Company expires at the 1999 Annual Meeting
of Shareholders.

         John A. Gray, age 51, has served as a Trustee of ESIF and its
predecessors since 1979 and as a director of Summit since November 1996. Since
1992, Mr. Gray has served as President of B.F. Deal, Inc., a yacht brokerage and
charter company, and since 1993 has served as Vice President of Marine Resources
Management, Inc., a supplier of marine equipment. From 1975 until his retirement
in 1992, Mr. Gray was President of Dura-Stress, Inc., a manufacturer of
pre-stressed and precast concrete products located in Leesburg, Florida. Mr.
Gray's term as a director of the Company expires at the 1997 Annual Meeting of
Shareholders.

         Robert L. Noojin, Sr., age 62, has served as a Trustee of ESIF and its
predecessors since 1979 and as a director of Summit since November 1996. Prior
to his retirement in 1994, 



                                      -41-
<PAGE>   42

Mr. Noojin was President of Eagle Supply, Inc., a roofing supply company
headquartered in Tampa, Florida, and a subsidiary of TDA Industries, Inc. Mr.
Noojin currently serves as Chairman Emeritus of Eagle Supply, Inc. Mr. Noojin's
term as a director of the Company expires at the 1998 Annual Meeting of
Shareholders.

         Thomas S. Petcoff, age 48, was employed by and involved with SCI from
1977 until Alexander & Alexander, an insurance company, purchased SCI in 1984.
Mr. Petcoff was first elected as a Trustee of ESIF and its predecessors in 1987
and was elected as a director of Summit in November 1996. Mr. Petcoff also
serves on the Board of Trustees of Florida Retail Federation Self Insurers Fund
and the Board of Directors of the Florida Retail Federation Association. Since
1984, Mr. Petcoff has served as President of Centurion Insurance Services, Inc.,
an insurance consulting firm and sales agency. Mr. Petcoff's term as a director
of the Company expires at the 1997 Annual Meeting of Shareholders

         Robert Siegel, age 66, has served as a Trustee of ESIF and its
predecessors since 1978 and as a director of Summit since November 1996. Mr.
Siegel is President of Siegel Gas & Oil Products, which he founded in 1957 and
which is located in Miami, Florida. Mr. Siegel's term as a director of the
Company expires at the 1999 Annual Meeting of Shareholders.

         Following is certain information about other key employees of the
Company:

         Allen C. Bennett, age 47, has served as Vice President of Summit Loss
Control Services, Inc., ("SLCS") a wholly owned subsidiary of SCI, since 1987.
Mr. Bennett is responsible for overseeing the daily operations and staff of such
entity. For two years prior thereto, Mr. Bennett worked at SLCS as a director
and a field loss control consultant.

         David T. Cederholm, age 52, has served as Vice President of Operations
of Bridgefield Casualty since January 1996. Since September 1996, Mr. Cederholm
has also served as a director and Vice Chairman of Bridgefield Casualty. From
May 1995 until January 1996, Mr. Cederholm worked as the Assistant to the
President of SCI. From December 1993 until April 1995, Mr. Cederholm served as
Vice President of Atlantic Region of TIG Insurance Company in New York, New York
with responsibility for overseeing and managing the underwriting facilities in
the eastern United States. From December 1992 through December 1993, Mr.
Cederholm served as President of Production Group of Continental Risk Management
Services, a property and casualty insurance company located in New York, New
York, where he was responsible for underwriting and production. For
approximately six years prior thereto, Mr. Cederholm served as President of
Continental Special Risk Underwriters, in New York, New York, overseeing the
large account casualty underwriting unit of Continental Insurance.

         Timothy J. Ermatinger, age 48, has served as Vice President of
Operations of SCI since January 1996. From August 1995 through December 1995,
Mr. Ermatinger worked as the Assistant to the President of SHC. Between February
1993 and January 1995, Mr. Ermatinger served as Vice President and Chief
Financial Officer of Independence One Mortgage Corp., a wholly owned subsidiary
of Michigan National Bank. From May 1986 to February 1993, Mr. Ermatinger was
the Executive Vice President of Alexsis, Inc., a third-party insurance
administrator concentrating in property and casualty claims.



                                      -42-
<PAGE>   43

         Ricky T. Hodges, age 43, has served as Vice President of Claims of
Summit Claims Management, Inc.("SCMI") since September 1991. Mr. Hodges has
worked at SCMI in various capacities since January 1984. Mr. Hodges is the
current Chairman of the Florida Workers' Compensation Advisory Council,
President of the Workers' Compensation Claims Professionals and Chairman for the
Adjustor Board Certification Program in Florida.

         The Articles of Incorporation of Summit provide for staggered terms of
the members of the Board of Directors. Summit's Board of Directors is divided
into three classes designated as Class I, Class II and Class III. The current
terms of office of the Class I directors will expire at the first annual meeting
of shareholders in 1997; the current terms of office for the Class II directors
will expire at the annual meeting of shareholders in 1998; and the current terms
of office for the Class III directors will expire at the annual meeting of
shareholders in 1999, and in each case upon the election and qualification of a
successor. At each annual meeting of shareholders commencing with the meeting
held in 1997, the successors to the directors whose terms are expiring will be
elected to terms expiring at the third succeeding annual meeting of
shareholders. The division of directors into three classes is to be nearly as
equal as possible, with the Class I, Class II and Class III directors currently
consisting of three, two and two directors, respectively.

         The executive officers and other key employees of the Company are
appointed by and serve at the discretion of the Board of Directors.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934, as amended, and
regulations of the Securities and Exchange Commission thereunder require the
Company's directors and executive officers and any persons who beneficially own
more than 10% of the Company's Common Stock or Series A Preferred Stock, as well
as certain affiliates of such persons, to file initial reports of their
ownership of such stock and subsequent reports of changes in such ownership with
the Securities and Exchange Commission and The Nasdaq Stock Market. Directors,
executive officers and persons beneficially owning more than 10% of the
Company's Common Stock or Series A Preferred Stock are required by applicable
regulations to furnish the Company with copies of all Section 16(a) reports they
file. However, the Section 16(a) filing requirements were not applicable to the
Company's directors, executive officers and beneficial owners of more than 10%
of the Company's Common Stock or Series A Preferred Stock during the fiscal year
ended March 31, 1997 because the Company's Common Stock and Series A Preferred
Stock was not registered under the Securities Exchange Act of 1934, as amended,
until May 14, 1997.







                                      -43-
<PAGE>   44



ITEM 11.  EXECUTIVE COMPENSATION

         The following table summarizes the compensation paid to or accrued by
the Company for services rendered during the fiscal year ended March 31, 1997 by
the Company's Chief Executive Officer and the only other executive officer whose
total salary and bonus exceeded $100,000 (collectively, the "Named Executive
Officers") during such fiscal year. The Company did not grant any stock options
or other equity-linked securities or make any long-term incentive plan payouts
during the fiscal year.

                          SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                           
                                                          ANNUAL COMPENSATION
                                           ------------------------------------------------
                                                                                OTHER                  ALL
                                                                               ANNUAL                 OTHER
                             YEAR(1)       SALARY($)      BONUS($)          COMPENSATION         COMPENSATION($)
                             -------       ---------      --------          ------------         ---------------
<S>                          <C>             <C>              <C>            <C>                    <C>      
William B. Bull
   President and Chief
   Executive Officer........ 1997            $250,000         $-0-           $12,000(2)             $8,256(3)

Russell L. Wall
   Vice President of
   Finance and Chief
   Financial Officer.......  1997             230,000          -0-            12,000(2)              8,824(4)
</TABLE>

--------------

(1)      Fiscal year ended March 31, 1997.
(2)      Represents automobile allowance ($12,000 for Mr. Bull and $12,000 for
         Mr. Wall).
(3)      Includes $1,131 for life insurance premiums paid by the Company and
         $7,125 contribution by the Company to Mr. Bull's 401(k) plan account.
(4)      Includes $1,691 for life insurance premiums paid by the Company and
         $7,125 contribution by the Company to Mr. Wall's 401(k) plan account.

EMPLOYMENT AGREEMENTS

         On the date of the Conversion (May 28, 1997), Summit entered into an
employment agreement with Mr. Bull pursuant to which he is employed full-time as
Summit's President and Chief Executive Officer. The agreement, which expires on
the fifth anniversary of the date thereof, provides for an annual base salary of
$250,000 and the right for Mr. Bull to receive a bonus in each year of the
agreement equal to 5% of the amount, if any, by which the Company's consolidated
net income after taxes exceeds $6.0 million. In addition to his cash
compensation, Mr. Bull receives additional benefits, including those generally
provided to other employees of the Company. The agreement also provides, in the
event of its expiration or termination, that: (i) Mr. Bull is to be subject to a
two-year confidentiality period and limitation on the use of trade secrets, and
(ii) Mr. Bull is subject to up to a one-year non-competition and
non-solicitation arrangement with the Company for which he would receive
$8,333.33 per month as consideration for such non-competition and
non-solicitation arrangement.



                                      -44-
<PAGE>   45

         Summit also entered into an employment agreement with Russell L. Wall
on the date of the Conversion, pursuant to which he is employed full-time as
Summit's Vice President and Chief Financial Officer. The agreement, which
expires on the third anniversary of the date thereof, provides for an annual
base salary of $230,000 and the right for Mr. Wall to receive a bonus in each
year of the agreement equal to 1.67% of the amount, if any, by which the
Company's consolidated net income after taxes exceeds $8.25 million in calendar
year 1997 and $12.16 million in each of calendar years 1998 and 1999. In
addition to his cash compensation, Mr. Wall receives additional benefits,
including those generally provided to other employees of the Company. The
agreement also provides, in the event of its expiration or termination, that:
(i) Mr. Wall is to be subject to a two-year confidentiality period and
limitation on the use of trade secrets, as such term is defined therein, and
(ii) Mr. Wall is subject to up to a one year non-competition and
non-solicitation arrangement with the Company. The agreement further provides
for a payment of $8,333.33 per month as consideration for such non-competition
and non-solicitation arrangement.

401(K) PLAN

         The Company has adopted the Summit Consulting, Inc. Retirement Plan
(the "401(k) Plan"), which is intended to qualify under Section 401(a) of the
Internal Revenue Code of 1986, as amended, so that contributions thereto by
employees or the Company and income earned on such contributions will not be
taxable to employees until withdrawn from the 401(k) Plan. All employees of the
Company who have completed at least 90 days of service with the Company are
eligible to participate in the 401(k) Plan. The 401(k) Plan provides that each
participant may make elective contributions of up to 16% of his or her
compensation, subject to statutory limits. The Company currently intends to make
matching contributions to the 401(k) Plan on behalf of each eligible employee in
an amount equal to approximately 75% of the employee's contributions, up to 6%
of such employees compensation. In addition, in connection with the Conversion,
the Company contributed, on behalf of all persons who were otherwise eligible
for the 401(k) Plan on the date of the Conversion, 100 shares of Common Stock
(the "Conversion Contribution"), subject to Internal Revenue Service
limitations. All contributions by employees are fully vested and are not subject
to forfeiture. A participant would vest in contributions made by the Company to
the 401(k) Plan, including the Conversion Contribution, at the following rates:
(i) for less than three "years of service" (as defined in the 401(k) Plan) with
the Company, 0%; (ii) for three years of service with the Company, 33 1/3%;
(iii) for four years of service with the Company, 66 2/3%; and (iv) for five or
more years of service with the Company, 100%. Contributions to the 401(k) Plan
may be invested in various available investment alternatives at the discretion
of the participant. Distributions may be made from a participant's account in
the form of a lump sum upon termination of employment, retirement, disability,
death or in the event of financial hardship, subject to certain limitations as
set forth in the 401(k) Plan.

INCENTIVE PLAN

         The Board of Directors and shareholders of Summit have adopted the 1996
Long-Term Incentive Plan (the "Incentive Plan"). Under the Incentive Plan,
certain directors, officers and other employees of Summit and its subsidiaries
can be granted a variety of long-term incentives, including non-qualified stock
options, incentive stock options, grants of restricted and unrestricted stock,
performance share awards, stock appreciation rights, dividend equivalents and
other stock-based awards. The purpose of the Incentive Plan is to promote the
success, and



                                      -45-
<PAGE>   46

enhance the value, of Summit and its subsidiaries by linking the personal
interests of their directors, officers and key employees to those of Summit
shareholders and by providing their directors, officers and key employees with
an incentive for outstanding performance.

         The Incentive Plan is administered by the Compensation Committee of
Summit, consisting of three non-employee directors. Such Committee determines,
in its discretion, among other things, which directors, officers and employees
will receive awards under the Incentive Plan, when the awards will be granted,
the type of awards to be granted, the number of shares or cash involved in each
award, the time or times when any options granted will become exercisable and,
subject to certain conditions, the price and duration of such options. A total
of 500,000 shares of Common Stock have been reserved for issuance under the
Incentive Plan.

         The Board of Directors or the Compensation Committee has the right at
any time to amend or discontinue the Incentive Plan without the consent of
Summit's shareholders or optionees, provided that no such action may adversely
affect awards previously granted without the recipient's consent.

         The Incentive Plan provides that in the event of a "change of control"
(as defined in the Incentive Plan) of Summit, all awards granted under the
Incentive Plan that are in the nature of rights that may be exercised shall
automatically become fully exercisable. In addition, at any time prior to or
after a change of control, the Compensation Committee may accelerate awards and
waive conditions and restrictions on any other awards under the Incentive Plan
to the extent it may determine appropriate.

         Stock Options. Options granted under the Incentive Plan may be either:
(i) options intended to qualify as incentive stock options under Section 422 of
the Tax Code, or (ii) non-qualified stock options. Incentive stock options may
be granted under the Incentive Plan to employees of Summit and its subsidiaries.
Non-qualified stock options may be granted to directors, officers or employees
of Summit and its subsidiaries. Options may be made exercisable in specified
installments.

         The exercise price of incentive stock options, as determined by the
Compensation Committee, may not be less than the fair market value of the Common
Stock on the date of grant and the term of any such option may not exceed ten
years from the date of grant. With respect to any participant in the Incentive
Plan who owns shares representing more than 10% of the voting power of the
outstanding capital shares of Summit, the exercise price of any incentive stock
option may not be less than 110% of the fair market value of such shares on the
date of grant and the term of such option may not exceed five years from the
date of grant. The exercise price of non-qualified stock options is determined
by the Compensation Committee on the date of grant, and the term of such option
may not exceed ten years from the date of grant.

