SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    FORM 10-K
                                   (Mark One)
        [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended December 31, 1997
                                       OR

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

Commission File No. 2-35669

                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
               (Exact name of Company as specified in its charter)

             Florida                         59-1231733
       (State or other jurisdiction    (Employer Identification Number)
    of incorporation or organization)

                   755 Rinehart Road, Lake Mary, Florida 32746
               (Address of principal executive offices) (Zip Code)

Company's telephone number, including area code:(407) 321-7113

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

                                             Name of Each Exchange on
             Title of Each Class              Which Registered
                   None                              None

           Securities registered pursuant to Section 12(g) of the Act:
                                      None
                                (Title of Class)

        Indicate  by check mark  whether  the  Company (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 Company
was  required  to file such  reports),  and (2) has been  subject  to the filing
requirements for the past 90 days.       X Yes   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 Company'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

State the aggregate market value of the voting stock held by nonaffiliates of
the Company: $5,585,889 as of February 27, 1998.

The number of shares of the Company outstanding as April 1, 1997 is as follows:
                                                    Number Outstanding at
                Title of Class                      April 1, 1998
               Common Stock
               Par value $1.00 per share                1,907,989

                                        1

<PAGE>



                                     PART I
Item 1.  Business.

        Southern  Security Life  Insurance  Company  ("the  Company") is a legal
reserve life insurance company  authorized to transact business in the states of
Alabama,  Florida,  Georgia,  Hawaii, Indiana,  Illinois,  Kentucky,  Louisiana,
Michigan,  Missouri,  Oklahoma,  South  Carolina,  Tennessee  and Texas.  It was
incorporated  under Florida law in 1966 and was licensed and commenced  business
in 1969.  The  Company  obtained  authorization  in the  states of  Indiana  and
Oklahoma  in 1996  and will  continue  the  process  of  seeking  authorization,
directly or through  acquisition,  to transact  business  in  additional  states
during 1997. During 1997, approximately 45% of the premium income of the Company
was from business in force in its state of domicile. The Company's only industry
segment is the ordinary life, accident and health and annuity business.

        The Company at present  writes  universal  life  policies  with  various
companion  riders  as well as a  traditional  life  product.  In the past it has
written various forms of ordinary life insurance policies and annuity contracts.
The  Company's   accident  and  health  insurance  business  has  never  been  a
significant  portion of the  Company's  business.  It does not  presently  write
industrial life or group life insurance other than through its  participation as
a reinsurer in the Servicemen's Group Life Insurance Program ("SGLI").  In 1996,
the Company  introduced a new whole life product designed to appeal to the final
expense market.

        The Company  introduced  its first  universal  life  product in 1986 and
currently has two principal  universal life products in force.  These  universal
life products offer  flexibility to the client as well as tax  advantages,  both
currently and upon the death of the insured. These products allow the Company to
better  compete in the current market  environment.  In excess of 43% and 60% of
the policies written by the Company in 1997 and 1996 respectively,  were for the
universal life products.

        During the first  quarter 1996,  the Company  introduced a new series of
products  designed for the seniors market.  This new series targets the needs of
senior  citizens  especially  as they  plan for  their  final  expenses.  A lead
generation  program was used to support  this new product as it was  introduced.
57% of the policies  written in 1997 represent this new series.  New field sales
representatives are being actively recruited to market the product.

        The Company is  continuing  to support its  traditional  universal  life
marketing as well. The Company  established a lead generation  program which has
been coupled with a recruiting  program for new sales agents to help rebuild the
market.  This has  helped  to  increase  opportunities  to  expand  sales of its
universal  life products  which are designed to provide an insurance  program as
well

                                        2

<PAGE>



as a savings vehicle through the cash values of the policy.

        The  following  table  provides   information  (on  a  statutory  basis)
concerning  the  amount and  percentage  of premium  income  resulting  from the
principal  lines  of  insurance  written  by  the  Company  during  the  periods
indicated:

<TABLE>
<CAPTION>

                            1997                  1996                         1995
                            ====                  ====                         ====

                                Per-                     Per-                       Per-
                    Amount      centage        Amount    centage       Amount       centage
<S>              <C>            <C>         <C>          <C>        <C>          <C>
Life
Insurance-
Ordinary
(1)(2)             $8,386,972      94%      9,225,755    92%         10,220,659      93%

Individual
Annuities
(1)                    70,809       1%        307,618     3%            195,473       2%

Life
Insurance-
Group
(SGLI)                476,455       5%        529,554     5%            518,597       5%

Other -
Accident &
Health                 11,323       0%          1,274     0%              1,385       0%
                   -----------    ----   ------------   ----         -----------    ----
  
                  $ 8,945,559     100%      10,064,201       100%       10,936,114        100%
                  ===========     ====      ==========       ====       ==========        ====

</TABLE>


(1)     A portion of each of the deposit term  policies  previously  sold by the
        Company represents ordinary life insurance and the balance represents an
        individual annuity.

(2)     The 1996 and 1997 premium income for life  insurance-ordinary are net of
        reductions of $1,773,148 and $1,517,988,  respectively, in ceded premium
        paid to all reinsurers, including Mega Life.










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                                        3

<PAGE>



        The  following  table  gives   information  [on  a  generally   accepted
accounting principles basis] for the Company concerning operating ratios for the
periods indicated:

<TABLE>
<CAPTION>
                                               1997                1996                1995
                                               ----                ----                ----

<S>                                   <C>                  <C>                  <C>
Total Net Insurance
 revenues                                $7,643,650           7,915,027           8,158,938

Benefit Costs:
  Amount                                 $4,307,013           3,818,562           4,061,096
  Ratio to Net Premium
   Income                                     56.4%               48.2%               49.8%

Acquisition Expenses:
  Amount                                 $3,542,617           3,364,738           3,069,742
  Ratio to Net Premium
   Income                                     46.3%               42.5%               37.6%

General Insurance Expenses:
  Amount                                 $3,382,255           3,246,552           2,735,280
  Ratio to Net Premium
    Income                                    44.3%                 41%               33.5%

Income Before Income Taxes:
  Amount                                   $249,410           1,588,505           1,274,903
  Ratio to Net Premium
   Income                                      3.3%               20.1%               15.6%
  Ratio to Total Income                        2.1%               13.1%               11.4%
  Ratio to Equity                              1.5%               10.1%                8.6%

</TABLE>


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                                        4

<PAGE>



        The following table provides  information  about the Company  concerning
changes in life insurance in force (shown in thousands -000 omitted)  during the
periods indicated (exclusive of acciden tal death benefits):

<TABLE>
<CAPTION>
                                                 1997              1996                1995
                                                 ----              ----                ----
<S>                                    <C>                  <C>                   <C>
Total life insurance in force 
at beginning of period:
   Ordinary Whole Life &
    Endowment-Participating                      $441               584                 583
   Ordinary Whole Life &
    Endowment-Non-Participating             1,157,624         1,289,250           1,459,149
   Term                                         7,884             8,371               9,422
   Reinsurance Assumed                        537,701           507,552             531,502
                                              -------           -------             -------

   Total                                   $1,703,650         1,805,757           2,000,656

Additions (including re-
insurance assumed):
   Ordinary Whole Life &
    Endowment-Participating                     - 0 -             - 0 -               - 0 -
   Ordinary Whole Life &
    Endowment-Non-Participating                82,390           122,578             125,961
   Term                                         - 0 -             - 0 -               - 0 -
   Reinsurance Assumed                         19,021            64,071                   8
                                              -------           -------             -------

   Total                                     $101,411           186,649             125,969


Terminations:
  Death                                        $2,010             1,756               2,204
  Lapse and Expiry                             57,435            73,919              89,868
  Surrender                                   186,654           212,801             228,334
  Other                                           152               280                 463
                                              -------           -------            --------
  Total                                      $246,251           288,756             320,869

Life Insurance in force at end of period:
   Ordinary Whole Life &
   Endowment-Participating                       $381               441                 583
   Ordinary Whole Life &
   Endowment-Non-Participating              1,019,179         1,157,624           1,289,250
   Term                                         6,478             7,884               8,371
   Reinsurance Assumed                        532,772           537,701             507,552
                                              -------           -------             -------

   Total                                   $1,558,810         1,703,650           1,805,756
                                            ---------         ---------           ---------
Reinsurance Ceded                            (337,901)         (386,084)           (448,382)
                                             --------          --------            --------
Total after Reinsurance Ceded              $1,220,909         1,317,566           1,357,374
                                            =========         =========           =========

Lapse Ratio (Reflecting termina-
tion by surrender and lapse;
ordinary life insurance only):                   20.0%             20.5%               21.1%
</TABLE>

                                        5

<PAGE>



     The Company invests and reinvests portions of its funds in securities which
are permitted  investments  under the laws of the State of Florida,  and part of
its  revenue is  derived  from this  source.  Generally,  securities  comprising
permitted   investments  include   obligations  of  Federal,   state  and  local
governments;  corporate  bonds and  preferred  and common  stocks;  real  estate
mortgages and certain leases. The following table summarizes certain information
regarding the Company's investment activities:

<TABLE>
<CAPTION>
                  Mean                  Gross                 Net
Fiscal         Investment             Investment           Investment            Net
Year           Assets (1)              Income(2)           Income (3)          Yield (4)
-----          ----------             ----------           ----------          ---------
<S>           <C>                    <C>                 <C>                  <C>

1997           $51,094,803             3,565,206            3,545,311            6.94%

1996           $50,752,712             3,508,161            3,318,627            6.54%

1995           $46,899,142             3,225,630            2,998,875            6.39%
</TABLE>


(1)     Computed  pursuant to valuations  prescribed  under  generally  accepted
        accounting principles.

(2)     Includes capital gains net of capital losses.

(3)     Net of  investment  expense and before  income  taxes or extra  ordinary
        terms.

(4)     Computed on an  annualized  basis.  Represents  ratio of net  investment
        income to mean invested assets.

        The Company  continues its  activities  as a qualified  lender under the
Federal Family Educational Loan Program.  Through this program the Company makes
various types of student and parent loans  available.  All student loans made by
the Company are guaranteed by the Federal Government. As it has in the past, the
Company  sells  these  student  loans on a periodic  basis to the  Student  Loan
Marketing Association ("SLMA") thereby keeping these funds liquid.

        The  Company  presently  sells its  policies on a general  agency  basis
through a field force  consisting of approximately  295 agents.  All such agents
are  licensed  as agents  of,  and sell for,  the  Company  and are  independent
contractors  who are paid  exclusively  on a  commission  basis for sales of the
Company's policies. Some of the Company's agents are part-time insurance agents.
Most of the Company's  agents are  associated  with  Insuradyne  Corporation,  a
wholly-owned subsidiary of the Company's parent,  Consolidare Enterprises,  Inc.
See "Certain  Relationships  and Related  Transactions"  in item 13, Part III of
this Report.

        The Company  presently  employs  36  persons,  none  of whom are covered
under any collective bargaining agreements. The Company

                                        6

<PAGE>



feels it has good relations with its employees.

        Section 624.408 of the Florida Statutes  requires a stock life insurance
company to  maintain  minimum  surplus on a  statutory  basis at the  greater of
$1,500,000 or four percent (4%) of total  liabilities.  The  Company's  required
statutory  minimum  surplus  calculated  in  accordance  with  this  section  is
approximately  $1,900,000. If the capital and surplus of the Company computed on
such basis should fall below that amount, then the Company's license to transact
insurance  business  in the State of Florida,  the  Company's  most  significant
market,  could be revoked  unless the  deficiency is promptly  corrected.  As of
December 31, 1997 the Company had statutory  capital and surplus of  $9,316,923,
well in excess of the required minimum.

        The  Risk-Based  Capital for Life and/or Health  Insurers Model Act (the
"Model Act") was adopted by the National Association of Insurance  Commissioners
(NAIC) in 1992.  The main  purpose  of the  Model  Act is to  provide a tool for
insurance regulators to evaluate the capital resources of insurers as related to
the specific  risks which they have  incurred  and is used to determine  whether
there is a need  for  possible  corrective  action.  The  Model  Act or  similar
regulations may have been or may be enacted by the various states.

        The Model Act provides for four different  levels of regulatory  action,
each of which may be triggered if an insurer's  Total  Adjusted  Capital is less
than a corresponding "level" of Risk-Based Capital ("RBC").

        The "Company  Action Level" is triggered if an insurer's  Total Adjusted
        Capital  is less than 200% of its  "Authorized  Control  Level  RBC" (as
        defined in the Model Act), or less than 250% of its  Authorized  Control
        Level RBC and the insurer  has a negative  trend  ("the  Company  Action
        Level").  At the  Company  Action  Level,  the  insurer  must  submit  a
        comprehensive plan to the regulatory  authority of its state of domicile
        which  discusses  proposed  corrective  actions to improve  its  capital
        position.

        The  "Regulatory  Action  Level"  is  triggered  if an  insurer's  Total
        Adjusted Capital is less than 150% of its Authorized  Control Level RBC.
        At the Regulatory Action Level, the regulatory  authority will perform a
        special  examination  of the  insurer  and  issue  an  order  specifying
        corrective actions that must be followed.

        The  "Authorized  Control  Level" is  triggered  if an  insurer's  Total
        Adjusted Capital is less than 100% of its Authorized  Control Level RBC,
        and at that level the regulatory  authority is authorized  (although not
        mandated) to take regulatory control of the insurer.


                                        7

<PAGE>



        The  "Mandatory  Control  Level"  is  triggered  if an  insurer's  Total
        Adjusted  Capital is less than 70% of its Authorized  Control level RBC,
        and at that level the regulatory  authority must take regulatory control
        of the  insurer.  Regulatory  control  may  lead  to  rehabilitation  or
        liquidation of an insurer.

        Based on  calculations  using the NAIC  formula as of December 31, 1997,
the Company was well in excess of all four of the control levels listed.

        The  industry  in which the  Company is  engaged is highly  competitive.
There are in excess of 850 life insurance companies licensed in Florida, where a
substantial  amount of the Company's  premium income is produced,  and there are
comparable numbers of insurance companies licensed in Alabama,  Georgia, Hawaii,
Illinois, Kentucky, Louisiana, Michigan, Missouri, South Carolina, Tennessee and
Texas.  Many of the  Company's  competitors  have been in  business  for  longer
periods of time, have substantially  greater financial  resources,  larger sales
organizations, and have broader diver sification of risks. A large number of the
Company's competitors engage in business in many states and advertise nationally
while the Company  conducts its business on a regional basis. The Company is not
a  significant  factor in the life  insurance  business  in any state  where the
Company does business.

        The states of Alabama,  Florida,  Georgia,  Hawaii,  Illinois,  Indiana,
Kentucky, Louisiana, Michigan, Missouri, Oklahoma, South Carolina, Tennessee and
Texas  require that  insurers  secure and retain a license or a  certificate  of
authority  based on  compliance  with  established  standards  of  solvency  and
demonstration of managerial  competence.  The Company, like other life insurers,
is subject to extensive regulation and supervision by state insurance regulatory
authorities.  Such  regulation  relates  generally  to such  matters  as minimum
capitalization,  the nature of and limitations on investments,  the licensing of
insurers and their agents, deposits of securities for the benefit and protection
of  policyholders,  the  approval of policy  forms and premium  rates,  periodic
examination  of the affairs of insurance  companies,  the  requirement of filing
annual  reports on a specified  form and the provision for various  reserves and
accounting standards.

        The  Company  reinsures  or places a portion of its  insured  risks with
other  insurers.  Reinsurance  reduces  the  amount  of  risk  retained  on  any
particular policy and, correspondingly, reduces the risk of loss to the Company,
thus giving it greater financial stability. Reinsurance also enables the Company
to write more  policies and policies in larger  amounts than it would  otherwise
consider prudent. On the other hand,  reinsurance  potentially reduces earnings,
since a portion of the premiums  received must be paid to the insurers  assuming
the reinsured portion of the risk.


                                        8

<PAGE>



        The  Company  currently  cedes  its  new  reinsurance  to  Businessmen's
Assurance Company ("BMA") and the Reinsurance Company of Hannover, both of which
are unaffiliated reinsurers.  Under the terms of the reinsurance agreements, the
Company cedes all risks in excess of the Company's current retention limits.

        The Company  currently  retains a maximum of $75,000 on any one life and
lesser amounts on substandard risks.

        Reinsurance  for  policy  amounts in excess of the  Company's  retention
limits is ceded on a  renewable  term basis,  under  which the amount  reinsured
normally decreases annually by the amount of increase in the policy reserve.  In
addition,  the Company has coinsurance  agreements with several insurers,  under
which premiums are shared based upon the share of the risk assumed.

        The Company remains directly liable to policyholders for the full amount
of all  insurance  directly  written by it,  even though all or a portion of the
risk is reinsured.  Reinsurers,  however, are obligated to reimburse the Company
for the  reinsured  portion of any claims paid.  Consequently,  if any reinsurer
becomes insolvent or is otherwise unable to make such reimbursement, the Company
would suffer an unexpected  loss.  The Company has no reason to believe that any
of its  reinsurers  will be unable to perform their  obligations  under existing
reinsurance agreements.

        On December 31, 1992, the Company entered into a Coinsurance Reinsurance
Agreement with United Group Insurance Company  ("UGIC"),  now Mega Life. In this
agreement,  UGIC agreed to indemnify and the Company  agreed to transfer risk to
UGIC in the amount of 18% of all  universal  life premium  paying  polices which
were in force on December  31, 1992.  Mega Life is an A rated  company with A.M.
Best and is an authorized reinsurer in the State of Florida.

        As a result of the 1992  agreement,  the  Company  will  continue to pay
reinsurance premiums to Mega Life while receiving ceding commissions.  As a part
of the coinsurance agreement, Mega Life agreed to share in the expenses of death
claims, surrenders, commissions, taxes and the funding of policy loans.

