FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

            [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, 1996

                                       OR

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

                        For the transition period from to

                         Commission file number 33-83116

                         ASSOCIATED BUSINESS & COMMERCE
                              INSURANCE CORPORATION
             (Exact name of Registrant as specified in its charter)

            FLORIDA                                  65-0496132
            -------                                  ----------
  (State or other jurisdiction of         (I.R.S. Employer Identification No.)
   incorporation of organization)

4700 N.W. BOCA RATON BOULEVARD, SUITE 400, BOCA RATON, FL             33431
------------------------------------------------------------------------------
(Address of principal executive offices)                            (Zip Code)

         Registrant's telephone number,
         including area code                                (561) 997-0708


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


TITLE OF EACH CLASS                   NAME OF EACH EXCHANGE ON WHICH REGISTERED
-------------------                   -----------------------------------------
Preferred Stock, Series A                                None
6% Cumulative Convertible

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


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

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

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

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<TABLE>
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                                TABLE OF CONTENTS

PART I

<S>                                                                              <C>
ITEM 1 - BUSINESS                                                                1
     General Description and Business Developments during 1996                   1
     Financial Information about Industry Segments                               3
     Narrative Description of Business                                           4
       Background                                                                4
       Strategy                                                                  5
       Products                                                                  5
       Management Agreement                                                      6
       Sales and Marketing                                                       6
       Managed Care                                                              6
       Underwriting                                                              7
       Loss Control                                                              8
       Reinsurance                                                               8
       Claims Management                                                         9
       Competition                                                              10
       Government Regulation                                                    10
       Reserves for Losses and Loss Adjustment Expenses (LAE)                   11
       Investments                                                              12
       Employees                                                                12
ITEM 2 - PROPERTIES                                                             12
     Facilities                                                                 12
ITEM 3 - LEGAL PROCEEDINGS                                                      13
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                    13

PART II

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS                                                    16
     Market Information                                                         16
     Number of Security Holders                                                 16
     Dividend History and Restrictions                                          16
ITEM 6 - SELECTED FINANCIAL DATA                                                16
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS                                                  17
     Organization                                                               17
     Results of Operations                                                      18
     Prospective Financial Information                                          20
     Reserves for Loss and Loss Adjustment Expense (LAE)                        21
     Excess of Loss Reinsurance                                                 22
     Proportional Quota-share Reinsurance                                       23
     Special Disabilities Trust Fund                                            23
     Managed Care                                                               24
     Investments                                                                25
     Liquidity and Capital Resources                                            25



<PAGE>



ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                            29
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE
                                                                                29

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                    34
     Executive Officers and Directors                                           34
ITEM 11 - EXECUTIVE COMPENSATION                                                36
     Compensation of Directors                                                  36
     Executive Compensation                                                     36
     Equity Compensation Plan                                                   36
     Holding's Stock Option Plan                                                38
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 
          MANAGEMENT                                                            38
     Shareholder's Agreement                                                    38
     Investment by Holdings and TIG Loan and Security Purchase                  39
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                        42

PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K       45

</TABLE>



<PAGE>


                                     PART I


ITEM 1 - BUSINESS

GENERAL DESCRIPTION AND BUSINESS DEVELOPMENTS DURING 1996

Associated Business & Commerce Insurance Corporation (the "Company) is a
property and casualty insurance company organized on May 13, 1994. The Company
commenced operations upon issuance to it of a Certificate of Authority by the
Florida Department of Insurance in December, 1995.

In a transaction approved by the Florida Department of Insurance, the Company
assumed the insurance related assets and liabilities of the Associated Business
and Commerce Workers' Compensation Self-Insurance Fund (the "Fund") by virtue of
a loss portfolio reinsurance treaty. The Fund was a workers' compensation
insurance trust organized in 1991 under the Workers' Compensation Act of the
State of Florida. By agreement with the Fund, the effective date of the
transaction was November 30, 1995. Accordingly, premiums earned on the Fund's
policies then in effect, and losses and underwriting expenses incurred
subsequent to that date are reported by the Company in its financial statements.
The Company did not assume liabilities of the Fund not related to insurance.

The Company is regulated by the Florida Department of Insurance and is subject
to laws and related rules of the Florida Insurance Code (the "Code"). Such laws
and rules required the Company to have initial minimum capital of $5.3 million
as a condition precedent to the issuance of a Certificate of Authority and the
approval of the loss portfolio reinsurance treaty with the Fund. However,
subsequent to the issuance of the Certificate of Authority, the minimum capital
required under the Code is $4 million. In addition, companies writing workers'
compensation insurance cannot have annualized net writings in excess of 3.2
times their statutory surplus. The Company satisfied the initial conditions
precedent through the sale of 221,805 shares of its registered Series A, 6%
Cumulative Convertible Preferred Stock at a price of $10.00 per share and the
sale of 3,200,000 shares of its unregistered Series B Convertible Preferred
Stock at a price of $1.00 per share.

The Series A Preferred Stock was sold to members of the Fund and to Fund agents
and vendors. The Series B Preferred Stock was sold to Associated Business &
Commerce Holdings, Inc. ("Holdings") which also owns 100% of the Company's
common stock. Holdings was organized for the purpose of providing financing for
the Company and performing certain management services for the Company under a
management agreement. Holdings obtained the funds for the purchase of the Series
B Preferred by entering into a term loan agreement with Underwriters Reinsurance
Company ("Underwriters") in December, 1995. The loan bore interest at 12.75% per
annum and, if not earlier prepaid, was due on September 30, 2000.

Holdings pledged as collateral for the loan, among other things, all of the
Common and Series B Preferred Stock of the Company held by Holdings. In
addition, Holdings granted Underwriters options to purchase shares of Holdings'
common stock in an amount, after issuance, up to a maximum of 49% of the number
of shares and options held by the founders, shareholders, officers, directors
and employees of Holdings. The number of shares subject to the option was based
upon the date on which the final payment to Underwriters under the loan
agreement was made.

                                      - 1 -
<PAGE>



In addition to the loan, the Company entered into a proportional quota share
reinsurance agreement with Underwriters. Under the terms of the agreement
(effective throughout 1996), the Company ceded 70% of its net written premium to
Underwriters which assumed 70% of the Company's retained losses. The agreement
provided for reimbursements to the Company for expenses associated with other
reinsurance and other underwriting expenses through direct reimbursement and
through a provisional ceding commission calculated at the rate of 27% of ceded
premiums. The agreement also provided for certain incentives and/or additional
costs depending upon claims loss history.

In order to relieve the debt service burden created by the Underwriters loan,
improve the financing terms, increase the quota share reinsurance ceding
commission and generate more capital available to the Company, Holdings, on
December 4, 1996, entered into a Term Loan Agreement and Securities Purchase
Agreement with TIG Reinsurance Company (hereinafter "TIG" or the "TIG Loan").

Because the voting securities purchase aspect of the entire TIG transaction
required prior approval by the Florida Department of Insurance, closing occurred
in two phases.

The first closing occurred on December 4, 1996. At this first closing, Holdings
entered into a loan agreement with TIG evidenced by two promissory notes (Note A
and Note B). Note A is in the principal amount of $3 million, bears interest at
10% per annum, payable interest only and, if not earlier prepaid, is due
December 4, 2003. Note B was in the principal amount of $912,908, bears interest
at 6% per annum, payable interest only and, if not earlier prepaid, was due
December 4, 2003, provided however, that upon approval of the proposed
securities purchase by the Florida Department of Insurance Note B was to be
canceled and returned to Holdings. The principal amount of the B Note would then
be credited by Holdings toward the acquisition by TIG of 2,912,908 shares of
Holdings Series I Preferred Stock. Upon approval by the Department of Insurance,
TIG was also required to complete its purchase of 2,912,908 shares of Series I
Preferred by the payment to Holdings of an additional $2 million (the "second"
closing).

In addition to the foregoing, at the first closing Holdings sold and TIG
purchased 87,092 shares of Holdings Series B Common Stock. The Series B Common
Stock was non-voting but carried all other features of common stock. The
purchase price of Series B Common was $1.00 per share. Upon approval by the
Department of Insurance, Holdings agreed to exchange voting common stock for the
Series B Common.

The proceeds of the TIG loan from the first closing were used by Holdings to
retire in full the Underwriters' loan (approximately $3.6 million) and to
purchase an additional 400,000 shares of the Company's Series B Convertible
Preferred Stock. This refinance and payment in full to Underwriters served to
reduce the Underwriters quota share to 20% of net written premium and limited
Underwriters' options to approximately 5%.

The second closing occurred on March 31, 1997, after receipt of approval of the
entire transaction by the Department of Insurance. At the second closing, TIG
surrendered the B Note and the Series B Common Stock and paid the $2 million due
for the purchase of Holdings' Series I Preferred. Holdings cancelled the B Note
and Series B Common Stock and issued to TIG 87,092 shares of Holdings' Common
Stock and 2,912,908 shares of Holdings' Series I Preferred Stock. The $2 million
proceeds of the second closing were used by Holdings to purchase an additional
1.5 million shares of the Company's Series B Preferred Stock and $500,000 was
advanced to the Company as working capital.

                                      - 2 -
<PAGE>



Therefore, as of March 31, 1997, TIG owns 87,092 shares of common stock and
2,912,908 of Series I Preferred Stock of Holdings. TIG, as holder of the Series
I Preferred Stock, is entitled to receive, when, as and if declared by the Board
of Directors of Holdings, cumulative dividends at the rate of 6% per annum.

The Series I Preferred Stock is redeemable by Holdings upon payment of the
stated value ($1.00 per share) together with all accrued and unpaid dividends
provided that Holdings shall redeem on or before December 4, 2003 and the TIG
Loan is repaid. On and after that date, if not earlier redeemed, the Series I
Preferred Stock is convertible to common stock at the option of the holder and
is similarly convertible in the event of default under the TIG Loan.

The Common Stock purchased under the Agreement represents an approximate 44%
stake in Holdings, provided, however, that in the event Underwriters shall
decline to exercise its options TIG may, in its discretion, increase its stake,
at the same price, to 49% of the number of shares and options held by the
founders, shareholders, officers, directors and employees of Holdings.

In addition to the Loan and Agreement, the Company entered into a proportional
quota share reinsurance agreement with TIG, for the period January 1, 1997
through December 31, 1997. The quota share arrangement is renewable annually, at
the option of TIG, for so long as the Loan remains outstanding and the Series I
Preferred has not been redeemed. Under the terms of this quota share treaty, the
Company cedes 50% of its net written premium to TIG which assumes 50% of the
Company's retained losses. The treaty provides for reimbursements to the Company
for expenses associated with other reinsurance and other underwriting expenses
through direct reimbursement and through a provisional ceding commission
calculated at the rate of 28% of ceded premiums. The ceding commission may
decrease depending upon the Company's loss ratio performance to a minimum of
23%. The treaty also provides for certain incentives and additional costs
depending upon claims loss history.

The Company has also renegotiated its quota share reinsurance arrangement with
Underwriters. Effective January 1, 1997, the Company cedes 20% of its net
written premium to Underwriters which assumes 20% of the Company's retained
losses. This treaty also provides for reimbursements to the Company for expenses
associated with other reinsurance and other underwriting expenses through direct
reimbursement and through a provisional ceding commission calculated at the rate
of 29% of ceded premiums. The agreement also provides for certain incentives
and/or additional costs depending upon claims loss history.

The development of the Company's business over the last five years, which
includes the period of operations of the Fund is summarized in Table #1 on page
14.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company currently offers only workers' compensation insurance in the state
of Florida, and accordingly, has no identifiable industry segments as defined in
FASB Statement 14.

                                      - 3 -
<PAGE>



NARRATIVE DESCRIPTION OF BUSINESS

BACKGROUND

In a November, 1993 Special Session of the Florida Legislature, certain changes
were instituted that required management to reevaluate the workers' compensation
regulatory landscape. The Legislature provided for the establishment of a Self
Insurance Fund Guarantee Association. This new guarantee association exposes the
assets of self insurance funds to assessments to support other financially
insolvent self insurance funds. Guarantee fund assessments could potentially
diminish surplus funds. Another legislative change was the creation of a joint
underwriting association (the "JUA") for workers' compensation. Stock insurance
companies are no longer required to subsidize the JUA as they had been required
to subsidize the JUA's predecessor, the assigned risk pool. Stock insurance
companies are, however, subject to assessment by the Florida Insurance Guaranty
Association to support financially insolvent insurance companies. The Company
believes that the failure rate of stock insurance companies is lower than that
of self-insurance funds due to greater regulation of capital, surplus and
premium volume. Therefore, the likelihood of assessment is believed to be lower
for stock insurance companies; and, additionally, under Florida Statutes any
such assessments are limited in any one year to no more than two (2) percent of
direct written premium. Further, according to the authors of this legislation,
the substantive impact of other legislative reforms instituted included
significant cost savings to the system and a return to the system's original
design of establishing a self-executing, return-to-work system. The legislative
changes clearly made it more beneficial for policyholders to be insured by a
stock insurance company rather than a self insurance fund.

Only those members of the Fund who elected to be insured by the Company were
retained by the Company. The Company did not assume any contingent assessment
liabilities for members who left the Fund or who choose not to be insured by the
Company. The Fund will maintain its legal existence until such time as the
Florida Department of Insurance permits otherwise; however, the Fund no longer
offers workers' compensation insurance coverage.

The Company is pursuing its goal of providing superior service with the use of
managed care plans, loss control analysis, aggressive claims adjusting and
premium credits, among other things. The Company believes that insureds benefit
from managed care through management of medical costs, utilization review and
more effective monitoring of claims and services. Cost savings are being offered
to insureds through allowed premium credits for a drug-free workplace and
retrospective rating plans based on claims experience in prior years. Further,
loss control engineers are working with insureds to decrease the incidence of
injury in the workplace and claims adjusters are seeking efficient and effective
settlements of claims for those who are injured. In addition, the company
believes that its focus on a single, specialized area of insurance coverage
increases its effectiveness, efficiency, and service to its insureds.

Holdings employs all personnel required to service the policyholders, except for
claims adjusting which is handled by Claims Capabilities, Inc., Orlando,
Florida, and a variety of firms which specialize in policyholder premium audits.

                                      - 4 -
<PAGE>



STRATEGY

The Company is marketing its products to the general public through Florida's
independent agent network as an insurance company specializing in workers'
compensation. It is the goal of the Company to provide superior service and
minimize the cost of workers' compensation insurance for its insureds. This
focus on a single line of business is expected to give the Company the
opportunity to position itself as a focused company in a service-intensive line
of insurance.