         On the date of the Conversion, Summit granted stock options to the
following directors and executive officers of Summit to purchase the following
number of shares of Common Stock at a price of $11.00 per share: William B.
Bull--109,627; Russell L. Wall--58,438; Greg C. Branch--109,627; C.C.
Dockery--85,170; John A. Gray--34,860; Robert L. Noojin, Sr.--32,586; Thomas S.
Petcoff--36,564; and Robert Siegel--33,128. The options granted to Mr. Bull and
Mr. Wall are incentive stock options, and 50% of such options vest 180 days
after the grant date and the remaining 50% of such options will vest on the
first anniversary of the grant date,



                                      -46-
<PAGE>   47

provided that such officer remains employed by Summit. The options granted to
the other named persons are non-qualified stock options and vested on the date
of the Conversion.

         Performance Awards. The Compensation Committee may grant performance
awards entitling the participant to receive Common Stock based upon the
achievement of individual or Company performance goals and upon such other
conditions as the Compensation Committee may determine.

         Restricted Stock. A specified number of shares of Common Stock may be
awarded contingently subject to a substantial risk of forfeiture to Summit under
such conditions, and during such periods of time, as the Compensation Committee
may determine ("Restricted Stock"). A participant who has been awarded
Restricted Stock may, if the award so provides, vote and receive dividends on
such shares, but, generally, may not sell, assign, transfer, pledge or otherwise
encumber the shares during the restricted period. An award of Restricted Stock
may provide that if a participant's employment ceases prior to the end of the
restricted period, all of the participant's Restricted Stock will be forfeited.
Grants may be made without consideration or in consideration of a payment by the
participant that is less than the fair market value of the shares on the grant
date.

         Unrestricted Stock. The Compensation Committee may also grant shares
(at no cost or for a purchase price determined by the Compensation Committee)
which are free from any restrictions ("Unrestricted Stock"). Unrestricted Stock
may be issued in recognition of past services or other valid consideration, and
may be issued in lieu of cash compensation due to the recipient.

         Stock Appreciation Rights. Stock appreciation rights ("SARs") may be
granted to employees which, upon the exercise thereof, entitle the employee to
receive an amount equal to the excess of the market price of the Common Stock
over the grant price of the SAR, as determined by the Compensation Committee.
Such grant price may not be less than the fair market value of a share of Common
Stock on the date of grant in the case of any SAR related to an incentive stock
option.

         Dividend Equivalents. The Compensation Committee may grant to a
participant who has received incentive stock options or SARs the right to
receive payments equal to dividends with respect to all or a portion of the
number of shares subject to such incentive stock options or SARs.

DIRECTOR COMPENSATION

         Each non-employee member of the Board of Directors of Summit receives a
fee of $10,000 per year and an additional $2,500 for attendance at each meeting
of the Board of Directors of Summit. In addition, members of committees of the
Board of Directors receive a fee of $2,500 for attendance at each committee
meeting. All meetings of the Board of Directors of the Insurance Subsidiaries
and the Administrative Subsidiaries are to be held in conjunction with meetings
of the Board of Directors of Summit, and no additional compensation is received
for being a member of the Board of Directors of any such subsidiaries.



                                      -47-
<PAGE>   48

         For information regarding stock options granted to directors of Summit
on the date of the Conversion, see "--Incentive Plan--Stock Options."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The members of the Compensation Committee are Greg C. Branch, C.C.
Dockery and Thomas S. Petcoff, each of whom was elected to such position upon
the formation of the Compensation Committee on November 20, 1996. Mr. Branch has
served as a Trustee or director of Bridgefield and its predecessors since 1980
and Chairman of the Board of Bridgefield since 1994, and has served as Chairman
of the Board and a director of Summit since November 15, 1996. Mr. Dockery
founded SCI in 1977, has served as a Trustee or director of Bridgefield and its
predecessors since 1987 and was first elected as a director of Summit on
November 15, 1996. Mr. Petcoff was an employee of, and involved with, SCI from
1977 to 1989; he has been a Trustee or director of Bridgefield and its
predecessors since 1987, and he had been a director of Summit since November 15,
1996.

         C.C. Dockery and Thomas S. Petcoff, directors of Summit, own 80,000
square feet of office space in Lakeland, Florida and lease such space to SCI.
The property is currently rented by SCI for approximately $90,000 per month
under a lease which runs through March 2000. During the fiscal year ended March
31, 1997, SCI made rental payments of approximately $1.1 million for such
property.

         Mr. Dockery is also the President, Chief Executive Officer and majority
shareholder of Crossroads Insurance Company, Ltd. ("Crossroads"), which provides
Excess Reinsurance to ESIF and the Funds. During the fiscal year ended March 31,
1997, the Company paid Crossroads approximately $3.9 million in premiums for
reinsurance relating to ESIF and the Funds.

         Mr. Dockery is the Chairman of the Board of Dockery Management
Corporation, which subleases approximately 2,600 square feet of office space
from the Company pursuant to a sublease agreement which expires in March 2000
and provides for rent of approximately $2,900 per month. During the fiscal year
ended March 31, 1997, the Company received approximately $36,000 in rental
payments from such entity.

         Mr. Dockery is the President and owner of Dockery Leasing Corporation
("Dockery Leasing") which provides aviation services for the Company. During the
fiscal year ended March 31, 1997, the Company paid Dockery Leasing approximately
$28,000 for such services.

         Mr. Dockery was an underwriting member of Lloyds of London from 1984 to
1996. Grey C. Branch has been an underwriting member of Lloyds of London since
1986. ESIF and the Funds have Excess Reinsurance agreements with Lloyds of
London from time to time.

         Mr. Petcoff is President of Centurion Insurance Services, Inc.
("Centurion"). Pursuant to an agreement between SCI and Centurion dated November
1995, and in connection with Centurion's involvement in the formation of KRF,
SCI pays Centurion an annual fee equal to 1% of KRF's premiums earned in each
year. During the fiscal year ended March 31, 1997, SCI paid fees of
approximately $31,000 to Centurion.



                                      -48-
<PAGE>   49

         In addition, for reinsurance policies placed by SCI on behalf of KRF,
which are brokered by Centurion, Centurion is entitled to brokerage commissions.
During the fiscal year ended March 31, 1997, the Company paid approximately
$13,000 to Centurion for brokerage commissions. SCI also pays Centurion agency
commissions for policies placed with the Funds, and during the fiscal year ended
March 31, 1997, the Company paid approximately $3,000 to Centurion for such
agency commissions.

         Mr. Petcoff is on the Board of one of the Funds, FRF, and, is on the
Board of Directors of the Florida Retail Federation (the "Association").
Pursuant to a written arrangement between SCI and the Association, the
Association, as the sponsoring party of FRF, is entitled to 1% of such Fund's
premiums earned in each year. During the fiscal year ended March 31, 1997, the
Company paid approximately $0.8 million to the Association for such fees. In
addition, during the year ended March 31, 1997, FRF paid SCI fees for
administrative services of approximately $24.5 million.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information with respect to the
beneficial ownership of shares of the Company's Common Stock as of May 31, 1997,
by (i) each director of the Company; (ii) each of the Named Executive Officers;
(iii) each person known by the Company to own beneficially more than 5.0% of the
outstanding shares of the Common Stock; and (iv) all directors and executive
officers as a group. Unless otherwise indicated, each shareholder has sole
voting and investment power with respect to the indicated shares. Except as
noted below, each person listed in the table will have sole investment and
voting power with respect to the shares held by such person.


<TABLE>
<CAPTION>
                                             NUMBER OF SHARES
NAME OF BENEFICIAL OWNER(1)                  OF COMMON
---------------------------                  STOCK BENEFICIALLY OWNED           PERCENT OWNED(2)
                                             ------------------------           ----------------
<S>                                          <C>                                <C>  
Greg C. Branch(3)                            249,627                            4.89%
C. C. Dockery(3)                             200,920                            3.95%
William B. Bull                              145,000                            2.90%
Russell L. Wall                               50,000                            1.00%
Thomas R. Petcoff(3)                          48,104                            *
John A. Gray(3)                               43,405                            *
Robert Siegel(3)                              38,628                            *
Robert L. Noojin, Sr.(3)                      37,131                            *
All executive officers and directors as a
group (8 persons)(3)                         812,815                           15.25%
</TABLE>

------------------
*     Less than 1%

(1)      Pursuant to the rules of the Securities and Exchange Commission, shares
         of the Company's Common Stock that a beneficial owner has the right to
         acquire within 60 days 


                                      -49-
<PAGE>   50

         pursuant to the exercise of stock options are deemed to be outstanding
         for the purpose of computing the percentage ownership of such owner but
         are not deemed outstanding for the purpose of computing the percentage
         ownership of any other person.

(2)      The percentages are based upon the 5,000,000 shares of the Company's
         Common Stock issued and outstanding as of May 31, 1997.

(3)      Includes shares issuable upon exercise of currently exercisable options
         as follows: Greg C. Branch -- 109,627; C.C. Dockery -- 85,170; Thomas
         S. Petcoff -- 36,564; John A. Gray--34,860; Robert Siegel -- 33,128;
         and Robert L. Noojin, Sr.-- 32,586.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Aeromech, Inc. ("Aeromech"), an entity in which Mr. Bull currently
owns approximately 10% of the outstanding shares, has provided services to SCI
in the form of airplane maintenance, hangar leasing and office space for the
crew since October 1994. During the fiscal year ended March 31, 1997, SCI paid
Aeromech $17,800 for such services.

         Mr. Bull is on the Board of Directors of the Florida Retail Federation
(the "Association"), which is the sponsoring trade association for FRF, one of
the Funds administered by SCI. Pursuant to a written arrangement between SCI and
the Association, the Association, as the Fund sponsor, is entitled to a fee
equal to 1% of such Fund's premiums earned in each year, and SCI is obligated to
pay such fee out of the administrative fee it receives from FRF. During the
fiscal year ended March 31, 1997, the Company paid approximately $0.8 million to
the Association for such fees. During the year ended March 31, 1997, FRF paid
SCI fees for administrative services of approximately $24.5 million.

         Mr. Bull is also the sole shareholder of Louisiana Employers Safety
Association, Inc., the sponsoring association for LESA, one of the Funds managed
by SCI, and Mr. Bull has been nominated to be on the Board of Directors of LESA
if it completes a currently proposed conversion to a nonassessable mutual
insurance company.

         Any future transactions between the Company and any director, officer
or principal shareholder of the Company, or any affiliate of such a person, must
be on terms no less favorable to the Company than can be obtained from
unaffiliated third parties.

         The 1994 and 1995 financial statements of SHC were restated in 1997 to
reflect an estimated return premium of approximately $3.7 million. This
restatement could have given rise to potential claims by the former shareholders
of SHC against ESIF for payment of additional purchase price in connection with
the Acquisition, and to claims by ESIF against such former shareholders for
taxes associated with such return premium. ESIF and the former shareholders of
SHC have agreed to the waiver and release of such potential claims. When such
return premium is paid, the Company will receive approximately $2.5 million net
of taxes. Mr. William Bull and Mr. Russell Wall were each former shareholders of
SHC.

         Mr. Bull was relieved of certain personal indemnification obligations
as a result of the Conversion. In connection with the Acquisition of SHC by ESIF
on January 16, 1996, the Florida 




                                      -50-
<PAGE>   51

DOI issued a Consent Order requiring that Mr. Bull, who was at that time
President and Chief Executive Officer and a principal shareholder of SHC,
personally indemnify ESIF up to a maximum of $5 million for loss, injury or
damage to ESIF that may result from the parties' execution of the merger
agreement pursuant to which ESIF acquired SHC, or that may result from SHC's
execution of a certain credit agreement with a commercial bank. According to the
Consent Order, Mr. Bull's indemnification obligations would decrease by $1.0
million for every $4.0 million increase in the statutory net worth of SHC, once
SHC's statutory net worth reached zero or greater, and such obligations would
expire fully on the earlier of January 11, 2001 or the date upon which the loans
from the bank are paid in full. Pursuant to the terms of the approval of the
Conversion by the Florida DOI, Mr. Bull was relieved of all such indemnification
obligations upon the effectiveness of the Conversion.


                                     PART IV

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

  (a)      Documents Filed as Part of This Report.

  1.       Financial Statements

                    The following consolidated financial statements of
           the Company and the independent auditors' report thereon set
           forth immediately following the Index of Financial Statements
           which appears on page F-1 of this report:

                    Consolidated Balance Sheets as of March 31, 1996 and 1997

                    Consolidated Statements of Income for the years ended 
                       March 31, 1995, 1996 and 1997

                    Consolidated Statements of Changes in Equity for the years 
                       ended March 31, 1995, 1996 and 1997

                    Consolidated Statements of Cash Flows for the years ended 
                       March 31, 1995, 1996 and 1997

                    Notes to Consolidated Financial Statements


  2.       Financial Statement Schedules

                    The following financial statement schedules and the
           independent auditors' report thereon are set forth beginning
           on page S-1 of this report:

                    Schedule I - Summary of Investments


                                      -51-
<PAGE>   52

                  Schedule II - Condensed Financial Statements of Registrant is
                  omitted due to minimal capitalization and lack of operations
                  to date of Summit Holding Southeast, Inc.

                  Schedule IV - Reinsurance

                  Schedule V - Supplemental Information Concerning Insurance
                  Operations

                           All other schedules for which provision is made in
                  the applicable accounting regulations of the Securities and
                  Exchange Commission have been omitted because such schedules
                  are not required under the related instructions or are
                  inapplicable or because the information required is included
                  in the financial statements or notes thereto.

         3.       Exhibits

                           The following exhibits are filed with or incorporated
                  by reference in this report. Where such filing is made by
                  incorporation by reference to a previously filed registration
                  statement or report, such registration statement or report is
                  identified in parentheses. The Company will furnish any
                  exhibit upon request to Russell L. Wall, Vice President of
                  Finance and Chief Financial Officer of the Company, 2310 A-Z
                  Park Road, Lakeland, Florida 33801. There is a charge of $.50
                  per page to cover expenses of copying and mailing.

                  2.1      Amended Plan of Conversion and Recapitalization of
                           Employers Self Insurers Fund. (Exhibit 2.1 of
                           Registration Statement on Form S-1 (File No.
                           333-16499).

                  2.2      Recapitalization Agreement between Summit and
                           Employers Self Insurers Fund. (Exhibit 2.2 of
                           Registration Statement on Form S-1 (File No.
                           333-16499).