        The Company  does not assume any  reinsurance  at the present time other
than its participation in SGLI.

        The Company is required to establish  policy  benefit and other reserves
which are calculated in accordance with statutory  requirements and standards of
actuarial  practice  and  established  at amounts  which,  with  additions  from
premiums to be  received  and assumed  interest  on policy  reserves  compounded
annually,  are  believed to be  sufficient  to meet policy  obligations  as they
mature. Life reserves for the Company are based upon the Commissioner's 1958 and
1980 Standard Ordinary Table of Mortality, with interest on policies computed at
3, 3-1/2, 4 or 4-1/2%.

                                        9

<PAGE>



Annuity reserves are based on the 1937 Standard Annuity Table,  with interest on
policies  computed  at 3-1/2  or 4%.  Reserves  on the  annuity  portion  of the
Company's  deposit  term  policies  are  computed  on the  accumulation  method.
Reserves for  universal  life  policies,  which  comprise  most of the Company's
insurance in force, have been valued by the California Method which was approved
by the  Florida  Department  of  Insurance.  Reserves  under this method are the
linear average of the policy  account value and the policy cash surrender  value
(account value less the surrender charge).

        In 1994,  the Florida  Department of Insurance  issued a new  regulation
that  required all  companies who are not already using the CRVM method to phase
into that method over a period of five years. As required, the Company has filed
with the Department  its plan to comply with the new regulation and  implemented
the plan beginning  January 1, 1995. This has resolved then pending  discussions
with the Florida Insurance  Department on the Company's  reserving methods.  The
CRVM  reserving  method  applies  only  to  the  Company's  statutory  financial
statements. The 1997, 1996 and 1995 increase in the statutory reserve due to the
implementation  of this  regulation  was  approximately  $52,400,  $158,000  and
$404,000 respectively.

        Estimation  and provision  for the cost of  HIV-related  claims  covered
under life and accident and health  insurance  policies of the Company have been
made.  The Company  utilizes the  services of KPMG Peat Marwick LLP,  consulting
actuaries, in calculating such reserves.

        In preparing financial  statements in accordance with generally accepted
accounting  principles,  the cost of insurance and expense  charges on universal
life products are recognized as revenue.  For "Annuity  Contracts" with flexible
terms, amounts received from policyholders are not recognized as revenue but are
recorded  as  deposits  in a manner  similar  to  interest-bearing  instruments.
Accumulations  on  these  universal  life  and  annuity  contracts  are  held as
"Policyholders' Account Balances." For all other policies (primarily whole-life)
revenue  and  reserves  are  calculated  using  the net  level  premium  method.
Accumulation  values for these types of policies  are held as benefit  reserves.
See "Future  Policy  Benefits"  in Note 1 of the Notes to  Financial  Statements
included in this report.

        The Company  maintains  its own policy  files,  prepares  its own policy
forms  (with  the  assistance  of  its  consulting  actuaries),  selects  risks,
calculates  premiums,  prepares  premium  notices,  pre  authorized  checks  and
commission statements, and maintains all of its accounting records.

        The  Company  is not  affected  by  Federal,  state or local  provisions
relating to  discharge of materials  into the  environment.  The Company has not
spent a material amount of money during the

                                       10

<PAGE>



last three fiscal years on research and development activities.  The business of
the Company is not  seasonal in nature and is not  dependent  on the sources and
availability of raw materials. The business of the Company is not dependent upon
a single customer or a few customers,  and no material  portion of the Company's
business is subject to  renegotiation  of profits or termination at the election
of the Government.


Item 2.  Properties.

        The Company's  corporate  headquarters  is located in a two story office
building  in Lake  Mary,  Florida  which is owned by the  Company.  The  Company
occupies the entire second floor of the building.  The remaining  rentable space
is fully leased as of December 31, 1997.


Item 3.  Pending Legal Proceedings.

        Lawsuits  against  the  Company  may have  arisen  in the  course of the
Company's business.  However, contingent liabilities arising from litigation and
other matters are not considered  material in relation to the financial position
of the Company.

        To the best of the Company's  knowledge,  it has no potential or pending
contingent  liabilities  that  might  be  material  to the  Company's  financial
condition,  results  of  operations  or  liquidity,   pursuant  to  product  and
environmental   liabilities.   The  Company  maintains  insurance  coverage  for
unforeseen  events  and the  insurance  carriers,  to the  best  of  managements
knowledge, have no solvency issues.


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

        During the fourth  quarter of the  Company's  fiscal year, no matter was
submitted to a vote of security holders.





                                       11

<PAGE>



                                     PART II

Item 5.  Market for the Company's Common Stock and Related
Stockholder Matters.

        (a) Principal  Market and Stock Price. The principal market on which the
Company's  common  stock  is  traded  is the  over-the-counter  market.  Trading
information  with  respect to the  Company's  shares is  available  through  the
National  Association of Securities Dealers Automated  Quotation (NASDAQ) System
under the symbol SSLI.

        The  table  below  presents  the  high  and low  market  prices  for the
Company's common stock during the calendar quarters indicated,  as quoted in the
NASDAQ system. The quotations represent prices between dealers in securities and
do not include retail  markups,  markdowns or commissions and do not necessarily
represent actual transactions.
<TABLE>
<CAPTION>

                                  QUARTER ENDED
----------------------------------------------------------------------------
                           1997                            1996
----------------------------------------------------------------------------

          Mar.31  Jun.30  Sep.30  Dec.31    Mar.31  Jun.30  Sep.30  Dec.31

<S>      <C>     <C>     <C>     <C>       <C>     <C>     <C>     <C>
Common
Shares:
  High    7 3/4   9 1/4   8 1/4    8        5       5 5/8   7 1/2   7 7/8
  Low     7 1/8   7 3/8   7 3/4    6 1/2    4 7/8   4 7/8   5 3/8   7 1/8
</TABLE>

        (b)  Approximate  Number of  Holders of Common  Stock.  There were 1,440
holders of record of the Company's Common Stock at December 31, 1997.

        (c) Dividends.  The Company has paid no cash  dividends to  stockholders
during the past two years,  and it is not  anticipated  that any cash  dividends
will be paid at any time in the foreseeable  future. The payment of dividends by
the Company is subject to the  regulation of the State of Florida  Department of
Insurance. Under such regulation an insurance company may pay dividends, without
prior approval of the State of Florida Department of Insurance, equal to or less
than the greater of (a) 10% of its  accumulated  capital  gains  (losses)  (i.e.
unassigned  surplus) or (b)  certain net  operating  profits  and  realized  net
capital gains of the Company,  as defined in the applicable  insurance statutes.
In no case can such dividends be paid if the Company will have less than 115% of
the minimum required statutory surplus as to policyholders after the dividend is
paid. The maximum  amount which the Company could pay as a dividend  during 1998
pursuant to such regulation is $183,000.


                                       12

<PAGE>



Item 6.  Selected Financial Data.

        The following table presents  selected  financial data (on a GAAP basis)
concerning the Company and its financial results during the periods indicated.








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                                       13

<PAGE>



<TABLE>
<CAPTION>
                                             YEARS ENDED DECEMBER 31,

                             1997                1996               1995              1994               1993
                          ----------           ---------        -----------       -----------        --------
<S>                  <C>                 <C>                <C>                 <C>             <C>  
Revenues:
Life insurance           $7,643,650           7,915,027          8,158,938          9,299,789        10,738,921
Net investment
    income                3,545,311           3,318,627          2,998,875          2,750,771         2,518,005
Realized Gain
  (Loss)on
  investments               506,795             869,502             60,237             60,732           138,985
                            -------             -------             ------             ------           -------

Total Revenue            11,695,756          12,103,156         11,218,050         12,111,292        13,395,911

Benefits, Losses
 & Expenses:
 Insurance
    living
    benefits              2,459,638           2,420,021          2,636,851          2,815,194         2,848,888
 Insurance death
    benefits              1,847,375           1,398,541          1,424,245          1,300,063         1,871,590
 Increase (decrease)
    in policy
    reserves                124,461             (5,201)           (12,971)           (67,036)         (152,011)
 Amortization of
    deferred policy
    acquisition
    costs                 3,542,617           3,364,738          3,069,742          3,242,706         5,216,871
 Commissions and
    general
    expenses              3,382,255           3,246,552          2,735,280          3,186,386         2,814,921
 Interest expense
    with related
    party                    90,000              90,000             90,000             90,000            90,000
                             ------              ------             ------             ------            ------

Total expenses           11,446,346          10,514,651          9,943,147         10,567,313        12,690,259
                         ----------          ----------          ---------         ----------        ----------
Income before
    income taxes            249,410           1,588,505          1,274,903          1,543,979           705,652
                            -------           ---------          ---------          ---------           -------
Income taxes                 54,200             196,000            160,000            530,000             1,000
                             ------             -------            -------            -------             -----


NET INCOME                 $195,210           1,392,505          1,114,903          1,013,979           704,652
                           ========           =========          =========          =========           =======

Weighted average
  number of
  shares
  outstanding             1,907,989           1,907,989          1,907,989          1,907,989         1,844,694
                          ---------           ---------          ---------          ---------         ---------

Basic income per
  common share                 $.10                 .73                .58                .53               .38
                               ----                 ---                ---                ---               ---

Diluted income per
  common share                 $.10                 .73                .58                .53               .38
                               ----                 ---                ---                ---               ---

Shareholders'
  Equity                $16,132,018          15,661,588         14,826,610         12,644,525        12,238,101
                        ===========          ==========         ==========         ==========        ==========

Shareholders'
  equity per
  common
  share                       $8.45                8.20               7.77               6.63              6.63
                              =====                ====               ====               ====              ====

</TABLE>

                                       14

<PAGE>

<TABLE>
<CAPTION>


                             1997              1996               1995                1994              1993
                          ----------      --------------     --------------      -------------      --------

<S>                  <C>                 <C>                <C>                 <C>             <C>  
Assets                   $82,142,465          81,809,360         81,872,350         77,185,070         81,211,540
                         -----------          ----------         ----------         ----------         ----------

Life Insurance:
  Insurance in
  force               $1,558,810,000       1,703,650,000      1,805,756,000      2,000,656,000      2,180,987,000
                      --------------       -------------      -------------      -------------      -------------

Individual
  insurance
  issued during
  current
  year                   $82,390,000         121,646,000        124,222,000        184,364,000        325,869,000
                         -----------         -----------        -----------        -----------        -----------

Long term
  obligation              $1,000,000           1,000,000          1,000,000          1,000,000          1,000,000
                          ----------           ---------          ---------          ---------          ---------

Dividends
  declared per
  common share                 $0.00                0.00               0.00               0.00               0.00
                               -----                ----               ----               ----               ----

</TABLE>

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                                       15

<PAGE>



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

Overview.

        This  analysis of the results of operations  and financial  condition of
Southern Security Life should be read in conjunction with the Selected Financial
Data and Financial  Statements and Notes to the Financial Statements included in
this report.

        In recent years the Company has  primarily  issued one type of insurance
product,  universal  life.  Universal  life  provides  insurance  coverage  with
flexible premiums,  within limits,  which allow policyholders to accumulate cash
values.  These accumulated cash values are credited with tax-deferred  interest,
as  adjusted  by the  Company  on a  periodic  basis.  Deducted  from these cash
accumulations are  administrative  charges and mortality costs.  Should a policy
surrender in its early years, the Company assesses a surrender fee against these
same  cash  accumulations,  based on issue  age of the  insured,  smoker  verses
non-smoker status, sex of the insured and the duration of the policy at the time
of surrender.

        Pursuant to the accounting  methods prescribed by Statement of Financial
Accounting  Standards No. 97 (SFAS 97), premiums received from  policyholders on
universal  life  products  are  credited to  policyholder  account  balances,  a
liability,  rather  than  income.  Revenues  on such  products  result  from the
mortality and administrative  fees charged to policyholder  balances in addition
to surrender  charges assessed at the time of surrender as explained above. Such
costs of  insurance,  expense  charges,  and  surrender  fees are  recognized as
revenue as earned. In addition,  the Company has adopted policy designs with the
characteristic  of having higher  expense  charges  during the first policy year
than in renewal  years.  Under SFAS 97, the excess of these charges are reported
as unearned revenue. The unearned revenue is then amortized into income over the
life of the policy  using the same  assumptions  and  factors  used to  amortize
capitalized  acquisition  costs.  Interest credited to policyholder  balances is
shown as a part of benefit expenses.

        In accordance with generally  accepted  accounting  principles,  certain
costs  directly  associated  with the  issuance of new policies are deferred and
amortized  over the lives of the  policies.  These costs are defined as deferred
policy acquisition costs and are shown in the asset section of the balance sheet
of the Company. Capitalized acquisition costs are amortized over the life of the
business at a constant rate,  based on the present value of the estimated  gross
profits expected to be realized over the life of the business.  SFAS 97 requires
that  estimates of expected  gross profits used as a basis for  amortization  be
evaluated on a regular basis, and the total  amortization to date be adjusted as
a charge or credit to earnings if actual experience or other evidence

                                              16

<PAGE>



suggests that earlier estimates be revised. Thus, variations in the amortization
of the deferred  policy  acquisition  costs,  from one period to the next, are a
normal aspect of universal life insurance business and are generally  attributed
to the  recognition  of current and emerging  experience in accordance  with the
principles of SFAS 97.

        Annuity products, of which the Company currently has a minor amount, are
recorded in similar fashion to universal life products.  Considerations received
by the Company are credited to the annuity account balances which are shown as a
liability in the balance  sheet.  Interest is credited to these accounts as well
and shown as an  expense  of the  Company.  Income  is  derived  primarily  from
surrender charges on this type product.

        An additional source of income to the Company is investment revenue. The
Company  invests those funds deposited by  policy-holders  of universal life and
annuity  products in debt and equity  securities  in order to earn  interest and
dividend  income,  a portion  of which is  credited  back to the  policyholders.
Interest rates and maturities of the Company's  investment portfolio play a part
in determining the interest rates credited to policyholders.

        Product  profitability is affected by several different factors, such as
mortality  experience ( actual versus  expected),  interest rate spreads (excess
interest earned over interest credited to policyholders)  and controlling policy
acquisition costs and other costs of operation. The results of any one reporting
period  may be  significantly  affected  by the  level of death  claims or other
policyholder benefits incurred due to the Company's relatively small size.

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                                       17

<PAGE>



        The following table sets forth certain percentages  reflecting financial
data  and  results  of  operations  (a) for  1997,  1996 and  1995  premium  and
investment revenues and (b) for period to period increases and (decreases).

<TABLE>
<CAPTION>
                                      Relationships to
                                       Total Revenues                     Period to Period
                                  Years Ended December 31              (Increase or Decrease)

                               1997       1996        1995               97-96         96-95
                              ------     ------      ------             -------       ------
<S>                        <C>          <C>         <C>               <C>           <C>

Insurance Revenues               65%        65%         73%                (3%)          (3%)
Net Investment Income            35         35          27                  7%           11%
Other Income

  Total Revenues                100%       100%        100%                (3%)           8%

Losses, claims and
 loss adjustment
 expenses                        38%        31%         36%                16%            6%
Acquisition costs                30         28          27                  5%           10%

Other operating
  costs and
  expenses                       30         27          26                  4%           18%
                                ----       ----        ----                ----         ----

  Total Expenses                 98%        86%         89%                 9%            6%

Income before income
  taxes                           2%        14%         11%               (84%)          24%
Provision for income
  taxes                           0          2           1                (72%)          22%
                                 ---        ---        ----               ----          ----

Net Income                        2%        12%         10%               (86%)          25%
                                  =         ==          ==                ===            ==

</TABLE>


Results of Operations.

        New  business  written was $82,  $122 and $124 million in face value for
1997,  1996 and 1995,  respectively.  The  Company's  new market is known as the
final expense market. This product is a traditional endowment policy designed to
help offset the financial  burdens  associated with the death of a family member
and targets the needs of senior  citizens.  57% of the policies  written in 1997
represent  this new  product.  Recruiting  new field  sales  representatives  is
directed at this new plan.  Policies  issued in this market are of a lesser face
value than those of the  Universal  Life market.  That being the case,  the face
amount of  insurance  appears to have  declined,  however  the actual  number of
policies issued  increased.  In 1996 and 1997, the Company issued  approximately
2,700 new policies.

                                       18

<PAGE>



        Premium  and policy  charges  for 1997 was $7.5  million,  1996 was $7.7
million, 1995 at $7.9 million. While policy production was up for 1997 and 1996,
premium and policy charges went down.

        Premium and policy charges for 1997 were $7.5 million.  Several  factors
have combined to create this decline.  Continued lapsation in the universal life
book of  business  has  resulted  in  reduced  revenues  in  administrative  and
mortality  fees. New production has not increased as  significantly  as would be
needed to be beneficial and the new product  currently  being marketed has lower
premiums than those of the universal life product.  Surrender fee income in 1997
was consistent  with the amount of 1996.  Surrender fee income is dependent upon
the duration and value of the policies lapsing.  Should the policies be in their
early years, the fee is high, however,  limited to the value in the policy which
is smaller in the early years.  The older policies have lower surrender fees and
greater account values from which to collect those fees.

        The  balance of the  decline in 1997,  1996 and 1995  premium and policy
charges is related to the  unlocking,  for  current  and future  experience,  of
unearned premium.  Unearned premium essentially represents the excess first year
charges  in the  policy.  With  the  advice  and  assistance  of our  consulting
actuaries,  each year the  Company  reviews  its  current  experience  rates for
mortality,  credited interest spreads, lapse rates, surrender fees and the like,
and adjusts its amortization of deferred  acquisition costs and unearned premium
to the appropriate levels for both the current experience and anticipated future
experience. This is an ongoing refinement process.