As of the date hereof, there are approximately 222 agencies representing the
Company throughout the state of Florida, spanning from Key West to Pensacola.
The Company intends to increase the number of agencies by which it is
represented to approximately 265 by the end of 1997. Prospective new agencies
are contacted by a marketing representative of the Company who completes a
profile for such agency. The Vice President, Marketing, reviews the profiles for
all agencies in a geographic area in which the Company desires additional
representation. No agency is accepted by the Company unless it has errors and
omissions insurance coverage and a valid State of Florida insurance agent's
license. All agencies are required to commit to the Company for a certain
minimum volume of new business.

The Company is committed to assisting its agents by, among other things,
providing current information, advertising, public relations, competitive
commission structures, responsive account underwriting, careful management of
claims and training seminars. All agents operate as independent contractors and
are required to execute an agency agreement with the Company.

The Company's primary marketing strategy is to preserve existing business
relationships and establish new relationships with agents, thus creating a
network of high-quality, high-volume producers for the Company. The Company
intends to employ seven field marketing representatives in addition to its vice
president of marketing. The Company anticipates adding additional marketing
personnel if needed to balance the Company's growth. The Company also employs
loss control personnel who work in the field to help control and prevent losses,
suggest and sometimes require safety improvements and assist claims adjusters.

PRODUCTS

Policies of workers' compensation insurance protect the insured against the
costs of medical care, rehabilitation and wage loss for workers who are injured
in the course of their employment duties. The Company offers a number of
workers' compensation insurance products. Standard coverage, which includes
employer's liability, typically offers the following discounts: (i) stock
premium volume discount of .1% to 14.4%; (ii) drug-free workplace credits of 5%;
and (iii) Florida Construction Classification Premium Adjustment Program
("FCCPAP") credits of 1% to 25%.

The Company also offers various loss sensitive, sliding scale and
retrospectively rated programs for the larger insureds who qualify. These
programs allow for a return of premium based on paid or incurred claims and the
ratio of these claims to earned premium. These particular products are typically
restricted to insureds generating certain levels of standard premium annually.

                                      - 5 -
<PAGE>



MANAGEMENT AGREEMENT

The Management Agreement entered into between the Company and Holdings in 1994
remains in effect. Pursuant to the Management Agreement, Holdings is responsible
for the day to day operations of the Company, including, but not limited to,
marketing, loss control, safety engineering and continuing service, billing and
premium collection, claims administration, books and records keeping and
underwriting. The Management Agreement has an initial term of five years and
provides for the payment by the Company to Holdings of fees equal to 14.1% of
gross written premiums up to $50 million, less allowed discounts, collected by
the Company. Fees paid for gross written premiums in excess of $50 million are
paid according to premium levels and range from 14.5% to 13.1%.

SALES AND MARKETING

The Company's sales are conducted by approximately 222 sales agencies. The
agencies each have a non-exclusive contract with the Company for the brokerage
of the Company's products and are compensated monthly with commissions for
premiums written. Each agency is required to commit to a minimum of $250,000 in
annualized premium production for the first year. Agents are encouraged to
direct their marketing efforts on accounts between $25,000 and $250,000 in
annual premium, although the Company does write accounts starting from
approximately $1,500 in annual premiums. The Company has special programs for
accounts in excess of $250,000 but is selective in its underwriting standards
with regard to coverage. The Marketing department manages the commission
structure and may, depending on production levels, arrange special commission
agreements with certain agents. The Company also conducts a sales incentive
contest periodically for the benefit of its agents to provide greater incentive
for increased sales production. Periodic production reviews of each agency are
conducted to determine whether the Company should continue the relationship with
the agency or replace the agency.

The Company's marketing efforts are managed by the Vice President, Marketing and
seven Field Marketing Representatives. Each of the Company's marketing
executives are experienced in workers' compensation insurance. The marketing
executives are expected to call on agencies approximately once every six weeks
and assist agents on their sales calls, hold agency seminars and conduct normal
company business. Loss control seminars for insureds and agents are conducted
periodically, the primary focus of which is determined by loss control and
claims experts and are directed by the needs of the Company's insureds.

MANAGED CARE

In the November 1993 Special Session of the Florida Legislature, an amendment to
Chapter 440 was also adopted, which created Section 440.134-Worker's
Compensation Managed Care Arrangement. The essence of this legislation
contemplates that an insurer in Florida may transfer a portion of the medical
risk assumed by that insurer under a policy of workers' compensation insurance
by virtue of a "capitated" contract to a health care provider, a health care
facility, a health maintenance organization, a health insurer, or such similar
arrangement (exclusive of capitation) with a preferred provider organization
("PPO"). This arrangement contemplates that injured workers of a covered
employer will have their injuries treated and receive medical care by virtue of
a network of providers, such as an HMO or PPO. The goal is to provide more
professional, efficient and cost-effective administration of health care to
injured employees.

                                      - 6 -
<PAGE>



The Fund entered into an agreement in 1994 with Humana to provide a managed care
arrangement on behalf of the Fund. The agreement was assigned to the Company and
contemplates that the Company transfers to Humana the risk of providing medical
services to injured workers for a period of three years from the date of injury.
The agreement was renewed in September, 1996 for two (2) years. The agreement
further contemplates that Humana provides these services for a premium
determined by actuarial calculations discounted based upon the time value of
money. Humana is expected to have networks in place in substantially all of the
populated areas of the State of Florida. Throughout 1996, a policyholder of the
Company could voluntarily participate in the managed care program and direct its
injured employees to a provider of medical services within the Humana network.
The Company remains the primary insurer, although Humana applies its managed
care experience to the management of the medical component of the Company's
claims. A policyholder choosing to participate in the managed care arrangement
was able in 1996 to receive up to a 10% premium discount.

Effective January 1, 1997, the managed care premium discount of 10% was
eliminated by act of the Florida Legislature. Furthermore, participation by all
Florida employers in a managed care arrangement became mandatory on that same
date. In consequence, the Company's ability to offer managed care is no longer a
matter of enhancing a competitive product but is now essential. As a result of
anticipated mandatory managed care, the cost to the Company of maintaining its
capitated program increased by 14% as a result of negotiations with Humana in
September 1996. This increase (equivalent to 3% of participating premium) will
have a direct impact upon the Company by increasing the Company's claims loss
ratio to earned premium.

In addition to the foregoing, in January, 1996, the Company entered into a
managed care arrangement with Vincam/HIP and the Company anticipates continuing
this contractual relationship through 1997. Vincam/HIP offers a PPO network
alternative to the Humana HMO arrangement. The Company encountered some market
resistance to an HMO provider by potential policyholders and sought therefore
this additional arrangement to provide an alternative to policyholders. The
Vincam/HIP agreement does not contemplate a "capitated" contract but is a fee
for services arrangement. Vincam/HIP has been approved to offer managed care
services in all 67 counties of Florida.

UNDERWRITING

The Company utilizes a network of independent insurance agents to solicit
workers' compensation coverage for prospective insureds. The agent submits the
insured's application to the Company for consideration to provide workers'
compensation coverage and employer's liability. The Company employs various
experienced and qualified underwriters to review these submissions to determine
proper classifications, rule compliance, and overall acceptability. The
financial solvency of the proposed insured may be examined depending upon the
nature and size of the risk. The underwriting department of the Company either
quotes coverage to the agent or refers the application to higher management for
approval. In a significant number of submissions, the underwriting department
requests the Company's loss control and safety engineering representatives to
visit on-site with the prospective insured to evaluate the risk and ascertain
their ability to comply with the Company's established safety and claims
procedure guidelines. This evaluation determines if the applicant falls within
the Company's pre-established underwriting guidelines. In the event that
management requires additional information in order to determine if the risk
should be accepted, management may refer the application to the underwriting
executive committee. The underwriting executive committee is composed of
department heads, including claims services. The committee seeks to reach a
consensus on acceptability and

                                      - 7 -
<PAGE>



premium pricing of the individual risk submitted for consideration. If the
underwriting executive committee is unable to reach a consensus as to a
particular risk, the application for coverage is submitted to the Board of
Directors, whose decision is final. Underwriting standards are strictly enforced
to avoid adverse loss experiences. For the year ended December 31, 1996, the
Company received new applications requesting a quote for coverage representing
premium of approximately $88.1 million. Of such applications, 697 were bound for
a total premium of $10.8 million.

Once an application is approved for coverage, a quote is issued by the Company.
If the quote is accepted by the proposed insured, the underwriting department
binds coverage conditional upon receipt of Company requirements and a signed
application for coverage by the insured. Periodically, the underwriting
department reviews the insured's loss history to determine the continued
acceptability of the risk. Additionally, each policy is evaluated annually for
continued acceptability of the coverage or for competitive pricing review.

During the period that the policy is in force, the loss control representative
or safety engineer periodically visits with the insured to inspect its
operations and provide assistance with its employees' safety efforts. Such
visits are aimed at reducing claims costs and frequency of injury. The
underwriting department is updated periodically with the results of these loss
control visits. Failure of the insured to comply with safety recommendations or
factors that otherwise cause the insured to become an undesirable risk may cause
the Company to cancel the coverage.

The Company has retained the services of Milliman & Robertson, Inc., a qualified
actuarial firm with offices in Minneapolis, Minnesota. One of the services
rendered by the actuarial firm is to provide the Company's management with
annual results of the Company's underwriting operations. The actuaries evaluate
claims and classes of business, as well as earned insurance premiums, to
determine ultimate claims expenses for each year. The actuary report contains a
range which assists management in determining the Company's loss ratio for the
year and ultimately the overall underwriting profit or loss for the year.

LOSS CONTROL

The Company's loss control efforts are managed by the Vice President of Loss
Control and performed by Loss Control Field Counselors employed by the Company.
The Loss Control Field Counselors are safety professionals and work directly
with the insured to develop safe workplaces and reduce the expenses resulting
from work related injuries. The Loss Control Department also acts as an arm of
the Underwriting Department. The Underwriting Department requests a Loss Control
Evaluation on prospective members who have marginal loss history or come from
industries of higher than normal loss problems. The Loss Control Department is
also expected to alert the Underwriting Department when an insured undergoes a
major change in the nature of its operations.

REINSURANCE

Through ceded reinsurance, other insurers and reinsurers agree to share certain
risks that the Company has underwritten. The purpose of reinsurance is to limit
the Company's maximum net loss arising from large risks or catastrophes.
Reinsurance also serves to increase the direct writing capacity of the Company
which may otherwise be restricted by regulatory rules which limit writings to a
multiple of statutory surplus.

                                      - 8 -
<PAGE>



The Company strives to achieve the following objectives with respect to ceded
reinsurance:

(1)       Protect its assets from large individual risk and occurrence losses by
          purchasing reinsurance from financially secure reinsurance companies
          at a reasonable cost.

(2)       Provide underwriting operations with the capacity necessary to write
          large limits on accounts by purchasing reinsurance from financially
          secure reinsurance companies at a reasonable cost.

(3)       Provide the Company the opportunity for growth in total writings by
          purchasing proportional quota share reinsurance from financially
          secure reinsurance companies under reasonable terms, such that the
          Company's ratio of net written premium to surplus is below regulatory
          maximums.

The collectibility of reinsurance is subject to the solvency of reinsurers. The
Company has had no uncollected reinsurance recoverables since inception.

The Company retains the first $350,000 of liability on each claim. Reinsurance
contracts attach thereafter, with Allstate RE (now SCOR RE) providing coverage
for up to $2,000,000 and CNA providing coverage for up to the maximum statutory
benefits.

Commencing January 1, 1996 through December 31, 1996, the Company entered into a
reinsurance treaty with Allstate RE for "Aggregate" reinsurance for coverage of
up to 70% of 15% excess 75% of Earned Standard Premium subject to a $4,500,000
maximum limit. While aggregate reinsurance was not contemplated by the Company
as part of its business plan, the securing of this aggregate cover was a
condition precedent to the Underwriters' loan to the Company. The proceeds of
the aggregate cover (if any) has been assigned to Underwriters' and
Underwriters' reimburses the Company for 100% of the premium due for the
aggregate cover.

Commencing January 1, 1997, the Company has renewed the SCOR RE aggregate treaty
under substantially similar terms. However, this cover has now been purchased by
the Company for its own account and the proceeds have not been assigned.

The Company pays premiums to its reinsurers on a quarterly basis and expects to
continue such coverage with these reinsurance companies. The Company expects to
also enter proportional reinsurance treaties or loss portfolio transfers, or a
combination of both, as premium growth and reserves may require.

Effective January 1, 1997 through December 31, 1997, the Company has entered
into proportional quota share reinsurance treaties with TIG Reinsurance Company
and Underwriters for 50% and 20% respectively (See Business Developments above).

The Company has also entered into an agreement with Humana (see "Managed Care"
above) which transfers the risk of providing medical services to injured workers
for a period of three years in exchange for a prepaid premium. Amounts
recoverable from Humana (medical services yet to be rendered) are secured by an
irrevocable letter of credit issued in favor of the Company.

CLAIMS MANAGEMENT

Claims administration, management and adjusting is administered on behalf of the
Company by Claims Capabilities, Inc., whose principal headquarters are in
Orlando, Florida. Claims Capabilities, Inc. was

                                      - 9 -
<PAGE>



formed in 1989 by a group of experienced workers' compensation insurance claims
professionals. Claims Capabilities, Inc. currently handles claims for three
insurers in Florida, including the Company, representing over $75,000,000 of
workers' compensation premium, and processes over 5,500 claims annually. Claims
Capabilities, Inc. has developed state-wide claims representation with field
adjusters located in all populated regions in the state of Florida. Its
expertise lies in handling of claims, employee/employer incentives for early
return to work and the recovery of monies on behalf of the insurers from the
Florida Special Disability Trust Fund and third party subrogation claims.
Clients serviced by Claims Capabilities, Inc. have experienced more special
disability fund recoveries than from any other individual or organization within
the State of Florida. Claims Capabilities, Inc. employs various key individuals
with many years of workers' compensation claims handling experience. Claims
Capabilities, Inc. administers claims for the Company under a five year contract
which commenced in 1995 with fees for services negotiated annually.