                  2.3      Order of the Florida DOI approving the Plan of
                           Conversion. (Exhibit 2.3 of Registration Statement on
                           Form S-1 (File No. 333-16499).

                  3.1      Articles of Incorporation of Summit. (Exhibit 3.1 of
                           Registration Statement on Form S-1 (File No.
                           333-16499).

                  3.2      Bylaws of Summit. (Exhibit 3.2 of Registration
                           Statement on Form S-1 (File No. 333-16499).

                  3.3      Form of Certificate of Designation, Preferences and
                           Rights of Series A Preferred Stock of Summit.
                           (Exhibit 3.3 of Registration Statement on Form S-1
                           (File No. 333-16499).

                  4.1      Specimen Stock Certificate of the Common Stock of
                           Summit . (Exhibit 4.1 of Registration Statement on
                           Form S-1 (File No. 333-16499).



                                      -52-
<PAGE>   53

                  4.2      Specimen Stock Certificate of the Series A Preferred
                           Stock of Summit. (Exhibit 4.2 of Registration
                           Statement on Form S-1 (File No. 333-16499).

                  10.1     Employment Agreement between Summit and William B.
                           Bull - filed herewith.

                  10.2     Employment Agreement between Summit and Russell L.
                           Wall - filed herewith.

                  10.3     Credit Agreement dated May 28, 1997 among Summit, the
                           Lenders named therein and First Union National Bank
                           of North Carolina, as Agent. (Incorporated by
                           reference to Exhibit 10.1 of Current Report on Form
                           8-K (Date of Report: May 21, 1997)).

                  10.4     Summit 1996 Long-Term Incentive Plan. (Exhibit 10.4
                           of Registration Statement on Form S-1 (File No.
                           333-16499).

                  10.5     The Summit Consulting, Inc. Retirement Plan. (Exhibit
                           10.5 of Registration Statement on Form S-1 (File No.
                           333-16499).

                  10.6     Amendment No. 1 to The Summit Consulting, Inc.
                           Retirement Plan. (Exhibit 10.6 of Registration
                           Statement on Form S-1 (File No. 333-16499).

                  10.7     Amendment No. 2 to The Summit Consulting, Inc.
                           Retirement Plan. (Exhibit 10.7 of Registration
                           Statement on Form S-1 (File No. 333-16499).

                  10.8     Third Amendment to The Summit Consulting, Inc.
                           Retirement Plan - filed herewith.

                  10.9     Florida Retail Federation Self Insurers Fund
                           Administrator's Contract, with Assignment and
                           Addendum. (Exhibit 10.8 of Registration Statement on
                           Form S-1 (File No. 333-16499).

                  10.10    Louisiana Employers Safety Association Self Insurers
                           Fund Administrator's Contract, with Addendum.
                           (Exhibit 10.9 of Registration Statement on Form S-1
                           (File No. 333-16499).

                  10.11    Louisiana Retailers Association Self Insurers Fund
                           Administrator's Contract, with Addendum. (Exhibit
                           10.10 of Registration Statement on Form S-1 (File No.
                           333-16499).

                  10.12    Kentucky Retail Federation Self Insurers Fund 
                           Administrator's Contract. (Exhibit 10.11 of 
                           Registration Statement on Form S-1 (File No. 
                           333-16499).


                                      -53-
<PAGE>   54

                  16.1     Letter from Brinton & Mendez relating to change in
                           accountants. (Exhibit 16.1 of Registration Statement
                           on Form S-1 (File No. 333-16499).

                  27.1     Financial Data Schedule (for SEC use only).

         (b) Reports on Form 8-K. No Current Reports on Form 8-K were filed by
the Company during the quarter ended March 31, 1997.

         (c)      See Item 14(a)(3) above.

         (d)      See Item 14(a)(2) above.















                                      -54-
<PAGE>   55

                                   SIGNATURES

         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, on June 25, 1997.

                                 SUMMIT HOLDING SOUTHEAST, INC.
                                 (REGISTRANT)

                                 By: /s/ William B. Bull
                                     -------------------------------
                                     William B. Bull
                                     President and Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on June 25, 1997.

       Signature                          Title
       ---------                          -----


/s/ William B. Bull                    President, Chief Executive Officer,
--------------------------------        and Director (principal executive 
William B. Bull                         officer)
                     
/s/ Greg C. Branch                     Chairman of the Board of Directors
--------------------------------
Greg C. Branch

                                       Director
--------------------------------
C. C. Dockery

/s/ John A. Gray                       Director
--------------------------------
John A. Gray

/s/ Robert L. Noojin, Jr.              Director
--------------------------------
Robert L. Noojin, Jr.

/s/ Thomas S. Petcoff                  Director
--------------------------------
Thomas s. Petcoff

                                       Director
--------------------------------
Robert Siegel

/s/ Russell L. Wall                    Vice President of Finance
--------------------------------        (principal financial and 
Russell L. Wall                         accounting officer)       
                                         





                                      -55-
<PAGE>   56


                          INDEX OF FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                          PAGE
                                                                                                          ----
<S>                                                                                                        <C>
Report of Ernst & Young LLP.............................................................                   F-2

Report of Brinton & Mendez, Certified Public Accountants................................                   F-3

Consolidated Balance Sheets as of March 31, 1996 and 1997...............................                   F-4

Consolidated Statements of Income for the years ended March 31, 1995,
   1996 and 1997........................................................................                   F-5

Consolidated Statements of Changes in Equity for the years ended March 31,
   1995, 1996 and 1997..................................................................                   F-6

Consolidated Statements of Cash Flows for the years ended March 31, 1995,
   1996 and 1997........................................................................                   F-7

Notes to Consolidated Financial Statements..............................................                   F-8
</TABLE>






















                                       F-1
<PAGE>   57
                        REPORT OF INDEPENDENT AUDITORS



Board of Directors
Summit Holding Southeast, Inc.

We have audited the accompanying consolidated balance sheet of Summit Holding
Southeast, Inc. (the "Company") and its subsidiaries as of March 31, 1997 and
1996, and the related consolidated statements of income, changes in equity, and
cash flows for the years then ended.  Our audits also included the financial
statement schedules listed in the Index at Item 14(a).  These financial
statements and financial statement schedules are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepting 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 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company and its
subsidiaries at March 31, 1997 and 1996, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.  Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects the
information set forth therein.

                                                        ERNST & YOUNG LLP



Jacksonville, Florida
June 26, 1997
<PAGE>   58
                         INDEPENDENT AUDITORS' REPORT



Board of Directors
Summit Holding Southeast, Inc.
Lakeland, Florida


        We have audited the accompanying consolidated statements of income,
equity, and cash flows of Summit Holding Southeast, Inc., formerly Employers
Self Insurers Fund (the "Company") and its subsidiaries for the year ended
March 31, 1995.  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 audit 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.

        We previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of March 31, 1995 (which is not
presented herein); and the related consolidated statements of income, equity,
and cash flows for the year ended March 31, 1995.  We expressed unqualified
opinions on these consolidated financial statements.  In our opinion, the
information set forth in the selected financial data for the year ended March
31, 1995, appearing is fairly stated in all material respects in relation to
the consolidated financial statements for which it has been derived.

        As discussed in Note 1 to the consolidated financial statements, the
Company's financial statements have been prepared in conformity with generally
accepted accounting principles applicable to stock property and casualty
insurance companies.

                                          /s/ Brinton & Mendez         
                                          --------------------         
                                          Brinton & Mendez             
                                          Certified Public Accountants


Lakeland, Florida
July 26, 1996


                                     F-3
<PAGE>   59

                         SUMMIT HOLDING SOUTHEAST, INC.
                                AND SUBSIDIARIES


                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                MARCH 31,
                                                                                                ---------
                                                                                          1996               1997
                                                                                          ----               ----
                                                                                              (IN THOUSANDS)
<S>                                                                                       <C>               <C>
                                                          ASSETS

Investments:
  Fixed maturities                                                                        $178,818          $180,075
  Equity securities                                                                         14,251            18,286
  Short-term investments                                                                    19,770            14,733
                                                                                         ---------         ---------
         Total investments                                                                 212,839           213,094
Cash and cash equivalents                                                                    7,427             3,578
Premiums receivable (net of $1,500 and $2,566
  allowance for doubtful accounts, respectively)                                            38,093            31,084
Accounts receivables                                                                         3,157             2,816
Reinsurance recoverable                                                                    111,519            94,009
Recoverable from Florida Special Disability Trust Fund                                      20,060            20,979
Accrued investment income                                                                    2,936             3,129
Property and equipment, net                                                                  2,448             1,452
Goodwill, net                                                                               46,738            44,651
Other intangible assets, net                                                                13,217            11,078
Deferred income taxes                                                                       14,861            14,869
Other assets                                                                                15,481             5,878
Net assets of healthcare subsidiary, held for disposition                                    2,456                --
Net assets of discontinued operations                                                          612                --
                                                                                        ----------       -----------
         Total assets                                                                     $491,844          $446,617
                                                                                          ========          ========

                                           LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Loss and loss adjustment expenses                                                       $387,632          $358,744
  Notes payable                                                                             44,000            32,675
  Unearned premiums                                                                          1,042             5,794
  Other policyholders' funds                                                                23,481             5,395
  Accounts payable and accrued expenses                                                      5,151            13,093
  Deferred revenue                                                                           7,384             3,915
  Federal income taxes payable                                                                  --               585
                                                                                      ------------        ----------
         Total liabilities                                                                 468,690           420,201
                                                                                         ---------         ---------
Stockholders' Equity:
  Retained earnings                                                                         21,659            25,899
  Net unrealized appreciation of available-for-sale
    securities, less applicable deferred income taxes                                        1,495               517
                                                                                        ----------        ----------
         Total stockholders' equity                                                         23,154            26,416
                                                                                         ---------         ---------

         Total liabilities and stockholders' equity                                       $491,844          $446,617
                                                                                          ========          ========


</TABLE>

                            See accompanying notes.
<PAGE>   60

                         SUMMIT HOLDING SOUTHEAST, INC.
                                AND SUBSIDIARIES


                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED MARCH 31,
                                                                                   --------------------
                                                                            1995            1996             1997
                                                                            ----            ----             ----

                                                                                       (IN THOUSANDS)

<S>                                                                        <C>          <C>                <C>
Revenue:
  Premiums earned                                                           $128,489      $114,893         $ 97,321
  Net investment income                                                       12,205        13,210           12,770
  Net realized investment gains                                                   --         4,354              687
  Administrative fees                                                             --         7,665           33,303
  Other income                                                                   121           206              692
                                                                          ----------     ---------        ---------
         Total revenue                                                       140,815       140,328          144,773
                                                                           ----------     ---------        ---------
Losses and expenses:
  Losses and loss adjustment expenses                                         69,116        94,844           65,152
  Other underwriting, general and administrative
    expenses                                                                  41,546        43,657           60,675
  Amortization and depreciation                                                   --         1,103            4,733
  Interest expense                                                                --           847            3,521
                                                                        ------------    -----------       ---------
         Total losses and expenses                                           110,662       140,451          134,081
                                                                           ---------      ---------        --------

Income (loss) from continuing operations 
  before income taxes                                                         30,153          (123)          10,692
Income tax expense (benefit)                                                  10,990          (505)           3,717
                                                                           ---------    -----------        --------
Income from continuing operations                                             19,163           382            6,975
                                                                           ---------    -----------        --------

Discontinued operations:
  Loss from discontinued operations (net of
    income tax benefit of $121 and $460, respectively)                            --          (197)            (893)
  Estimated loss on disposal of discontinued
    operations (net of tax benefit of $184)                                       --            --             (357)
                                                                        ------------   ------------        --------
Loss from discontinued operations                                                 --          (197)          (1,250)
                                                                        ------------    -----------        --------
Income before extraordinary charge                                            19,163           185            5,725
Extraordinary charge for conversion costs
  (net of income tax benefit of $328)                                             --            --           (1,485)
                                                                        ------------  -------------        --------

         Net income                                                        $  19,163    $      185        $   4,240
                                                                           =========    ===========       =========


</TABLE>

                            See accompanying notes.





<PAGE>   61

                         SUMMIT HOLDING SOUTHEAST, INC.
                                AND SUBSIDIARIES


                  CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
                   YEARS ENDED MARCH 31, 1995, 1996 AND 1997

<TABLE>
<CAPTION>
                                                                                        UNREALIZED
                                                                                        APPRECIATION
                                                                                       OF AVAILABLE-
                                                                                          FOR-SALE
                                                                          RETAINED        SECURITY
                                                                          EARNINGS      INVESTMENTS        TOTAL
                                                                          --------      -----------        -----
                                                                                       (IN THOUSANDS)
<S>                                                                        <C>            <C>              <C>
Balance at March 31, 1994                                                  $  2,311       $    (38)        $  2,273
Net income                                                                   19,163             --           19,163
Change in net unrealized investment gains                                        --         (1,371)          (1,371)
                                                                           --------       --------         -------- 

Balance at March 31, 1995                                                    21,474         (1,409)          20,065
Net income                                                                      185             --              185
Change in net unrealized investment gains                                        --          2,904            2,904
                                                                           --------       --------         --------

Balance at March 31, 1996                                                    21,659          1,495           23,154
Net income                                                                    4,240             --            4,240
Change in net unrealized investment gains                                        --           (978)            (978)
                                                                           --------       --------         -------- 

Balance at March 31, 1997                                                  $ 25,899       $    517         $ 26,416
                                                                           ========       ========         ========


</TABLE>



                            See accompanying notes.