        Increased  investment in debt securities  coupled with reduced  expenses
for student loan  processing are responsible for the 6.94% net yield in 1997 and
6.54%  net  yield in 1996.  The  Company  continues  to  review  its  investment
strategies  to increase its earned  interest  rate. As a part of this process of
review and refinement, the Company sold its entire stock portfolio just prior to
year end 1996.  This created a significant  increase in realized gains for 1996.
The resulting funds were invested in a more  aggressive  stock market fund which
created an increased  yield for the Company in 1997.  Additional  changes in the
Company's holdings are being planned for 1998.

        Annuity,  death and other benefits  increased 16% in 1997.  This expense
line is a combination of several  expenses with death claims,  annuity  benefits
and surrender  benefits  comprising  the most  significant  portion of the total
line. In 1997 each of these expenses  increased  with death claims  representing
the largest increase.  A significant increase or decrease in death claims in any
given  year can have a marked  impact on the  results of  operations  in a small
company.

        The amortization of deferred acquisition costs increased in

                                       19

<PAGE>



1997 by 5% as compared to a 10% increase in 1996. The  amortization  of deferred
acquisition  costs is a continuous  refinement  process which relates to current
experience in connection  with revenues,  mortality  gains and losses,  credited
interest rate spreads,  expense charges and surrender charges. The change in the
rate  of  premium  liabilities  is due  to  unlocking  for  current  and  future
experience  based on the  results  of the  changing  experience  encountered  as
required under FAS 97.

        Operating  expenses for the Company were $3.4 million,  $3.3 million and
$2.7  million  for 1997,  1996 and 1995,  respectively.  New  products  and lead
programs are responsible for the increased operating costs of 1997 and 1996. The
lead  generation  program used to introduce  and promote the new product was not
without cost. The Company also attempted some new marketing  procedures in these
two years which added to the costs.  The Company has  reviewed  its  promotional
expenses and now that the new product has established a market,  has cut back on
these expenses.

        Reinsurance  premiums  ceded  for 1997,  1996 and 1995 were  $1,516,422,
$1,767,418  and  $2,112,884  respectively.  Policy  benefits were reduced due to
reinsurance  recoveries of $301,068,  $709,643,  and $405,345 for 1997, 1996 and
1995,  respectively.  Reinsurance  commissions amounted to $281,434 for 1997 and
$308,179  and $397,253 for 1996 and 1995  respectively.  In addition,  under the
terms of the Company's  treaty with Mega Life (formerly  United Group  Insurance
Company)  expenses of  $1,111,130  were  transferred  for 1997 and  $956,143 and
$911,452 for 1996 and 1995 respectively.

        Income, before income taxes, in 1997 was $249,410,  inclusive of gain on
equity securities of $506,795, compared to $1,588,505, in 1996 and $1,274,903 in
1995. The 1997 income declined approximately $1,339,000 from the prior year as a
result of reduced total  revenue of $407,000  with realized gain on  investments
representing  $363,000 of this amount.  Total expenses  increased  $932,000 with
death  claims  representing  $449,000 of this amount and the balance of $493,000
attributed  to  acquisition  costs and  operating  expense of $324,000 and other
policy benefits of $169,000.

Liquidity and Capital Resources.

        Statement  of  Financial  Accounting  Standards  No. 115  ("SFAS  115"),
"Accounting  for Certain  Investments  in Debt and Equity  Securities"  requires
investments  in all debt  securities  and those equity  securities  with readily
determinable   market  values  be  classified  into  one  of  three  categories:
held-to-maturity,  trading or available-for-sale.  Classification of investments
is based upon management's  current intent. Debt securities which management has
a  positive  intent  and  ability  to hold  until  maturity  are  classified  as
securities held-to-maturity and are carried at amortized cost.

                                       20

<PAGE>



Unrealized  holding  gains and losses on  securities  held-to-maturity,  are not
reflected  in the  financial  statements.  Debt and equity  securities  that are
purchased for short-term  resale are classified as trading  securities.  Trading
securities are carried at market value, with unrealized holding gains and losses
included in earnings.  All other debt and equity  securities not included in the
above two categories are classified as securities available-for-sale. Securities
available-for-sale  are carried at market value,  with unrealized  holding gains
and losses reported as a separate component of stockholders'  equity, net of tax
and a valuation allowance against deferred  acquisition costs.  Adoption of this
statement had no effect on the income of the Company.

        The Company's insurance  operations have historically  provided adequate
positive cash flow enabling the Company to continue to meet operational needs as
well as increase its investment-grade securities to provide ample protection for
policyholders.

        Student loans are a service the Company makes available to the public as
well as an investment.  While the Company  anticipates  the seasonal  demand for
student  loan funds and the  subsequent  sale of such loans to the Student  Loan
Marketing Association (SLMA), there are times when additional funds are required
to meet demand for student loans until such time as the sale thereof to SLMA can
be completed.  In 1997 the Company  renewed its  $5,000,000  line of credit with
SLMA until  2007 in order to meet these  seasonal  borrowing  requirements.  The
Company made no draws against this line of credit throughout the seasonal period
for  1997 or 1996.  The  Company  anticipates  continued  borrowings  to be made
through this line of credit with SLMA to the extent that student loan borrowings
are required for 1998. SLMA offers a more  competitive  rate of interest on such
borrowings than the Company has been able to obtain through banks.

       The Company began a new association  with USA Group, CAP Program in 1996,
for the purpose of making more student loan funds  available  without  increased
costs to the Company. This association aided in eliminating  borrowings for 1997
and 1996.

       Except as otherwise provided herein,  management  believes that cash flow
levels in future  periods will be such that the Company will be able to continue
its prior growth  patterns in writing life  insurance  policies,  fund Federally
insured student loans and meet normal operating expenses.

       The National Association of Insurance Commissioners,  in order to enhance
the regulation of insurer solvency,  issued a model law to implement  risk-based
capital (RBC) requirements for life insurance  companies,  which are designed to
assess  capital  adequacy.  Pursuant  to the model  law,  insurers  having  less
statutory  surplus  than  required  by the RBC  calculation  will be  subject to
varying degrees of regulatory action. While Florida, the Company's state

                                       21

<PAGE>



of domicile,  had yet to adopt the  provisions of the RBC model law, the Company
is monitoring its RBC results in  anticipation of future  adoption.  At December
31,  1997,  the Company had  statutory  surplus well in excess of any RBC action
level requirements.

The Company has no material commitments for capital expenditures  throughout the
balance of the year 1998 as all rentable  space on the first floor of its office
building is fully leased.

The  Company is aware of  potential  problems  all  computer  systems  face with
respect to the year 2000, and has investigated various solutions.  Present plans
call for the  conversion  to be completed by the end of 1998. It is estimated to
cost  approximately  $200,000,  which  would not have a  material  impact on the
Company.

Testing for hardware  problems  will be done during the second  quarter of 1999,
although the Company is not  expecting  any  problems  which could not be solved
before December 31, 1999.


Item 8.  Financial Statements and Supplementary Data.


                                       22

<PAGE>














                    SOUTHERN SECURITY LIFE INSURANCE COMPANY

                       Financial Statements and Schedules

                        December 31, 1997, 1996 and 1995


                   (With Independent Auditors' Report Thereon)










                                       23

<PAGE>










                          Independent Auditors' Report



Board of Directors
Southern Security Life Insurance Company:

We have audited the accompanying  financial statements of Southern Security Life
Insurance  Company as listed in the  accompanying  index  under Item  14(a).  In
connection with our audit of the financial statements,  we have also audited the
amounts  included  in  the  financial  statement  schedules  as  listed  in  the
accompanying index under Item 14(a)2.  These financial  statements and financial
statement  schedules are the  responsibility  of the Company's  management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
financial statement schedules based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of  Southern  Security  Life
Insurance  Company as of  December  31,  1997 and 1996,  and the  results of its
operations  and its cash  flows for each of the years in the three  year  period
ended  December 31, 1997,  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.




KPMG Peat Marwick LLP

Orlando, Florida
April 3, 1998


                                       24

<PAGE>



                           SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                        Balance Sheets

                                  December 31, 1997 and 1996

<TABLE>
<CAPTION>
   Assets                                                           1997             1996
   ------                                                           ----             ----
<S>                                                          <C>                <C>

Investment (note 3):
   Fixed maturities held to maturity
     (fair value, $10,631,003 and
     $15,140,919   at December 31,
     1997 and 1996, respectively)                               $10,501,712        14,974,962
   Securities available for sale,
     at fair value:
     Fixed maturities (cost of
       $30,880,390 at December 31,
       1997 and $24,298,618 at
       December 31, 1996)                                        31,483,324        24,476,239
     Equity securities (cost, $800,000
       and $0 at December 31, 1997 and
         1996, respectively)                                        839,973              -
   Policy and student loans                                       7,945,381         7,315,809
   Short-term investments                                           100,000         4,539,106
   Other invested assets                                               -               13,100
                                                                 ----------        ----------
                                                                 50,870,390        51,319,216

Cash and cash equivalents                                         2,448,994           206,056
Accrued investment income                                           637,460           687,699
Deferred policy acquisition costs
   (note 4)                                                      15,451,689        16,979,612
Policyholders' account balances on
   deposit with reinsurer (note 7)                                8,667,241         8,522,449
Reinsurance receivable (note 7)                                     359,688           379,692
Receivables:
   Agent balances                                                   590,368           588,290
   Other                                                            324,752           340,680
   Refundable income taxes                                          121,680              -
Property and equipment, net,
   at cost (note 5)                                               2,670,203         2,785,666
                                                                 ----------        ----------
                                                                $82,142,465        81,809,360

</TABLE>




                 See accompanying notes to financial statements


                                       25

<PAGE>



                           SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                  Balance Sheets (continued)

                                  December 31, 1997 and 1996

<TABLE>
<CAPTION>
   Liabilities and Shareholders' Equity                             1997               1996
   ------------------------------------                             ----               ----
<S>                                                          <C>                <C>
Liabilities:
   Policy liabilities and accruals
     (notes 6 and 7):                                           $1,409,031           985,720
  Future policy benefits:
     Policyholders' account balances                            52,335,511        52,347,996
     Unearned premiums                                           7,108,662         8,249,190
     Other policy claims and benefits
       payable                                                     427,649           293,221
   Other policyholders' funds, dividend
     and endowment accumulations                                    59,686            59,596
   Funds held by reinsurance treaties
     with reinsurers (note 7)                                    1,339,927         1,193,366
   Note payable to related party
     (note 9)                                                    1,000,000         1,000,000
   Due to affiliated insurance
     agency (note 11)                                               68,646            33,411
  General expenses accrued                                         897,627           894,131
  Unearned investment income                                       313,018           228,032
   Other liabilities                                               100,990           204,845
   Income taxes payable                                               -               70,164
   Deferred income taxes (note 10)                                 949,700           588,100
                                                                   -------           -------
                                                                66,010,447        66,147,772

Shareholders' equity (notes 2,3 and 12):
   Common stock, $1 par, authorized
     3,000,000 shares; issued and out-
     standing, 1,907,989 shares                                  1,907,989         1,907,989
   Capital in excess of par                                      4,011,519         4,011,519
   Unrealized appreciation (depreciation)
     on securities available for sale, net
     of adjustment to deferred policy
     acquisition costs of $215,867 and $187,196
     net of deferred Federal income taxes
     of $160,700 and ($675) at December 31,
     1997 and 1996, respectively                                   266,340            (8,880)
   Retained earnings                                             9,946,170         9,750,960
                                                                ----------         ---------
                                                                16,132,018        15,661,588
Commitments and contingencies
   (notes 7 and 14)                                                   -                 -
                                                                  --------         ------
                                                               $82,142,465        81,809,360
</TABLE>

                                       26

<PAGE>



                           SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                     Statements of Income

                         Years ended December 31, 1997, 1996, and 1995



<TABLE>
<CAPTION>
                                                   1997             1996              1995
                                                   ----             ----              ----
<S>                                           <C>               <C>               <C>    
Revenues:
   Premium and policy
  
    charges                                    $7,499,760        7,702,639         7,919,362
   Less reinsurance ceded                        (914,071)      (1,030,673)       (1,201,432)
   Surrender fee income                         1,057,961        1,243,061         1,441,008
                                                ---------        ---------         ---------

       Net insurance revenue                    7,643,650        7,915,027         8,158,938
   Net investment income
     (notes 3 & 8)                              3,545,311        3,318,627         2,998,875
   Realized gain on
     investments (note 3)                         506,795          869,502            60,237
                                                 --------          -------            ------

                                               11,695,756       12,103,156        11,218,050
                                               ----------       ----------        ----------


Benefits, losses and expenses:
   Annuity, death, surrender
     and other benefits                         4,307,013        3,818,562         4,061,096
   Increase (decrease) in future
    policy benefits                               124,461           (5,201)          (12,971)
   Amortization of deferred
     policy acquisition
     costs (note 4)                             3,542,617        3,364,738         3,069,742
   Operating expenses
     (note 11)                                  3,382,255        3,246,552         2,735,280
   Interest expense with
     related party (note 9)                        90,000           90,000            90,000
                                                   ------           ------            ------

                                               11,446,346       10,514,651         9,943,147
                                               ----------       ----------         ---------

       Income before income taxes                 249,410        1,588,505         1,274,903

Income tax expense (note 10)                       54,200          196,000           160,000
                                                   ------          -------           -------

       Net income                                $195,210        1,392,505         1,114,903
                                                 ========        =========         =========

Basic net income per share of
   common stock                                      $.10              .73               .58
                                                     ====              ===               ===

Diluted net income per share of
 common stock                                        $.10              .73               .58
                                                     ====              ===               ===
</TABLE>
                 See accompanying notes to financial statements.

                                       27

<PAGE>



                                  SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                     Statements of Shareholders' Equity

                                Years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                                                              Unrealized
                                                                             Appreciation
                                                                            (depreciation)
                                                             Capital         of securities
                                  Common stock             in excess           available           Retained
                             Shares          Amount           of par            for sale           Earnings
<S>                        <C>             <C>             <C>             <C>                  <C>      
Balances,
 December 31,

 1994                      1,907,989       $1,907,989       4,011,519            (518,535)        7,243,552
                           ---------       ----------       ---------            --------         ---------

Net income for
 the year                       -                -               -                   -            1,114,903
Unrealized appre-
 ciation of
 securities avail-
 able for sale                  -                -               -              1,067,182              -
                             -------          -------         -------           ---------          -----
Balances,
 December 31,
 1995                      1,907,989        1,907,989       4,011,519             548,647         8,358,455
                           ---------        ---------       ---------             -------         ---------

Capital Stock
 issued
Net income for
 the year                       -                -               -                -               1,392,505
Unrealized depre-
 ciation of
 securities avail-
 able for sale
 investments                    -                -               -               (557,527)             -
                             -------          -------         -------            --------           ----
Balances,
 December 31,
 1996                      1,907,989       $1,907,989       4,011,519              (8,880)        9,750,960
                           ---------       ----------       ---------              ------         ---------

Capital Stock
 issued
Net income for
 the year                       -                -               -                    -             195,210
Unrealized depre-
 ciation of
 securities avail-
 able for sale
 investments                    -                -               -                275,220              -
                             -------          -------         -------             -------           ----

Balances,
 December 31,
 1997                      1,907,989       $1,907,989       4,011,519             266,340         9,946,170
                           =========       ==========       =========             =======         =========
</TABLE>
 
                See accompanying notes to financial statements.