COMPETITION

As a provider of workers' compensation insurance, the Company operates within
the property and casualty insurance industry. This industry is highly
competitive on a regional and national level. The principal competitive factors
in offering workers' compensation insurance are the types and amounts of
coverage, price, service, name recognition and financial strength. The Company
competes with large, well-established insurance companies doing business in the
Florida workers' compensation insurance market, including ITT Hartford, Riscorp,
FCCI and Liberty Mutual. Such competitors generally have greater financial
resources, larger agency networks and greater name recognition than the Company.
Larger carriers, however, tend to focus on larger risks than those targeted by
the Company and spread their resources over a broader range of products. In
addition, the Company competes with other specialty insurers in its field.

The Company believes that its focus on one distinct line of insurance creates an
ability to service its customers in an efficient manner, and allows the Company
to continue to compete in the workers' compensation market, as the Fund has in
prior years. In addition, the Company believes that its management is well-known
to the independent agency network and is recognized by such network for
possessing the knowledge and experience of the larger competitors. The Company
anticipates that the property and casualty insurance industry will continue to
be highly competitive as providers look to introduce new and innovative products
to the market.

GOVERNMENT REGULATION

The principal regulations governing the Company are Florida laws and regulations
of the Florida Department of Insurance. As of the date of this filing, the
Company expects to do business only in the State of Florida. However, should the
Company decide to do business in other states at some time in the future, the
Company also is subject to regulation of those states. Laws and regulations
govern significant aspects of the Company's business, including, but not limited
to, licensing, reserve adequacy, solvency, premium rates and changes in control.
Generally, such laws and regulations are designed and administered to protect
the interests of policyholders rather than an insurance company's shareholders.
There can be no assurance that these laws would not adversely affect the ability
of the Company to earn a profit on its underwriting operations.

                                     - 10 -
<PAGE>



As a provider of workers' compensation insurance, the Company is affected by
workers' compensation laws governing such insurance in Florida. The Company may
be required by the appropriate State of Florida agency, under solvency or
guaranty laws, to pay assessments for policyholder losses or liabilities of
other Florida insurance companies if they become insolvent. These assessments
may be deferred or forgiven if they would threaten the Company's financial
strength and, in certain instances, may be offset against future premium taxes.
The Company cannot determine the likelihood or amount of any future assessments,
and such assessments are beyond the control of the Company and its management.

A number of states have proposed workers' compensation reform initiatives. Such
initiatives, if adopted in the state of Florida, or another state in which the
company operates in the future, could have an affect on the financial condition
or results of operations of the Company. The Company does not expect, however,
to begin doing business in any state if management believes that its regulatory
environment is not conducive to the operations of the Company.

RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES (LAE)

When claims are made by or against policyholders, any amounts that the Company
pays or expects to pay to the claimant are referred to as losses. The costs of
investigating, resolving and processing these claims are referred to as loss
adjustment expenses (LAE). Reserves are established that reflect the estimated
unpaid total cost of these two items. The reserves for unpaid losses and LAE
cover claims that have already been reported but not yet settled, and those that
have been incurred but not yet reported. Loss reserves are established on an
undiscounted basis, and are reduced for deductibles recoverable from
policyholders and estimates of salvage and subrogation and recoveries from
reinsurers. Provisions for increased costs due to inflation are implicit in the
reserving assumption.

Management continually reviews loss reserves, using a variety of statistical and
actuarial techniques to analyze claim costs, frequency and severity data, and
social and economic factors. Based upon these reviews and the reports of the
Company's independent actuaries, management believes that the reserves currently
established for losses and LAE are adequate to cover their eventual costs.
However, final claim payments may differ from these reserves, particularly when
these payments may not take place for several years. Adjustments to previously
estimated reserves are reflected in results in the year in which they are made.

Table #2 on Page 15 presents a development of net loss and LAE reserve
liabilities and payments since the inception of the Fund through 1996, prepared
in accordance with generally accepted accounting principles ("GAAP"). The top
line of the table shows the estimated reserves for unpaid claim and claim
settlement expenses recorded at each year end date. Each amount in the top line
represents the estimated amount of claim and claim settlement expenses for the
claims occurring in that year as well as future payments on claims occurring in
prior years. The upper (cumulative amount paid) portion of the table presents
the amounts paid as of subsequent years on those claims for which reserves were
carried as of each specific year. The lower (liability re-estimated) portion
shows the re-estimated amounts of the previously recorded reserves based on
experience as of the end of each succeeding year. The estimate changes as more
information becomes known about the actual claims for which the initial reserves
were carried. An adjustment to the carrying value of unpaid claims for a prior
year will also be reflected in the adjustments for each subsequent year. For
example, an adjustment made in 1996 for 1992 loss reserves will be reflected in
the re-estimated ultimate net loss for each of the years 1992 through 1995. The
cumulative (deficiency) redundancy line presents the cumulative change in
estimates since the initial

                                     - 11 -
<PAGE>



reserve was established. It is equal to the differences between the initial
reserve and the latest liability re-estimated amount.

Table #2 presents calendar year data. The anniversary date of all policies
written by the Fund through November of 1995 was December 31. The Company's
policies written subsequent to that date will have staggered anniversary dates
depending upon the inception date of the policy.

Other than the loss portfolio transfer between the Fund and the Company, there
have been no reserve swaps or transfers since the inception of the Fund and no
significant changes in reserving assumptions. In addition, there have been no
changes in the mix of business, changes in anticipated payout patterns, or
unusually large gains or losses.

INVESTMENTS

Investments since inception have consisted solely of fixed maturity U.S.
Treasury Notes, Treasury Strips, U.S. Government agency notes and
mortgage-backed securities and certificates of deposit. The Company's board of
directors approves the annual investment plan which includes investments of
funds reserved for loss and loss adjustment expenses and investment of capital
resources in support of statutory surplus. The primary objectives of those plans
are as follows:

(1)       To maintain a diversified fixed maturities portfolio structured to
          maximize investment income while minimizing credit risk through
          investments in high-quality instruments.

(2)       To manage the mix of portfolio maturities to complement anticipated
          insurance loss pay-out patterns.

Table #3 on Page 15 presents information about the fixed maturities portfolio
for the last five years.

The fixed maturity portfolio is managed conservatively to provide a reasonable
return while limiting exposure to risks. All investments carry ratings of AA or
better.

More information about the Company's investments is contained in the notes to
the Company's financial statements and in management's discussion of financial
position and results of operations contained elsewhere in this filing.

EMPLOYEES

The Company, through its management agreement with Holdings, has approximately
38 employees, none of which are represented by a union. The Company considers
its relations with its employees to be good.

ITEM 2 - PROPERTIES

FACILITIES

The Company maintains offices in leased premises at 4700 N.W. Boca Raton
Boulevard, Boca Raton, FL 33431. In September of 1996, the Company added an
additional 2,500 square feet of space to its existing facilities to accommodate
growth. As of September, 1996, the lease covers 10,000 square feet of office

                                     - 12 -
<PAGE>



space for a monthly rental of $12,878. The Company may enter into a lease for
larger space at competitive rates within the South Florida area as growth may
require.

ITEM 3 - LEGAL PROCEEDINGS

From time to time, the Company may be involved in workers' compensation
proceedings relating to claims arising out of its operations in the normal
course of business. As of the date of this filing, the Company is not a party to
any legal proceedings, other than those initiated by the Company relating to the
recovery of accounts receivable.

In July, 1992, the Fund filed a lawsuit in the State Circuit Court of Palm Beach
County, Florida, for breach of contract against Advanced Risk Management
Incorporated ("ARMI") claiming damages for excess fees and advances collected by
ARMI, the former service company of the Fund. A counterclaim was filed by ARMI
alleging breach of contract, breach of fiduciary duty and fraud. On January 2,
1994, the court granted summary judgment in favor of the Fund with respect to
all of the counterclaims made by ARMI. The Summary judgment was appealed by ARMI
and reversed by the Fourth District Court of Appeal, which remanded the matter
back to the trial court to resolve specific issues. On December 15, 1995, the
trial court granted the Fund's renewed motion for summary judgment. ARMI filed
an appeal as to this judgment as well. On or about April 10, 1997, the Fourth
District Court of Appeal rendered its decision affirming the final judgment of
the Trial Court. The appellate decision is not final until the time period (15
days) for filing motions to rehear has passed. Although ARMI may appeal this
decision to the Florida Supreme Court, it is unlikely that the Supreme Court
will assume jurisdiction. The Fund intends to continue to defend this claim, in
the event further proceedings occur, on its own behalf. There can be no
assurance however, that, in the event of an unfavorable ruling against the Fund,
recovery would not be sought from the Company. In the event there is an
unfavorable outcome, which management believes at this time to be extremely
unlikely, the Fund's liability is estimated at less than $1,000,000.

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

None.

                                     - 13 -
<PAGE>
<TABLE>
<CAPTION>

                                     TABLE 1
                    FIVE YEAR HISTORY OF BUSINESS DEVELOPMENT



                                     THE COMPANY   COMBINED                   THE FUND
-----------------------------------------------------------------------------------------------------

($ IN THOUSANDS)                        1996       1995 (1)        1994         1993       1992 (3)
-----------------------------------------------------------------------------------------------------
<S>                                  <C>            <C>         <C>         <C>          <C>
Statutory Data:
    Direct premium earned          $    27,737       27,919   $   24,704   $   21,822   $    8,865
    Less: Premium ceded to
    reinsurers(2)                       19,587        6,979        2,186        1,969        1,084
                                     ---------- ------------  -----------  -----------  -----------
      Net premium earned           $     8,150   $   20,940   $   22,518   $   19,853   $    7,781
                                     ---------- ------------  -----------  -----------  -----------

    Losses and LAE (4)             $     5,657   $   14,886   $   13,724   $   14,723   $    6,378

    Ratio of losses and LAE to
    net premiums earned                  69.41%       71.09%       60.95%       74.16%       81.97%

    Statutory surplus(deficit)(5)  $     4,300   $    4,669   $     (552)  $   (1,995)  $     (269)


GAAP  Data(6) :
    Total assets                   $    42,282   $   40,701   $   25,092   $   20,120   $    7,663

    Total equity (deficit)         $     5,144   $    5,499   $    1,075   $    (354)   $    (108)
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
</TABLE>

(1)  Represents the sum of Associated Business & Commerce Workers' Compensation
     Self Insurance Fund's results for the eleven months ended November 30,
     1995, and the Company's results for the one month ended December 31, 1995.
     The loss portfolio transfer between the companies has been eliminated and
     the combined sum has been presented for comparison of significant operating
     data.
(2)  Gives effect to $17.7 million paid to quota share reinsurer in 1996 and
     $4.5 million paid in 1995 under agreement effective October 1, 1995.
(3)  Represents the sum of Associated Business & Commerce Workers' Compensation
     Self Insurance Fund's results for the fifteen months October, 1991
     (inception) through December 31, 1992, the Fund's first statutory loss
     year.
(4)  Gives effect to loss and loss adjustment expense development of previous
     years as reported in Table 2. See the discussion under "Reserves for Losses
     and Loss Adjustment Expenses (LAE)".
(5)  Calculated in accordance with statutory accounting practices applicable to
     stock insurance companies, on a pro-forma basis for the Fund through
     November 30, 1995. 
(6) Calculated in accordance with Generally Accepted Accounting Principles.


                                      -14-
<PAGE>
<TABLE>
<CAPTION>

                                     TABLE 2
         ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE (LAE) DEVELOPMENT



($ IN THOUSANDS)
--------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31          1992          1993           1994           1995          1996
--------------------------------------------------------------------------------------------------

<S>                          <C>            <C>            <C>           <C>           <C>
Net liability for unpaid
  losses and  LAE           $  4,627      $  12,411    $    12,360    $    13,835   $    10,376
                           ===========   ============   ============   ============  ============

Cumulative amount of net
   liability paid through:
One year later                 2,507          7,874          8,659          7,909
Two years later                4,139         10,018         11,813
Three years later              4,315         10,701
Four years later               4,370


Liability re-estimated as of:
One year later                 4,497         11,028         12,684         12,603
Two years later                4,138         11,036         12,849
Three years later              4,464         11,538
Four years later               4,545
Cumulative redundancy
  (deficiency)              $     82      $     873      $    (489)     $    1,232
                           ===========   ============   ============   ===========

</TABLE>

<TABLE>
<CAPTION>

                                     TABLE 3
                            FIXED MATURITY PORTFOLIO


($ IN THOUSANDS)
----------------------------------------------------------------------------------------------
                        AMORTIZED       MARKET       PRETAX NET
                         COST AT       VALUE AT      INVESTMENT       PRETAX       AFTER-TAX
   YEAR                  YEAR-END      YEAR-END        INCOME          YIELD         YIELD
----------------------------------------------------------------------------------------------

<S>                   <C>           <C>            <C>               <C>          <C>
   1996               $      8,709  $       8,586  $         860           6.5%          4.3%
   1995               $     14,439  $      14,412  $         858           6.3%          4.2%
   1994               $     12,631  $      12,016  $         575           5.0%          3.3%
   1993               $     10,566  $      10,567  $         286           3.9%          2.6%
   1992               $      3,975  $       3,941  $         144           4.6%          3.0%

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

</TABLE>

                                      -15-
<PAGE>



                                     PART II

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

MARKET INFORMATION

There is no established public trading market for any of the Company's stock.

NUMBER OF SECURITY HOLDERS

All of the Company's common stock is owned by Associated Business & Commerce
Holdings, Inc.

DIVIDEND HISTORY AND RESTRICTIONS

The Company has not declared or paid any dividends on its common stock since its
commencement of business in December, 1995. As a stock insurance company, the
Company is permitted to pay stock dividends, at the discretion of the Board of
Directors, only out of surplus derived from net income and is otherwise
restricted from paying dividends in excess of a statutory formula without prior
approval of the Florida Department of Insurance. In general, the formula permits
the payment of stock dividends in amounts not exceeding the larger of net income
(excluding capital gains) or 10% of accumulated surplus, provided that, after
payment of the dividend, surplus will equal at least 115% of the minimum
required statutory surplus. No dividends may be paid on the Common Stock until
all of the accumulated and unpaid dividends on the Company's registered Series A
Preferred have been paid in full.

Notwithstanding the foregoing, the Company has agreed, as a condition to
obtaining its certificate of authority, to not pay dividends on any class of
stock until December 7, 2000 without prior written approval of the Department of
Insurance.

In addition, as a part of the term loan agreement between TIG and Holdings, the
Company has agreed to pay no dividends on any class of stock for so long as
Holdings remains indebted to TIG without TIG's approval. Moreover, if any
dividends are approved, declared and paid on the common stock, such dividends
are required to be used to retire any then remaining indebtedness to TIG.

The Company received the required approvals and paid all dividends due to Series
A Preferred shareholders on April 1, 1996 and October 1, 1996.