<PAGE>   62

                         SUMMIT HOLDING SOUTHEAST, INC.
                                AND SUBSIDIARIES


                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED MARCH 31,
                                                                                   --------------------
                                                                            1995            1996             1997
                                                                            ----            ----             ----
                                                                                      (IN THOUSANDS)

<S>                                                                       <C>            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                               $ 19,163       $    185        $   4,240
Adjustments to reconcile net income to net cash
    provided by operating activities:
  Amortization and depreciation                                                 372          1,103            4,733
  Net realized gains                                                             --         (4,354)            (687)
  Bad debt allowance                                                           (216)          (600)           1,066
  Decrease in premiums receivable                                             8,880         12,898            5,943
  (Increase) decrease in accounts receivable                                     14         (3,157)             341
  (Increase) decrease in reinsurance recoverable                            (20,424)        (1,377)          17,510
  Increase in Special Disability Trust Fund
    recoverable                                                              (5,950)        (4,181)            (919)
  (Increase) decrease in accrued investment
    income                                                                   (1,184)           473             (193)
   Decrease in deferred income taxes                                            513          4,239              602
  (Increase) decrease in other assets                                            --        (14,309)           9,603
  (Increase) decrease in discontinued operations                                 --           (588)             588
  Increase (decrease) in loss and loss adjustment expense                     9,677         20,240          (28,888)
  Increase in unearned premiums                                                  --          1,042            4,752
  Increase (decrease) in other policyholder funds                               667         (2,273)         (18,086)
  Increase (decrease) in accounts payable and accrued
    expenses                                                                    670           (935)           7,942
   Increase (decrease) in deferred revenue                                       86          7,298           (3,469)
   Increase (decrease) in federal income tax payable                          1,043         (4,878)             585
                                                                           --------       --------        ---------
Net cash provided by operating activities                                    13,311         10,826            5,663

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities                                          (859,038)      (979,829)        (238,324)
Disposal and maturity of investment securities                              846,575        972,918          236,188
Purchase of property and equipment                                               --         (2,697)            (669)
Proceeds from sales of property and equipment                                    --             --            1,343
Purchase of Summit Holding Corporation                                           --        (37,500)              --
Other investing activities                                                      152             --               --
                                                                           --------       --------        ---------
Net cash used in investing activities                                       (12,311)       (47,108)          (1,462)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable                                                      --         44,000               --
Payments on notes payable                                                        --             --          (11,325)
                                                                           --------       --------        ----------
Net cash provided by (used in) financing activities                              --         44,000          (11,325)
                                                                           --------       --------        --------- 
Net increase (decrease) in cash and cash equivalents                          1,000          7,718           (7,124)
Beginning cash and cash equivalents                                           1,984          2,984           10,702
                                                                           --------       --------        ---------
Ending cash and cash equivalents
  Continuing operations                                                       2,984          7,427            3,578
  Operations held for disposition                                                --          3,251               --
  Discontinued operations                                                        --             24               --
                                                                           --------       --------        ---------
         Total ending cash and cash equivalents                            $  2,984       $ 10,702        $   3,578
                                                                           ========       ========        =========
</TABLE>
                            See accompanying notes.





<PAGE>   63

                         SUMMIT HOLDING SOUTHEAST, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         MARCH 31, 1995, 1996 AND 1997



1.  NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

  Organization

         Summit Holding Southeast, Inc. ("Summit") is the holding company for
Bridgefield Employers Insurance Company ("Bridgefield"), the successor, as of
May 28, 1997 to Employers Self Insurers Fund ("ESIF") and for Summit Holding
Corporation ("SHC"). On May 28, 1997, ESIF completed a conversion from a group
self-insurance fund to a stock property and casualty insurance company.
Concurrent with this conversion, ESIF's name was changed to Bridgefield, and the
new holding company, Summit, issued $16.4 million of preferred stock to the
former policyholders or members of ESIF for the extinguishment of the membership
interests of such policyholders, including the elimination of the accessibility
feature of the membership interests.  At the same time, in connection with a
recapitalization to simplify Summit's corporate structure, all of the capital
stock of SHC, which had been owned by ESIF prior to the conversion, was acquired
by Summit, and SHC also became a wholly owned subsidiary of Summit. Also, as
part of the recapitalization, SHC's ownership of Bridgefield Casualty Insurance
Company ("Bridgefield Casualty") was transferred to Bridgefield.

         The conversion and recapitalization transactions described above are
considered to be similar to pooling of interests transactions.  The historical
cost basis accounting of the predecessor companies has been retained, and the
Company's financial statements have been presented using pooling of interests
basis accounting.  The conversion and recapitalization transactions had no
impact upon previously reported net income of the consolidated entities.

         Subsequent to the conversion and recapitalization, Summit's insurance
subsidiaries, Bridgefield and Bridgefield Casualty (the "insurance
subsidiaries"), will continue to underwrite and assume the underwriting risks
with respect to workers' compensation insurance policies for Florida employers,
and Summit's administrative subsidiaries (SHC and subsidiaries) (the
"administrative subsidiaries") will continue to provide administrative
services for the insurance subsidiaries and for four unaffiliated self-
insurance funds.

         In the accompanying notes to financial statements, the "Company"
refers to the consolidated financial statements of Summit and its consolidated
subsidiaries. 

         Prior to the conversion, ESIF was domiciled in Florida as a group
self-insurance workers' compensation fund defined by section 624.4621, Florida
Statutes.  ESIF was regulated by the Bureau of Self Insurance under the
Department of Insurance of the State of Florida (the "Florida DOI").

         ESIF was formed in 1978 for the stated purpose of providing statutory
workers' compensation coverage for certain Florida employers.  ESIF's wholly
owned subsidiary, Employers Safety Group Association, Inc. ("ESGA"), is a trade
association primarily for employers in the construction, manufacturing,
wholesale and retail, and service industries, and any employer that was a
member of ESGA could obtain coverage from ESIF.  An indemnity agreement issued
by ESIF indemnified the member employer against loss or liability relating to
workers' compensation insurance risk.  Any employer that obtained workers'
compensation coverage from ESIF automatically became a member of ESIF with
certain rights, including the right to vote for the election of ESIF's
Trustees, the right to receive any distribution of profits that was authorized
by the 





                                                                              1
<PAGE>   64

                         SUMMIT HOLDING SOUTHEAST, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         MARCH 31, 1995, 1996 AND 1997


Trustees and the right to participate in the distribution of the surplus of ESIF
in the event of its liquidation.  However, all members of ESIF were subject to
joint and several liability for the obligations of ESIF.  ESIF has historically
not operated for the purpose of generating profits, but it has retained a
portion of its earnings and profits to avoid making assessments against its
members.  ESIF occasionally during its operating history paid a distribution of
profits to its members, but it has never made an assessment against its members.

         ESIF was a trust with a Board comprised of six Trustees, but no
employees or officers.  ESIF's bylaws specifically directed the Board to engage
an administrator, and ESIF's administrator since its inception has been Summit
Consulting, Inc. ("SCI").  SCI performed all daily operational activities for
ESIF, including premium and claims processing, pursuant to a written agreement.
SCI also performs similar functions for four other group self-insurance funds
located in Florida, Louisiana and Kentucky.

         SCI owns several subsidiaries formed to assist it in providing
specialized administrative services, and SCI is wholly owned by SHC.  Effective
January 16, 1996, ESIF purchased all of the outstanding stock of SHC (see Note
13 for a further discussion of this acquisition).  In addition to SHC and its
subsidiaries, ESIF also owns a reinsurance subsidiary, U.S. Employers Insurance,
Inc. ("USEI").

  Consolidation and Presentation

         The accompanying consolidated financial statements include the
accounts, after intercompany eliminations, of Summit and its wholly owned
subsidiaries and have been prepared in conformity with generally accepted
accounting principles ("GAAP") applicable to stock property and casualty
insurance companies, which differ from statutory accounting practices prescribed
or permitted by the Florida DOI.

  Use of Estimates and Assumptions

         The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect amounts
reported in the financial statements and accompanying notes. Such estimates and
assumptions could change in the future as more information becomes known which
could impact the amounts reported and disclosed herein.

  Recognition of Revenues

         Workers' compensation insurance premiums are based on rates established
by the National Council on Compensation Insurance. Premium revenues generally
are recognized over 





                                                                              2
<PAGE>   65

the life of the related policies on the daily pro rata method with a reserve 
for unearned premiums established for the unexpired portion of the premiums 
applicable to those policies.  For retrospectively rated policies, the ultimate 
premium for a period is determined on the basis of the insured's actual losses 
for that period.  If the actual losses are less than expected, ESIF may be 
required to refund a portion of the premiums previously paid.  ESIF considers
loss development experience through the date of the financial statements in
estimating the ultimate premium and, as adjustments to premiums become necessary
as a result of loss development, such adjustments are included in current
operations.  All indemnity contracts issued by ESIF prior to March 31, 1997 have
a common anniversary date of April 1, thus, for ESIF, there was no liability for
unearned premium or deferred policy acquisition costs at March 31, 1996 or March
31, 1997. The unearned premiums included on the accompanying balance sheets
relate to Bridgefield Casualty, the related commissions which are incurred as 
the premiums are earned, and other acquisition costs are insignificant.

         Administrative fee revenue is recognized in proportion to the premiums
earned by the self-insurance funds at the contractual administrative fee
percentage of premiums.  Adjustments to revenue for premium audits are recorded
in the period they occur.  Fees for administrative services provided to ESIF
subsequent to the date of ESIF's acquisition of SHC have been eliminated in the
consolidated statements of income.

         Reinsurance premiums ceded are recorded and recognized on a pro rata
basis of earned premiums of the contract.

  Income Taxes

         Income taxes have been provided using the liability method in
accordance with Financial Accounting Standards Board ("FASB") Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes.
Under that method, deferred tax assets and liabilities are determined based on
the differences between financial reporting and tax bases of assets and
liabilities and are measured using enacted tax rates.

  Investments

         In 1993, the FASB issued SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities.  This Statement requires that debt
investment securities are to be classified as either "held-to-maturity"
(carried at amortized cost), "trading" (carried at fair value with unrealized
gains and losses reported in income), or "available-for-sale" (carried at fair
value with unrealized gains and losses reported as a component of stockholders'
equity). Equity securities are to be classified as either trading or 
available-for-sale.

         The Company recognizes that there may be occasions where it is
necessary and appropriate to sell a security prior to its maturity in response
to changes in circumstances.  Recognizing this need for the ability to
proactively respond to changes in tax position and in market conditions, the
Company has classified its entire investment portfolio as available-for-sale.

         Accordingly, all investments in the accompanying balance sheets are
reported at fair value with the corresponding net unrealized gains and losses,
net of tax, reported as a separate component of stockholders' equity.  Realized
gains and losses and declines in value judged to be other than temporary are
included in investment income.  The cost of fixed maturities sold is determined
principally on the specific identification method, while the cost of equity
securities sold is based on the first-in-first-out method.





                                                                             3
<PAGE>   66

         Short-term investments are reported at cost.

         In the normal course of business, the Company is party to financial
instruments, none of which have significant off-balance-sheet risk.

  Loss and Loss Adjustment Expenses

         The reserve for unpaid loss and loss adjustment expenses ("LAE")
represents management's best estimate of the ultimate cost of the loss and LAE
that are unpaid at the balance sheet date including incurred but not reported
claims.  Such reserve is established by management based upon (i) results of
actuarial reviews which incorporate the Company's experience with similar
cases, estimates of future claim trends, and historical trends such as
recurring loss payment and reporting patterns, claim closures and product
mixes; (ii) facts known to the Company, and (iii) regulatory requirements.
Such reserve is continually reviewed and as adjustments become necessary, such
adjustments are included in current operations.

         The reserve for permanent indemnity disability claims has been
discounted at 4% as permitted under Florida law.  For GAAP purposes,
discounting is computed based on the Company's anticipated payout patterns and
a discount rate consistent with that permitted by section 625.091, Florida
Statutes.  The amount of such discount was $4.7 million and $4.4 million at
March 31, 1996 and 1997, respectively.

         Prior to the January 16, 1996 acquisition of SHC, certain unallocated
LAE of ESIF were provided by SHC under the administrative agreement between
ESIF and SHC.  Subsequent to the acquisition, ESIF has included the liability
for such unallocated LAE in the loss and LAE liability.





                                                                             4
<PAGE>   67

  Reinsurance

         Under FASB Statement No. 113, Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts, all assets and
liabilities related to reinsurance ceded contracts are reported on a gross
basis rather than the previous practice of reporting such liabilities net
of reinsurance.  The amounts recoverable from reinsurers are
classified separately on the accompanying balance sheets.

         The accompanying statements of income reflect premiums and losses
incurred, net of reinsurance ceded (see Note 5).  Reinsurance arrangements
allow management to control exposure to potential losses arising from large
risks.  A significant portion of the reinsurance is effected under excess of
loss reinsurance contracts.  Amounts recoverable from reinsurers are estimated
in a manner consistent with the loss and loss expense reserves associated with
the reinsured policies.  Similarly, reinsurance premiums, losses and loss
adjustment expenses are accounted for on bases consistent with those used in
accounting for the related original policies issued and the terms of the
reinsurance contracts.

  Guaranty Fund Assessments

         As a self-insurance fund, ESIF has periodically been assessed by a
state guaranty fund as part of that fund's activities to collect money from
solvent self-insurance funds to cover certain losses to policyholders of
insolvent self-insurance funds, after assessment of the policyholders of the
insolvent funds.  This type of guaranty fund is separate from the Florida
Special Disability Trust Fund (the "SDTF"), which is designed to pay insurers
for certain benefits paid to previously injured workers as discussed in Note 12.

         Florida statutes limit the assessment to a maximum of 2% of direct
written premiums annually, but because there are many uncertainties regarding
the ultimate amount of assessments, ESIF's policy has been to recognize its
obligation for guaranty fund assessments when it receives notice that an amount
is payable to the guaranty fund.  At March 31, 1997, ESIF was not able to
estimate reasonably the potential effects of any future assessments and,
accordingly, the accompanying financial statements do not include any provision
for such future assessments.  Assessments charged to expense during the fiscal
years ended March 31, 1995, 1996 and 1997 were $1.5 million, $1.6 million and
$1.4 million, respectively.  Such assessments are credited against the
Company's administrative tax.

         Upon conversion to a stock property and casualty insurer, ESIF will be
subject to assessment by a separate guaranty fund.  Such assessments will not
be credited against ESIF's administrative tax.

  Concentrations of Credit or Financial Risk

         Florida law allowed ESIF to write policies only in the State of
Florida.  Therefore, all of ESIF's premium revenues for the fiscal years ended
March 31, 1995, 1996 and 1997 were derived from policies offered to customers
located in Florida.  Accordingly, ESIF could be adversely affected by economic
downturns, significant unemployment, and other conditions that may occur from
time-to-time in Florida, which may not as significantly affect its more
geographically diversified





                                                                              5
<PAGE>   68

competition.

         SHC has significant amounts of revenue associated with its third-party
processing as a result of its contracts with several self-insurance funds.
Changes with respect to these contracts could adversely affect the Company.

         As further described in Note 5, the insurance subsidiaries have 
significant amounts of reinsurance recoverables as a result of ceding
reinsurance under specific and aggregate reinsurance treaties.