                                       28

<PAGE>



                                  SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                          Statements of Cash Flows

                                Years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>

                                                             1997                   1996               1995
                                                             ----                   ----               ----

<S>                                                     <C>                 <C>               <C>      
Cash flows provided by (used in)
    operating activities:
  Net income                                               $195,210            1,392,505         1,114,903
  Adjustments to reconcile net cash
    provided by (used in) operating
    activities:
    Depreciation and amortization                           232,471              169,681           182,971
    Net realized (gains) on
      investments                                          (506,795)            (869,502)          (60,237)
    Loss on disposal of property,
      plant & equipment                                         100                  124               918
    Deferred income taxes                                   198,100               16,900          (221,000)
    Amortization of deferred
      policy acquisition costs                            3,542,617            3,364,738         3,069,742
    Acquisition costs deferred                           (2,069,778)          (2,018,043)       (2,779,393)
    Change in assets and liabilities
      affecting cash provided by
      operations:
        Accrued investment income                            50,239              (48,890)          (33,958)
        Other invested assets                                13,100                 -                 -
        Due from affiliated insurance
          agency                                             (2,078)                -               10,419
        Accounts receivable                                (105,752)            (265,682)          305,725
        Reinsurance Receivable                               20,004              134,649          (191,157)
        Other policy claims and
          future benefits payable                           557,739               36,488           (96,568)
        Policyholders' Account balances                   2,065,521            2,332,863         2,388,047
        Funds held under reinsurance                        146,561              215,950           276,715
        Unearned premiums                                (1,114,188)            (962,941)         (427,955)
        Dividend and endowment
          accumulations                                          90                2,152             2,069
        Payable to affiliated insurance
          agent                                              35,235             (209,957)           18,155
        Income taxes payable                                (70,164)              53,814            16,350
        Other liabilities                                   (15,373)            (134,983)         (361,184)
                                                            -------             --------          --------

    Net cash provided by operating
        activities                                        3,172,859            3,209,866         3,214,562
                                                          ---------            ---------         ---------

</TABLE>


                                   (continued)


                                       29

<PAGE>



                                  SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                    Statements of Cash Flows (continued)

                                Years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                                             1997                   1996               1995
                                                             ----                   ----               ----
<S>                                                     <C>                 <C>               <C>      
Cash flows from (used in) investing activities:
  Purchase of investments:
  Purchase of investments held to maturity                     -              (1,965,240)       (3,492,860)
  Purchase of investments available
    for sale                                            (32,704,906)          (8,085,785)       (3,754,242)
  Purchase of equity securities                          (3,316,249)                -                 -
  Proceeds from maturity of held to
    maturity securities                                   4,488,354            2,165,750         1,135,203

  Proceeds from maturity of available
    for sale securities                                        -                 635,533           141,150
  Proceeds from sale of available for
    sale securities (equity and fixed
    maturity)                                            29,049,745            6,367,780         2,664,089
  Net change in short term investments                    4,439,106           (3,040,006)          376,658
  Net change in policy and student loans                   (629,572)           2,655,845        (1,104,685)
  Net change in other investments                             2,178                7,605             8,476
  Acquisition of property and equipment                     (35,779)             (60,559)         (204,142)
                                                            -------              -------          --------

   Net cash provided by (used in)
      investing activities                                1,292,877           (1,319,077)       (4,230,353)
                                                          ---------           -----------       ----------

Cash flows from financing activities:
   Receipts from universal life and
     certain annuity policies credited
     to policyholder account balances                     4,042,137            5,213,760         5,609,910
   Return of policyholder account
     balances on universal life and
     certain annuity policies                            (6,264,935)          (5,904,692)       (5,334,176)
   Proceeds from short-term borrowings                         -               2,500,000         3,250,000
   Repayment of short-term borrowings                          -              (3,900,553)       (2,741,270)
                                                         ----------           ----------        ----------

Net cash provided by (used in)
   financing activities                                  (2,222,798)          (2,091,485)          784,464
                                                         -----------          ----------        ----------

Increase (decrease) in cash and
   cash equivalents                                       2,242,938             (200,696)         (231,327)

Cash and cash equivalents at
   beginning of year                                        206,056              406,752           638,079
                                                            -------              -------           -------

Cash and cash equivalents at
   end of year                                           $2,448,994              206,056           406,752
                                                         ==========              =======           =======
</TABLE>

                                   (continued)

                                       30

<PAGE>



                                  SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                    Statements of Cash Flows (continued)

                                Years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>

                                                             1997                 1996              1995
                                                             ----                 ----              ----

<S>                                                     <C>                    <C>               <C>
Supplemental schedule of cash flow Information:
   Interest paid during the year                            $90,000              102,094           114,935
                                                             ======              =======           =======

   Income taxes paid during the year                       $115,000              130,500           249,000
                                                            =======              =======           =======

Change in market value adjustments-
investments available for sale:
  Fixed maturities                                         $425,313             (557,065)        2,109,314
  Equity securities                                          39,973             (418,345)          406,612

Change in deferred acquisition costs                        (55,084)             181,196        (1,669,168)
Change in premium deposit funds                              26,340              (95,241)          871,220
Deferred income tax asset (liability)                      (163,500)             333,800          (651,000)
Other                                                         2,178               (1,872)              204
                                                              -----               ------              ----

Net change in unrealized appreciation
 (depreciation)                                            $275,220             (557,527)        1,067,182
                                                            =======             ========         =========

</TABLE>






                 See accompanying notes to financial statements.


                                       31

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                          Notes to Financial Statements
                        December 31, 1997, 1996 and 1995


1.    Nature of business and summary of significant accounting policies:

      (a)   Nature of Business

            The primary  business  purpose of Southern  Security Life  Insurance
            Company (the  "Company") is the issuance of long duration  universal
            life  insurance  contracts.  Prior to 1986,  the Company's  business
            included traditional whole life and annuity contracts.  The majority
            of the  Company's  business  is  conducted  in the states of Florida
            (43%),  Georgia (13%) and Texas (14%).  None of the remaining eleven
            states in which the Company is licensed to conduct  business account
            for over 10% of the Company's total business.

            Certain  executive   officers  and  directors  of  the  Company  are
            shareholders  of  approximately  60% of the issued  and  outstanding
            common  shares  of   Consolidare   Enterprises,   Inc.   Consolidare
            Enterprises,  Inc. owns  approximately  57% of the Company's  voting
            securities at December 31, 1997.

            The following is a description of the most significant  risks facing
            life and health insurers and how the Company mitigates those risks:

            Legal/Regulatory  Risk is the  risk  that  changes  in the  legal or
            regulatory  environment  in which an insurer  operates  will  create
            additional  expenses not  anticipated  by the insurer in pricing its
            products. That is, regulatory initiatives designed to reduce insurer
            profits,  new  legal  theories  or  insurance  company  insolvencies
            through  guaranty fund  assessments may create costs for the insurer
            beyond those recorded in the consolidated financial statements.  The
            Company seeks to mitigate this risk through geographic  marketing of
            their insurance products.

            Credit  Risk is the risk that  issuers  of  securities  owned by the
            Company will default or that other  parties,  including  reinsurers,
            which owe the Company money,  will not pay. The Company  attempts to
            mitigate  this  risk  by  adhering  to  a  conservative   investment
            strategy,  by maintaining sound reinsurance and by providing for any
            amounts deemed uncollectible.




                                       32

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


1.    Nature of business and summary of significant accounting
      policies, continued

      (a)   Nature of Business

            Interest Rate Risk is the risk that  interest  rates will change and
            cause a  decrease  in the value of an  insurer's  investments.  This
            change in rates may cause  certain  interest-sensitive  products  to
            become  uncompetitive  or may cause  disintermediation.  The Company
            mitigates this risk by charging fees for nonconformance with certain
            policy  provisions,  by offering products that transfer this risk to
            the purchaser,  and/or by attempting to match the maturity  schedule
            of its assets with the expected payouts of its  liabilities.  To the
            extent that liabilities come due more quickly than assets mature, an
            insurer would have to sell assets prior to maturity and  potentially
            recognize a gain or loss.

      (b)   Basis of Financial Statements

            The  financial  statements  have  been  prepared  on  the  basis  of
            generally accepted accounting  principles ("GAAP"),  which vary from
            reporting   practices   prescribed   or  permitted   by   regulatory
            authorities.

      (c)   Use of Estimates

            In preparing  the  financial  statements,  management is required to
            make estimates and assumptions  that affect the reported  amounts of
            assets and  liabilities.  Actual results could differ  significantly
            from those estimates.

            The estimates  susceptible to  significant  change are those used in
            determining  the liability  for future  policy  benefits and claims,
            deferred  income  taxes  and  deferred  policy   acquisition  costs.
            Although some variability is inherent in these estimates, management
            believes that the amounts provided are adequate.

      (d)   Investments

            Investments in all debt securities and those equity  securities with
            readily  determinable market values are classified into one of three
            categories:   held-to-maturity,   trading   or   available-for-sale.
            Classification  of  investments is based upon  management's  current
            intent. Debt securities which management has a positive intent and

                                       33

<PAGE>




                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


1.    Nature of business and summary of significant accounting
      policies, continued

      (d)   Investments

            ability  to  hold  until   maturity  are  classified  as  securities
            held-to-maturity  and are  carried  at  amortized  cost.  Unrealized
            holding  gains and  losses on  securities  held-to-maturity  are not
            reflected in the financial  statements.  Debt and equity  securities
            that are purchased for  short-term  resale are classified as trading
            securities.  Trading  securities  are  carried at fair  value,  with
            unrealized holding gains and losses included in earnings.  All other
            debt and equity  securities not included in the above two categories
            are   classified   as  securities   available-for-sale.   Securities
            available-for-sale  are  carried  at  fair  value,  with  unrealized
            holding  gains  and  losses  reported  as a  separate  component  of
            stockholders'  equity, net of tax and a valuation  allowance against
            deferred  acquisition  costs.  At December  31,  1997 and 1996,  the
            Company  did  not  have  any  investments   categorized  as  trading
            securities.

            The Company's carrying value for investments in the held-to-maturity
            and  available-for-sale  categories  is  reduced  to  its  estimated
            realizable  value if a decline in the market  value is deemed  other
            than temporary. Such reductions in carrying values are recognized as
            realized losses and charged to income.

            Interest on fixed maturities and short-term  investments is credited
            to  income  as it  accrues  on  the  principal  amounts  outstanding
            adjusted for amortization of premiums and discounts  computed by the
            scientific  method which  approximates  the effective  yield method.
            Realized gains and losses on disposition of investments are included
            in net income.  The cost of  investments  sold is  determined on the
            specific identification method.  Dividends are recorded as income on
            the ex-dividend dates.

            Policy loans and student  loans are carried at the unpaid  principal
            balance, less any amounts deemed to be uncol-lectible. The Company's
            policy is that  policy  loans are not made for  amounts in excess of
            the cash surrender value of the related policy. Accordingly,  policy
            loans are fully  collateralized  by the related liability for future
            policy  benefits  for  traditional  insurance  policies  and  by the
            policyholders' account balance for interest sensitive policies.

                                       34

<PAGE>



            

                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


1.    Nature of business and summary of significant accounting
      policies, continued

      (e)   Cash and Cash Equivalents

            For purposes of the statements of cash flows, the Company  considers
            all  highly  liquid  debt  instruments  purchased  with an  original
            maturity of one month or less to be cash equivalents.

      (f)   Deferred Policy Acquisition Costs

            The  costs  of  acquiring  new  business,  net  of  the  effects  of
            reinsurance,  principally commissions and those home office expenses
            that tend to vary with and are primarily  related to the  production
            of new business,  have been deferred.  Deferred  policy  acquisition
            costs applicable to non-universal  life policies are being amortized
            over the  premium-paying  period of the related policies in a manner
            that will charge each year's  operations in direct proportion to the
            estimated  receipt of premium revenue over the life of the policies.
            Premium  revenue   estimates  are  made  using  the  same  interest,
            mortality  and  withdrawal  assumptions  as are used  for  computing
            liabilities for future policy benefits.  Acquisition  costs relating
            to universal  life  policies are being  amortized at a constant rate
            based on the present  value of the  estimated  gross profit  amounts
            expected  to be  realized  over the life of the  policies.  Deferred
            policy  acquisition  costs are  adjusted  to  reflect  the impact of
            unrealized gains and losses on fixed maturity  securities  available
            for sale.

            The   Company   has   performed   several   tests   concerning   the
            recoverability of deferred  acquisition costs. These methods include
            those  typically  used  by  many  companies  in the  life  insurance
            industry.  Further,  the Company conducts a sensitivity  analysis of
            its assumptions  that are used to estimate the future expected gross
            profits,   which   management  has  used  to  determine  the  future
            recoverability of the deferred acquisition costs.

      (g)   Depreciation

            Depreciation is being provided on the straight-line  method over the
            estimated useful lives of the assets.


                                       35

<PAGE>




                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes To Financial Statements (continued)


1.    Nature of business and summary of significant accounting
      policies, continued

      (h)   Future Policy Benefits

            The liability for future policy  benefits has been provided on a net
            level  premium  basis  based  upon  estimated   investment   yields,
            withdrawals,  mortality and other  assumptions that were appropriate
            at the time the policies were issued.  Such estimates are based upon
            industry  data and the  Company's  past  experience  as  adjusted to
            provide for possible adverse deviation from the estimates.

      (I)   Recognition of Premium Revenue and Related Costs

            Premiums are recognized as revenue as follows:

            Universal life policies - premiums received from  policy-holders are
            reported as deposits.  Cost of insurance,  policy administration and
            surrender charges which are charged against the policyholder account
            balance  during the  period,  are  recognized  as revenue as earned.
            Amounts  assessed  against the  policyholder  account  balance  that
            represent compensation to the Company for services to be provided in
            future  periods are reported as unearned  revenue and  recognized in
            income  using the same  assumptions  and  factors  used to  amortize
            acquisition costs capitalized.

            Annuity  contracts  with  flexible  terms - premiums  received  from
            policyholders are reported as deposits.

            All other  policies - recognized as revenue over the premium  paying
            period.

      (j)   Income Taxes

            Deferred tax assets and  liabilities  are  recognized for the future
            tax consequences  attributable to differences  between the financial
            statement  carrying  amounts of existing  assets and liabilities and
            their respective tax bases.  Deferred tax assets and liabilities are
            measured using enacted tax rates expected to apply to taxable income
            in the years in which those temporary differences are expected to be
            recovered  or  settled.  The  effect  on  deferred  tax  assets  and
            liabilities  of a change in tax rates is recognized in income in the
            period that includes the enactment date.


                                       36

<PAGE>




                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


1.    Nature of business and summary of significant accounting
      policies, continued

      (k)   Earnings Per Share

            In 1997, the Financial Accounting Standards Board issued
            Statement No. 128, Earnings per Share.  Statement No. 128
            replaced the calculation of primary and fully diluted
            earnings per share with basic and diluted earnings per
            share.  Unlike primary earnings per share, basic earnings
            per share excludes any dilutive effects of options,
            warrants and convertible securities.  Diluted earnings per
            share is very similar to the previously reported fully
            diluted earnings per share.  All earnings per share amounts
            for all periods presented are restated to conform to
            Statement No. 128 requirements.

      (l)   Reclassification

            Certain amounts presented in the 1996 and 1995 financial  statements
            have been restated to conform to the 1997 presentation.


2.    Basis of Financial Statements

      The more significant  generally accepted accounting  principles applied in
      the  preparation of financial  statements  that differ from life insurance
      statutory  accounting  practices  prescribed  or permitted  by  regulatory
      authorities (which are primarily designed to demonstrate  solvency) are as
      follows:

      a.    Costs of acquiring new business are deferred and  amortized,  rather
            than being charged to operations as incurred.

      b.    The liability  for future  policy  benefits and expenses is based on
            conservative estimates of expected mortality,  morbidity,  interest,
            withdrawals and future maintenance and settlement  expenses,  rather
            than on statutory rates for mortality and interest.

      c.    The liability for policyholder  funds associated with universal life
            and  certain  annuity  contracts  are  based  on the  provisions  of
            Statement of Financial Accounting Standards Statement No. 97, rather
            than on the statutory rates for mortality and interest.
      d.    Investments  in securities  are reported as described in Note 

                                       37

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


2.    Basis of financial statements, continued

      d.    1 (d), rather than in accordance with valuations  established by the
            National Association of Insurance Commissioners  ("NAIC").  Pursuant
            to NAIC valuations,  bonds eligible for amortization are reported at
            amortized value;  other securities are carried at values  prescribed
            by or deemed acceptable by NAIC.

      e.    Deferred income taxes, if applicable,  are recognized for future tax
            consequences  attributable  to  differences  between  the  financial
            statement  carrying  amounts of existing  assets and liabilities and
            their respective tax bases.

      f.    The  statutory  liabilities  for the  asset  valuation  reserve  and
            interest maintenance reserve have not been provided in the financial
            statements.

      g.    Certain assets,  principally  receivables from agents and equipment,
            are  reported  as assets  rather  than  being  charged  directly  to
            surplus.

      h.    Expenses  attributable  to the public  offering of the common shares
            have been  reclassified  from retained earnings to capital in excess
            of par.

    I.      Realized gains or losses on the sale or maturity of investments  are
            included in the  statement  of income and not  recorded net of taxes
            and  amounts  transferred  to the  interest  maintenance  reserve as
            required by statutory accounting practices.

      j.    Certain  proceeds  from a note payable  (note 9) that are treated as
            shareholders'  equity  for  statutory  purposes  are  treated  as  a
            liability under generally accepted accounting principles.

      k.    Reinsurance  assets and  liabilities  are  reported on a gross basis
            rather  than  shown  on  a  net  basis  as  permitted  by  statutory
            accounting practices.

      A  reconciliation  of net income  (loss) for the years ended  December 31,
      1997, 1996 and 1995 and  shareholders'  equity as of December 31, 1997 and
      1996  between  the amounts  reported on a statutory  basis and the related
      amounts presented on the basis of generally accepted accounting principles
      is as follows:


                                       38

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


2.    Basis of financial statements, continued
<TABLE>
<CAPTION>

                                                                                  Shareholders'
                                        Net income                                equity
                                    Years ended December 31,                      December 31,
                                1997          1996         1995             1997           1996
                                ----          ----         ----             ----           ----
<S>                      <C>         <C>              <C>            <C>          <C>    
As reported
 on a statutory
  
 basis                      $45,398     1,022,183        232,180        9,316,923      9,283,928
                             ------     ----------       -------        ----------     ---------

Adjustments:
  Deferred policy
  acquisition
  costs, net             (1,472,839)   (1,346,695)      (290,344)      15,451,689     16,979,611

Future policy
  benefits, un-
  earned premiums
  and policy-
  holders' funds          1,644,330     1,626,090      1,006,862       (8,915,443)   (10,643,224)

 Deferred
  income taxes             (198,100)      (16,900)       221,000         (949,700)      (588,100)

 Asset valuation
  reserve                      -             -              -             465,452        307,364

 Interest main-
  tenance reserve           129,109       (18,221)        24,909          338,845        209,736
 Non-admitted
  assets                       -             -              -             698,024        795,659
 Unrealized gains
  -SFAS 115                    -             -              -             602,934        177,621
Capital and
  surplus note                 -             -              -          (1,000,000)    (1,000,000)
 Other adjustments,
  net                        47,312       126,048        (79,704)         123,294        138,993
                             ------       -------        -------          -------        -------
 Net difference             149,812       370,322        882,723        6,815,095      6,377,660
                            -------       -------        -------        ---------      ---------

As reported on a
 GAAP basis                $195,210     1,392,505      1,114,903       16,132,018     15,661,588
                            =======     =========      =========       ==========     ==========
</TABLE>


        Under  applicable  laws and  regulations,  the  Company is  required  to
        maintain minimum surplus as to  policyholders,  determined in accordance
        with regulatory accounting practices, in the


                                       39

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


2.    Basis of financial statements, continued

      aggregate amount of approximately $1,900,000.