ITEM 6 - SELECTED FINANCIAL DATA

Set forth in Table #4 On Page 30 are five years of selected financial
information. Financial information is presented for Associated Business &
Commerce Workers Compensation Self-Insurance Fund (the "Fund") for the years
ended December 31, 1992 through November, 1995 and for the Company for the
period December, 1995 (inception of principal operations) through December 31,
1996. The GAAP information was derived from the audited financial statements and
related notes of the Fund and the Company. The statutory data has been derived
from statutory financial statements. Such

                                     - 16 -
<PAGE>



statutory financial statements are prepared in accordance with statutory
accounting principles, which differ from GAAP. For additional information, see
the Financial Statements of the Company, the Financial Statements of the Fund,
and the related notes thereto included elsewhere in this filing.

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

This discussion should be read in conjunction with the information contained in
the Financial Statements and notes thereto included elsewhere in this filing.

ORGANIZATION

Associated Business & Commerce Insurance Corporation (the "Company") commenced
business as a stock insurance company in December 1995 upon receipt from the
Florida Department of Insurance (the "Department of Insurance") of a Certificate
of Authority. Concurrently with the commencement of business, the Company
assumed substantially all of the assets and liabilities of the Associated
Business and Commerce Workers' Compensation Self-Insurance Fund (the "Fund"). As
of December 31, 1996, the Company had approximately 1,300 policyholders and $28
million in annual written premiums. The Company offers a full range of workers'
compensation coverage, including a managed care plan. See "Business--Products"
and "Business--Managed Care".

The Company's business is regulated by the Department of Insurance. The Company
is subject to assessments by the Florida guarantee association for insurance
carriers. Policies issued by the Company to its insureds, however, are
non-assessable, in contrast to the assessable policies issued by self-insurance
funds. A stock insurance company cannot assess its policyholders for losses of
the company and is required to satisfy statutory capital and surplus
requirements. Therefore, stock insurance companies afford their policyholders
greater financial certainty and security.

It is the goal of the Company to provide superior service and minimize the cost
of workers' compensation insurance for its insureds. This focus on a single line
of business is expected to give the Company a unique opportunity to position
itself as a focused company in a service-intensive line of insurance. The
Company's primary marketing strategy is to preserve existing business
relationships and establish new relationships with agents, thus creating a
network of high-quality, high-volume producers for the Company.

Upon acquisition of the Fund's assets and liabilities by the Company, the
Company assumed claims liabilities and assessable provisions of existing
insurance coverage of past members of the Fund who chose to be insured by the
Company.

The Company is a wholly owned subsidiary of Associated Business & Commerce
Holdings, Inc. ("Holdings"). Holdings was organized solely for the purpose of
providing financing for the Company and performing certain management services
for the Company under a Management Agreement between the Company and Holdings
(the "Management Agreement"). Holdings does not carry on any other business
activities. The employees of Holdings devote their full business time to the
business and affairs of the Company pursuant to the terms of the Management
Agreement.

                                     - 17 -
<PAGE>



As of December 31, 1996, Holdings had invested $3,702,501 in the Company through
the purchase of 3,600,000 shares of the Company's Convertible Preferred Stock,
Series B (the "Series B Preferred") and 102,501 shares of the Company's Common
Stock. On March 31, 1997, Holdings increased its investment in the Series B
Preferred to $5,100,000 funded by part of the proceeds of the "second" closing
with TIG (see "Business Developments").

RESULTS OF OPERATIONS

For the year ended December 31, 1996, the Company is reporting an after-tax net
loss of $923,000 determined under GAAP. Although the Company's net loss ratio
decreased from 1995, the ratio of net underwriting expenses to earned premium
increased significantly. Anticipated increases in premium volume over 1995
amounts did not materialize causing the relationship between increased
underwriting costs and premium to deteriorate.

Table #4 on Page 30 sets forth the operating results of the Fund since January
1, 1992 through November 30, 1995, the effective date of the loss portfolio
transfer and assumption of the business by the Company and of the Company from
December 1, 1995 through December 31, 1996. The data in this table has been
adjusted to eliminate the loss portfolio transaction, and the operations of the
Fund during 1995 have been combined with the Company's operations for the month
of December, 1995 in order to allow comparison of 1995 operating results with
that of the prior years and with 1996 results. The data for the Fund and the
Company gives effect to the 70% proportional quota-share arrangements with
Underwriters which became effective October 1, 1995, but which terminated at the
70% level December 31, 1996.

Gross earned premium for 1996 amounted to $27.7 million compared to $27.9
million for 1995 and $24.7 million for 1994. Net earned premium amounted to $8.2
million for 1996 compared to $20.9 million for 1995 and $22.5 million for 1994.
Quota-share premium ceded (which was effective October 1, 1995) for 1996
amounted to approximately $17.7 as compared to approximately $4.5 million for
1995. Net losses and loss adjustment expenses decreased by $9.2 million over
1995 (primarily the result of quota-share ceding) and the loss ratio (losses
over net earned premium) decreased from 71.1% in 1995 to 69.4% in 1996.

1996 underwriting expenses decreased by $3.1 million from 1995, net of expense
reimbursements and ceding commissions of approximately $5.65 million. However,
as discussed below, as a percentage of net earned premium, underwriting expenses
increased by 19.1% over the prior year. The overall impact of these factors upon
the Company's underwriting operations produced an underwriting loss of $2.0
million for 1996, compared to an underwriting loss for 1995 of $1.5 million, and
an underwriting gain of $1.5 million in 1994. The GAAP combined ratio for 1996
was 124.7% compared to 107.3% for 1995 and 93.5% for 1994.

The underwriting expense ratio increased from 36.2% in 1995 to 55.3% in 1996 due
primarily to personnel additions and related costs, increases in facilities
costs, and increases in systems investments planned as a part of the Company's
anticipated growth. With the additions to personnel combined with ongoing
enhancements to data processing systems, management believes that the Company
can increase its premium writings without a corresponding increase in the fixed
component of underwriting expenses which would have the effect of decreasing the
expense ratio in future periods. As discussed under liquidity and capital
resources, the Company can double its net writings without an increase in
capital.

                                     - 18 -
<PAGE>



Management believes the Company is appropriately staffed for this potential
currently and, if realized, the Company's operating ratios should improve.

Investment incomes, including realized capital gains and losses, amounts to
$832,000 for 1996 compared to $960,000 for 1995 and $605,981 for 1994. Depending
on premium growth, management anticipates that investment income will be less
for 1997 than 1996 and 1995 due to anticipated negative cash flows attributable
to the quota-share treaty, as discussed under liquidity and capital resources.

The Fund concluded more than four years of operations in December, 1995 with
annualized writings of $28 million. Of this amount, $23.5 million of insurance
was renewed by the Company with the issuance of non-assessable policies during
December of 1995 and January of 1996. (See "prospective Financial Information"
below).

Over the four year period, the Fund (which commenced business only with its
trustees as insureds) wrote more than $80 million of premium and realized GAAP
after-tax profits of $835,000. Of the total 7,300 claims reported as of December
31, 1996, 6,300 have been settled and closed. In dollar terms, of the $52.8
million total of net losses and LAE incurred and reserved, $49 million have been
paid as of December 31 with an ending reserve of $3.8 million (net of
recoverables).

In a study conducted by the Fund in 1995 which was based upon an analysis of the
statutory financial filings of all Florida funds by the Bureau of
Self-Insurance, Florida Department of Insurance, the Fund ranked #1 in the
settling and payment of claims, confirming the Fund's philosophy of fair and
prompt settlement of claims incurred by the employees of insureds. Management of
the Fund (and the Company) believe that this philosophy limits the possibility
of reserve deficiency development and reduces the overall cost of claims. The
history of the Fund's and the Company's reserve development since inception
through December 31, 1996, is displayed in Table #2 on Page 15.

During the period of its existence, the Fund incurred extraordinary costs
associated with its own start-up, legal fees in defense of its claims against a
former service company (see "Legal Proceedings" under Part I), and fees and
costs related to research and evaluation of methods proposed to limit the
exposure of members to assessments including the use of retrospective loss
portfolio transfer reinsurance, annualizing of claims liabilities,
reorganization as a mutual assessable fund and, finally, a loss portfolio
transfer transaction with an approved stock insurance carrier.

Under statutory accounting practices ("SAP") applicable to stock insurance
companies, the Fund concluded its operations with a deficit of $445,000. SAP
differs from Generally Accepted Accounting Principals (GAAP) by reducing net
assets to those that can be used to pay claims. For instance, GAAP assets such
as prepaid expenses and deferred income taxes are not recognized as assets under
SAP. Table #5 on Page 31 reconciles the Fund's and the Company's ending GAAP
surplus with the surplus or deficit accounted for under SAP.

By agreement with the Department of Insurance, the Company will maintain
separate financial records for the reserves of the Fund which were transferred
to the Company as a part of the loss portfolio transfer. Such accounting will
facilitate the Department's later review (projected to occur in 1999) of the
Company's possible request to refund premium to certain former members of the
Fund participating in the Fund's merit plan program. In making such a request,
the Company will consider the financial position of the Company, the development
of the Fund's loss reserves and the likelihood of collection of Fund
recoverables still due.

                                     - 19 -
<PAGE>



PROSPECTIVE FINANCIAL INFORMATION

The historical operations of the Company cannot be used to predict the future
results of operations of the Company. The factors affecting future operations
and their probable favorable and unfavorable impacts upon the Company's
operations in 1997 include the following:

The Company's quota-share arrangements with TIG and Underwriters will have the
effect of ceding 70% of the Company's underwriting income to TIG & Underwriters
and investment earnings will be reduced attributable to reserves held by TIG &
Underwriters.

The Company has entered into a management agreement with Holdings. The fees
payable to Holdings under this arrangement include amounts necessary to service
the debt related to Holdings term loan agreement with TIG, the proceeds of which
were used by Holdings to refinance the Underwriters loan and to add additional
capital to the Company. The portion of fees reserved for this debt service
equates to approximately 2.3% of the Company's written premium.

The capitalization of the Company, through the sale of its Series A and B
preferred stock increases the investment base of the Company, mitigating to some
extent the cost of the management agreement described above and the loss of
investment income of premium ceded through the quota-share agreements.

The financial plan of the company included as a part of its business plan gave
effect to these differences and assumed that direct premium writings would
increase by 50% (or approximately $15 million) during the Company's initial year
of operations (1996) with increases thereafter approximating $10 million per
year through December 31, 2000. The source of this anticipated growth was
customers of assessable self-insurance funds, and, at the levels of writings
projected, operating results and cash flows were sufficient to meet the
Company's obligations, including the payment of dividends to holders of the
Series A Preferred Stock.

The Company failed to achieve its goal of $15 million of direct new premium in
1996; however, $10.8 million of direct new premium was added (which offset a
similar amount of premium losses due to cancellations and other factors) which
resulted in no net premium growth. The Company's inability to attain the
projected level of new premium was due to increased competition generated by
favorable legislative changes as well as rate adequacy during 1996. Management
initially adjusted budgeted expenditures to account for the premium reduction
and additionally has (effective December 4, 1996) refinanced its debt structure
and generated an additional $1.9 million of capital through the TIG
transactions. The financial and business plan of the Company has been adjusted
accordingly and the additional capital shall be used for, among other things:
expansion of marketing staff from three (3) to seven (7); increase in marketing
budget to accommodate more agent incentive plans; increase in utilization of
retrospective policy products; implementation of 24 hour coverage; expansion of
underwriting staff; offset of Applied Systems computer implementation costs and
general mobilization costs associated with staff increases necessary to
accommodate an aggressive marketing and management philosophy. The Company's
ability to achieve the planned increase of $10 million per year in premium
writings subsequent to 1996 appears attainable (new premium written as of April
7, 1997 equals approximately $7.9 million) and the number of submissions
received from the Company's agents continues to exceed those experienced by the
Fund. However, the Company remains dedicated to accelerated growth in new
premium writings consistent with adherence to the Company's long standing and
conservative underwriting philosophy.

                                     - 20 -
<PAGE>



The Florida workers' compensation insurance market has become increasingly
competitive since the elimination of the Florida Workers' Compensation Assigned
Risk Plan in 1994. These competitive pressures have required the Company to
increase its insurance agent commissions and incentive programs and to hire
additional marketing staff--there are now seven employees in this department--in
order to better attract new business. These competitive pressures have also
reduced the market standards for advance premiums on new accounts. In the past,
the Company was able to obtain 20% advance premium. Now, many customers are able
to find competitors willing to offer coverage for 10% advance premium or lower.

Despite the positive impact of system reforms, some system costs continue to
increase. Significant expenses have been incurred by the Company to comply with
SEC requirements for filing and reporting financial results and these costs are
anticipated to continue. Furthermore, the Company has made a large investment in
policy management system software. The staff time used for testing, training and
implementing the improved system also affected the efficiency and cost of
operating the company in 1996 and such costs are continuing during the first
part of 1997.

During 1996 and 1997, the Company has responded to the increased competition in
this line of business by improving the quality and quantity of the underwriting
staff by attracting more experienced underwriters and a vice president of
underwriting. These staff changes increased costs to the Company.

Finally, pressure on profits was exerted by increased fees from our managed care
contract with Humana, Inc. These costs increased by 13.6% beginning in
September, 1996. The estimated recoveries from the Florida Special Disability
Trust Fund also decreased from previous years even though the assessment
remained at 4.52% of premium.

The Company's statutory capital (policyholders' surplus) as of December 31,
1996, was $4.3 million or $300,000 above the statutory minimum of $4,000,000.
However, the final funding of the TIG transaction did not occur until March 31,
1997 due to delays incurred in awaiting necessary approvals from the Florida
Department of Insurance. Had the closing occurred as planned (December 4, 1996)
then statutory capital would have been $5.8 million or $1.8 million in excess of
the statutory minimum (see "Liquidity and Capital Resources"). The final closing
and its impact on the Company's financial position will be reflected in the
first quarter, 1997 unaudited financial reports (Form 10-Q). Although the
Company may remain solvent under GAAP and Statutory accounting practices during
the soft market, its continuation as a going concern will be dependent upon
maintaining statutory surplus above the minimum level.

RESERVES FOR LOSS AND LOSS ADJUSTMENT EXPENSE (LAE)

Loss reserves constitute 86% of the Company's liabilities as of December 31,
1996. The Company establishes reserves that reflect management's estimates of
the total losses and loss adjustment expenses the Company will ultimately have
to pay under insurance policies. These include losses that have been reported
but not settled and losses that have been incurred but not yet reported to the
Company (IBNR). Loss reserves are established on an undiscounted basis after
reductions for deductibles, estimates of salvage and subrogation, and
reinsurance recoverables. These reductions totaled $21.5 million, $14.5 million,
and $6.8 million at the end of 1996, 1995, and 1994, respectively.