  Intangible Assets

         The majority of the Company's intangible assets were recorded in
connection with the January 1996 acquisition of SHC.  These intangible assets
principally consists of customer accounts and contracts, purchased software,
and the excess of costs over the fair value of identifiable net assets acquired
(goodwill).  The customer accounts and contracts as well as the purchased
software are being amortized on a straight-line basis over the related
estimated lives and contract periods which range from three to ten years.  The
excess of costs over the fair value of identifiable net assets acquired is
being amortized on a straight-line basis over 25 years.

         Periodically, the Company evaluates the recoverability of the costs in 
excess of the fair value of net assets acquired and the costs associated with
customer listings through a comparison of forecasted undiscounted cash flows of
SHC and the remaining asset balances.

  Property and Equipment

         Property and equipment are stated at cost less accumulated
depreciation.  Expenditures for improvements are capitalized, and expenditures
for maintenance and repairs are charged to operations as incurred.  Upon sale
or retirement, the cost and related accumulated depreciation and amortization
are removed from the accounts and the resulting gain or loss, if any, is
reflected in income.  Depreciation has been provided using the straight-line
method over the estimated useful lives of the related assets which range from
five to ten years.  Leasehold improvements are amortized on the straight-line
method over the term of the related leases.

  Cash and Cash Equivalents

         Cash and cash equivalents principally consists of demand deposits with
financial institutions and highly liquid investments having original maturities
of three months or less when purchased.

  Bad Debt Allowance

         The bad debt allowance is based on the Company's experience with
uncollectible premiums receivable and represents the Company's best estimate of
the ultimate uncollectible amounts incurred through the balance sheet date.

  Earnings Per Share

         Because there were no common or preferred stock shares outstanding
during the fiscal years ended March 31, 1995, 1996 or 1997, the presentation of
earnings per share is not applicable to the accompanying financial statements.

  Reclassifications

         Certain amounts in the financial statements as of and for the fiscal
year ended March 31, 1996 have been reclassified to better conform with the
presentation in the financial statements as of and for the fiscal year ended
March 31, 1997.  




                                                                             6
<PAGE>   69

2.  INVESTMENTS

         The amortized cost and the estimated fair value of available-for-sale
debt security investments are summarized as follows:

<TABLE>
<CAPTION>
                                                                               GROSS          GROSS         ESTIMATED
                                                          AMORTIZED         UNREALIZED      UNREALIZED         FAIR
                                                             COST              GAINS          LOSSES          VALUE
                                                             ----              -----          ------          -----
                                                                                 (IN THOUSANDS)
<S>                                                         <C>                <C>             <C>            <C>
AT MARCH 31, 1996
  U.S. Treasury and other U.S.
    government agencies                                     $ 71,975           $  727          $1,069         $ 71,633
  States and political subdivisions                           68,697              934             270           69,361
  Corporate debt securities                                   37,258              850             284           37,824
                                                            --------           ------          ------         --------
Total debt securities                                       $177,930           $2,511          $1,623         $178,818
                                                            ========           ======          ======         ========

AT MARCH 31, 1997
  U.S. Treasury and other U.S.
    government agencies                                     $ 56,265           $  123          $1,142         $ 55,246
  States and political subdivisions                           83,455              421             559           83,317
  Corporate debt securities                                   41,861              173             522           41,512
                                                            --------           ------          ------         --------
Total debt securities                                       $181,581           $  717          $2,223         $180,075
                                                            ========           ======          ======         ========

</TABLE>

         The amortized cost and estimated fair value of debt securities at
March 31, 1997, by contractual maturity, are shown below.  Actual maturities
may differ from contractual maturities because certain borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.


<TABLE>
<CAPTION>
                                                                                                            ESTIMATED
                                                                                          AMORTIZED            FAIR
                                                                                            COST              VALUE
                                                                                            ----              -----
                                                                                                (IN THOUSANDS)
<S>                                                                                       <C>                <C>
Years to maturity:
  One or less                                                                             $   3,524          $   3,512
  After one through five                                                                     79,526             79,393
  After five through ten                                                                     82,351             81,077
  After ten                                                                                  16,180             16,093
                                                                                          ---------          ---------
Total                                                                                     $ 181,581          $ 180,075
                                                                                          =========          =========


</TABLE>







                                                                              7
<PAGE>   70

         Proceeds from the sales of investments in debt securities during
fiscal year ending March 31, 1995 were $21.8 million.  No gains or losses were
realized on those sales.  Proceeds from the sales of investments in debt
securities during fiscal year ending March 31, 1996 were $195.5 million.  Gross
gains of $3.1 million and gross losses of $1.0 million were realized on those
sales.  Proceeds for the sales of investments in debt securities during the
fiscal year ending March 31, 1997 were $78.4 million resulting in gross
realized gains of $0.6 million and gross realized losses of $1.0 million.

         Unrealized gains and losses on investments in equity securities are
reported directly in equity and do not affect operations.  The gross unrealized
gains and losses on, and the cost and fair value of, those investments are
summarized as follows:

<TABLE>
<CAPTION>
                                                                               GROSS          GROSS
                                                                            UNREALIZED      UNREALIZED         FAIR
                                                             COST              GAINS          LOSSES          VALUE
                                                             ----              -----          ------          -----
                                                                                 (IN THOUSANDS)
<S>                                                          <C>               <C>              <C>            <C>
AT MARCH 31, 1996
  Preferred stocks                                           $ 3,167           $   18           $  29          $ 3,156
  Common stocks                                                9,576            1,640             121           11,095
                                                             -------           ------           -----          -------
Total                                                        $12,743           $1,658           $ 150          $14,251
                                                             =======           ======           =====          =======

AT MARCH 31, 1997
  Preferred stocks                                           $ 4,452           $   95           $  --          $ 4,547
  Common stocks                                               11,517            2,511             289           13,739
                                                             -------           ------           -----          -------
Total                                                        $15,969           $2,606           $ 289          $18,286
                                                             =======           ======           =====          =======

</TABLE>
         Major categories of investment income are summarized as follows:

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED MARCH 31,
                                                                                   --------------------
                                                                            1995            1996             1997
                                                                            ----            ----             ----
                                                                                       (IN THOUSANDS)
<S>                                                                          <C>            <C>              <C>
Income from:
  Fixed maturities                                                           $ 9,788        $10,923          $10,500
  Equity securities                                                               16            534              874
  Short-term investments and cash                                              2,401          1,753            1,396
                                                                             -------        -------          -------
Net investment income                                                        $12,205        $13,210          $12,770
                                                                             =======        =======          =======
</TABLE>

         The Florida DOI requires cash and investments to be held in trust for
the Florida DOI for 10% of statutory basis loss reserves and the 1986-1995 fund
years aggregate reserve plans.  The aggregate plans approved by the Florida DOI
require the interest earned on the related reserves to accumulate with the
restricted principal.  The reserves are reviewed annually and a revised funding
plan is submitted to the Florida DOI.  At March 31, 1996 and 1997, the amount
in trust is approximately $62.9 million and $53.5 million, respectively.



 

                                                                              8
<PAGE>   71

3.  PROPERTY AND EQUIPMENT

         The major components of property and equipment are as follows:

<TABLE>
<CAPTION>
                                                                                             MARCH 31,
                                                                                         1996          1997
                                                                                         ----          ----
                                                                                            (IN THOUSANDS)
         <S>                                                                           <C>            <C>
         Furniture, fixtures and equipment                                              $  771         $  992
         Data processing equipment                                                         649            795
         Airplane                                                                          968             --
         Leasehold improvements                                                            103            103
         Software                                                                          139            270
         Automobiles                                                                        --              7
                                                                                        ------         ------
                                                                                         2,630          2,167
         Less accumulated depreciation and amortization                                    182            715
                                                                                        ------         ------
                                                                                        $2,448         $1,452
                                                                                        ======         ======

</TABLE>
         Depreciation and amortization expense for the fiscal years ended March
31, 1996 and 1997 was $0.2 million and $0.7 million, respectively.
Substantially all property and equipment was acquired in the January 1996
acquisition of SHC.





                                                                            9
<PAGE>   72

4.  INTANGIBLES

         Intangible assets consist of the following:

<TABLE>
<CAPTION>
                                                                                             MARCH 31,
                                                                                        1996          1997
                                                                                        ----          ----
                                                                                            (IN THOUSANDS)
         <S>                                                                           <C>            <C>
         Goodwill                                                                      $47,185        $47,239
         Other intangible assets:
           Customer accounts and contracts                                               6,608          6,608
           Purchased software                                                            6,300          6,300
           Capitalized debt acquisition costs                                              757            757
                                                                                       -------        -------
                                                                                        60,850         60,904
         Less accumulated amortization                                                     896          5,175
                                                                                       -------        -------
                                                                                       $59,954        $55,729
                                                                                       =======        =======

</TABLE>




                                                                             10
<PAGE>   73

5.  REINSURANCE

         In accordance with general practice in the insurance industry, the
insurance subsidiaries are engaged in reinsurance transactions to cede risk to
other companies.  Reinsurance ceded contracts do not relieve the insurance
subsidiaries from their obligation to policyholders, as they remain liable to
their policyholders to the extent that any reinsurer does not meet its
obligations for reinsurance ceded to it under reinsurance contracts.  The
largest net amount retained by the insurance subsidiaries on any one occurrence
is $500,000 with deductibles of $750,000 and $500,000 for each of the fiscal 
years ended March 31, 1996 and 1997, respectively.  The insurance subsidiaries 
currently have the following coverages under specific and aggregate reinsurance 
agreements:




                                                                              11
<PAGE>   74

                              SPECIFIC REINSURANCE
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
FISCAL
 YEAR                                                                                                            SPECIFIC
 ENDED                                                                 SPECIFIC                                 OCCURRENCE
MARCH 31,                          CARRIER                            ATTACHMENT                                  LIMIT
---------                          -------                            ----------                                  -----
<S>                       <C>                                            <C>                                   <C>
1982                      INA                                            $  100                                $    2,000
                          Employers Re                                    2,100                                     3,000
1983                      INA                                               125                                     2,000
                          Employers Re                                    2,125                                     3,000
1984                      Employers Re                                      125                                     2,000
                          INA                                             2,125                                 Statutory
1985                      Employers Re                                      125                                     2,000
                          INA                                             2,125                                 Statutory
1986                      Employers Re                                      225                                    20,000
1987                      Safety Mutual(1)                                1,000                                     5,000
                          Old Republic(2)                                 1,000                                     1,000
                          National Union(2)                               2,000                                     8,000
1988                      Old Republic                                    1,000                                     5,000
1989                      Old Republic                                    1,000                                     5,000
1990                      Transamerica                                    1,000                                    15,000
1991                      Transamerica                                    1,000                                    15,000
1992                      Transamerica                                    1,000                                    25,000
1993                      Transamerica                                    1,000                                    25,000
1994                      Lloyd's                                           500                                       500
                          Transamerica                                    1,000                                 Statutory
1995                      Lloyd's                                           500                                       500
                          Continental Casualty                            1,000                                 Statutory
1996                      Federal Insurance Co.                             500                                       500
                          Federal Insurance Co.                           1,000                                     1,000
                          Continental Casualty                            2,000                                 Statutory
1997                      Lloyd's                                           500                                     1,500
                          Continental Casualty(3)                           500                                 Statutory
                          National Union                                  2,000                                 Statutory
</TABLE>
(1)  4/1/86-5/31/86
(2)  6/1/86-3/31/87
(3)  Pertains to Bridgefield Casualty




                                                                             12
<PAGE>   75

                             AGGREGATE REINSURANCE
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
FISCAL
 YEAR                                                                                                           
 ENDED                                                                AGGREGATE                                 AGGREGATE
MARCH 31,                          CARRIER                            ATTACHMENT                                  LIMIT
---------                          -------                            ----------                                  -----
<S>                       <C>                                           <C>                                     <C>
1982                      INA                                           $11,542                                 $   2,000
                          Employers Re                                   13,542                                     3,000
                          INA                                            16,542                                 Statutory
1983                      INA                                            11,365                                     2,000
                          Employers Re                                   13,365                                     3,000
                          INA                                            16,365                                 Statutory
1984                      Employers Re                                   14,341                                     2,000
                          INA                                            16,341                                 Statutory
1985                      Employers Re                                   17,814                                     3,000
                          INA                                            20,814                                 Statutory
1986                      Employers Re                                   40,091                                       301
1987                      N/A                                               N/A                                       N/A
1988                      N/A                                               N/A                                       N/A
1989                      Crossroads                                     90,648                                    19,000
1990                      Crossroads                                    110,973                                    25,000
1991                      Crossroads                                    130,726                                    31,000
1992                      Crossroads                                    113,015                                    31,000
1993                      Crossroads                                    141,956                                    33,401
1994                      Crossroads                                    146,016                                    34,357
1995                      Crossroads                                    133,800                                    31,482
1996                      Crossroads                                    115,970                                    27,287
1997                      American Re-Insurance (Quota Share)(1)            N/A                                       500
</TABLE>

(1) Pertains to Bridgefield Casualty


                                                                            13
<PAGE>   76

         Insurance premiums for the fiscal years ended March 31, 1995, 1996 and
1997 are summarized as follows:

<TABLE>
<CAPTION>
                                                                            1995            1996           1997
                                                                            ----            ----           ----
                                                                                       (IN THOUSANDS)
<S>                                                                         <C>            <C>            <C>
Direct premiums earned                                                      $135,033       $119,028       $105,044     
Reinsurance ceded                                                              6,544          4,135          7,723
                                                                           ---------       --------       -------- 
Net premiums earned                                                         $128,489       $114,893       $ 97,321
                                                                            ========       ========       ========
</TABLE>

<TABLE>
<CAPTION>
                                                                            1995            1996           1997
                                                                            ----            ----           ----
                                                                                       (IN THOUSANDS)
<S>                                                                         <C>            <C>            <C>
Gross premiums written                                                      $153,844       $130,528       $132,321
Ceded premiums written                                                         9,417          9,232         15,278
                                                                            --------       --------       --------
Net premiums written                                                        $144,427       $121,296       $117,043
                                                                            ========       ========       ========
</TABLE>

         Losses and LAE incurred for the fiscal years ended March 31, 1995,
1996 and 1997 are summarized as follows:

<TABLE>
<CAPTION>
                                                                            1995            1996           1997
                                                                            ----            ----           ----
                                                                                       (IN THOUSANDS)
<S>                                                                         <C>            <C>            <C>
Direct losses and LAE                                                       $ 74,368       $102,832       $ 77,979
Reinsurance ceded                                                              5,252          7,988         12,827
                                                                            --------       --------       --------
Net losses and LAE incurred                                                 $ 69,116       $ 94,844       $ 65,152
                                                                            ========       ========       ========
</TABLE>

         Reinsurance ceded premiums and losses included in the preceding table
reflect the elimination of amounts assumed by USEI through retrocession by
Crossroads Insurance Company, Limited ("Crossroads") of amounts ceded by ESIF
to Crossroads as described in the following paragraph.