      The payment of dividends  by the Company is  subject to the  regulation of
      the State of Florida Department of Insurance.

      The Insurance  Commissioner's  approval is not required if the dividend is
      equal to or less than the greater of: (a) 10% of the Company's  surplus as
      to  policyholders'  derived  from  realized net  operating  profits on its
      business and net realized  capital gains; or (b) the Company's  entire net
      operating  profits and  realized  net  capital  gains  derived  during the
      immediately  preceding  calendar year, if the Company will have surplus as
      to  policyholders  equal  to or  exceeding  115% of the  minimum  required
      statutory  surplus as to policyholders  after the dividend is declared and
      paid. As a result of such  restrictions,  the maximum  dividend payable by
      the Company during 1997 without prior approval is approximately  $183,000.
      Accordingly,  GAAP excess earnings over a stat basis are not available for
      dividends.

      The Risk-Based  Capital  ("RBC") for Life and/or Health Insurers Model Act
      (the "Model  Act") was adopted by the  National  Association  of Insurance
      Commissioners  (NAIC)  in 1992.  The main  purpose  of the Model Act is to
      provide  a tool for  insurance  regulators  to  evaluate  the  capital  of
      insurers.  Based on calculations  using the appropriate NAIC formula,  the
      Company exceeded the RBC requirements at December 31, 1997.


3.    Investments

      (a)   Equity Securities and Fixed Maturities

      Equity  securities  consist of $839,973 and $0 of common stock at December
      31, 1997 and 1996 respectively.

      Unrealized (depreciation) appreciation in investments in equity securities
      for the years ended December 31, 1997,  1996, and 1995 is $39,973,  $0 and
      $406,611, respectively.

      The  amortized  cost and  estimated  fair  values of  investments  in debt
      securities are as follows:





                                       40

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


3.    Investments, continued

      (a)   Continued
<TABLE>
<CAPTION>
                                                          Gross          Gross       Estimated
                                          Amortized    Unrealized     Unrealized        Fair
                                            Cost          Gains         Losses         Value
<S>                                     <C>            <C>           <C>          <C>
December 31, 1997:
   Held to maturity:
    U.S. Treasury
     securities and
     obligations of U.S.
     government corpora-
     tions and agencies
     (guaranteed)                        $2,516,052        53,948         -          2,570,000

   Corporate securities                   6,976,738        79,620       4,277        7,052,081

   Special revenue and
     special assessment
     obligations and all non-
     guaranteed obligations of
     agencies and authorities
     of governments and
     their political
     subdivisions                         1,008,922          -            -          1,008,922
                                          ---------       -------       ------       ---------

                                         10,501,712       133,568        4,277      10,631,003
                                         ----------       -------        -----      ----------

   Available for sale:
    U.S. Treasury
     securities and
     obligations of U.S.
     government corporations
     and agencies (guaranteed)            9,301,191       173,517         -          9,474,708

   Corporate securities                  21,481,892       429,907         -         21,911,799

   Special revenue and
     special assessment
     obligations and all non-
     guaranteed obligations of
     agencies and authorities
     of governments and their
     political subdivisions                  97,307          -             490          96,817
                                            -------       -------        -----         -------

                                         30,880,390       603,424          490      31,483,324
                                         ----------       -------         ----      ----------

                                        $41,382,102       736,992        4,767      42,114,327
                                        ===========      ========        =====      ==========
</TABLE>

                                       41

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


3.    Investments, continued

      (a)   Continued

<TABLE>
<CAPTION>
                                                          Gross          Gross       Estimated
                                          Amortized    Unrealized     Unrealized        Fair
                                             Cost         Gains         Losses         Value
<S>                                     <C>            <C>           <C>          <C>
December 31, 1996:
   Held to maturity:
    U.S. Treasury securities
     and obligations of U.S.
     government corporations
     and agencies (guaranteed)           $4,503,477        61,523           -        4,565,000

    Corporate securities                  9,461,064       120,955          -         9,582,019

    Special revenue and
     special  assessment
     obligations and all non-
     guaranteed obligations of
     agencies and authorities
     of governments and their
     political subdivisions               1,010,421           -         16,521         993,900
                                          ---------        ------       ------         -------

                                         14,974,962       182,478       16,521      15,140,919
                                         ----------       -------       ------      ----------
   Available for sale:
   U.S. Treasury securities
     and obligations of U.S.
     government corporations
     and agencies (guaranteed)           20,383,080      180,672           -        20,563,752

   Corporate securities                   3,585,084          -           2,084       3,583,000

   Special  revenue and
    special  assessment
     obligations and all non-
     guaranteed obligations of
     agencies and authorities
     of governments and their
     political subdivisions                330,454           -             967        329,487
                                           -------       -------           ---       -------

                                         24,298,618      180,672         3,051     24,476,239
                                         ----------      -------         -----     ----------

                                        $39,273,580      363,150        19,572     39,617,158
                                        ===========      =======        ======     ==========

</TABLE>

                                       42

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


3.    Investments, continued

      (a)   Continued

            Unrealized appreciation (depreciation) of fixed maturities for years
            ending December 31, 1997, 1996 and 1995 is $388,847,  ($720,253) and
            $2,779,872 respectively.

            The amortized cost and estimated  fair value of fixed  maturities at
            December 31, 1997 by contractual  maturity,  are  summarized  below.
            Expected maturities will differ from contractual  maturities because
            borrowers may have the right to call or prepay  obligations  with or
            without call or prepayment penalties.

      Fixed maturity securities held-to-maturity:

<TABLE>
<CAPTION>
                                                               Amortized          Estimated
                                                                  Cost            Fair value
<S>                                                           <C>                <C>   
           Due in one year or less                             $3,949,982          3,960 500
           Due after one year through
              five years                                        5,281,472          5,400,245
           Due after five years through
              ten years                                              -                  -
           Due after ten years                                    261,336            261,336
                                                                  -------            -------

                                                                9,492,790          9,622,081
           Mortgage backed securities                           1,008,922          1,008,922
                                                                ---------          ---------

                                                              $10,501,712         10,631,003



         Fixed maturity securities available-for-sale:


          Due after one year through
             5 years                                           $9,130,069          9,229,142
          Due after five years through
             ten years                                         15,121,559         15,477,301
          Due after ten years                                   6,531,455          6,680,064
                                                                ---------          ---------

                                                               30,783,083         31,386,507
          Mortgage backed securities                               97,307             96,817
                                                                  -------            -------

                                                              $30,880,390         31,483,324

</TABLE>
                                       43

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


3.    Investments, continued

      (a)   Continued

            Proceeds  from  sale  of  equity  securities  and  fixed  maturities
            available  for  sale and  related  realized  gains  and  losses  are
            summarized as follows:

<TABLE>
<CAPTION>
                                                  1997              1996             1995
                                               ----------        ----------       -------
<S>                                          <C>                <C>                <C>    
       Proceeds from sale of
        equity securities                     $2,873,980         2,885,010          854,339
                                              ----------         ---------          -------


       Proceeds from sale of
        fixed maturities
         available for sale                  $26,175,765         3,482,770        1,809,750
                                             -----------         ---------        ---------


       Fixed maturities:
        Gross realized gains                    $278,904            15,013          145,136
        Gross realized (losses)                 (150,045)          (18,881)        (119,908)
       Equity securities:
        Gross realized gains                     357,731           930,919           55,543
        Gross realized (losses)                     -              (57,620)         (20,540)
                                                 --------          -------          -------


                                                $486,590           869,431           60,231
                                                 =======           =======           ======

</TABLE>

       Certain of the fixed maturity securities classified as available for sale
       and held to maturity were called during the year ended December 31, 1997,
       1996 and 1995 resulting in the following realized gains and losses:
<TABLE>
<CAPTION>

                                                      1997             1996              1995
                                                      ----             ----              ----
<S>                                          <C>                <C>                <C>     
       Held to maturity:
          Gross realized gains                     $20,205               71                 6
        Available for sale:
          Gross realized gains                      21,997                -                 -
                                                    ------                -                 -
                                                   $42,202               71                 6
                                                   =======               ==                 =


</TABLE>






                                       44

<PAGE>




                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)

3.    Investments, continued

      (a)      Continued

               Investments,   aggregated   by  issuer,   in  excess  of  10%  of
               shareholders'  equity (before net unrealized  gains and losses on
               available for sale  securities) at December 31, 1997,  other than
               investments  issued or guaranteed by the United States government
               are as follows:
<TABLE>
<CAPTION>

               1997                                           Carrying Amount
<S>                                                             <C>       
               Dean Witter Discover                             $2,114,643
               Federal Express                                   2,260,000
               Lehman Brothers Inc.                              2,080,000
               Philip Morris Inc.                                3,535,000
</TABLE>

               There were no investments, aggregated by issuer, in excess of 10%
               of shareholders' equity at December 31, 1996.

      (b)      Concentrations of credit risk

               At  December  31,  1997 and 1996,  the  Company  did not hold any
               unrated or less-than-investment  grade corporate debt securities.
               The Company also invests in subsidized and  unsubsidized  student
               loans  totaling  $244,361  and  $514,483 at December 31, 1997 and
               1996, respectively,  which are guaranteed by the U.S. government.
               Subsequent to December 31, 1997,  all of these loans were sold at
               their unpaid principal balance.


                                       45

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


3.    Investments, continued

      (c)   Investment Income

            Net investment  income for the years ended December 31, 1997,  1996,
            and 1995 consists of the following:
<TABLE>
<CAPTION>

                                                             1997           1996          1995
                                                             ----           ----          ----
<S>                                                   <C>             <C>           <C>      
           Interest:
             Fixed maturities                          $2,918,006      2,581,198     2,319,914
             Policy and student loans                     401,621        526,820       483,382
             Short-term investments                       232,342        280,158       333,850

            Dividends on equity securities
              common stock, including mutual
              fund                                         16,189         31,245        28,247
                                                           ------         ------        ------

                                                        3,568,158      3,419,421     3,165,393
            Less investment expenses                       22,847        100,794       166,518
                                                           ------        -------       -------

                                                       $3,545,311      3,318,627     2,998,875
                                                        =========      =========     =========

</TABLE>

        (d) Investments on Deposit

              In order to comply with statutory regulations, investments were on
              deposit  with the  Insurance  Departments  of  certain  states  as
              follows:

<TABLE>
<CAPTION>
                                         1997                  1996               1995
                                         ----                  ----               ----

<S>                                  <C>                    <C>                <C>      
             Florida                 $1,727,034             1,718,751          1,735,900
             Alabama                    100,000               100,000            100,000
             South Carolina             304,816               306,028            304,696
             Georgia                    254,013               255,024            251,193
             Indiana                    199,317               199,752               -
                                        -------              --------          ---------

                                     $2,585,180             2,579,555          2,391,789
                                      =========             =========          =========
</TABLE>

              Certain  of these  assets,  totaling  approximately  $850,000  and
              $650,000  for each of the years ended  December 31, 1997 and 1996,
              are  restricted  for the  future  benefit  of  policyholders  in a
              particular state.




                                       46

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


4.    Deferred policy acquisition costs

      Deferred  policy  acquisition  costs at December 31,  1997,  1996 and 1995
      consist of the following:
<TABLE>
<CAPTION>

                                                     1997             1996          1995
                                                     ----             ----          ----
<S>                                              <C>               <C>            <C>   
        Deferred policy acquisition
        costs at beginning of year               $16,979,612       18,145,111     20,104,624

        Policy acquisition costs
         deferred:
          Commissions                              1,204,604        1,030,875      1,418,644
          Underwriting & issue costs                 450,800          652,868        805,794
          Other                                      414,374          334,300        554,955
          Change in unrealized
           appreciation (depreciation)               (55,084)         181,196     (1,669,164)
                                                     -------          -------     -----------
                                                   2,014,694        2,199,239      1,110,229

        Amortization of deferred
          policy acquisition costs                (3,542,617)      (3,364,738)    (3,069,742)
                                                  ----------       ----------     ----------

        Deferred policy acquisition
          costs at end of year                   $15,451,689       16,979,612     18,145,111
                                                 ===========       ==========     ==========
</TABLE>


5.    Property and equipment

      Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                        December              December
                                                          1997                  1996
<S>                                                    <C>                    <C>    
           Land                                          $982,027               982,027
           Building and improvements                    2,169,975             2,173,955
           Furniture and equipment                      1,057,586             1,019,621
                                                        ---------             ---------
                                                        4,209,588             4,175,603
           Less accumulated depreciation                1,539,385             1,389,937
                                                        ---------             ---------
                                                       $2,670,203             2,785,666
                                                        =========             =========

</TABLE>

           Depreciation  expense for the years ended December 31, 1997, 1996 and
           1995 totaled $145,912, $151,950, and $150,213, respectively.


6.         Future policy benefits

           At December 31, 1997 and 1996,  future policy benefits,  exclusive of
           universal life and flexible term annuities

                                       47

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


6.    Future policy benefits, continued

      consist of the following:
<TABLE>
<CAPTION>

                                                           December              December
                                                             1997                  1996
<S>                                                    <C>                    <C>    
          Life insurance                                  $1,103,462               672,913
           Annuities                                         295,525               304,394
           Accident & health
            insurance                                         10,044                 8,413
                                                              ------                 -----
          Total life
           insurance policies                             $1,409,031               985,720
                                                           =========               =======

</TABLE>

       Life insurance  in-force  aggregated  approximately $1.2 billion and $1.3
       billion at December 31, 1997, and 1996, respectively.

       Mortality  and  withdrawal  assumptions  are  based  upon  the  Company's
       experience  and  actuarial   judgment  with  an  allowance  for  possible
       unfavorable deviations from the expected experience.

       The mortality table used in calculating benefit reserves is the 1965-1970
       Basic Select and Ultimate for males.

       For  non-universal  life  policies  written  during  1983  through  1988,
       interest  rates used are 8.0 percent for policy  years one through  five,
       decreasing by .1 percent per year for policy years six through twenty, to
       6.5 percent for policy years twenty-one and thereafter. For non-universal
       life policies written in 1982 and prior,  interest rates vary,  depending
       on policy  type,  from 7 percent  for all policy  years to 6 percent  for
       policy years one through five and 5 percent for years six and thereafter.
       For universal life policies written since 1988, the interest rate used is
       a credited rate based upon the Company's investment yield less 1 percent.


7.     Reinsurance

       The Company routinely cedes and, to a limited extent, assumes reinsurance
       to limit its exposure to loss on any single  insured.  Ceded insurance is
       treated as a risk and liability of the assuming companies. As of December
       31, 1997, ordinary insurance coverage in excess of $75,000 is

                                       48

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


7.     Reinsurance, continued


       reinsured;  however  for  some  policies  previously  issued,  the  first
       $30,000,  $40,000 or $50,000  was  retained  and the  excess  ceded.  The
       retention  limit  for  some  substandard  risks  is  less  than  $75,000.
       Reinsured  risks would give rise to  liability to the Company only in the
       event that the reinsuring company might be unable to meet its obligations
       under  the  reinsurance  agreement  in  force,  as  the  Company  remains
       primarily liable for such obligations. Under these contracts, the Company
       has ceded  premium  of  $432,486,  $448,327,  and  $525,662  included  in
       reinsurance  ceded,  and received  recoveries  of $131,449,  $608,355 and
       $204,171  included in  annuity,  death and other  benefits  for the years
       ended December 31, 1997, 1996 and 1995, respectively.

       On December 31, 1992,  the Company  entered into a reinsurance  agreement
       with The MEGA Life and Health Insurance Company  ("MEGA"),  ceding an 18%
       share of all  universal  life policies in force at December 31, 1992 as a
       measure  to manage  the  future  needs of the  Company.  The  reinsurance
       agreement is a co-insurance  treaty entitling the assuming company to 18%
       of all future  premiums,  while  making them  responsible  for 18% of all
       future claims and policyholder  loans relating to the ceded policies.  In
       addition,   the  Company   receives   certain   commission   and  expense
       reimbursements.

       For the years ended  December 31, 1997,  1996 and 1995, the Company ceded
       premiums  to  MEGA  of  $481,585,  $582,346  and  $675,770,  included  in
       reinsurance  ceded,  and received  recoveries  of $503,159,  $367,295 and
       $459,090,  included in annuity,  death and other benefits,  respectively.
       The funds held by  reinsurance  treaties with reinsurer of $1,339,927 and
       $1,193,366 represent the 18% share of policy loans ceded to the reinsurer
       at December 31, 1997 and 1996, respectively.


8.     Notes Payable

       As of  December  31,  1997,  the  Company had an unused line of credit of
       $5,000,000  which is secured by student loans equaling 115% of the unpaid
       principal balance. The note





                                       49

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


8.    Notes Payable, continued

      bears interest at a variable rate per annum payable monthly and expires on
      September 18, 2007.

      Interest  expense  relating to these notes payable  during the three years
      ended December 31, 1997, 1996 and 1995 totaled $0,  $12,094,  and $26,240,
      respectively and is included in net investment income.


9.    Note Payable to Related Party

      Note  payable  to  related  party  consists  of  amounts  due on demand to
      Consolidare  Enterprises,  Inc., the Company's majority  shareholder.  The
      note proceeds were  obtained in December,  1988 and the note  qualifies as
      shareholders'  equity for statutory accounting purposes in accordance with
      Section  628.401 of the Florida  Statutes.  At December 31, 1997, the note
      bears interest at 9.0% percent (payable monthly);  principal  repayment is
      contingent  upon the Company  maintaining  statutory  surplus in excess of
      $1,900,000 and approval in advance by the Florida Department of Insurance.
      Interest  expense relating to the balance of note payable to related party
      during  1997,  1996 and 1995  aggregated  $90,000,  $90,000,  and  $90,000
      respectively.