                                     - 21 -
<PAGE>



For reported losses, the Company establishes reserves on a "case" basis within
the parameters of coverage provided in the related policy. For IBNR losses, the
Company estimates reserves using established actuarial methods, which are
reviewed and reported upon by the Company's independent actuaries. The case and
IBNR loss reserve estimates reflect such variables as past loss experience,
social trends in damage awards, changes in judicial interpretation of legal
liability and policy provisions.

Due to the nature of workers' compensation insurance, which may involve claims
that may not be settled for many years after they are incurred, subjective
judgments as to the company's ultimate exposure to losses are an integral and
necessary component of the loss reserving process. Management continually
reviews the Company's reserves, using a variety of statistical and actuarial
techniques to analyze current claim costs, frequency and severity data, and
prevailing economic, social and legal factors. The Company adjusts reserves
established in prior years as loss experience develops and new information
becomes available. Adjustments to previously estimated reserves are reflected in
the Company's financial results in the periods in which they are made.

Table #6 on Page 31 presents a reconciliation of beginning and ending loss
reserves for the last three years.

In 1994, the Fund recorded reductions in the loss provision for claims incurred
in prior years. These reductions resulted primarily from reevaluation of claims
reserves established during the two years following the Fund's inception where
the lack of a reserving history and experience suggested reserving at industry
norms. As claims were reported and settled, the Company's independent actuaries
were able to develop a history for the Fund and the Company which led to
significant reductions in reserved losses for 1992 and 1993.

In 1995, the Company recorded increases in the provisions for losses and LAE in
prior years related primarily to reduced anticipated recoveries from the Special
Disabilities Trust Fund (see below).

For 1996, the Company has recorded a net decrease in the provisions for losses
and LAE of $75,000.

For statutory purposes, the Company has reported its loss reserves at $7.8
million for the year ended December 31, 1996. The difference between this amount
and the gross reserve of $31.9 million appearing in Table #6 is attributable to
the reporting of recoveries due from reinsurance and the SDTF as reductions to
gross reserves with $3.1 million of prepaid fees for managed care also
classified as reductions to net reserves for statutory purposes. In addition,
for statutory purposes, the Company is required to reserve for unallocated loss
adjustment expenses (even though such costs have already been paid pursuant to
the contract with CCI) which serves to increase statutory reserves by
approximately $460,000.

EXCESS OF LOSS REINSURANCE

The Company retains the first $350,000 of liability on each claim. Reinsurance
contracts attach thereafter, with SCOR RE providing coverage for up to
$2,000,000 and CNA providing coverage for up to the maximum statutory benefits.
For 1996 the Company entered into a reinsurance treaty with Allstate RE (now
SCOR RE) for "aggregate" reinsurance for coverage of 70% of 15% excess 75% of
Earned Standard Premium subject to a $4,500,000 maximum limit. The Company has
assigned any recoveries on the aggregate reinsurance treaty to Underwriters
which is reimbursing all of the cost of this reinsurance to the Company (see
Proportional Quota-share Reinsurance below).

                                     - 22 -
<PAGE>



Commencing January 1, 1997, the Company has entered into a substantially similar
aggregate reinsurance treaty with Scor Re (the successor company to Allstate
Re). However, the Company has secured this cover for its own account and
therefore no recoveries have been assigned and the cost will be borne by the
Company.

The Company pays premiums to its excess of loss reinsurers on a quarterly basis
and invoices reinsurers for recoveries as claim payments in excess of the
Company's retention are paid. These amounts are classified as "paid
recoverables" in the Company's financial statements and amounted to $0, $95,000,
and $204,000 for 1996, 1995, and 1994, respectively.

PROPORTIONAL QUOTA-SHARE REINSURANCE

Effective October 1, 1995, the Fund entered into a 70% proportional quota-share
reinsurance treaty with Underwriters which was assigned to the Company in
December, 1995. Under the terms of the agreement, the Company cedes 70% of its
net written premium to Underwriters with Underwriters assuming 70% of the
Company's retained losses and loss adjustment expenses. To cover the costs of
underwriting, Underwriters reimburses the Company for certain direct expenses
incurred and pays the Company a ceding commission to cover other general
expenses. Premium ceded for the three months ended December 31, 1995 amounted to
approximately $4.5 million. Expense reimbursements and commissions amounted to
approximately $1.4 million.

For 1996, premium ceded amounted to approximately $17.7 million and expense
reimbursements and commissions amounted to approximately $5.65 million.

The effect of these arrangements is a transfer of 70% of the net results of
underwriting operations to Underwriters, which reduces the Company's net
writings reported to the Department. This allows the Company to increase its
direct writings through leveraging of its capital resources (see "Liquidity and
Capital Resources" in this section). Premium ceded to Underwriters creates
recoverables for Underwriters' share of unpaid losses and loss adjustment
expenses. As claims are paid, the Company reduces amounts remitted to
Underwriters proportional to Underwriters' liability. In addition, Underwriters'
share of reimbursable expenses and amounts due the Company for the ceding
commission are deducted from ceded premium amounts otherwise due Underwriters.

Commencing January 1, 1997, the Company has entered into a quota share treaty
with Underwriters for the 1997 calendar year. The treaty is substantially
similar to the 1996 treaty explained above with the exception of the percentage
of quota share, which has been reduced to 20%, and the provisional ceding
commission due the Company, which has been increased to 29% of ceded premium.

For the 1997 calendar year, the Company has entered into a 50% proportional
quota share reinsurance treaty with TIG Reinsurance Company. The treaty is
substantially similar to the 1996 Underwriters treaty with the exception that
the provisional ceding commission has been increased to 28% of ceded premium.

SPECIAL DISABILITIES TRUST FUND

The Special Disabilities Trust Fund of the Bureau of Workers Compensation makes
assessments upon all Florida workers compensation insurers at a current rate of
4.52% of premium collected and distributes

                                     - 23 -
<PAGE>



such sums among insurers whose policyholders have employed individuals with
previously determined workers' compensation-related disabilities, and such
individuals have filed a claim. The Company has included, as recoverables
against losses and LAE, amounts submitted and to be submitted to the Bureau.
Table #7 on Page 32 summarizes the history of the Company's recordings of SDTF
recoverables and Table #8 on Page 32 summarizes remaining recoverables due from
reinsurers and the SDTF by loss year.

The Special Disability Trust Fund was created in 1955 to provide a financial
incentive for employers to hire previously injured workers. If the worker was
injured a second time and the employer (or insurance carrier) could prove that
the two injuries were related, the Trust Fund will reinburse the insurer for
claims paid regarding the second or subsequent injuries.

It has been reported that the Trust Fund is financially impaired with claims
exceeding the Trust Fund's ability to pay. The Florida Legislature is
considering legislation to deal with the issue but no definite laws have yet
been adopted. Proposals range from increased assessments to carriers to
terminating the Trust Fund at a date certain as a means of dealing with the
problem.

The Company is unable to ascertain with any certainty what, if any, legislation
will be adopted regarding the Trust Fund. If terminated at a date certain or if
assessments are increased, such actions could adversely impact the Company.

MANAGED CARE

In September, 1996, the Company extended its contract with Humana for a 2 year
period to provide a managed care arrangement under which Humana provides medical
services to injured workers whose employers were participating in the managed
care arrangement. The terms of the agreement with Humana provide for the payment
of a capitated fee in exchange for which Humana covers all the medical cost
associated with a claim for a period of three years after the date the claim is
reported.

The Company records amounts paid to Humana as a prepaid expense with adjustments
recorded as medical services are rendered. The recorded prepaid expense at
December 31, 1996 of $3.1 million equals the amount of covered medical losses
recorded as unpaid and included in reserves.

As of December 31, 1996, approximately 68% of the company's customers were
covered by the Humana managed care program. Participation in a managed care
program is mandatory under Florida law effective January 1, 1997. In January,
1996, the Company complimented its managed care alternatives by entering into an
agreement with Vincam/HIP to provide case management services for covered
medical claims for a fee under a preferred provider-type arrangement. These
arrangements do not transfer risk to Vincam/HIP and the Company will continue to
pay the costs of covered claims. However, the arrangement does qualify as a
managed care arrangement under Florida law. The Vincam/HIP agreement is a three
year contract terminable with 90 days notice.

Although the Company has no immediate plans for termination of this agreement,
additional companies are now offering identical services as Vincam/HIP and are
competitively pricing their services in light of the mandatory nature of managed
care in Florida. The Company is exploring these alternatives with a view toward
cost savings and may, at some point in 1997, avail itself of the more
competitive nature of the PPO market.

                                     - 24 -
<PAGE>



INVESTMENTS

The Company follows a conservative investment strategy that emphasizes
maintaining a high-quality investment portfolio and maximizing after-tax current
income. Investments since the inception of the Company have consisted solely of
fixed maturity U.S. Treasury Notes, Treasury Strips, U.S. Government agency
notes and mortgage-backed securities and certificates of deposit, all with
ratings of AA or better.

As of December 31, 1996, total financial statement investments and cash under
GAAP (pursuant to which certain assets are stated at amortized cost) decreased
to $10.9 million, a decrease of 35% over the year ended December 31, 1995, total
of $16.7 million. The 1996 amount includes $8.7 million of fixed maturity
investments carried at amortized cost as held to maturity securities and $0
million carried at fair value as available for sale securities. The net decrease
in financial statement investments and cash reflects the net proceeds (total
proceeds less assigned security deposits) of the Company's continuing sale of
its registered Series A preferred stock and the sale of its unregistered Series
B preferred stock to Holdings, and underwriting results including net premium
ceded to reinsurers.

Table #9 on Page 33 reflects investment results for the three year period ended
December 31, 1996.

The increase in effective yield for 1996 and 1995 is primarily due to higher
yielding securities in the Company's investment portfolio, which included
purchases of U.S. Government agency bonds and mortgage-backed securities in
1994, pursuant to a planned restructuring of the portfolio brought about by the
changes in rules of the Department of Insurance governing allowed investments
which became effective July 1, 1994.

The average maturity of all investments is approximately 3.5 years. The Company
continues to seek opportunities to enhance investment yield through a
conservative, primarily fixed maturity investment strategy. Its current
investment strategy does not contemplate material investments in non-investment
grade securities, real estate, commercial mortgages, or equity securities.

More information concerning the Company's investments is contained in the notes
to the Company's financial statements included in this filing.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity refers to the Company's ability to generate sufficient cash flows to
meet the short- and long-term cash requirements of business operations. The
short-term cash needs of underwriting primarily consist of funding insurance
loss and loss adjustment expense payments and day-to-day operating expenses.
Those needs are met through cash receipts from operations, which consist
primarily of insurance premiums collected and investment income. The Company's
investment portfolio is also a source of liquidity, in the form of readily
marketable fixed maturities and short-term investments. Underwriting's net
positive cash flows from operations are used to build the investment portfolio
and thereby increase future investment income.

As security for an insured's contractual premium obligation, the Company
previously required that each insured pay an advanced deposit premium, generally
equal to 20% of the insureds estimated annual premium. During 1996, the
competitive pressures of the market drove the average deposit below 10%

                                     - 25 -
<PAGE>



although the Company strives to maintain higher deposits whenever possible. The
balance of premium is invoiced by the Company over a period of 12 months. Under
these typical arrangements, the Company does not extend credit to any insured
for premium which has been earned by the Company, and, in the event an insured
is past due in installment payments, the underlying policy can be canceled for
non-payment prior to the Company incurring bad debt losses on premium earned but
not collected. The advanced deposit premiums provide an additional source of
liquidity to operations and such funds are also used to build the Company's
investment portfolio.

Because of the nature of an insurance company's underwriting operations, where
premiums are generally collected and invested before related losses are paid,
liquidity requirements are customarily funded by operational cash flows. Cash
flows from operations for 1996 totaled a negative $6.2 million, compared to cash
flows from the combined operations of the Fund and the Company for 1995 of a
negative $1.5 million and the Fund's operating cash flows of $1.1 million in
1994. Operating cash flows for 1997 are expected to continue negative because of
the Company's quota-share arrangements with Underwriters and TIG (see "Results
of Operations" above). The payment of claims on reserves assumed by the Company
from the Fund will require the liquidation of investments held for this purpose.
It is anticipated that such liquidations (and maturities) will exceed investment
purchases funded by cash flows from the Company's retained underwriting
operations.

Invested assets and cash as of December 31, 1996 amounted to $10.9 million with
approximately $2.4 million of such amount consisting of investments with
maturities of less than one year or cash. Even with the impact of quota-share
arrangements, it is not anticipated that negative operating cash flows will
require liquidations of investments in advance of their fixed maturities.

The Company's capital resources represent funds deployed or available to be
deployed to support business operations and consist of common and preferred
shareholders' equity. Table #10 on Page 33 summarizes the Company's GAAP
capitalization as of December 31, 1996 and December 31, 1995 compared to the
Fund's GAAP surplus as of December 31, 1994.

The Company's Series A preferred stock was sold to former member/insureds of the
Fund and sales agents and vendors pursuant to a Form S-1 registration with the
Securities and Exchange commission. The unregistered Series B preferred stock
was sold to Holdings which also owns all of the Company's common stock. The
Company's capital is regulated by the Department of Insurance with certain
minimum levels of capital required depending upon net writings of the Company.
For purposes of these calculations, capital (surplus as to policyholders) is
calculated under statutory accounting practices ("SAP") which, generally,
reduces capital to liquidation amounts.

The insurance code of Florida requires a stock insurance carrier to maintain
capital of no less than $4 million. In addition, companies writing workers'
compensation insurance cannot have annualized net writings in excess of 3.2
times their statutory surplus, calculated and reviewed on a quarterly basis. As
of December 31, 1996, the Company's statutory surplus approximates $4.3 million
or approximately $300,000 above the statutory minimum. The TIG transaction (see
Business Developments 1996), was originally scheduled to close December 4, 1996.
Due to delays suffered while awaiting Florida Department of Insurance approval
only the TIG Loan portion of the transaction closed on December 4, 1996 (the
first closing). The proceeds of the first closing were used to pay in full the
Underwriters loan (approximately $3.6 million) and the balance was used by
Holdings to purchase an additional 400,000 shares of the Company's Series B
Preferred. The Securities Purchase Agreement closed March 31, 1997

                                     - 26 -
<PAGE>



(the second closing) and generated an additional approximate $2 million
available to Holdings. The proceeds of this transaction were used by Holdings to
purchase an additional 1.5 million shares of the Company's Series B Preferred
Stock at $1.00 per share and $500,000 was advanced to the Company by Holdings as
additional working capital. This additional capital (combined with the
quota-share) has increased the Company's direct writing capacity to $65 million
which is more than double the Company's current writings.