         Of the reinsurance ceded amounts above for fiscal year ended March 31,
1997, and losses and loss adjustment expenses of $3.0 million, and no related
premium, are attributable to reinsurance agreements with Crossroads, a Bermuda
domiciled insurance company, in which a Trustee of ESIF has an ownership
interest.  Crossroads is licensed to do business in Florida and is a member of
the Florida Insurance Guaranty Association.  Fifty percent of business ceded to
Crossroads has been retroceded by Crossroads to USEI. All of ESIF's aggregate
excess reinsurance coverage for fiscal years ended March 31, 1989, 1990, 1994
and 1995 is also ceded to Crossroads.  At March 31, 1996 and 1997, loss and LAE
reserves recoverable of approximately $9.4 million and $9.9 million,
respectively (net of amounts retroceded to USEI), are attributable to excess
reinsurance agreements with Crossroads.  For the years ending March 31, 1987,
1988, 1991, 1992 and 1993, effective aggregate excess reinsurance is not
currently in place because these years have been self-funded or because the
coverages have expired.  Exposure to significant adverse development for these
years is considered minimal due to the maturity of the loss development for
these years.





                                                                             14
<PAGE>   77

         In fiscal years ended March 31, 1996 and 1997, ESIF did not commute
any ceded reinsurance nor did it enter into or engage in any loss portfolio
transfers.  ESIF remains obligated for amounts ceded in the event that the
reinsurers do not meet their obligations.

         The reinsurance recoverable asset at March 31, 1997 is comprised of
amounts related to reinsurance agreements with the following companies (in
thousands):

<TABLE>
<CAPTION>
                                                                               PAID         UNPAID
REINSURANCE CARRIER                    RATING(1)                              CLAIMS        CLAIMS            TOTAL
-------------------                    ------                                 ------        ------            -----
<S>                                    <C>                                    <C>          <C>              <C>
American Re                            A+XII                                  $  486        $ 4,376          $ 4,862
Continental Casualty                   A XV                                       --          7,653            7,653
Crossroads(2)                          N/R                                     1,945          9,912           11,857
Employers Re                           A++ XV                                    779          4,663            5,442
Federal Ins. Co.                       A++ XIV                                    --          6,528            6,528
INA                                    A- XIII                                   447          5,824            6,271
Lloyds of London                       N/R                                        --         12,695           12,695
National Union                         A++ XV                                     --          2,158            2,158
Old Republic                           A+ IX                                     796         10,273           11,069
Transamerica                           A XI                                      482         24,992           25,474
                                                                              ------        -------          -------
         Total                                                                $4,935        $89,074          $94,009
                                                                              ======        =======          =======
</TABLE>

-------------
(1) 1996 Best's Key Rating Guide -- Property-Casualty Edition.
(2) Based on filings with the Florida DOI, Crossroads maintains trust fund
    assets sufficient to fund its reinsurance obligations, although no specific
    recoverable from Crossroads is directly secured by such trust fund assets.



         Substantially all of the recoverable amounts related to paid claims
have been outstanding less than ninety days at the balance sheet date.  The
reinsurance recoverable amounts related to unpaid claims are calculated
considering the provisions of the specific and aggregate reinsurance agreements
and using ultimate losses by accident year consistent with the reported loss
and LAE liabilities.





                                                                            15




<PAGE>   78

6.  FEDERAL INCOME TAXES

         The Company files a consolidated federal income tax return.  ESIF does
not have a tax sharing agreement with two of its subsidiaries, ESGA and USEI.
ESIF does not collect from or refund to these subsidiaries the amount of income
taxes or benefits which would result if the entities filed separate returns.
An informal tax sharing agreement exists between ESIF and SHC such that the
amount of taxes or tax benefits are shared as if separate returns were filed.

         Income before federal income taxes differs from taxable income
principally due to tax-exempt investment income, dividends-received tax
deductions, and differences in loss and LAE discounting and unearned premium
reserves for tax and financial reporting purposes.

         After carryback of the fiscal year ended March 31, 1996 operations loss
to prior years, federal income taxes of $6.9 million and $12.2 million for
fiscal years ended March 31, 1994 and 1995, respectively, would be subject to
recovery in the event that the Company incurs net operating losses within three
years of the years for which such taxes were paid.  State taxes paid were $0.8
million, $0.8 million and $0.7 million for the fiscal years ended March 31,
1995, 1996 and 1997, respectively.

         Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.

         Significant components of the Company's deferred tax liabilities and
assets as of March 31, as calculated in accordance with FASB 109, are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                                               1996        1997
                                                                                               ----        ----
<S>                                                                                           <C>          <C>
Deferred tax liabilities:
  Unrealized investment gains                                                                  $   902        840
  Special Disability Trust Fund recoverables                                                       175        283
  Reinsurance premium adjustment                                                                 1,494        898    
  Intangible assets                                                                              3,684      4,038
                                                                                               -------    -------
Total deferred tax liabilities                                                                   6,255      6,059    
Deferred tax assets:
  Discount on loss and LAE reserves                                                             18,936     18,470
  Unallocated remittances                                                                        1,161        180
  Uncollectible premiums                                                                           564        941
  Other                                                                                            455        789
  Unrealized investment losses                                                                      --        548
                                                                                               -------    -------
                                                                                                21,116     20,928
  Valuation allowance for deferred tax assets                                                       --
Total deferred tax assets                                                                       21,116     20,928
                                                                                               -------    -------
Net deferred tax assets                                                                        $14,861     14,869
                                                                                               =======    =======

</TABLE>
         The Company has made an election under the Internal Revenue Code of
1986 to treat income tax payments attributable to loss reserve discounting as
special estimated tax payments which are specifically recoverable upon reversal
of the discounting effects.  Accordingly, the deferred tax





                                                                            16

<PAGE>   79

assets attributable to loss reserve discounting are considered to be fully
recoverable.  The Company also has significant tax loss carryback potential for
the fiscal years ended March 31, 1994 and 1995.  For those reasons, a deferred
tax valuation allowance is not considered necessary.

         The Company's consolidated federal income tax liability (asset) at
March 31 is summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                           1996                  1997
                                                                                           ----                  ----
<S>                                                                                       <C>                   <C>
Current                                                                                   $ (9,690)             $    585
Deferred                                                                                   (14,861)              (14,869) 
                                                                                          --------              --------
Total net asset                                                                           $(24,551)             $(14,284)
                                                                                          ========              ========

</TABLE>
         Significant components of the provision for income taxes for the
fiscal years ended March 31, attributable to continuing operations are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                                            
                                                                                            
                                                                                           1996                  1997
                                                                                           ----                  ----
<S>                                                                                        <C>                   <C>
Current tax expense (benefit)                                                              $ 1,424                $3,152
Deferred taxes                                                                              (1,930)                  565
                                                                                           -------                ------
Total income tax expense (benefit) on income                                               $  (506)               $3,717
                                                                                           =======                ======

</TABLE>
         Income taxes paid by the Company totaled $12.2 million, $11.2 million
and $3.3 million in 1995, 1996 and 1997, respectively.

         The reconciliation of income tax expense (benefit) for the fiscal
years ended March 31, attributable to continuing operations computed at the
U.S. federal statutory tax rate of 35%, to income tax expense (benefit) is as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                            1995            1996             1997
                                                                            ----            ----             ----
<S>                                                                       <C>              <C>              <C>    
Income tax (at 35% of pretax income or loss)                              $10,554          $   (43)         $3,742
Tax-exempt investment income                                                 (673)          (1,067)         (1,245)
Non taxable/deductible (income) expenses                                      579               32             404
Intangibles amortization                                                       --              177             539
State income taxes                                                           (600)             495             263
Other items, net                                                            1,130              (99)             14
                                                                          -------          -------          ------
Provision (credit) for federal income tax
  expense (benefit)                                                       $10,990          $  (505)         $3,717
                                                                          =======          =======          ======

</TABLE>





                                                                             17
<PAGE>   80

7.  LOSSES AND LAE

         The reserves for unpaid losses and LAE are estimated using individual
case-basis valuations and statistical analyses.  These estimates are subject to
the effects of trends in loss severity and frequency.  Although some
variability is inherent in such estimates, management believes that the
reserves for losses and LAE are adequate.  The estimates are reviewed annually
by independent consulting actuaries and adjusted as necessary as experience
develops or new information becomes known; such adjustments are included in
current operations.

         The following table provides a reconciliation of the beginning and
ending reserve balances for losses and LAE for fiscal years ended March 31,
1995, 1996 and 1997:

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED MARCH 31,
                                                                                   --------------------
                                                                            1995            1996             1997
                                                                            ----            ----             ----
                                                                                       (IN THOUSANDS)
<S>                                                                       <C>            <C>               <C>
Net reserves for losses and LAE at beginning
  of period                                                                $274,102       $259,085         $277,995
Less: Recoverable from Florida SDTF(1)                                       (9,929)       (15,879)         (20,060)
                                                                           --------       --------         -------- 
Net reserves for losses and LAE less SDTF
  recoverable asset at beginning of year                                    264,173        243,206          257,935
Add provision for claims occurring in:
  The current year                                                           94,520         84,058           69,014
  Prior years                                                               (25,404)        10,786           (3,862)
                                                                           --------       --------         -------- 
Incurred losses during the current year                                      69,116         94,844           65,152
Deduct payments for claims occurring in:
  The current year                                                           16,857         15,432           14,131
  Prior years                                                                73,226         64,683           60,265
                                                                           --------       --------         --------
Claim payments during the current year                                       90,083         80,115           74,396
Net reserves for losses and LAE less SDTF
  recoverable asset at end of period                                        243,206        257,935          248,691
Add:  Recoverable from Florida SDTF(1)                                       15,879         20,060           20,979
                                                                           --------       --------         --------
Net reserves for losses and LAE at end of
  period                                                                    259,085        277,995          269,670
Add: Reinsurance recoverables (exclusive of
  recoverables on paid losses)                                              108,306        109,637           89,074
                                                                           --------       --------         --------
Gross reserves for losses and LAE at end of
  period (GAAP basis)                                                      $367,391       $387,632         $358,744
                                                                           ========       ========         ========
</TABLE>

(1)      The change in the SDTF Recoverable asset is included in incurred
         losses in the Statement of Income.

         The foregoing reconciliation shows that a $25.4 million reserve
redundancy emerged during the fiscal year ended March 31, 1995.  This amount
represents the release of certain loss reserves previously carried which were
determined, based on comparisons to actuarially projected amounts, to be
redundant.  The foregoing reconciliation shows that a $10.8 million reserve
strengthening in the March 31, 1995 reserve emerged during the fiscal year
ended March 31, 1996.  The increased losses and LAE expense resulted
principally from settling case reserves established in prior years for more than
previously anticipated.

         The foregoing reconciliation also shows that a $3.9 million reserve
redundancy emerged during the fiscal year ended March 31, 1997.  This amount
represents the release of certain loss reserves previously carried which were
determined, based on comparisons to actuarially projected amounts, to be
redundant.  The increased losses and LAE expense resulted
principally from settling case reserves established in






                                                                          18



<PAGE>   81

prior years for more than previously anticipated.

         Statutory basis loss reserves were determined using paid loss data net
of historic SDTF recoveries; GAAP basis loss reserves were determined using
paid loss data gross of SDTF recoveries.  This adjustment increased loss
reserves by $24.8 million, $31.4 million and $26.0 million at March 31, 1995,
1996 and 1997, respectively, and increased reinsurance recoverables by $10.3
million, $11.8 million and $5.7 million at March 31, 1995, 1996 and 1997,
respectively.  In addition ESIF has recorded, as an asset, amounts recoverable
from the SDTF based upon ESIF's historical collection experience and the amount
of claims identified as subject to SDTF recovery.  The recoverable amount
recorded at March 31, 1995, 1996 and 1997 was $15.9 million, $20.1 million and
$21.0 million, respectively.  In order to quantify the amounts recoverable from
the SDTF, ESIF reviews its claims that have been identified as subject to SDTF
recovery considering ESIF's historical recovery experience on claims submitted
to the SDTF.  In addition, ESIF estimates the amount of claims it expects to
recover over the next four years based on actual collection experience for the
most recent two years, and discounts the expected recoveries using an
appropriate interest rate.  The amounts reflected as recoverables from the SDTF
were based on the discounted expected collection amounts rather than on the
total claims identified as subject to SDTF recovery.

         The SDTF reinsurance recoverable results from calculating such
recoverables using loss and LAE reserves computed using paid losses gross of
SDTF recoveries and in consideration of expected recoveries from SDTF.  Certain
of the claims used in the determination of the SDTF recoverable are of an
amount which will pierce reinsurance layers.  The Company will pursue recovery
of such claims under the provisions of its reinsurance agreements.
Subsequently, as the Company remits the claims to the SDTF, and ultimately
collects these claims from SDTF, the Company will remit to the reinsurers their
portion of the SDTF recoveries.  The aggregate recoverable from SDTF asset and
the SDTF related reinsurance recoverable, which approximates the amount of the
increase in loss reserves resulting from determining the GAAP basis loss
reserves using paid loss data gross of SDTF recoveries, represents managements
best estimate of the aggregate amounts that will be recovered.

         LAE assumed in the acquisition of SHC represents unallocated LAE
reserves established by ESIF that were, prior to the acquisition, accrued by
SHC under the administrator's contract between ESIF and SHC.






                                                                             19
<PAGE>   82

8.  ACCRUED RETROSPECTIVE PREMIUMS

         The Company offers several types of retrospectively rated policies yet
for each, the ultimate premium is determined by the insured's loss experience.
This determined premium, upon comparison with premiums previously collected
from the insured, generally results in additional accrued premium or a premium
refund to be recognized.  Accrued retrospectively rated premiums and refunds,
including those relating to bulk incurred but not reported losses, have been
determined by individual policyholder accounts.  Included as
premiums receivable in the accompanying balance sheets are accrued
retrospective premiums, net of accrued retrospective premium refunds, of $26.9
million and $11.7 million as of March 31, 1996 and 1997, respectively.