              (The remainder of this page intentionally left blank)














                                       50

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


10.    Income taxes

       Total income taxes for the years ended December 31, 1997,  1996, and 1995
       were as follows:

<TABLE>
<CAPTION>

                                                   1997              1996             1995
                                                   ----              ----             ----

<S>                                              <C>               <C>               <C>    
       Net income                                $54,200           196,000           160,000
       Unrealized appreciation
         (depreciation) of
         investments                             160,700              (675)          331,000
                                                 -------           --------         --------
                                                $214,900           195,325           491,000
                                                ========           ========          =======

</TABLE>

       Income  taxes for the years ended  December  31,  1997,  1996 and 1995 is
       summarized as follows:

<TABLE>
<CAPTION>

                                         1997            1996              1995
                                         ----          -------           ------
<S>                                  <C>                <C>               <C>    
        Current:
         Federal                     $(142,870)         167,700           370,800
         State                          (1,030)          11,400            10,200
                                         -----           ------            ------

                                      (143,900)         179,100           381,000
                                      --------         --------           -------
        Deferred:
         Federal                       169,100           14,450          (188,700)
         State                          29,000            2,450           (32,300)
                                        ------            -----           -------

                                       198,100           16,900          (221,000)
                                       -------          -------           --------

                                       $54,200          196,000           160,000
                                        ======          =======           =======

</TABLE>


                                       51

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


10.    Income taxes, continued

       Income tax expense for the years ended  December 31, 1997,  1996 and 1995
       differs from "expected" tax (computed by applying the U.S. federal income
       tax rate to pretax income as a result of the following:
<TABLE>
<CAPTION>

                                                        1997              1996          1995
                                                      --------          --------      ------

<S>                                                   <C>              <C>           <C>    
       Computed "expected" tax expense                $84,800           540,100       446,200
       Increase (reduction) in income
        taxes resulting from:
         Small life insurance
           company deduction                          (76,000)         (346,000)     (340,200)
         Changes in the valuation
           allowance for deferred
           tax assets, allocated to
           income tax expense                          11,100            64,900        62,600
         (Over) under accrual of
           prior year expense                           6,100           (82,000)       11,000
         State taxes, net of federal
           income tax benefit                          18,200             9,000       (14,600)
         Other, net                                    10,000            10,000        (5,000)
                                                       ------            ------         -----

                                                      $54,200           196,000       160,000
                                                      =======           =======       =======

</TABLE>

       Under tax laws in effect  prior to 1984,  a portion  of a life  insurance
       company's  gain  from   operations  was  not  currently   taxed  but  was
       accumulated in a memorandum "Policyholders' Surplus Account." As a result
       of the Tax Reform Act of 1984, the balance of the Policyholders'  Surplus
       Account has been frozen as of December 31, 1983 and no additional amounts
       will be  accumulated  in this account.  However,  distributions  from the
       account will continue to be taxed,  as under  previous law, if any of the
       following conditions occur:

       a.   The Policyholders' Surplus exceeds a prescribed maximum,
            or;

       b.   Distributions, other than stock dividends, are made to
            shareholders in excess of Shareholders' Surplus, as
            defined by prior law, or;

       c.   The  entity  ceases to  qualify  for  taxation  as a life  insurance
            company.


                                       52

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


10.    Income taxes, continued

       At December 31, 1997, the balance of the  Policyholders'  Surplus account
       aggregated  approximately $236,000. The Company has not recorded deferred
       income taxes totaling approximately $80,000 relating to this amount as it
       has no plan to distribute  the amounts in  Policyholders'  Surplus in the
       foreseeable future.

       The Tax Reform Act of 1986  enacted a new  separate  parallel  tax system
       referred to as the Alternative  Minimum Tax (AMT) system. AMT is based on
       a flat rate applied to a broader tax base.  It is  calculated  separately
       from the  regular  Federal  income tax and the higher of the two taxes is
       paid.  The excess of the AMT over regular tax is a tax credit,  which can
       be carried  forward  indefinitely  to reduce  regular tax  liabilities of
       future  years.  In 1997,  1996 and  1995,  AMT  exceeded  regular  tax by
       $11,100,  $64,900, and $62,600,  respectively.  At December 31, 1997, the
       AMT tax credit available to reduce future regular tax totaled $409,600.

       The principal elements of deferred income taxes consist of the following:
<TABLE>
<CAPTION>
                                                          1997          1996            1995
                                                        --------     ---------       -------

<S>                                                   <C>            <C>            <C>      
       Deferred policy acquisition costs              $(467,000)     (431,500)      (155,500)
       Future policy benefits                           694,000       532,000        (23,000)
       Other                                            (28,900)      (83,600)       (42,500)
                                                        -------      --------         ------
                                                       $198,100        16,900       (221,000)
                                                        =======      ========        =======
</TABLE>


        The tax effect of temporary  differences  that give rise to  significant
        portions of the  deferred tax assets and  deferred  tax  liabilities  at
        December 31, 1997 and 1996 are presented below:
<TABLE>
<CAPTION>

                                                                  1997               1996
                                                               ----------         -------
<S>                                                          <C>                <C>

        Deferred tax assets:
        Unearned premiums, due to deferral of
          "front-end" fee                                      $2,760,000          3,180,000
        Policy liabilities and accruals,
           principally due to adjustments
           to reserves for tax purposes                         1,540,000          1,814,000
        Deferred policy acquisition costs
          related to unrealized appreciation
          (depreciation)                                           81,200             68,900
        Other                                                     120,000            141,900

</TABLE>
                                       53

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


10.    Income taxes, continued
<TABLE>
<CAPTION>


                                                                  1997               1996
                                                               ----------         -------
<S>                                                          <C>                <C>
        Alternative minimum tax credit
           carry forwards                                         409,600            398,500
                                                                  -------            -------

        Total gross deferred tax assets                         4,910,800          5,603,300
        Less valuation allowance                                 (409,600)          (398,500)
                                                                 --------           --------

        Net deferred tax assets                                 4,501,200          5,204,800
                                                                ---------          ---------

        Deferred tax liabilities:
         Deferred policy acquisition costs,
          principally due to
          deferrals                                            (5,178,000)        (5,645,000)
        Other                                                     (31,000)           (81,100)
        Unrealized appreciation                                  (241,900)           (66,800)
                                                                 --------            -------

        Total gross deferred tax liabilities                   (5,450,900)        (5,792,900)
                                                               ----------          ---------

        Net deferred tax (liability)                            $(949,700)          (588,100)
                                                                 ========           ========

</TABLE>

        The net  change in the total  valuation  allowance  for the years  ended
        December 31, 1997,  1996,  and 1995 was an increase of $11,100,  $64,900
        and $62,000, respectively.

        In  assessing  the  realizability  of deferred  tax  assets,  management
        considers whether it is more likely than not that some portion or all of
        the deferred tax assets will not be realized.  The ultimate  realization
        of  deferred  tax  assets is  dependent  upon the  generation  of future
        taxable income during the periods in which those  temporary  differences
        become  deductible.  Management  considers  the  scheduled  reversal  of
        deferred tax  liabilities,  projected  future  taxable  income,  and tax
        planning  strategies in making this assessment.  Based upon the level of
        historical taxable income and projections for future taxable income over
        the periods  which the  deferred tax assets are  deductible,  management
        believes  it is more  likely  than  not the  Company  will  realize  the
        benefits of these deductible differences,  net of the existing valuation
        allowances at December 31, 1997.




                                       54

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


11.    Related party transactions

       The Company's general agent,  Insuradyne  Corporation,  is a wholly-owned
       subsidiary of Consolidare  Enterprises,  Inc.,  which owns  approximately
       fifty-seven  percent  (57%)  of  the  Company's  outstanding  stock.  The
       balances  due (to) from  affiliated  insurance  agency  reflected  in the
       accompanying  balance sheets principally  represent  unearned  commission
       advances paid to Insuradyne.  The Company incurred  commission expense to
       Insuradyne  aggregating  $323,303,  $344,904 and $422,121, in 1997, 1996,
       and 1995,  respectively.  These  amounts are  included as  components  of
       acquisition costs deferred and related amortization.  Insuradyne incurred
       insurance-related  expenses aggregating $25,604,  $31,703, and $35,271 in
       1997, 1996 and 1995, respectively.


12.    Earnings per share

       The  following  table sets  forth the  computation  of basic and  diluted
       earnings per share:
<TABLE>
<CAPTION>

                                                      1997            1996            1995
                                                     ----            ----            ----
<S>                                              <C>            <C>             <C>
 
       Numerator for basic and 
         diluted Earnings per share:
             Net income                             $195,210       1,392,505       1,114,903

       Denominator:
           Denominator for basic
             earnings per share
             weighted average shares             1,907,989       1,907,989       1,907,989

           Effective dilutive
             securities:
             Agent stock options                     1,214               0               0

       Dilutive potential common shares              1,214               0               0
       Denominator for diluted earnings
             per share weighted average
             shares and assumed
             conversions                         1,908,203       1,907,989       1,907,989
       Basic earnings per share                      $0.10            0.73            0.58
       Diluted earnings per share                    $0.10            0.73            0.58

</TABLE>




                                       55

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


13.    Agents' Incentive Stock Bonus Plan

       The  Company  has an  incentive  bonus plan for agents  that was  adopted
       January 1, 1995 by the Company's Board of Directors and effective through
       December 31, 2001.  Agents that qualify under the plan have the option to
       purchase shares of common stock.  The number of shares of common stock is
       determined  on the date of the award as the number of whole  shares equal
       to the award based on the applicable  stock price on as of December 31 of
       the year the agent has qualified for the bonus.  For each share of common
       stock  purchased  by the agent,  the Company will  concurrently  award an
       equivalent number of shares to the agent.

       The first  awards  were  granted in 1997 under  this  plan.  The  Company
       incurred  expenses of  approximately  $13,000  relating to the  Company's
       matching  number of shares.  If the agent,  does not  purchase the shares
       within the  designated  period,  then the agent  forfeits their rights to
       purchase  the shares of common  stock as well as the  matching  number of
       shares to be contributed by the Company.


14.    Disclosures About Fair Value of Financial Instruments

       Statement of Financial  Accounting  Standards No. 107  Disclosures  About
       Fair Value of Financial  Instruments  (SFAS 107)  requires the Company to
       disclose  estimated  fair value  information.  The following  methods and
       assumptions  were  used by the  Company  in  estimating  fair  values  of
       financial instruments as disclosed herein:

       Cash and cash equivalents,  short-term investments and policy and student
       loans:  The  carrying  amount  reported  in the  balance  sheet for these
       instruments approximate their fair value.

       Investment securities available-for-sale and held-to-maturity: Fair value
       for fixed maturity and equity securities is based on quoted market prices
       at the reporting date for those or similar investments.

       Policyholders' account balances: The fair values for policyholder account
       balances are based on their approximate surrender values.

       The following table presents the carrying amounts and

                                       56

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


14.    Disclosures About Fair Value of Financial Instruments

       estimated fair values of financial  instruments held at December 31, 1997
       and 1996. The fair value of a financial instrument is the amount at which
       the  instrument  could be  exchanged  in a  current  transaction  between
       willing parties.





              (The remainder of this page intentionally left blank)


                                       57

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)



14.     Disclosures About Fair Value of Financial Instruments,
        continued
<TABLE>
<CAPTION>

                                                      1997                            1996
                                              ----------------------          ------------
                                      Carrying     Estimated          Carrying     Estimated
                                       amount      fair value          amount      fair value
<S>                               <C>             <C>             <C>             <C>       
        Financial assets:
        Fixed maturities
           held to maturity
           (see note 3)            $10,501,712     10,631,003      $14,974,962     15,140,919
        Fixed maturities
           Available for
           sale (see note 3)        31,483,324     31,483,324       24,476,239     24,476,239
        Equity securities
           Available for sale          839,973        839,973                0              0
        Policy and student
           loans                     7,945,381      7,945,381        7,315,809      7,315,809
        Short-term invest-
           ments                       100,000        100,000        4,539,106      4,539,106
        Cash and cash
           equivalents               2,448,994      2,448,994          206,056        206,056

        Financial liabilities:
        Policy liabilities-
           Policyholders'
           account balances         52,335,511     46,514,475       52,347,996     45,274,432

</TABLE>

15.     Comprehensive Income

        In June 1997, the Financial  Accounting Standards Board issued Statement
        of   Financial   Accounting   Standards   (SFAS)  No.  130,   "Reporting
        Comprehensive   Income."  This  statement   establishes   standards  for
        reporting and display of  comprehensive  income and its  components in a
        full set of  financial  statements.  The  Company  will be  required  to
        reclassify  items  or  other  comprehensive  income  by  nature  in  the
        financial  statements,  and  display  the  accumulated  balance of other
        comprehensive  income  separately from retained  earnings and additional
        paid-in  capital in the equity section of the balance  sheet.  This will
        have no impact on net income.


16. Legal proceedings:

        Lawsuits against the Company have arisen in the normal

                                       58

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
                    Notes to Financial Statements (continued)


16.     Legal proceedings, continued

        course  of  the  Company's  business.  However,  contingent  liabilities
        arising from litigation and other matters are not considered material in
        relation to the financial position of the Company.

        To the best of the Company's  knowledge,  it has no potential or pending
        contingent liabilities that might be material to the Company's financial
        condition,  results of operations  or liquidity  pursuant to product and
        environmental liabilities.


17.     Year 2000

        The Company is aware of potential  problems  all  computer  systems face
        with respect to the year 2000, and has investigated  various  solutions.
        Present  plans call for the  conversion  to be  completed  by the end of
        1998. It is estimated to cost  approximately  $200,000,  which would not
        have a material impact on the Company.

        Testing for hardware  problems will be done during the second quarter of
        1999, although the company is not expecting any problems which could not
        be solved before December 31, 1999.






                                       59

<PAGE>



                                   Schedule I
                    SOUTHERN SECURITY LIFE INSURANCE COMPANY
        Summary of Investments Other Than Investments in Related Parties
                               December 31, 1997
<TABLE>
<CAPTION>

                                                                 Number of
                                                                 shares or                                               Amount at
                                                           units-principal                                              which shown
                                                                amounts of                                  Fair          in the
Type of investment                                          bonds or notes               Cost              Value      balance sheet
------------------                                          --------------               ----              -----      -------------
<S>                                                         <C>                 <C>                 <C>               <C>      
Fixed maturities held for investment:
   U.S. Government and government agencies and authorities       2,500,000         $2,516,052          2,570,000          2,516,052
   Public utilities                                                500,000            506,520            525,000            506,520
   Industrial and miscellaneous                                  6,484,173          6,470,218          6,527,081          6,470,218
   Special revenue and special assessment of agencies and
      authorities of governments and political
     subdivisions                                                1,000,000          1,008,922          1,008,922          1,008,922
                                                                 ---------          ---------          ---------          ---------

   Total fixed maturities                                       10,484,173         10,501,712         10,631,003         10,501,712
                                                                ----------         ----------         ----------         ----------

Fixed maturities available for sale:
   U.S. Government and government agencies and authorities      11,700,000          9,301,191          9,474,708          9,474,708
  Public utilities                                                 855,000            899,891            917,950            917,950
   Industrial and miscellaneous                                 19,940,000         20,582,001         20,993,849         20,993,849
   Special revenue and special assessment of agencies and
     authorities of governments and political
     subdivisions                                                   97,541             97,307             96,817             96,817
                                                                   -------            -------            -------            -------

                                                                32,592,541         30,880,390         31,483,324         31,483,324
                                                                ----------         ----------         ----------         ----------

   Total fixed maturities                                       43,076,714        $41,382,102         42,114,327         41,985,036
                                                                ==========         ----------         ==========         ----------

Equity securities:
   Common, including investments in Mutual fund                     53,071            800,000            839,973            839,973
                                                                    ======            -------            =======            -------

Policy loans                                                                        7,701,020                             7,701,020
                                                                                    ---------                             ---------

Student loans                                                                         244,361                               244,361
                                                                                      -------                               -------

Short-term investments                                                                100,000                               100,000
                                                                                    ---------                             ---------

Other invested assets                                                                    -                                     -
                                                                                       ------                                 ---

   Total investments                                                              $50,227,483                           $50,870,390
                                                                                   ==========                            ==========


</TABLE>

                       See accompanying auditors' report.