The Company's business plan (see "Prospective Financial Information")
contemplates the continuing sale of Series A preferred stock to insureds, agents
and vendors to provide a cushion to surplus and to facilitate further growth in
writings. The Company intends to file additional registration statements and
amendments thereto, as necessary, with the SEC to accomplish this objective.

As previously discussed, all of the Company's common stock and the Series B
preferred stock is owned by Holdings. As discussed in Part 1 of this filing,
Holdings has pledged all of its stock in the Company, among other things, as
collateral for a loan from TIG. The Company entered into a management agreement
with Holdings wherein Holdings shall be responsible for managing the day to day
operations of the Company, including, but not limited to, marketing, loss
control, safety engineering and continuing service, billing and premium
collection, claims administration, maintenance of books and records, and
underwriting. The fees payable by the Company to Holdings pursuant to the
agreement are currently 14.1% of written premium. The note to TIG is otherwise
due on December 4, 2003.

In connection with the financing and securities purchase arrangements, the
Company and Holdings have provided these and additional covenants and entered
into other agreements with TIG, Underwriters and the Department of Insurance.
The nature of these arrangements, their possible effects upon the Company, and
management's opinion related thereto are summarized below.

DESCRIPTION:                                                

Holdings has pledged all of the Company's common stock and Series B preferred
stock as collateral for the TIG loan.

POSSIBLE EFFECTS UPON THE COMPANY:

If Holdings defaults on the loan, and fails to cure the default, then TIG would
own and control the operations of the Company.

DESCRIPTION:

Holdings and the Company have agreed not to declare or pay any dividends on any
class of stock without the approval of TIG for so long as Holdings is indebted
to TIG.

POSSIBLE EFFECTS UPON THE COMPANY:

The Company expects to continue to offer for sale its Series A preferred stock
in order to expand its premium writing capacity. The inability to pay a
dividend, even though dividends accumulate, may nevertheless adversely affect
these plans.

DESCRIPTION:

As a condition to the acquisition of the Fund's assets and approval of the TIG
transaction, the Company has agreed to not pay a dividend on any class of stock
without the written approval of the Department for a period of five years.

POSSIBLE EFFECTS UPON THE COMPANY:

The Department's determination of the Company's capacity to pay a dividend may
be biased in favor of policyholders, with a possible further adverse effect upon
the Company's continuing sale of its preferred stock.

DESCRIPTION:

The Company has agreed to not pay any form of premium refund to the Fund's
former insureds without the approval of the Department.
DESCRIPTION:
POSSIBLE EFFECTS UPON THE COMPANY:

The Company's continued retention of former Fund insureds as customers of the
Company may be jeopardized if refunds are not paid.

                                     - 27 -
<PAGE>


DESCRIPTION:

The Company has entered into a total 70% proportional quota share reinsurance
contract with TIG and Underwriters and has granted TIG and Underwriters a
continuing interest in such arrangements for so long as Holdings' debt is unpaid
and for a lesser period in the case of Underwriters, respectively.

POSSIBLE EFFECTS UPON THE COMPANY:

The quota share arrangements serve to reduce the Company's required capital thus
increasing the Company's writing capacity. However, underwriting and investment
incomes related to ceded premium are eliminated.

DESCRIPTION:

Holdings has granted Underwriters options to purchase the equivalent of up to an
approximate 5% interest in Holdings common stock and has sold approximately 44%
of its common stock to TIG.

POSSIBLE EFFECTS UPON THE COMPANY:

Even though the loan by TIG to Holdings may be paid, TIG and Underwriters may
still exercise significant influence over operations of the Company in the
future.

DESCRIPTION:

Holdings has sold TIG 2,912,908 shares of its Series I Preferred Stock. 

POSSIBLE EFFECTS UPON THE COMPANY:

If Holdings fails to redeem this stock on or before December 4, 2003, TIG will
be in a position to control the Company.

DESCRIPTION:

Holdings and the Company have agreed to use the proceeds of any sale of
securities or financing (other than the sale of Series A preferred) to retire
Holdings indebtedness to TIG.

POSSIBLE EFFECTS UPON THE COMPANY:

Opportunities for expansion in writing capacity or acquisitions of other
business could be adversely affected in favor of this requirement.

Management of the Company and Holdings considers the relationship with TIG and
Underwriters a mutually beneficial alliance. Through its loan to Holdings, TIG
provided the financing necessary to complete a restructuring of debt and the
addition of further capitalization to the Company; and, through the quota-share
arrangements, TIG and Underwriters assist the Company in reducing the amount of
required capital. Both TIG and Underwriters are major reinsurers with high AM
Best Ratings. Management is of the opinion that its alignment with TIG is
significant to the Company and its plans for the future.

Quota-share arrangements are a necessary feature in the Company's business plan
with a continuing need for such arrangements forecasted in the Company's five
year financial plan. In order for the Company to write new business, the Company
must satisfy the writing ratio requirements of the Florida Insurance Code. The
quota-share arrangements facilitate growth in the Company by maintaining these
ratios above statutory minimums.

The Company considers its relationship with the Department of Insurance to be
good. In January of 1996, the Company was advised by the Department that the
Department's audit of the Fund's financial statements covering the three year
period ended December 31, 1994 resulted in no changes. The Department has worked
with the Company's management since inception of the Company's business plan,
providing interpretations of rules relating to capitalization and operations.
Management understands that the Department has recognized the potential for
adverse development of the Fund's loss reserves (assumed by the Company) and,
therefore, has restricted the Company's payment of premium refunds (if any such
refunds may be payable and approved) pending an ultimate accounting of the
actual losses sustained by the Fund. Management considers these restrictions to
be reasonable and in the best interests of policyholders.

                                     - 28 -
<PAGE>



Management considers the Company's indemnification of the former members of the
Fund (who transferred coverage to the Company) against assessment for possible
deficiencies in losses to be significant to the Fund's former members and that
such indemnification will mitigate the consequences of the required delay in the
payment of premium refunds, if any.

The Company's Series A preferred stock accumulates dividends at a rate of 6% of
stated value. Any dividends not paid at each semi-annual payment date are
accrued. The Company cannot pay a dividend on its common stock until all accrued
dividends on the Series A preferred stock are paid in full. If the underwriting
operations of the company continue profitable, excess earnings may accumulate
sufficient to pay dividends, including a dividend on the common stock. Inasmuch
as any dividends paid on the common stock must be used to retire any then
remaining indebtedness by Holdings to TIG, management is of the opinion that TIG
would approve such payments.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See the Index included on Page F-1 and the Financial Statements which begin on
Page F-2.

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

None.


                                     - 29 -
<PAGE>
<TABLE>
<CAPTION>

                                     TABLE 4
                             SELECTED FINANCIAL DATA





                                       THE COMPANY    COMBINED                    THE FUND
---------------------------------------------------------------------------------------------------------------
($ IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)                          1996        1995 (1)        1994         1993         1992
--------------------------------------------------------------------------------------------------------------
<S>                                        <C>          <C>             <C>         <C>          <C>
Operating Data
(GAAP):
    Gross premium earnes                  $ 27,737     $ 27,919       $ 24,704     $ 21,822     $  8,766
    Net premium earned                       8,150       20,940         22,517       19,852        7,713
    Losses and LAE                           5,657       14,887         13,724       14,723        6,299
    Underwriting expenses                    4,503        7,587          7,320        5,703        1,854
    Underwriting gain (loss)                (2,010)      (1,533)         1,473         (574)        (440)
    Net investment income                      860          846            606          284          133
    Net realized capital gains (losses)        (28)         115            (31)           2           11
    Income (loss) before income taxes       (1,178)        (572)         2,049         (287)        (296)
    Income taxes (benefits)                   (255)        (322)           620          (41)        (212)
    Net income(loss)                      $   (923)    $   (250)      $  1,429     $   (246)    $    (84)

Primary Earnings Per Share (loss)         $ (10.12)    $  (0.11)      $   n/a      $    n/a     $     n/a

Other GAAP Operating Data (2):
    Losses and LAE ratio                      69.4%        71.1%         61.0%         74.2%         81.7%
    Underwriting expense ratio                55.3%        36.2%         32.5%         28.7%         24.0%
                                          --------     --------       -------      --------      --------
    Combined ratio                           124.7%       107.3%         93.5%        102.9%        105.7%

Balance Sheet Data-GAAP  (at end of period):
    Total investments and cash            $ 10,864     $ 16,681      $ 12,979      $ 12,111     $   4,592
    Total assets (3)                        42,282       40,701         25,092       20,120         7,663
    Losses and LAE reserves (3)             31,982       28,306         19,185       16,653         6,172
    Total equity (Deficit)                $  5,144     $  5,499      $   1,075     $   (354)    $    (108)
    (Deficit)

Statutory Data (4):
    Policyholders' surplus (Deficity)     $  4,300     $  4,669      $   (552)     $ (1,995)    $    (269)
    Losses and LAE ratio                      75.1%        71.1%         61.0%         74.2%         82.0%
    Underwriting expense ratio                55.3%        36.8%         32.5%         30.0%         26.1%
                                          --------     --------       -------      --------      --------
    Combined ratio                           130.4%       107.9%         93.5%        104.2%        108.1%
--------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Represents the sum of Associated Business & Commerce Workers' Compensation
     Self Insurance Fund's results for the eleven months ended November 30,
     1995, and the Company's results for the one month ended December 31, 1995.
     The loss portfolio transfer between the companies has been eliminated and
     the combined sum has been presented for comparison of significant operating
     data.
(2)  GAAP losses and LAE ratio represents the sum of losses and LAE as a
     percentage of net premiums earned. GAAP combined ratio represents the sum
     of the GAAP loss and LAE ratio and GAAP underwriting expense ratio. See
     "Management's Discussion and Analysis of the Company's Results of
     Operations and Financial Condition".
(3)  Stated in accordance with the gross financial reporting requirements as
     prescribed by Financial Accounting Standard No. 113, "Accounting and
     Reporting for Reinsurance of Short-Duration and Long-Duration Contracts."
(4)  Statutory loss and LAE ratio represents the sum of statutory losses and LAE
     as a percentage of statutory net premiums earned. Statutory underwriting
     expense ratio represents statutory underwriting expenses as a percentage of
     statutory net premiums written. Statutory combined ratio represents the sum
     of the statutory loss and LAE ratio and the statutory underwriting expense
     ratio. The Fund's first statutory loss year covered the fifteen month
     period ended December 31, 1992. Therefore, no statutory data is presented
     for 1991. See "Management's Discussion and Analysis of the Company's
     Results of Operations and Financial Condition".


                                      -30-
<PAGE>
<TABLE>
<CAPTION>

                                     TABLE 5
          RECONCILATION OF GAAP SURPLUS TO STATUTORY SURPLUS (DEFICIT)




                                                               THE COMPANY                           THE FUND (1)
-----------------------------------------------------------------------------------------------------------------------------------
                                                        DECEMBER 31,   DECEMBER 31,    DECEMBER 31,   DECEMBER 31,  DECEMBER 31,
($ IN THOUSANDS)                                             1996         1995             1994          1993          1992
-----------------------------------------------------------------------------------------------------------------------------------

<S>                                                      <C>           <C>              <C>           <C>          <C>     
Total equity (deficit) under GAAP                        $    5,144    $  5,499         $  1,075      $   (354)    $  (108)

Non-admitted assets:
    Deferred policy acquisition costs                          (260)       (390)            (331)         (304)       (106)
    Prepaid expenses                                           (198)       (101)             (37)          (65)        (11)
    Deferred income taxes                                      (715)     (1,084)          (1,227)       (1,227)
    Property and equipment                                      (79)        (16)             (32)          (45)        (45)

Other adjustments:
    ULAE contingency reserve                                   (464)
    Deferred ceding revenue                                     228
    Deferred gain on LPT transaction                            644         761              -0-            -0-         -0-
                                                             ------    --------         -------        -------      ------

Total equity (deficit) under SAP                         $    4,300    $  4,669         $  (552)       $(1,995)    $  (270)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
    (1) Calculated on a pro-forma basis for the Fund through December 31, 1994.


<TABLE>
<CAPTION>

                                         TABLE 6
                              RECONCILATION OF LOSS RESERVES


($ IN THOUSANDS)
-------------------------------------------------------------------------------------------
                                                        DECEMBER    DECEMBER     DECEMBER
                                                           31,         31,          31,
(INCLUDES RESERVE TRANSACTIONS OF THE FUND THROUGH        1996        1995         1994
NOVEMBER 30, 1995)
-------------------------------------------------------------------------------------------

<S>                                                    <C>         <C>          <C>        
Loss and LAE reserves at beginning of year             $   28,306 $    19,185   $   16,653
 as reported
Less reinsurance and other recoverables on unpaid losses
    at beginning of year                                   14,471       6,825        4,242
                                                        ----------  ----------   ----------
    Net loss and LAE reserves at                           13,835      12,360       12,411
    beginning of year

Provision for losses and LAE for claims incurred:
    Current year                                            5,732      14,341       15,107
    Prior years                                              (75)         324      (1,383)
                                                        ----------  ----------   ----------
    Total  incurred                                         5,657      14,665       13,724
                                                        ----------  ----------   ----------
Losses and LAE payments for claims incurred:
    Current year                                            1,170       2,209        5,871
    Prior years                                             7,857      10,981        7,904
                                                        ----------  ----------   ----------
    Total  paid                                             9,027      13,190       13,775
                                                        ----------  ----------   ----------
Net Loss and LAE reserves at end of year                   10,465      13,835       12,360
    Plus reinsurance and other
    recoverables on unpaid losses
      at end of year                                       21,517      14,471        6,825
                                                        ----------  ----------   ----------
Loss and LAE reserves at end of year,                $     31,982 $    28,306 $     19,185
as reported
-------------------------------------------------------------------------------------------
</TABLE>



                                      -31-
<PAGE>
<TABLE>
<CAPTION>

                                     TABLE 7
                   SPECIAL DISABILITIES TRUST FUND RECOVERIES



---------------------------------------------------------------------------------------------------------------------------
                                           DECEMBER 31,     DECEMBER 31,     DECEMBER 31,      DECEMBER 31,   DECEMBER 31,
($ IN  THOUSANDS)                              1996             1995             1994            1993           1992
---------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>              <C>              <C>               <C>            <C>          
Earned premium for the year             $         27,737 $         27,919 $         24,704  $      21,822  $       8,766
                                          ---------------  ---------------  ---------------   ------------   ------------
Assessments paid                        $          1,254 $          1,262 $          1,117  $         986  $         396
                                          ---------------  ---------------  ---------------   ------------   ------------

Estimated total recoverables as of
    December 31, 1996 (1)               $          1,028 $          1,028 $            565  $       1,961  $       1,041
Recoveries  received through
    December 31, 1996                                  0                0               14          1,011            774
                                          ---------------  ---------------  ---------------   ------------   ------------

STDF Recoverables                       $          1,028 $          1,028 $            551  $         950  $         267
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Includes estimated amounts receivable on claims incurred but not
     reported (IBNR).