                                                                            20
<PAGE>   83

9.  EQUITY

         ESIF and its insurance subsidiaries, subsequent to the conversion to a
stock property and casualty company, has legal restrictions as to the
transfer of funds in the form of dividends, loans, and advances.  These
restrictions, determined in accordance with statutory reporting practices,
generally limit the payment of dividends to amounts based upon statutory equity
or profits and limit the amount of certain investments to specified percentages
of statutory admitted assets.  At March 31, 1997, under regulations applicable
to stock property and casualty insurance companies, $2.2 million of ESIF's
statutory net assets of $21.7 million could be transferred from the insurance
entities subject to regulatory approval.

         Equity and net income as determined in accordance with statutory
accounting practices for self-insurance funds are as follows:

<TABLE>
<CAPTION> 
                                          FOR THE       STATUTORY            
                        STATUTORY        YEAR ENDED     NET INCOME
         MARCH 31,        EQUITY         MARCH 31,        (LOSS)
         ---------      ---------        ----------     ----------
              (IN THOUSANDS)                  (IN THOUSANDS)
         <S>             <C>               <C>           <C>
         1996            $16,373           1995          $22,286
         1997            $21,759           1996          $(4,660)
                                           1997          $ 9,036
</TABLE>

         As a self-insurance fund, ESIF recorded for statutory reporting an
asset of $47.3 million and $44.4 million at March 31, 1996 and 1997,
respectively, representing future investment income determined by discounting
loss and LAE reserves at a statutory prescribed rate.  Upon conversion to a
stock property and casualty insurer, ESIF is permitted to record discounts only
on the indemnity portion of permanent disability cases.  The amount of such
discount is estimated at $4.7 million and $4.4 million at March 31, 1996 and
March 31, 1997, respectively.  Upon conversion, ESIF has utilized proceeds of a
public offering to meet statutory basis capital and equity requirements for a
stock property and casualty company.

         In order to improve the regulation of insurer solvency, the National
Association of Insurance Commissioners ("NAIC") issued a model law to implement
risk-based capital ("RBC") requirements for property and casualty insurance
companies, which are designed to assess capital adequacy and to raise the level
of protection that statutory equity provides for policyholder obligations.  The
RBC formula for property and casualty insurance companies measures these major
areas of risk facing property and casualty insurers: (i) underwriting, which
encompasses the risk of adverse loss development and inadequate pricing; (ii)
declines in asset values arising from credit risk; and (iii) declines in asset
values arising from investment risks.  Pursuant to the model law, insurers
having less statutory equity than required by the RBC calculation will be
subject to varying degrees of regulatory action, depending on the level of
capital inadequacy.  Florida, ESIF's state of domicile, has yet to adopt the
provisions of the RBC model law.  Upon completion of the conversion and
recapitalization, the insurance subsidiaries intend to maintain statutory basis
equity in excess of the amount required by Florida law.





                                                                             21
<PAGE>   84

10.  COMMITMENTS AND CONTINGENCIES

         The Company leases office facilities and automobiles under
noncancellable operating leases which expire at various dates through the year
2001.  These leases generally contain renewal options and escalation clauses
based on increases in lessors' operating expenses and other charges.  The
Company anticipates that most leases will be renewed or replaced upon
expiration.

         Future minimum annual payments at March 31, 1997 for all
noncancellable leases are (in thousands):

<TABLE>
         <S>                                                                                          <C>
         Year Ending March 31: 
           1998                                                                                       $1,691
           1999                                                                                        1,599
           2000                                                                                        1,296
           2001                                                                                          116
                                                                                                      ------
         Total minimum future lease payments                                                           4,702
         Income from subleases                                                                          (117)
                                                                                                      ------ 
         Net minimum future lease payments                                                            $4,585
                                                                                                      ======
</TABLE>

         In excess of 80% of the future lease commitments relates to rented
office facilities from certain trustees of ESIF.

         Rental expense for the fiscal year ended March 31, 1997 for operating
leases totaled $1.7 million.

         The Company, in the normal course of business, is named as a defendant
in various legal actions arising principally from claims made under insurance
policies and contracts.  Those actions are considered by the Company in
estimating the loss and LAE reserves.  The Company's management believes that
the resolution of those actions will not have a material effect on the
Company's financial position or results of operations.





                                                                            22
<PAGE>   85

11.  CHANGE IN ACCOUNTING ESTIMATE

         During the fiscal year ended March 31, 1996, ESIF refined its method
of estimating accrued retrospective premiums.  Prior to that fiscal year,
ESIF estimated the accrued retrospective premiums using aggregate premium and
loss data.  The estimation methodology was revised in 1996 such that individual
member premium and loss data was utilized in the calculation.  The refinement
to using more detailed data to perform the estimation was implemented by
management in order to more accurately estimate the accrued retrospective
premium amounts.  This change decreased the accrued retrospective premium asset
and equity at March 31, 1996 by approximately $9.3 million and $6.0 million,
respectively, and decreased operations results for the fiscal year ended March
31, 1997 by approximately $6.0 million.





                                                                           23
<PAGE>   86

12.  SDTF

         The State of Florida maintains the SDTF for the purpose of providing
benefits to workers who have a pre-existing condition and incur a second or
subsequent injury.  The SDTF is funded through annual assessments against
workers' compensation insurers which are based on a percentage of gross
workers' compensation premiums written.

         The SDTF has not charged adequate assessments to actuarially fund its
claims liability.  In 1996, the Florida legislature reauthorized the SDTF for
four years; however, in the future, the Florida legislature may impose greater
assessments on insurance carriers, such as ESIF, to satisfy pending claims.
Changes in the SDTF's operations which decrease the availability of recoveries
from the SDTF, or increase the SDTF assessments payable by ESIF, or changes in
regulations which further limit ESIF's ability to reduce statutory basis loss
reserves for a portion of SDTF future recoverable amounts, may have a material
adverse effect on ESIF's business, financial condition or results of operations.
Discontinuance of the SDTF could have either a favorable or unfavorable effect
on ESIF depending on the relation of the amount of assessments by SDTF to the
amount of recoveries from SDTF.  If the SDTF is discontinued, ESIF believes that
the existing reimbursement obligations of the SDTF would become general
obligations of the State of Florida, although there is no assurance that a
reviewing court would adopt that view.  The SDTF has made no acknowledgment with
regard to the enforceability of its reimbursement obligations to insurers such
as ESIF.

         The SDTF recently underwent legislative review. Under a recent
enactment of the Florida legislature, the SDTF law has been amended so that
claims arising from accidents occurring on or after January 1, 1998 will not be
accepted for reimbursement by the SDTF. The bill states the SDTF will be liable
for reimbursement for subsequent injuries that occur prior to January 1, 1998
and that assessments are to continue for funding purposes.

         Loss and LAE reserves included in the accompanying financial
statements are presented gross of future SDTF recoveries and have been
determined using historical loss data which excludes SDTF recoveries.

         ESIF has recorded an SDTF recoverable of $20.1 million and $21.0
million at March 31, 1996 and 1997, respectively, for the estimated amounts
expected to be received from the SDTF.  The estimated amount of recoveries,
which is management's best estimate of the amount that will be recovered, was
based on claims identified as subject to SDTF recovery as well as ESIF's
recovery experience.

         Amounts recovered from SDTF for the fiscal years ended March 31, 1995,
1996 and 1997 were $5.7 million, $5.6 million and $7.5 million, respectively.
Assessments paid by ESIF to the SDTF were $4.7 million, $5.6 million and $5.1
million for the fiscal years ended March 31, 1995, 1996 and 1997, respectively.

         ESIF records assessments from SDTF as premiums are written.





                                                                            24
<PAGE>   87

13.  ACQUISITION OF SHC

         On January 16, 1996, ESIF purchased all of the outstanding capital
stock of SHC.  The purchase price consisted of $26.0 million paid in cash by
ESIF, $11.5 million in cash distributed by SHC, and $44.0 million of debt
incurred by SHC (see Note 14).  SHC is a third party administrator which
provides insurance related services (including marketing, policy issuance and
servicing, claims processing and administration, loss control, brokerage,
audits, financial and data processing services and risk management services) to
ESIF, four other self-insurance funds and a property and casualty insurance
company.  The acquisition was accounted for using the purchase method, and the
results of operations of SHC are included in the consolidated statement of
operations from the date of acquisition.

         The following unaudited pro forma information presents the
consolidated results of operations of ESIF and SHC as if the acquisition had
been effective at April 1, 1995, after giving effect to adjustments to reflect
the acquisition.  This information is intended for informational purposes only
and may not be indicative of future results of operations:

<TABLE>
<CAPTION>
                                                                                                YEAR ENDED
                                                                                              MARCH 31, 1996
                                                                                              --------------
                                                                                              (IN THOUSANDS)
<S>                                                                                                <C>
Total revenues                                                                                     $169,178
Income before income tax expense                                                                      3,330
Net income                                                                                            2,496
</TABLE>

         To comply with requirements of the Florida DOI, SHC's chairman has
personally indemnified ESIF up to a maximum of $5.0 million for certain loss,
injury or damage to ESIF which may result from the acquisition of SHC.  Such
indemnification will expire on the earlier of January 11, 2001 or on the date
upon which the bank debt, incurred in the acquisition, is retired.





                                                                         25
<PAGE>   88

14.  NOTES PAYABLE

         In connection with the purchase of SHC by ESIF, SHC utilized a bank
term loan and procured a revolving bank credit facility. On the date of the
conversion, May 28, 1997, the Company and First Union National Bank of North
Carolina entered into a new credit agreement pursuant to which, upon
consummation of the conversion, the then-existing debt was restructured. Under
this new credit facility, the term loan is $32.7 million, the revolving line of
credit is $5.0 million with no balance outstanding as of March 31, 1997, and
the interest rate applicable to the entire debt package is initially at prime
plus 1%. Scheduled quarterly payments of the term loan, including related
interest, began on September 30, 1996.

         Maturities for the term loan and reductions in the availability of the
revolving credit facility are as follows:

<TABLE>
<CAPTION>
                                                                                                 REDUCTION IN THE
                                                                                                 AVAILABILITY OF
                                                                            TERM                  THE REVOLVING
                                                                            LOAN                 CREDIT FACILITY
                                                                            ----                 ---------------
                                                                                     (IN THOUSANDS)
         <S>                                                                 <C>                        <C>
         Years Ending March 31:
           1998                                                                2,875                         --
           1999                                                                5,200                         --
           2000                                                                6,000                         --
           2001                                                                8,300                      1,500
         Thereafter                                                           10,300                      3,500
                                                                             -------                     ------
                                                                             $32,675                     $5,000
                                                                             =======                     ======
</TABLE>

         As collateral for the debt, SHC pledged the issued and outstanding
stock of SCI and three other wholly owned subsidiaries, Bridgefield Casualty
Insurance Company, Meritec Solutions, Inc. and Carolina Summit Healthcare, Inc.
The credit agreement contains certain covenants which require that certain
financial ratios and/or levels be maintained by SHC and its insurance
subsidiary, Bridgefield Casualty.  Among these covenants are the following:
operating leverage, fixed charge coverage ratio, minimum stockholder equity and
risk based capital for the insurance subsidiary.

         In addition, the credit agreement places certain operational 
restrictions on SHC.





                                                                            26
<PAGE>   89

15.  EMPLOYEE BENEFIT PLANS

         The Company's subsidiary, SCI, has a deferred savings and
profit-sharing plan (the "401(k)") covering substantially all employees of SHC.
Under the 401(k), SCI makes contributions equal to 75% of the participant's
contributions, not to exceed 6% of the participant's annual compensation.
SCI's contributions to the 401(k) totaled $0.38 million for the year.





                                                                         27
<PAGE>   90

16.  FAIR VALUES OF FINANCIAL INSTRUMENTS

         The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:

         _       Cash and cash equivalents, short-term investments: The
                 carrying amounts reported in the balance sheets for these
                 instruments approximate fair values.

         _       Investment securities: Fair values for debt and equity security
                 investments are based on quoted market prices.

         _       Premiums and accounts receivable: The carrying amounts of the
                 Company's receivables approximate fair values.

         _       Notes payable: SHC has $32.675 million of notes payable at
                 March 31, 1997 that approximates its fair value.

         The Company's fair value of reinsurance recoverable approximates its
carrying value for March 31, 1996 and 1997, respectively, as summarized below:

<TABLE>
<CAPTION>
                                                              MARCH 31, 1996                  MARCH 31, 1997
                                                              --------------                  --------------
                                                         CARRYING           FAIR           CARRYING           FAIR
                                                          AMOUNT           VALUE            AMOUNT           VALUE
                                                          ------           -----            ------           -----
                                                                               (IN THOUSANDS)
<S>                                                      <C>                <C>               <C>              <C>
Reinsurance recoverable                                  $111,519           $111,519          $94,009          $94,009
</TABLE>






                                                                              28

<PAGE>   91

17.  DISCONTINUED OPERATIONS

         Effective July 31, 1996, the Company decided to discontinue its
computer software development operation.  As of December 31, 1996 all assets
have been disposed and the Company has recognized an after tax loss of
approximately $1.2 million on the disposition of this operation (including
estimated operating losses to the disposition date).

         The operating results of the computer software development subsidiary
for the period until disposition were as follows (in thousands):

<TABLE>
         <S>                                            <C>
         Revenue                                        $    660
         Expenses                                          2,012
                                                        --------
         Loss before income taxes                       $ (1,353)
         Income tax (benefit)                               (460)
                                                        -------- 
         Net loss                                       $   (892)
                                                        ======== 
</TABLE>





                                                                              29
   
<PAGE>   92

18.  DISPOSITION

         Effective July 31, 1996, the Company decided to terminate its efforts
to develop a healthcare subsidiary in North Carolina.  This start up effort was
initiated by SHC prior to the acquisition of SHC by ESIF.  The disposition of
this subsidiary by a sale of its stock was completed during the second quarter
of 1997.