                                       60

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY

                             Financial Data Schedule

             For the periods ending December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                                  YTD                  YTD                  YTD
                                              December 31,         December 31,         December 31,
                                                  1997                 1996                 1995
                                              -----------          -----------          --------
<S>                                          <C>                   <C>                 <C>       
Fixed maturities held for sale                $31,843,324           24,276,239            21,812,096
Fixed maturities held to
  maturity (carrying value)                    10,501,712           14,974,962            15,165,395
Fixed maturities held to
  maturity (market value)                      10,631,003           15,140,919            15,494,540
  Investment in equity
  securities                                      839,973                 -                1,715,386
Mortgage loans on real estate                        -                    -                     -
Investment in real estate                            -                    -                     -
Total investments                              50,870,390           51,319,216            50,186,208
Cash and cash equivalents                       2,448,994              206,056               406,752
Reinsurance recoverable on
  paid losses                                     359,688              379,692               514,341
Deferred policy acquisition costs              15,451,689           16,979,612            18,145,111
Total assets                                   82,142,465           81,809,360            81,872,350
Policy liabilities-future
  benefits, losses, claims                      1,409,031              985,720             1,050,498
Policy liabilities-unearned
  premiums                                      7,108,662            8,249,190             9,116,890
Policy liabilities-other claims
  and benefits                                    427,649              293,221               191,955
Other policyholder funds                           59,686               59,596                57,444
Notes payable, bonds, mortgages,
  and similar debt                              1,000,000            1,000,000             2,400,553
Preferred stocks mandatory
  Redemption                                         -                     -                    -
Preferred stocks non-
  mandatory redemption                               -                     -                    -
Common stock                                    1,907,989            1,907,989             1,907,989
Other stockholders equity                       4,011,519            4,011,519             4,011,519
Total liabilities and
  stockholders equity                          82,142,465           81,809,360            81,872,350
Premiums                                        7,643,650            7,915,019             8,158,938
Net investment income                           3,545,311            3,318,627             2,998,875
Realized investment gains
  and losses                                      506,795              869,502                60,237
Other income                                         -                     -                    -
Benefits, claims, losses
  and settlement expenses                       4,307,013            3,812,463             4,048,125
Underwriting acquisition and
  insurance expenses-
  amortization of deferred
  policy acquisition costs                      3,542,617            3,364,738             3,069,742
</TABLE>

                                       61

<PAGE>




                    SOUTHERN SECURITY LIFE INSURANCE COMPANY

                       Financial Data Schedule, continued


<TABLE>
<CAPTION>

                                                  YTD                  YTD                  YTD
                                              December 31,         December 31,         December 31,
                                                 1997                  1996                 1995
                                              -----------          -----------          --------
<S>                                          <C>                   <C>                 <C>       
Underwriting acquisitions and
  insurance expense other                       3,382,255            3,246,552             2,735,280
Income or loss before taxes                       249,410            1,588,505             1,274,903
Income tax expense                                 54,200              196,000               160,000
Income/Loss continuing
  operations                                      195,210            1,392,505             1,114,903
Discontinued operations                              -                     -                    -
Extraordinary items                                  -                     -                    -
Cumulative effect-changes in
  accounting principals                              -                     -                    -
Net income                                        195,210            1,392,505             1,114,903

Earnings per share - basic                           $.10                  .73                   .58
Earnings per share - diluted                         $.10                  .73                   .58

</TABLE>
















                                       62

<PAGE>



                                  Schedule III

                                SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                   Supplementary Insurance Information

                                    December 31, 1997, 1996 and 1995


<TABLE>
<CAPTION>
                        Future policy                         Other                                Benefits Amortization
             Deferred   benefits,      Policy-              policy                                 claims    of deferred
               policy   losses claims   holders'             claims &                       Net    losses &       policy      Other
            acquisition    and loss      account  Unearned   benefits      Premium   investment  settlement  acquisition  operating
                cost       expenses     balances  premiums    payable      revenue       income    expenses        costs   expenses

<S>         <C>         <C>          <C>         <C>        <C>        <C>          <C>         <C>          <C>        <C>      
1997 Life
  and
  annuities $15,451,689    1,409,031 52,335,511  7,108,662    427,649    7,643,650    3,545,311   4,431,474    3,542,617  3,382,255
            ===========    ========= ==========  =========    =======    =========    =========   =========    =========  =========

1996 Life
  and
  annuities $16,979,612      985,720 52,347,996  8,249,190    293,221    7,915,019    3,318,627   3,813,361    3,364,738  3,246,552
            ===========      ======= ==========  =========    =======    =========    =========   =========    =========  =========

1995 Life
  and
  annuities $18,145,111    1,050,498 50,624,276  9,116,890    191,955    8,158,938    2,998,875   4,048,125    3,069,742  2,735,280
            ===========    ========= ==========  =========    =======    =========    =========   =========    =========  =========



</TABLE>


                       See accompanying auditors' report.












                                       63

<PAGE>



                                   Schedule IV
                    SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                   Reinsurance

                        December 31, 1997, 1996 and 1995


        
<TABLE>
<CAPTION>
                                                                                                                       Percentage
                                                                 Ceded to             Assumed                           of amount
                                                                   other            from other                           assumed
                                          Gross amount           companies           companies         Net amount        to net


December 31, 1997:
<S>                                     <C>                    <C>                 <C>              <C>                <C>
  Life insurance in force               $1,026,038,000         337,901,000         532,772,000      1,220,909,000             44%
                                        ==============         ===========         ===========      =============             ===

  Premiums:
    Life insurance                           8,055,672             914,071             490,726          7,632,327            6.4%
    Accident & health insurance                 11,323                -                   -                11,323              -
                                                ------               -----               -----             ------              -

  Total Premiums                            $8,066,995             914,071             490,726          7,643,650            6.4%
                                            ==========             =======             =======          =========            ====

December 31, 1996:
  Life insurance in force               $1,165,948,000         386,084,000         537,743,000      1,317,607,000             41%
                                        ==============         ===========         ===========      =============             ===

  Premiums:
    Life insurance                           8,415,790           1,030,673             528,636          7,913,753            6.7%
    Accident & health insurance                  1,274                -                   -                 1,274               -
                                                 -----             -------             -------              -----               -

  Total Premiums                            $8,417,064           1,030,673             528,636          7,915,027            6.7%
                                            ==========           =========             =======          =========            ====

December 31, 1995:
  Life insurance in force               $1,298,205,000         448,382,000         507,552,000      1,357,375,000             37%
                                        ==============         ===========         ===========      =============             ===

  Premiums:
    Life insurance                           8,829,073           1,201,432             529,912          8,157,553              7%
    Accident & health insurance                  1,385                -                   -                 1,385               -
                                                 -----               -----               -----              -----               -

  Total Premiums                            $8,830,458           1,201,432             529,912          8,158,938              7%
                                            ==========           =========             =======          =========              ==


</TABLE>









<PAGE>



Item 9.  Change in and disagreements on Accounting and Financial
Disclosure.

      Not applicable


                                       65

<PAGE>



                                    PART III

Item 10.  Directors and Executive Officers of the Company.

(a) Directors.  The following table lists the names and ages of all directors of
the Company at December 31, 1997,  states the date when service as a director of
the Company  began,  and lists all other  positions  or offices with the Company
presently held by each such person.
<TABLE>
<CAPTION>

                                     Director             Other Positions &
Name                         Age      Since               Offices with Company


<S>                         <C>     <C>                  <C>                                   
Samuel F. Brewer             62      May, 1978            Member, Audit Committee

A. Thomas Frank              73      June, 1986           Member, Executive Committee

Frank A. Hulet               78      May 1978             Chairman, Audit Committee

C. Wesley Johnson            78      May, 1978

Lewis E. Kassis              85      Jan., 1981

Robert L. Martin             56      June, 1979           Member, Audit Committee

Charles W. Mullenix          81      April, 1979          Member, Executive Committee

George Pihakis               72      May, 1978            President & Chief Executive
                                                          Officer, Member, Executive
                                                          Committee

Ferris Ritchey, Jr.          68      April, 1978          Chairman of the Board,
Chairman                                                  Executive Committee

John M. Roehm                44      July, 1996

David C. Thompson            60      April, 1978          Executive Vice President &
                                                          Chief Operating Officer,
                                                          Secretary, Treasurer

Lloyd C. Zobrist             70      May, 1978            Member, Executive Committee
</TABLE>

        All Directors  serve until the next Annual  Meeting of Share holders and
until their  respective  successors are duly elected and  qualified.  All of the
Directors named in the table above are stockholders of Consolidare  Enterprises,
Inc., which purchased  effective  control of the Company on May 3, 1978.  Except
for such  affiliation  with  Consolidare  Enterprises,  Inc.,  there  exists  no
arrangement  or  understanding  between  any  Director  and any other  person or
persons  pursuant to which any of such  Directors  were selected as Directors of
the Company.

                                       66

<PAGE>



(b)  Executive  Officers.  The  following  table lists the names and ages of the
executive officers of the Company, the positions with the Company presently held
by each such officer, and the period during which each has served as such:
<TABLE>
<CAPTION>

                               Position                                        Commencement
Name                     Age    Held                                            of Service

<S>                     <C>   <C>                                             <C> 
George Pihakis           72    President & Chief Executive                     June, 1979
                               Officer; Director

David C. Thompson        60    Executive Vice President and                    April, 1978
                               Chief Operating Officer;
                               Treasurer; Secretary; Director

Nikki Clark              50    Vice President; Director of                     July, 1992
                               Financial Services

Stephen Reck             56    Vice President; Chief Actuary                   July, 1995

</TABLE>

      The Company has an executive  compensation  agreement with George Pihakis,
President and Chief Executive Officer of the Company.  The remaining term of the
agreement is automatically extended each year for an additional five year period
unless  either party gives notice of  termination.  The  agreement  provides for
annual  increases  in Mr.  Pihakis'  compensation  in such  amounts  as shall be
determined by the Board of Directors.

      At a meeting of the Company's  Board of Directors in January of 1993,  the
base  compensation  payable to Mr.  Pihakis  under the  agreement  was raised to
$244,800.

      Except as set forth  herein,  the officers of the Company have no definite
terms of office as such;  they serve at the pleasure of the Board of  Directors.
The Board of Directors customarily elects officers annually.

(c) Business  Experience  of Officers and  Directors.  The  following is a brief
account of the business experience of each executive officer and Director of the
Company during the past five years or more:

      Samuel F.  Brewer - Since July of 1990,  Mr.  Brewer has been the owner of
Brewer  Development  Corporation,  Inc.,  a food service  company.  From 1976 to
present,  Mr.  Brewer  has  been  owner  and  President  of  Brewer-Costin  Inc.
Insurance.  From 1983 to 1989, Mr. Brewer served as the State Executive Director
of  the  Georgia  office  of the  Agricultural  Stabilization  and  Conservation
Services of the U.S. Department of Agriculture. Mr. Brewer is the brother-in-law
of Ferris S. Ritchey, Jr., a director of the Company.

                                       67

<PAGE>



     Nikki Clark - Ms. Clark has been employed by the Company since 1988.  Since
her  employment  by the Company,  her duties have  included  responsibility  for
policyholder services, data processing services, agent advances and commissions,
agent  licensing  matters and record  keeping.  In July of 1992,  Ms.  Clark was
elected to the office of Vice  President and Director of Financial  Services for
the Company.  Ms. Clark is the daughter of Mr. George Pihakis, the President and
Chief Executive Officer of the Company.

     A. Thomas Frank - Mr. Frank was the Chairman of the Board and the President
of Medidentic,  Inc., a financial  consulting firm for  physicians,  from 1959 -
1989. Mr. Frank retired from this position in 1989.

     Frank A. Hulet - Mr.  Hulet served as a  consultant  to Food-  Mills,  Inc.
d/b/a Jayhawk Manufacturing Company, a manufacturer of food processing machinery
located in Hutchinson,  Kansas until he retired in 1992.  From 1977 to 1983, Mr.
Hulet  served  as   Secretary/   Treasurer   and  General   Manager  of  Jayhawk
Manufacturing Company.

     C. Wesley Johnson - For more than five years,  Mr. Johnson had been manager
of the Sacramento  Field Office of the Fort Worth  Division of General  Dynamics
Corporation,  a diversified  aerospace  company.  Mr. Johnson  retired from this
position in 1984.

     Lewis E.  Kassis - Mr.  Kassis has for many years been the  Chairman of the
Board  and  part  owner  of  Wholesale  Cash  &  Carry  (Grocers),   Sacramento,
California.  He is also a partner of Kassis  Enterprises,  Country  Club  Lanes,
Kassis Wholesale Co. and an officer of Kassis Building Co.

     Robert L.  Martin - Mr.  Martin is a rancher  and  cattlebroker.  He is the
owner of Robert Lee Martin  Ranch and a partner in I. L. Martin  Ranch,  both of
which are located in Jacksboro, Texas.

     Charles W. Mullenix - Dr. Mullenix is an ophthalmologist who has served for
more than five years as President of Charles W. Mullenix and Richard B. O'Grady,
S. C., Ophthalmologists, Glenview, Illinois.

     George  Pihakis - Mr.  Pihakis has served as President and Chief  Executive
Officer  of the  Company  since  June of  1978.  He is  also  the  President  of
Insuradyne  Corporation.  Mr.  Pihakis is the father of Ms. Nikki Clark,  a Vice
President and the Director of Financial Services for the Company.

     Stephen  L.  Reck - Mr.  Reck has been an FSA,  Fellow  of the  Society  of
Actuaries,  since 1972. He has been with Southern Security since 1993 serving as
the Chief Actuary.  His primary  responsibility has been developing new products
as the Company  expands its  marketing  efforts to other  distribution  outlets.
Prior to joining Southern Security he was the President of Coastal States

                                       68

<PAGE>



Life Insurance Company.  In July of 1995, Mr. Reck was elected to
the office of Vice President and Chief Actuary.

     Ferris S. Ritchey, Jr. - Mr. Ritchey, an attorney, is the senior partner in
the law firm of Ritchey & Ritchey,  P. A., a position  which he has occupied for
more than five years.  He is an officer of Bowlo-Mac,  Inc.,  Super Bowl,  Inc.,
Stonehenge, Inc., Vestavia Bowl, Inc., and P.R. Leasing Co., Inc. Mr. Ritchey is
the brother-in-law of Samuel F. Brewer, a Director of the Company.

     John M. Roehm - Mr.  Roehm,  RPH, is a pharmacist  and  President of Fisher
Pharmacy in Defuniak  Springs,  FL. Mr. Roehm is the son of Charles J. Roehm who
served as a Director of Southern Security for many years.

     David C.  Thompson  - Since  April of 1978,  Mr.  Thompson  has  served  as
Executive  Vice  President  and Chief  Operating  Officer and  Treasurer  of the
Company.  Since 1982,  Mr.  Thompson has served as Secretary of the Company.  He
also serves as Vice President of Consolidare  Enterprises  and is Vice President
and  Treasurer  of  Insuradyne  Corporation.  He is also the  President of and a
stock-  holder  in BBQ Rib  Ranch,  Inc.  Mr.  Thompson  is a  certified  public
accountant.

     Lloyd C. Zobrist - Mr.  Zobrist is a retired  general  contractor  and real
estate developer from Morton,  Illinois.  He is a partner in Zobrist Development
Co., WRCL, Co., and Cross Creek Development  Company and is  Secretary/Treasurer
of N. Zobrist & Sons, Inc.

     Except as otherwise noted above, no family  relationships exist between any
of the Directors or executive officers of the Company.

     No officer or Director of the Company presently holds a directorship in any
other  company with a class of securities  registered  pursuant to Section 12 of
the Securities  Exchange Act or subject to the  requirements of Section 15(d) of
the Securities  Exchange Act or any company  registered as an investment company
under the Investment Company Act of 1940.

     No person  named as an officer or Director of the Company  has,  during the
past five years, filed a petition under the Bankruptcy Code, been convicted of a
crime, or been enjoined from  participating in activities  related to securities
or engaging in any type of business  practice.  Neither has any such person been
the  subject  of any order  suspending  his  right to  engage in any  securities
related  activity or finding any person so named to have violated any Federal or
state securities laws.

   (d)  Compliance  with Section  16(a) of the Exchange  Act. The Company has no
class of securities registered pursuant to Section 12 of the Exchange Act.


                                       69

<PAGE>



Item 11.  Executive Compensation.

   (a)  Summary  Compensation.  The  following  summary  compensation  table  is
provided with respect to the Company's Chief Executive Officer and its Executive
Vice  President,  who  constitute  all of the executive  officers of the Company
whose total annual salary and bonus exceed $100,000:

                                         SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                         Long Term Compensation

                                           Annual Compensation   |    Awards     Awards  | Payouts  |
                                                                 |                       |          |
   (a)              (b)    (C)           (d)          (e)        |     (f)        (g)    |   (h)    |   (I)
                                                                 |                                  |
                                                     Other       |              Securities|         |All other
Name and                                             Annual      |  Restricted  Underlying|   LTIP  | Compen-
Principal                                         Compensation   |  Stock AwardsOptions/ | Payouts  | sation
Position           Year    Salary ($)  Bonus ($)      ($)        |     ($)      SARs(#)  |   ($)    |   ($)
                                                                 |                       |          |
President                                                        |                       |          |
and Chief                                                        |                       |          |
Executive                                                        |                       |          |
Officer                                                          |                       |          |
                                                                 |                       |          |
<S>                <C>     <C>         <C>        <C>               <C>         <C>        <C>       <C>
George Pihakis     1997    $244,800    $0.00      $11,674(1)     |  $0.00       N/A      | N/A      | N/A
                                                                 |                       |          |
George Pihakis     1996    $244,800    $0.00      $11,374(1)     |  $0.00       N/A      | N/A      | N/A
                                                                 |                       |          |
George Pihakis     1995    $247,976    $0.00       $9,574(1)     |  $0.00       N/A      | N/A      | N/A
                                                                 |                       |          |
                                                                 |                       |          |
                                                                 |                       |          |
                                                                 |                       |          |
Executive Vice                                                   |                       |          |
President                                                        |                       |          |
                                                                 |                       |          |
David C. Thompson  1997    $121,275    $0.00      $14,043(2)     |  $0.00       N/A      | N/A      | N/A
                                                                 |                       |          |
David C. Thompson  1996    $121,275    $0.00      $13,685(2)     |  $0.00       N/A      | N/A      | N/A
                                                                 |                       |          |
David C. Thompson  1995    $114,634    $0.00      $11,770(2)     |  $0.00       N/A      | N/A      | N/A
                                                                 |                       |          |
                                                                 |                       |          |
                                                                 |                       |          |
</TABLE>

(1)       During  1997  this  amount  included  $6,600  paid  in the  form  of a
          Director's  fee, $550 paid in the form of an Executive  Committee Fee,
          and  $4,524  paid in the form of a car  allowance.  During  1996  this
          amount included $6,300 paid in the form of a Director's fee, $550 paid
          in the form of an Executive  Committee Fee, $4,524 paid in the form of
          a car allowance.  During 1995 this amount  included $4,800 paid in the
          form  of a  Director's  fee,  $250  paid in the  form of an  Executive
          Committee Fee, and $4,524 paid in the form of a car allowance.