<TABLE>
<CAPTION>


                                     TABLE 8
                  RECOVERIES AND RECOVERABLES DUE BY LOSS YEAR



                                               DECEMBER 31,     DECEMBER 31,     DECEMBER 31,      DECEMBER 31,   DECEMBER 31.
($ IN THOUSANDS)                                  1996             1995             1994            1993           1992
-------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>              <C>               <C>              <C>
Reimbursements due from and estimated
    additional recoveries from excess of
    loss reinsurers by loss year:
       1992                                 $        246     $      1,155     $        747     $      652        $    950
       1993                                        1,211            1,828            1,013          1,450
       1994                                        1,738            2,420              150
       1995                                        2,780            2,766
       1996                                        2,780
-------------------------------------------------------------------------------------------------------------------------
Reimbursements due from and estimated
    additional recoveries from quota-share
    reinsurer
       1995                                        1,074            2,421
       1996                                        7,864
-------------------------------------------------------------------------------------------------------------------------
Estimated recoveries from claims submitted
    and to be submitted to SDTF and other
    non-reinsurance recoverables
       1992                                          267              280              909            629            595
       1993                                          950            1,402            1,746          1,541
       1994                                          551              994            2,259
       1995                                        1,028            1,205
       1996                                        1,028
-------------------------------------------------------------------------------------------------------------------------
Total reinsurance and related receivables    $    21,517     $     14,471     $      6,824     $    4,272       $  1,545
-------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      -32-
<PAGE>
<TABLE>
<CAPTION>

                                     TABLE 9
                               INVESTMENT RESULTS




-----------------------------------------------------------------------------------------------------
                                                                                        PRE-TAX
                                                      NET PRE-TAX                       REALIZED NET
                                     AVERAGE          INVESTMENT         EFFECTIVE      CAPITAL GAINS
($ IN THOUSANDS)                   INVESTMENTS (1)     INCOME (2)        YIELD (3)      (LOSSES)
-----------------------------------------------------------------------------------------------------

<S>                                  <C>              <C>                  <C>            <C>
Year ended
    December 31, 1996             $    11,574      $     860              7.4%         $     (28)
    December 31, 1995             $    14,386      $     846              5.9%         $     115
    December 31, 1994             $    11,772      $     605              5.2%         $     (31)

-----------------------------------------------------------------------------------------------------
</TABLE>

(1)  Simple average of beginning-of-period and end-of-period financial statement
     investments and cash for applicable periods.
(2)  After investment expenses, excluding net realized capital gains (losses).
(3)  Net pre-tax investment income for the period divided by average investments
     for the same period. In calculating effective yield, the net pre-tax
     investment income for the eleven-month period ended November 30, 1995, and
     for the one-month period ended December 31, 1995, have been annualized.


<TABLE>
<CAPTION>

                                    TABLE 10
                                 CAPITALIZATION



                                                           DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
($ IN THOUSANDS)                                             1996            1995           1994
----------------------------------------------------------------------   ----------------------------

<S>                                                       <C>               <C>           <C>
THE COMPANY:

Common shareholders' equity (deficit):
    Common stock, 102,501 shares
       issued, $1 par value                             $         103    $        103    $       103
    Retained  earnings (deficit)                               (1,059)            (22)           (10)
                                                          ------------   -------------   ------------
       Total common shareholders' equity (deficit)               (956)              81             93
                                                          ------------   -------------   ------------

Preferred stock, Series A:
    Preferred shares, 248,885 (1996), 221,805 (1995)
       shares issued, $1 par value                                249             222            -0-
    Additional paid-in capital, preferred stock                 2,252           1,996            -0-
                                                          ------------   -------------   ------------
       Total Preferred stock, Series A                          2,501           2,218            -0-
                                                          ------------   -------------   ------------

Preferred stock, Series B:
Preferred shares, 3,600,000 (1996), 3,200,000 (1995)
    shares issued, $1 par value                                 3,600           3,200            -0-
                                                          ------------   -------------   ------------
       Total Preferred stock, Series B                          3,600           3,200            -0-
                                                          ------------   -------------   ------------
       Total capitalization                             $       5,145  $        5,499  $          93
                                                          ------------   -------------   ------------

THE FUND: (1)

Undistributed surplus                                                                  $       1,075
                                                                                         ------------
       Total capitalization                                                            $       1,075
-----------------------------------------------------------------------------------------------------
</TABLE>

(1)  The Fund's GAAP surplus as of November 30, 1995, the effective date of the
     loss portfolio transfer, was $835,000. The Company has deferred the
     recognition of any gain on the transaction to later periods as the loss
     reserves of the Fund are reduced through claim payments.

                                      -33-

<PAGE>


                                    PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the executive
officers and directors of the Company:

     NAME                         AGE               POSITION
     ----                         ---               --------

  Lawrence J. Marchbanks (2)      50      Chairman of the Board and Director
  James R. Nau                    45      President
  Errol Bader (1) (2)             50      Executive Vice President and Director
  Frederick R. Prout (1) (2)      49      Secretary and Director
  Daniel J. Webber (2)            57      Director
  James L. Wilson (1)             52      Director
  James R. Harris (3)             46      Vice President, Loss Control
  Clifford G. Merritt             41      Vice President, Finance
  R. James Wiggins (3)            56      Vice President, Marketing and
                                                     Field Operations

(1)   Member of Audit Committee
(2)   Member of Compensation Committee
(3)   Officers of Holdings only

Errol Bader has been Executive Vice President and a director of the Company
since March, 1994. He was the President of Bader Management & Consulting, Inc.,
the Administrator of the Fund, from 1991 through 1995. From 1979 to 1991, Mr.
Bader was Executive Vice President of the Associated Builders & Contractors
Trade Association of South Florida. At various times between 1989 and 1990, Mr.
Bader served as the Vice Chairman and the Chairman of the Florida Workers'
Compensation Oversight Board. He was a contributor to the 1990 Workers'
Compensation Reform Legislation and served on the Governor's Workers'
Compensation Task Force in 1989. In 1983, Mr. Bader founded the Preferred
Builders Warranty Corp., a company which engages in the homeowners' warranty
business. Mr. Bader attended Temple University.

James R. Harris is Vice President, Loss Control. He has held this position since
May, 1995. He is responsible for loss control, safety and inspection activities.
Mr. Harris has been employed by the Fund and by Holdings since 1994. Prior to
joining ABC, Mr. Harris was employed as a loss control representative by CIGNA
Insurance Corporation, a major property/casualty insurer, and was risk manager
at a Jacksonville, Florida hospital.

Lawrence J. Marchbanks, since 1974, has been the majority shareholder and
President of Marchbanks, Daiello & Leider, P.A.. law firm with offices in Boca
Raton, Florida. Mr. Marchbanks has served as Chairman of the Board of Directors
and a Director of the Company since March, 1994. Mr. Marchbanks holds a Juris
Doctor degree from Florida State University College of Law and is a member of
the Florida and Palm Beach County Bar Associations.

                                     - 34 -
<PAGE>



Clifford G. Merritt has been Vice President of Finance since August, 1995. From
June, 1978 to August, 1995, Mr. Merritt held various financial positions with
the National Council on Compensation Insurance ("NCCI"), including Director of
Residual Market Financial Operations from 1985 to 1995, with responsibility for
financial management and reporting for workers' compensation assigned risk plans
operating in 32 states. Mr. Merritt holds a Bachelor degree in Accounting from
William Paterson College.

James R. Nau has been President of the Fund and of the Company since June, 1995.
From May, 1974 to June, 1995, Mr. Nau held various positions with the National
Council on Compensation Insurance ("NCCI"), including Senior Vice President from
1992 to 1995. Mr. Nau holds a Bachelor of Science Degree in Business
Administration from Butler University. He also holds designations of Chartered
Property Casualty Underwriter and Associate in Risk Management.

Frederick R. Prout is the President of Prout Realty, Inc. He attended Palm Beach
Community College, and has been a state licensed general contractor since 1972
and a state licensed real estate broker since 1980. Mr. Prout has served as an
executive officer of numerous construction, development and real estate
companies over the last twenty years. He served on the Board of Directors of the
Gold Coast Chapter of Associated Builders and Contractors from 1981 through
1988, the State Board of Directors from 1984 through 1988, and the National
Board of Directors from 1985 through 1987. Mr. Prout has served as a Trustee of
the Fund since its inception in 1991 and has been Secretary and a Director of
the Company since March, 1994.

Daniel J. Webber has been President of Webber, Scollon & Paris & Associates,
Inc., an insurance brokerage agency, since 1980. Mr. Webber has served as a
Trustee of the Fund since its inception in 1991 and as a Director of the Company
since March, 1994. He is licensed as a life and health insurance agent and as a
securities broker in the state of Florida. Mr. Webber attended Hardin-Simmons
University and Oklahoma University.

James R. Wiggins is Vice President, Underwriting/Marketing. Mr. Wiggins joined
Holdings in this capacity in September, 1996. Mr. Wiggins was formerly an
underwriter at Hartford Insurance Company from 1964 to 1992. Mr. Wiggins was
also Chief Workers Compensation Underwriter for Reliance Insurance Company from
1992 until joining Holdings.

James L. Wilson has been President, Chief Operating Officer and a Director of
Southern Security Bank Corp. since 1992 and serves on the Executive Committee of
its Board of Directors. He has been Chairman of the Audit Committee of the Board
of Trustees of the Fund since 1993 and a Director of the Company since March,
1994. From 1990 to 1992, Mr. Wilson was Executive Vice President and Senior
Lending Officer of Boca Bank, a commercial bank. From 1984 to 1990, he was a
principal in Bayshore Investments, a company engaged in the management of income
producing real estate. Mr. Wilson holds a Bachelor of Arts and Sciences degree
from Union College.

The Board of Directors of Holdings is identical to the Board of the Company with
the exception that by agreement with TIG, Mr. Allen B. Binder was added to the
Board of Directors of Holdings in December, 1996. Mr. Binder is Senior Vice
President of TIG Reinsurance Company.

There are no family relationships among any of the directors or executive
officers of the Company.

                                     - 35 -
<PAGE>



The Board of Directors is classified into three classes, each with a three year
term. One class of directors are eligible for election each year. The term of
the Class A director, Lawrence J. Marchbanks, will expire in July, 1998. The
terms of the Class B directors, Errol Bader and James L. Wilson, will expire in
July, 1999. The terms of the Class C directors, Frederick R. Prout and Daniel J.
Webber, will expire in July, 1997. Officers are elected annually by the Board of
Directors and serve at the discretion of the directors. The Company is not
currently a party to any employment agreements.

The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee reviews the scope and results of the audit and
other services performed by the Company's independent accountants. The
Compensation Committee sets compensation to be paid to executive officers and
other key employees and is charged with the administration of the Company's
Equity Compensation Plan.

ITEM 11 - EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

The Company does not pay any director's compensation. All directors'
compensation is paid by Holdings. Outside directors of Holdings receive an
annual retainer of $24,000, plus $500 per board meeting attended.

EXECUTIVE COMPENSATION

Commencing December 1, 1995, all of the Company's executive officers are paid by
Holdings, from fees received by Holdings under the management agreement. Prior
to that time, no compensation had been paid to the officers by the Company or
Holdings.

James R. Nau, the Company's President is paid a base salary of $220,000; an
annual performance bonus of up to $30,000; an automobile allowance; health
insurance and is reimbursed for expenses incurred on Company business.

Errol Bader, the Company's Executive Vice President and a Director who also
serves as President of Holdings, is paid a salary of $250,000; an automobile
allowance; health insurance and is reimbursed for expenses incurred on Company
business. In addition, through March 31, 1997, Mr. Bader has been granted
options to purchase 114,000 shares of Holding's common stock.

No other officers of the Company received salaries and bonuses totaling $100,000
or more.

Table #11 on Page 43 sets forth the cash and non-cash compensation for 1996
awarded to or earned by the Company's President and Executive Vice President.

EQUITY COMPENSATION PLAN

The Company's Equity Compensation Plan (the "Equity Plan") was approved by the
Board of Directors on July 6, 1994, and adopted by the shareholders of the
Company on the same date. The Equity Plan permits the granting to officers, key
employees, eligible directors and eligible independent contractors of

                                     - 36 -
<PAGE>



certain of the following types of awards (i) stock options, including incentive
stock options and non-qualified stock options (ii) stock appreciation rights;
and/or (iii) restricted stock. The Equity Plan is currently administered by a
Committee of the Board of Directors (the "Committee") appointed by the Board.
The Board has reserved 2,000,000 shares of Common Stock for issuance under the
Equity Plan. No stock options have been issued under the plan.

Generally, awards under the Equity Plan are granted for no consideration other
than prior or future services. Awards granted under the Equity Plan may, in the
discretion of the Committee, be granted along or in addition to, in tandem with
or in substitution for any other aware under the Equity Plan or other Plan of
the Company. The exercise price for options granted under the Equity Plan may
not be less than 100% of the fair market value of the Common Stock on the date
of grant and the term of such options may not be greater than ten years.
However, incentive stock options granted to an optionee who owns more than 10%
of the voting power of the Company or its subsidiaries shall have an exercise
price of not less than 110% of the fair market value of the Common Stock on the
date of grant and shall have a term not greater than five years. Stock
appreciation rights may be granted under the Equity Plan to officers, key
employees and eligible independent contractors only in conjunction with a
related option (with an exercise price at least equal to the related option).
Stock appreciate rights generally provide for the payment of cash or Common
Stock (subject to Committee approval of the form of payment) equal in value to
the excess of the fair market value of one share of Common Stock over the
exercise price multiplied by the number of shares for which the stock
appreciation right shall have been exercised (the "Spread"). Restricted stock
may only be awarded to officers and key employees. The shares of Common Stock
subject to a restricted stock award may be released to the award recipient upon
the lapse of applicable restrictions concerning such award without the payment
of any cash consideration.