         The operating results for the healthcare subsidiary for the year ended
March 31, 1997 were as follows (in thousands):

<TABLE>
         <S>                                               <C>
         Revenue                                           $ 114
         Expenses                                            701
                                                           -----
         Loss before income taxes                           (587)
         Income tax benefit                                 (200)
                                                           ----- 
         Net loss                                          $(387)
                                                           ===== 

</TABLE>






                                                                             30
<PAGE>   93

19.  SEGMENT INFORMATION

         The operations of ESIF, prior to the January 1996 acquisition of SHC,
were solely in the workers' compensation insurance industry segment.
Subsequent to the acquisition of SHC, ESIF also operates in the insurance
administration segment.  Financial information by industry segment for
revenues, income before income taxes, and identifiable assets are summarized as
follows:

<TABLE>
<CAPTION>
                                                                   WORKERS'
                                                                 COMPENSATION         INSURANCE        INTERCOMPANY
                                                 TOTAL            INSURANCE         ADMINISTRATION      ELIMINATION
                                                 -----            ---------         --------------      -----------
                                                                          (IN THOUSANDS)
<S>                                            <C>                  <C>                <C>                 <C>
Year Ended March 31, 1995
  Revenues                                      $140,815             $140,815                --                  --
  Income before income taxes                    $ 30,154             $ 30,154                --                  --
  Identifiable assets                           $425,206             $425,206                --                  --
Year Ended March 31, 1996
  Revenues                                      $140,328             $132,393           $15,051            $ (7,116)
  Income (loss) from
    continuing operations
    before income taxes                         $   (123)            $ (1,559)          $ 1,436                  --
  Identifiable assets                           $491,844             $401,679           $90,165                  --
Year Ended March 31, 1997
  Revenues                                      $144,773             $110,733           $55,935            $(21,895)
  Income (loss) from   
    continuing operations
    before income taxes                         $ 10,692             $ 11,387           $  (695)                 --
  Identifiable assets                           $447,617             $379,179           $68,438                  --

</TABLE>
         Depreciation expense and capital expenditures are not considered
material.

         The preceding financial information does not include the computer
software operations which are presented as discontinued operations in the
accompanying financial statements.




                                                                           31

<PAGE>   94

20.  RELATED PARTY TRANSACTIONS

         As more fully described in Note 10, the Company has entered into office
premises lease agreements with certain Trustees of ESIF.

         As more fully described in Note 5, the Company has entered into
reinsurance agreements with an insurance company in which a Trustee of ESIF has
an ownership interest. Included as reinsurance recoverable in the accompanying
balance sheets are recoverables from this insurance company in amounts of $10.3
million and $11.9 million as of March 31, 1996 and 1997, respectively.

         As more fully described in Note 13, to comply with requirements of the
Florida DOI, SHC's president and chief executive officer has personally
indemnified ESIF up to a maximum of $5.0 million for certain loss, injury, or
damage to ESIF, if any, which may result from the acquisition of SHC.

         Entities in which SHC's president and chief executive officer held
ownership interests have provided certain transportation related services to
SHC.  Fees paid by SHC to these entities aggregate approximately $0.4 million
and $0.03 million for the years ended March 31, 1996 and 1997, respectively.

         SHC's president and chief executive officer is also a member of the
Board of Directors of Florida Retail Federation (the "Association"), which is
the sponsoring trade association for Florida Retail Federation Self Insurers
Fund ("FRF"), one of the group self-insurance funds administered by SHC.  The
Association, as the fund sponsor, is entitled to a fee equal to 1% of FRF's
premiums earned in each year, and SHC is obligated to pay such fee out of the
administrative fee it receives from FRF.  During the fiscal years ended March
31, 1995, 1996 and 1997, SHC paid approximately $1.0 million, $0.9 million and
$0.6 million to the Association for such fees.  During the years ended March
31, 1995, 1996 and 1997, FRF paid to SHC fees for administrative services of
approximately $30.5 million, $27.7 million and $24.5 million, respectively.





                                                                          32
<PAGE>   95


                     INDEX OF FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
                                                                                                          PAGE
                                                                                                          ----
<S>                                                                                                        <C>
Schedule I - Summary of Investments.....................................................                   S-2

Schedule IV - Reinsurance...............................................................                   S-3

Schedule VI - Supplemental Information Concerning Insurance Operations..................                   S-4
</TABLE>


























                                      S-1

<PAGE>   96
 
                         SUMMIT HOLDING SOUTHEAST, INC.
                                AND SUBSIDIARIES
 
                      SCHEDULE I -- SUMMARY OF INVESTMENTS
 
<TABLE>
<CAPTION>
COLUMN A                                                     COLUMN B   COLUMN C      COLUMN D
--------                                                     --------   --------    -------------
                                                                                      AMOUNT AT
                                                                                     WHICH SHOWN
                                                                          FAIR         IN THE
TYPE OF INVESTMENT                                             COST      VALUE      BALANCE SHEET
------------------                                           --------   --------    -------------
                                                                      (in thousands)
<S>                                                          <C>        <C>         <C>
                                         MARCH 31, 1996
Securities available-for-sale:
  Fixed maturities:
     U.S. Government and other
       U.S. government agencies............................  $ 71,975   $ 71,633      $ 71,633
     States, municipalities and political subdivisions.....    68,697     69,361        69,361
     Corporate obligations.................................    37,258     37,824        37,824
                                                             --------   --------      --------
          Total fixed maturities...........................   177,930    178,818       178,818
                                                             --------   --------      --------
Equity securities:
  Common stocks:
     Public utilities......................................       141        153           153
     Banks, trusts and insurance companies.................       579        607           607
     Industrial and miscellaneous..........................     8,856     10,335        10,335
                                                             --------   --------      --------
          Total common stocks..............................     9,576     11,095        11,095
  Non redeemable preferred stock...........................     3,167      3,156         3,156
                                                             --------   --------      --------
          Total equity securities..........................    12,743     14,251        14,251
                                                             --------   --------      --------
Short-term investments.....................................    19,770     19,770        19,770
                                                             --------   --------      --------
          Total investments................................  $210,443   $212,839      $212,839
                                                             ========   ========      ========
                                         MARCH 31, 1997
Securities available-for-sale:
  Fixed maturities:
     U.S. Government and other
       U.S. government agencies............................  $ 56,265   $ 55,246      $ 55,246
     States, municipalities and political subdivisions.....    83,455     83,317        83,317
     Corporate obligations.................................    41,861     41,512        41,512
                                                             --------   --------      --------
          Total fixed maturities...........................   181,581    180,075       180,075
                                                             --------   --------      --------
Equity securities:
  Common stocks:
     Public utilities......................................       499        498           498
     Banks, trusts and insurance companies.................       737        873           873
     Industrial and miscellaneous..........................    10,281     12,368        12,368
                                                             --------   --------      --------
          Total common stocks..............................    11,517     13,739        13,739
  Non redeemable preferred stock...........................     4,452      4,547         4,547
                                                             --------   --------      --------
          Total equity securities..........................    15,969     18,286        18,286
                                                             --------   --------      --------
Short-term investments.....................................    14,733     14,733        14,733
                                                             --------   --------      --------
          Total investments................................  $212,283   $213,094      $213,094
                                                             ========   ========      ========
</TABLE>
<PAGE>   97
 
                         SUMMIT HOLDING SOUTHEAST, INC.
                                AND SUBSIDIARIES
 
                           SCHEDULE IV -- REINSURANCE
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
COLUMN A                           COLUMN B   COLUMN C     COLUMN D    COLUMN E    COLUMN F
--------                           --------   ---------    ---------   --------    --------
                                                            ASSUMED                  % OF
                                              CODED TO       FROM                   AMOUNT
                                                OTHER        OTHER                 ASSUMED
DESCRIPTION                         DIRECT    COMPANIES    COMPANIES     NET        TO NET
-----------                        --------   ---------    ---------   --------    --------
<S>                                <C>        <C>          <C>         <C>         <C>
Year ended March 31, 1995:
  Premiums -- Workers'
     Compensation................  $135,033    $6,544         $0       $128,489        0%
 
Year ended March 31, 1996:
  Premiums -- Workers'
     Compensation................  $119,028    $4,135         $0       $114,893        0%
 
Year ended March 31, 1997:
  Premiums -- Workers'
     Compensation................  $105,044    $7,723         $0       $ 97,321        0%
</TABLE>
<PAGE>   98
 
                         SUMMIT HOLDING SOUTHEAST, INC.
                                AND SUBSIDIARIES
 
    SCHEDULE VI -- SUPPLEMENTAL INFORMATION CONCERNING INSURANCE OPERATIONS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A                           COLUMN B      COLUMN C     COLUMN D    COLUMN E     COLUMN F     COLUMN G
--------                          -----------   ----------    ---------   --------    ----------   ----------
                                                 RESERVES
                                                FOR UNPAID
                                   DEFERRED     CLAIMS AND
                                    POLICY        CLAIM       DISCOUNT                                NET
                                  ACQUISITION   SETTLEMENT    DEDUCTED    UNEARNED    NET EARNED   INVESTMENT
SEGMENT                              COSTS       EXPENSES     IN COL. C   PREMIUMS     PREMIUMS      INCOME
-------                           -----------   ----------    ---------   --------    ----------   ----------
<S>                               <C>           <C>           <C>         <C>         <C>          <C>
Year ended March 31, 1995:
  Workers' Compensation
    Insurance...................      $0         $367,391       $4,875       $0        $128,489     $12,205
Year ended March 31, 1996:
  Workers' Compensation
    Insurance...................      $0         $387,632       $4,668       $1,042    $114,893     $13,209
Year ended March 31, 1997:
  Workers' Compensation
    Insurance...................      $0         $358,744       $4,367       $5,794    $ 97,321     $12,770
 
<CAPTION>
COLUMN A                               COLUMN H           COLUMN I      COLUMN J    COLUMN K
--------                          -------------------   ------------   ----------   --------
                                    CLAIMS & CLAIMS                       NET
                                  SETTLEMENT EXPENSES   AMORTIZATION      PAID
                                  INCURRED RELATED TO   OF DEFERRED     CLAIMS &
                                  -------------------      POLICY        CLAIMS       NET
                                  CURRENT     PRIOR     ACQUISITION    SETTLEMENT   PREMIUMS
SEGMENT                            YEAR       YEARS        COSTS        EXPENSES    WRITTEN
-------                           -------    --------   ------------   ----------   --------
<S>                               <C>        <C>        <C>            <C>          <C>
Year ended March 31, 1995:
  Workers' Compensation
    Insurance...................  $94,520    $(25,404)    $10,078       $90,083     $144,427
Year ended March 31, 1996:
  Workers' Compensation
    Insurance...................  $84,058    $ 10,786     $ 9,707       $80,115     $121,296
Year ended March 31, 1997:
  Workers' Compensation
    Insurance...................  $69,014    $ (3,862)    $ 9,655       $74,396     $117,043
</TABLE>
<PAGE>   99




                         SUMMIT HOLDING SOUTHEAST, INC.

                                INDEX OF EXHIBITS

         The following exhibits are filed with or incorporated by reference in
this report. Where such filing is made by incorporation by reference to a
previously filed registration statement or report, such registration statement
or report is identified in parenthesis.

<TABLE>
<CAPTION>
EXHIBIT NO.                                           DESCRIPTION                                           PAGE
-----------                                           -----------                                           ----
<S>      <C>                                                                                                 <C>
2.1      Amended Plan of Conversion and Recapitalization of Employers Self
         Insurers Fund. (Exhibit 2.1 of Registration Statement on Form S-1 (File
         No. 333-16499).

2.2      Recapitalization Agreement between Summit and Employers Self Insurers
         Fund. (Exhibit 2.2 of Registration Statement on Form S-1 (File No.
         333-16499).

2.3      Order of the Florida DOI approving the Plan of Conversion. (Exhibit 2.3
         of Registration Statement on Form S-1 (File No. 333-16499).

3.1      Articles of Incorporation of Summit. (Exhibit 3.1 of Registration
         Statement on Form S-1 (File No. 333-16499).

3.2      Bylaws of Summit. (Exhibit 3.2 of Registration Statement on Form S-1
         (File No. 333-16499).

3.3      Form of Certificate of Designation, Preferences and Rights of Series A
         Preferred Stock of Summit. (Exhibit 3.3 of Registration Statement on
         Form S-1 (File No. 333-16499).

4.1      Specimen Stock Certificate of the Common Stock of Summit. (Exhibit 4.1
         of Registration Statement on Form S-1 (File No. 333-16499).

4.2      Specimen Stock Certificate of the Series A Preferred Stock of Summit.
         (Exhibit 4.2 of Registration Statement on Form S-1 (File No.
         333-16499).

10.1     Employment Agreement between Summit and William B. Bull - filed
         herewith.

10.2     Employment Agreement between Summit and Russell L. Wall - filed
         herewith.

10.3     Credit Agreement dated May 28, 1997 among Summit, the Lenders named
         therein and First Union National Bank of North Carolina, as Agent.
         (Incorporated by reference to Exhibit 10.1 of Current Report on Form
         8-K (Date of Report: May 21, 1997)).
</TABLE>



                                      E-1


<PAGE>   100

<TABLE>
<S>      <C>                                                              
10.4     Summit 1996 Long-Term Incentive Plan. (Exhibit 10.4 of Registration
         Statement on Form S-1 (File No. 333-16499).

10.5     The Summit Consulting, Inc. Retirement Plan. (Exhibit 10.5 of
         Registration Statement on Form S-1 (File No. 333-16499).

10.6     Amendment No. 1 to The Summit Consulting, Inc. Retirement Plan.
         (Exhibit 10.6 of Registration Statement on Form S-1 (File No.
         333-16499).

10.7     Amendment No. 2 to The Summit Consulting, Inc. Retirement Plan.
         (Exhibit 10.7 of Registration Statement on Form S-1 (File No.
         333-16499).

10.8     Third Amendment to The Summit Consulting, Inc. Retirement Plan - filed
         herewith.

10.9     Florida Retail Federation Self Insurers Fund Administrator's Contract,
         with Assignment and Addendum. (Exhibit 10.8 of Registration Statement
         on Form S-1 (File No. 333-16499).

10.10    Louisiana Employers Safety Association Self Insurers Fund
         Administrator's Contract, with Addendum. (Exhibit 10.9 of Registration
         Statement on Form S-1 (File No. 333-16499).

10.11    Louisiana Retailers Association Self Insurers Fund Administrator's
         Contract, with Addendum. (Exhibit 10.10 of Registration Statement on
         Form S-1 (File No. 333-16499).

10.12    Kentucky Retail Federation Self Insurers Fund Administrator's Contract.
         (Exhibit 10.11 of Registration Statement on Form S-1 (File No.
         333-16499).

16.1     Letter from Brinton & Mendez relating to change in accountants.
         (Exhibit 16.1 of Registration Statement on Form S-1 (File No.
         333-16499).

27.1     Financial Data Schedule - (for SEC use only).
</TABLE>





                                      E-2