(2)       During  1997  this  amount  included  $6,600  paid  in the  form  of a
          Director's  Fee, $550 paid in the form of an Executive  Committee Fee,
          $6,000 paid in the form of a car allowance, and $893 paid

                                       70

<PAGE>



          in the form of dues at a social  club used  exclusively  for  business
          purposes.  During 1996 this amount included $6,300 paid in the form of
          a Director's Fee, $550 paid in the form of an Executive Committee Fee,
          $6,000 paid in the form of a car allowance,  and $835 paid in the form
          of dues at a social  club  used  exclusively  for  business  purposes.
          During  1995  this  amount  included  $4,800  paid  in the  form  of a
          Director's  fee, $250 paid in the form of an Executive  Committee fee,
          $6,000 paid in the form of a car  allowance  and $720 paid in the form
          of dues at a social club used exclusively for business purposes.

  (b)  Perquisites.  Executive  officers of the Company who are employees of the
Company are covered under a group life, group  disability,  and  hospitalization
plan that  does not  discriminate  in favor of  officers  and that is  generally
available  to all  salaried  employees.  The  Company  does not have a  pension,
retirement  or  other   deferred   compensation   plan,  or  any  other  similar
arrangement.

  (c)  Director's  Fees and  Other  Fees.  Directors  of the  Company  receive a
Director's fee of $6,600 per year for serving as Directors of the Company.  Each
director  of the Company  also  receives  the sum of $275.00 for each  committee
meeting attended, if such committee meeting is not in conjunction with a meeting
of the Company's Board of Directors held at the same time and place.

  (d) Employment Contracts.  The Company has an executive compensation agreement
with George Pihakis,  President and Chief Executive Officer of the Company.  The
remaining  term of the  agreement  is  automatically  extended  each year for an
additional five year period unless either party gives notice of termination. The
agreement  provides for annual  increases in Mr.  Pihakis'  compensation in such
amounts as shall be determined by the Board of Directors.  The base compensation
payable to Mr. Pihakis under the agreement is $244,800.

  (e) Compensation Committee Interlocks and Insider Participation. The Executive
Committee of the Company's Board of Directors makes  recommendation to the Board
of Directors  concerning the compensation of the Company's  executive  officers.
Subsequently,  the Board of Directors makes all final decisions  concerning such
compensation. The Company's Executive Committee consists of Charles W. Mullenix,
Ferris S. Ritchey,  Jr., A. Thomas Frank,  Lloyd C. Zobrist and George  Pihakis,
President and Chief Executive Officer.

  (f)  Board  Compensation  Committee  Report  on  Executive  Compensation.   In
determining  what  level  and type of  compensation  was made  available  to the
Company's  executive officers during 1997, the Executive  Committee and Board of
Directors  considered the overall  performance of the Company and each officer's
contribution to that performance.  Specifically, in determining the compensation
of

                                       71

<PAGE>



Mr. Pihakis,  the Company's President and Chief Executive Officer, the Executive
Committee and Board of Directors  considered  his length of employment  with the
Company, his experience in the industry, the financial condition of the Company,
payments  received by other executive  officers  holding  similar  positions and
performing similar duties, and other subjective criteria.


                                       72

<PAGE>



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

    (a) The  following  table sets forth,  as of December 31, 1997,  information
with respect to the only persons known by the Company to be the beneficial owner
of more than 5% of the Company's outstanding voting securities:
<TABLE>
<CAPTION>

                                                         Number of Shares
Title                                                     and Nature of
 of            Name and Address of                          Beneficial              Percent
Class          Beneficial Owner                              Ownership             of Class

<S>                                                     <C>                     <C>  
Common         Consolidare Enterprises, Inc                  1,095,496               57.4%
Shares         c/o Southern Security Life                      Direct
                Insurance Company
               755 Rinehart Road
               Lake Mary, FL 32746

Common         Capital Indemnity Corp.,                        142,872                7.5%
Shares         George A. Fait                                  Direct
               4610 University Ave, Madison, WI
</TABLE>

        Executive  officers and  directors of the Company are  sharehold  ers of
Consolidare  Enterprises,  Inc., which was the owner of approximately 57% of the
Company's  voting  securities  at  December  31,  1997.  At December  31,  1997,
approximately  60.8% of the issued and outstanding  common shares of Consolidare
Enterprises,  Inc. was owned by directors and executive officers of Company. The
following  table sets forth  information  as to the common  shares of  Company's
parent,  Consolidare Enterprises,  Inc., beneficially owned by all directors and
executive officers of the Company at December 31, 1997.
<TABLE>
<CAPTION>

Name                                                  Number of Shares             Percent of Class

<S>                                                   <C>                          <C>  
Samuel F. Brewer (10)                                     95,966                       2.84%

A. Thomas Frank(1)                                        75,640                       2.24%

Frank A. Hulet(2)                                        129,180                       3.83%

C. Wesley Johnson(3)                                     109,999                       3.26%

Lewis Kassis(4)                                          293,152                       8.68%

Robert L. Martin(5)                                      122,987                       3.64%

Charles W. Mullenix(6)                                   315,548                       9.35%

George Pihakis(7)                                        167,446                       4.96%
</TABLE>


                                       73

<PAGE>
<TABLE>
<CAPTION>

Name                                                  Number of Shares             Percent of Class
<S>                                                   <C>                          <C>  
Ferris S. Ritchey, Jr.                                   326,870                       9.68%

John M. Roehm                                            194,298                       5.75%

David C. Thompson(8)                                      69,043                       2.04%

Lloyd C. Zobrist(9)                                      153,550                       4.55%

All Directors &
 Officers                                              2,053,679                       60.8%

</TABLE>

(1)     Includes 70,645 shares  registered in the name of Margaret Jeanne Frank,
        his wife.

(2)     Shares registered in the  name of Frank  and his wife  Virginia Hulet as
        trustee's of the Frank A. & Virginia Hulet Revocable Trust.

(3)     Shares registered in the name of Johnson Family Trust.

(4)     Shares registered in the name of Lewis and Helen Kassis Trust.

(5)     Shares  attributed to Mr. Martin are registered in the name of his wife,
        Virginia A. Martin.

(6)     240,000 shares attributed to Mr. Mullenix are registered to the Mullenix
        Family  Partnership.  75,548  shares are  registered  in the name of Mr.
        Mullenix and his wife, Mary Jane Mullenix.

(7)     Shares attributed to Mr. Pihakis are registered in the name of his wife,
        Dolores Pihakis. Mr. Pihakis disclaims any  beneficial ownership of such
        shares.

(8)     Shares  registered  in the  name of  David  C.  Thompson  and his  wife,
        Patricia M.

(9)     141,799  Shares  registered  in the name of WRCL  Company,  of which Mr.
        Zobrist is a principal,  and 11,751  shares are  registered  to Lloyd C.
        Zobrist, individually.

(10)    Shares registered in the name of Samuel F. and his wife, Anna T. Brewer.

        In  addition  to  common  stock,  Consolidare   Enterprises,   Inc.  has
outstanding one additional class of securities,  14.25% Convertible Subordinated
Debentures which are convertible into common shares of Consolidare.



                                       74

<PAGE>



Item 13.  Certain Relationships and Related Transactions.

        Insuradyne   Corporation,   a  wholly-owned  subsidiary  of  Consolidare
Enterprises,  Inc.,  serves as  general  agent for the  Company,  pursuant  to a
general  agency  agreement,  which is  terminable  by either  party with 30 days
notice.  In such  capacity,  Insuradyne  receives a commission on the first year
commissionable  premium on certain of the Company's  policies as well as a small
renewal  commission on certain other  policies.  In accordance  with the Florida
Insurance Code, a copy of the Company's General Agency Agreement with Insuradyne
Corporation was filed with and approved by the Florida  Department of Insurance.
Management  of the  Company  believes  that  the  terms  of its  General  Agency
Agreement  with  Insuradyne are as favorable to the Company as terms which could
be obtained from independent  third parties.  During 1997, gross com missions in
the amount of $323,303  were earned by Insuradyne  Corporation.  At December 31,
1997, the Company owed $68,646 to Insuradyne as a result of  commissions  earned
by Insuradyne but for which Insuradyne has not yet requested payment.

        No Director or officer of the Company or any  associates of any director
or officer of the Company was indebted to the Company at December 31, 1997.

        The  Company  continues  to  be  indebted  to  its  parent,  Consolidare
Enterprises,  Inc., in the amount of $1,000,000,  pursuant to a promissory  note
dated December,  1988, which bears interest at the annual rate of interest equal
to the Prime Rate (as hereinafter  defined) plus 2%, with such interest rate not
to be less than 9% nor in excess of 11%. For purposes of this  promissory  note,
"Prime  Rate" is defined to mean the Prime Rate as  announced  by Compass  Bank,
Birmingham,  Alabama,  from time to time, as its prime rate (which interest rate
is only a bench mark, is purely discretionary and is not necessarily the best or
lowest rate charged borrowing customers).  This promissory note is due on demand
and is payable  out of  capital  surplus in excess of  $1,900,000,  pursuant  to
Florida Statutes  ss.628.401  (1990).  Interest and principal can only be repaid
upon the express written approval of the Florida Department of Insurance.

        On December 31, 1997,  approximately 60.8% of the issued and outstanding
stock of Consolidare Enterprises,  Inc. was owned by the directors and executive
officers of the Company.  See item 12 Security  Ownership of Certain  Beneficial
Owners and Management.

        Ferris  S.  Ritchey,  Jr.,  a  Director  and a member  of the  Executive
Committee,  is a member of the law firm of Ritchey & Ritchey, P.A., which serves
as legal counsel to the Company on certain matters.


                                       75

<PAGE>



                                     PART IV


Item 14.  Financial Statements, Exhibits filed and Reports on Form 8-K.
<TABLE>
<CAPTION>

        (a)    1.     Financial Statements                                            Page Number
<S>                                                                               <C>    

                      The following  financial  statements of Southern  Security
                      Life Insurance Company are included in Part II,
                      Item 8:

                      Independent Auditors' Report............                              24

                      Balance Sheets - December 31,
                      1997 and 1996...........................                              25

                      Statements of Income - years ended
                      December 31, 1997, 1996 and 1995........                              27

                      Statements of Shareholders' Equity - years
                      ended December 31, 1997, 1996 and 1995..                              28

                      Statements of Cash Flows - years ended
                      December 31, 1997, 1996 and 1995........                              29

                      Notes to Financial Statements...........                              32

               2.     Supplemental Schedules.

                      Required Financial Data - for the years ended December 31,
                      1997, 1996 and 1995 included in Part II, Item 8:

                      Schedule I - Summary of Investments -
                      Other than Investments in Related
                      Parties.................................                              60

                      Financial Data Schedule.................                              61

                      Schedule III - Supplementary Insurance
                      Information.............................                              63

                      Schedule IV - Reinsurance...............                              64

</TABLE>

        Schedules  other than those listed above have been omitted  because they
are not  applicable  or because  the  required  information  is  included in the
financial statements and notes thereto or in Item 7 -Management's Discussion and
Analysis of Financial Condition
and Results of Operations.

                                       76

<PAGE>



3.      Exhibits

<TABLE>
<CAPTION>

        Exhibit Number                                                                Page Number
<S>                                                                               <C>

                3.    Articles of  Incorporation,  as amended,  and By-Laws,  as
                      amended   (without   exhibits)   dated   September   1994,
                      incorporated by reference herein from From Exhibit 3(1) of
                      the Annual  Report of the  Company  filed on Form 10-K for
                      the
                      fiscal year ended December 31, 1994.....                              89

               10.    Executive  Compensation  Agreement between the Company and
                      George  Pihakis   (without   exhibits)   incorporated   by
                      reference  herein from Exhibit  10(B) of the Annual Report
                      of the Company filed on Form 10-K for the fiscal year
                      ended December 31, 1984.................                              90

               10.A   Revolving Financing Agreement between
                      the Company and the Student Loan
                      Marketing Association, dated as of
                      September 19, 1996......................                              91

               10.B   Reinsurance Agreement between the Company and United Group
                      Insurance   Company,   dated  as  of  December   31,  1992
                      incorporated by reference herein from Exhibit 10(B) of the
                      Annual  Report of the  Company  filed on Form 10-K for the
                      fiscal
                      year ended December 31, 1992............                              92

               10.C   Agency  Agreement   between  the  Company  and  Insuradyne
                      Corporation  incorporated by reference herein from Exhibit
                      10(C) of the Annual  Report of the  Company  filed on Form
                      10-K for the fiscal year ended
                      December 31, 1993.......................                              93

               11.    Statement Re Computation of Net Income per
                      common share............................                              94

               20.    Definitive proxy materials for the
                      Annual Meeting of Shareholders held
                      July 26, 1997..........................                               95

               (b)    Reports on Form 8-K

                      None.

</TABLE>



                                       77
<PAGE>

                                       

                                   SIGNATURES


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



                                        SOUTHERN SECURITY LIFE INSURANCE COMPANY


                                            By:  /s/George Pihakis
                                                 George Pihakis
                                                 President, Chief Executive
                                                 Officer and Director


                                            By:  /s/David C. Thompson
                                                 David C. Thompson
                                                 Executive Vice President
                                                 Secretary, Treasurer,
                                                 Chief Operating Officer and
                                                 Director


Date: April 15, 1998


























                                       78

<PAGE>



Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been  signed  below by the  following  Director  of the  Company on the date
indicated.


SOUTHERN SECURITY LIFE INSURANCE COMPANY


By:  /s/Samuel F. Brewer
     Samuel F. Brewer (Director)
     April 15, 1998



                                       79

<PAGE>



Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been  signed  below by the  following  Director  of the  Company on the date
indicated.

SOUTHERN SECURITY LIFE INSURANCE COMPANY


By: /s/Alfred T. Frank
    Alfred T. Frank (Director)
    April 15, 1998



                                       80

<PAGE>



Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been  signed  below by the  following  Director  of the  Company on the date
indicated.

SOUTHERN SECURITY LIFE INSURANCE COMPANY


By:  /s/Frank A. Hulet
     Frank A. Hulet (Director)
     April 15, 1998


                                       81

<PAGE>



Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been  signed  below by the  following  Director  of the  Company on the date
indicated.

SOUTHERN SECURITY LIFE INSURANCE COMPANY


By:  /s/C. Wesley Johnson
     C. Wesley Johnson (Director)
     April 15, 1998



                                       82

<PAGE>



Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been  signed  below by the  following  Director  of the  Company on the date
indicated.

SOUTHERN SECURITY LIFE INSURANCE COMPANY


By:  /s/Lewis Kassis
     Lewis Kassis (Director)
     April 15, 1998



                                       83

<PAGE>




Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been  signed  below by the  following  Director  of the  Company on the date
indicated.

SOUTHERN SECURITY LIFE INSURANCE COMPANY


By:  /s/Robert Lee Martin
     Robert Lee Martin (Director)
     April 15, 1998



                                       84

<PAGE>



Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been  signed  below by the  following  Director  of the  Company on the date
indicated.

SOUTHERN SECURITY LIFE INSURANCE COMPANY


By:  /s/Dr. Charles W. Mullenix
     Dr. Charles W. Mullenix (Director)
     April 15, 1998



                                       85

<PAGE>



Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been  signed  below by the  following  Director  of the  Company on the date
indicated.

SOUTHERN SECURITY LIFE INSURANCE COMPANY


By:  /s/Ferris S. Ritchey, Jr.
     Ferris S. Ritchey, Jr. (Director)
     April 15, 1998



                                       86

<PAGE>



Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been  signed  below by the  following  Director  of the  Company on the date
indicated.

SOUTHERN SECURITY LIFE INSURANCE COMPANY


By:  /s/John M. Roehm
     John M. Roehm (Director)
     April 15, 1998



                                       87

<PAGE>



Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been  signed  below by the  following  Director  of the  Company on the date
indicated.

SOUTHERN SECURITY LIFE INSURANCE COMPANY


By:  /s/Lloyd C. Zobrist
     Lloyd C. Zobrist (Director)
     April 15, 1998



                                       88

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                    EXHIBIT 3

                 EXHIBITS FILED WITH ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 1994


                                       89

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                   EXHIBIT 10

                 EXHIBITS FILED WITH ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 1984


                                       90

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                  EXHIBIT 10.A

                      REVOLVING FINANCING AGREEMENT BETWEEN
                        THE COMPANY AND THE STUDENT LOAN
                              MARKETING ASSOCIATION


                                       91

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                  EXHIBIT 10.B

                              REINSURANCE AGREEMENT
                             BETWEEN THE COMPANY AND
                         UNITED GROUP INSURANCE COMPANY


                       EXHIBIT FILED WITH ANNUAL REPORT ON
                          FORM 10-K FOR THE YEAR ENDED
                                DECEMBER 31, 1992


                                       92

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                  EXHIBIT 10.C

                          AGENCY AGREEMENT BETWEEN THE
                       COMPANY AND INSURADYNE CORPORATION

                       EXHIBIT FILED WITH ANNUAL REPORT ON
                          FORM 10-K FOR THE YEAR ENDED
                                DECEMBER 31, 1993


                                       93

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                   EXHIBIT 11

                            COMPUTATION OF NET INCOME

                                PER COMMON SHARE


<TABLE>
<CAPTION>

                                1997                1996            1995
                             ----------           --------        ------
<S>                         <C>                 <C>            <C>  
Weighted Average
Shares Outstanding           1,907,989           1,907,989      1,907,989

Net Income                    $195,210          $1,392,505     $1,114,903

Per Share Amount                  $.10                $.73           $.58

</TABLE>




                                       94

<PAGE>



                    SOUTHERN SECURITY LIFE INSURANCE COMPANY

                                   EXHIBIT 20

                DEFINITIVE PROXY MATERIALS FOR THE ANNUAL MEETING



                                       95