The Committee is authorized to determine, from time to time, the persons to whom
awards are granted and types of awards. The Committee has the power to establish
and waive, in its discretion, vesting provisions for awards; permit optionees to
exercise options through the delivery of Common Stock with a fair market value
equal to the exercise price of such options ("Stock Delivery"); and amend the
terms of an outstanding award with the consent of the Equity Plan participant.
At the time of grant, the Committee may authorize the grant of replacement
options covering shares of Common Stock equal to the number of shares that the
optionee may tender in any future exercise of options through Stock Delivery
("Replacement Options"). Replacement Options shall have a per share exercise
price equal to the fair market value of one remaining term of the original
options. At the time of grant, the Committee may reserve the right to cash out
an option (as of the date the optionee delivers a notice of exercise) by paying
an amount of cash or Common Stock equal to the Spread. No options have been
granted with the cash out or Replacement Option feature.

In the event of a Change in Control, unless otherwise determined by the
Committee or the Board, or Potential Change in Control, if determined by the
Committee or the Board, any stock appreciation rights outstanding for at least
six months and all outstanding options would become fully vested and immediately
exercisable, and the restrictions on any restricted stock awards would lapse
with such awards becoming fully vested, and the value of all outstanding awards
may be cashed out by the Company on the basis of the highest price paid for
Common Stock during the 60 days preceding the actual or potential Change in
Control. A Potential Change of Control is defined in the Equity Plan as the
execution by the Company of an agreement that would result in a Change in
Control or certain acquisitions of 5% or more of the voting power of the
Company's outstanding securities, as determined by the Committee or the Board.

                                     - 37 -
<PAGE>



The Board may amend, alter or discontinue the Equity Plan at any time and from
time to time, subject to the terms and conditions of the Equity Plan. The right
to grant awards under the Equity Plan terminates on the tenth anniversary of the
approval of the Equity Plan by the shareholders, unless otherwise terminated
sooner or extended with the approval of the shareholders.

HOLDING'S STOCK OPTION PLAN

Under grants dated March, 1994, and September, 1995, the founding shareholders
were issued options totaling 540,000 shares of common stock of Holdings. The
issued Holdings' options have been granted in varying amounts and can be
exercised at a purchase price of $1 per share during the first three years of
the company's existence and $1.50 per share during years four and five of the
Company's existence. These options vest in equal annual proportions during the
first five years of the Company's existence and must be exercised within five
years of vesting.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Associated Business & Commerce Holdings, Inc. ("Holdings") owns all of the
issued and outstanding shares of Common Stock of the Company. Holdings' address
is Suite 400, 4700 N.W. Boca Raton Boulevard, Boca Raton, Florida 33431.

Table #12 on Page 44 sets forth, at March 31, 1997, certain information with
respect to beneficial ownership of the Common Stock of Holdings by (i) each
shareholder known by the Company to be the beneficial owner of more than 5% of
the Common Stock of Holdings, (ii) each director of the Company, (iii) each
executive officer of the Company, and (iv) all directors and executive officers
of the Company as a group. Except as otherwise indicated, each of the persons
listed on the table has sole voting and sole investment power with respect to
all shares beneficially owned, subject to community property laws, where
applicable.

All of the Company's issued and outstanding Series B Convertible Preferred Stock
is owned by Holdings, consisting of 3,600,000 shares issued at a price of par
value of $1 per share. On March 31, 1997, an additional 1,500,000 shares were
purchased bringing Holdings' total holdings to 5,100,000 shares. These shares
are convertible by Holdings to common stock of the Company at any time. Such
conversion would have no effect upon the beneficial ownership interests
appearing on Table #12.

SHAREHOLDER'S AGREEMENT

Each of the current holders of the Holdings' Common Stock (the "Founding
Shareholders") is a party to an Exchange and Shareholders Agreement dated March
23, 1995, and amended November 27, 1996 (the "Shareholder Agreement"), among the
Founding Shareholders and the Company. The Shareholder Agreement provides, among
other things, for certain rights of first refusal with respect to sales or
transfers of the shares of Common Stock, transfers of the shares upon the death
of a Founding Shareholder and certain voting agreements with respect to the
shares.

The Shareholders Agreement provides that in the event a Founding Shareholder
proposes to sell any of his shares the Company has the right and option to
purchase all, but not less than all, of the shares proposed to be sold at a
price equal to the proposed sale price. The Company may exercise its right to

                                     - 38 -
<PAGE>



purchase the shares at any time within 14 days of the date the Company is given
notice of the shareholder's proposed sale. In the event the Company does not
exercise this option, or waives its option, then the remaining Founding
Shareholders have the right and option, within 21 days thereof, to purchase the
shares on the same terms. Should more than one Founding Shareholder exercise
this right, then the shares are to be purchased pro rata by the electing
Founding Shareholders. All shares so purchased by Founding Shareholders remain
subject to the Shareholders Agreement. If neither the Company nor any of the
other Founding Shareholders exercise their option, then the selling shareholder
may, within 90 days, sell those shares to the proposed purchaser at the stated
purchase price.

In the event of the death of a Founding Shareholder, his shares may be
transferred by will or intestate succession. However, the transferees of such
shares must continue to be bound by the terms of the Shareholders Agreement.

The Shareholders Agreement also provides that the Founding Shareholders will
vote all shares of Common Stock held by them in favor of the election to the
Board of Directors of the current Board of Directors.

The Shareholders Agreement will terminate on the earlier of (i) the written
consent of the holders of at least 80% of the shares of Common Stock subject to
the Shareholders Agreement (ii) a public offering of the Common Stock for which
a registration statement under the Securities Act of 1993 is filed, or (iii)
December 31, 2003.

INVESTMENT BY HOLDINGS AND TIG LOAN AND SECURITY PURCHASE

The Company is a wholly owned subsidiary of Holdings. Holdings was organized for
the purpose of providing financing for the Company and performing certain
management services for the Company under the Management Agreement. The
employees of Holdings devote their full business time to the business and
affairs of the Company pursuant to the terms of the Management Agreement. See
"Business-Management Agreement".

As of March 31, 1997, Holdings has invested $5,100,000 in the Company through
the purchase of 5,100,000 shares of Company Series B Preferred. Holdings entered
into a term loan agreement (the "Loan") with TIG Reinsurance Company ("TIG")
pursuant to which (often giving effect to the first and second closing) TIG has
loaned Holdings $3,000,000 for use by Holdings to repay outstanding amounts
under the Underwriters loan. The loan bears interest at 10% per annum. If not
earlier prepaid, the loan is due on December 4, 2003. Holdings has pledged as
collateral for the loan, among other things, all of the Common and Series B
Preferred Stock of the Company held by Holdings. Holdings expects to repay the
loan from fees it receives under the Management Agreement.

As of March 31, 1997, pursuant to the Securities Purchase Agreement (the
"Agreement"), Holdings (after giving effect to the first and second closing) has
sold and TIG has purchased 87,092 shares of Common Stock and 2,912,908 shares of
Series I Preferred Stock at a purchase price of $1.00 per share. TIG, as holder
of the Series I Preferred Stock, is entitled to receive, when, as and if
declared by the Board of Directors of Holdings cumulative dividends at the rate
of 6% per annum. The Series I Preferred Stock is redeemable by Holdings upon
payment of the stated value ($1.00 per share) together with all accrued and
unpaid dividends provided that Holdings shall redeem on or before December 4,
2003 and the TIG Loan is repaid. On and after that date, if not earlier
redeemed, the Series I Preferred Stock is

                                     - 39 -
<PAGE>



convertible to common stock at the option of the holder and is similarly
convertible in the event of default under the TIG Loan.

The Common Stock purchased under the Agreement represents an approximate 44%
stake in Holdings, provided, however, that in the event Underwriters shall
decline to exercise its options TIG may, in its discretion, increase its stake,
at the same price, to 49% of the number of shares and options held by the
founders, shareholders, officers, directors and employees of Holdings.

As a result of the securities purchased by TIG, it is the largest shareholder of
Holdings and will be able to significantly influence the business and affairs of
the Company.

The proceeds from the sale of the Common and Series I Preferred Stock may solely
be used by Holdings for (i) the repayment of indebtedness owing by Holdings to
Underwriters, (ii) the purchase of equivalent amounts of Convertible Preferred
Stock, Series B, of the Company, when necessary to increase the capital of the
Company, (iii) loan repayment or prepayment to TIG, (iv) redemption of Series I
Preferred Stock, and (v) reasonable operating expenses of the Company.

Holdings has agreed not to permit the Company to pay any dividends or repurchase
any of its stock without the prior consent of TIG. The Company does not expect
TIG to permit the Company to pay dividends until the TIG loan to Holdings is
repaid.

Until the TIG loan to Holdings is repaid in full, Holdings and its shareholders
have agreed to cause one designee of TIG to be elected to the board of directors
of Holdings. As of the date hereof, Holdings has been advised that such designee
will be Mr. Allen B. Binder, Senior Vice President, TIG Reinsurance Company. Mr.
Binder does not have any prior relationship with Holdings or the Company and
will not be a director of the Company.

Holdings expects to repay TIG through fees received by it pursuant to the
Management Agreement (see "Business-Management Agreement"). In the event
Holdings is unable to repay the loan in accordance with its terms, it is
expected that TIG would foreclose its lien on the shares of Common Stock pledged
to it by Holdings, and thereby become the sole holder of the Company's Common
Stock. As sole common shareholder, TIG would be able to elect all of the
directors of the Company and thereby control the Company's business and affairs.
TIG may also foreclose its lien on the pledged shares of the Company's Common
Stock in the event that the Loan Agreement is breached. In addition to customary
loan agreement events of default, the Loan Agreement will be in default if the
following covenants are not met:

CONSOLIDATED NET WORTH. Holdings and its consolidated subsidiary shall have at
all times consolidated net worth of not less than $2 million.

THE COMPANY'S STATUTORY SURPLUS. Holdings will not permit the statutory surplus
of the Company at any time to be less than the greater of (1) $4 million, or (2)
the minimum statutory surplus required by the Florida Insurance Department PLUS
$500,000.

                                     - 40 -
<PAGE>



LOSS RESERVES. On each quarterly date, commencing with December 31, 1996,
Holdings will not permit the loss reserves of the Company to be outside the
actuarial range determined annually by an independent actuary. To illustrate, if
the loss reserve is determined by the independent actuary for December 31, 1996,
then such reserve will be used to determine compliance with this provision as of
December 31, 1996. If such loss reserve is not redetermined by the independent
actuary until December 31, 1997, then the loss reserve for December 31, 1996
will be used to determine compliance with this covenant for the quarterly dates
of March 31, 1997, June 30, 1997 and September 30, 1997.

RISK BASED CAPITAL RATIO. Holdings will not permit the risk-based capital ratio
of the Company at any time to be less than one hundred twenty percent (120%) of
the Company action level risk based capital ratio as determined by the Florida
Department of Insurance.

WRITING RATIO. During each quarterly period, commencing with the quarterly
period from January 1, 1997 to March 31, 1997, Holdings will not permit the
result of the Company's annualized net premiums written during such period to
exceed three hundred twenty percent (320%) of the statutory surplus of the
Company as of the last day of such quarterly period.

DEBT TO EQUITY RATIO. Holdings will maintain the ratio of (x) outstanding debt
to TIG hereunder to (y) consolidated net worth PLUS outstanding debt to TIG
hereunder at no greater than the respective amounts for the periods set forth
below:

From the closing date               3:7.00
to December 31, 1998

From January 1, 1999 to             3:8.04
December 31, 1999

From January 1, 2000 to             3:8.33
December 31, 2000

From January 1, 2001 and            3:9.23
all years thereafter

As of the date of this filing, the Company and Holdings are in compliance with
such financial covenants.

The Loan Agreement also provides that, to the extent permitted by law, the
proceeds of future sales of securities by the Company and Holdings shall be used
to repay the loan, other than proceeds of sales of the Series A Preferred.
Before any proceeds of sales of securities by the Company could be permitted to
be paid to Holdings to repay the loan, all accrued dividends on the Series A
Preferred would have to be paid and the permission of the Florida Department of
Insurance would have to be obtained.

In connection with the loan, Holdings has also agreed to cause TIG to provide
the Company with proportional quota share reinsurance until the loan is repaid
and the Series 1 Preferred Stock is redeemed. If the rate of profit made by TIG
on the reinsurance agreement exceeds an agreed upon amount, the excess will
reduce the loan balance, on a dollar for dollar basis. If the loan is repaid
prior to its due date and the Series 1 Preferred Stock is redeemed, Holdings has
agreed to cause the Company to

                                     - 41 -
<PAGE>



obtain quota share reinsurance from TIG at cession levels selected by the
Company in its sole discretion, through December 4, 2003. These quota share
reinsurance obligations were a material inducement to TIG to agree to make the
loan to Holdings and to purchase the Series I Preferred Stock of Holdings.
Holdings has also pledged to TIG as additional collateral all of Holdings'
rights in the Management Agreement.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Marchbanks, Daiello & Leider, P.A., a law firm of which Lawrence J. Marchbanks
is a majority shareholder, President and Director, has provided legal services
to the Company. Fees paid by the Fund and the Company for 1996 were $233,000.
The fees for such services may exceed 5% of that law firm's consolidated gross
revenues.

The Company has entered into a Management Agreement with Holdings, effective
upon the Company's receipt of a Certificate of Authority (December 7, 1995).
Pursuant to the Management Agreement, Holdings is responsible for the day to day
operations of the Company, including but not limited to, marketing, loss
control, safety engineering and continuing service, billing and premium
collection, claims administration, books and records and underwriting. The
Management Agreement has an initial term of five years and provides for the
payment by the Company to Holdings of fees equal to 14.1% of gross written
premiums up to $50 million, less allowed discounts, collected by the Company.
Fees paid for gross written premiums in excess of $50 million are to be paid
according to gross written premium levels and range from 14.5% to 13.1% of gross
written premium. Fees paid during 1996 were $3.8 million.

                                     - 42 -
<PAGE>
<TABLE>
<CAPTION>

                                    TABLE 11
                           SUMMARY COMPENSATION TABLE




                            ANNUAL COMPENSATION                                  LONG-TERM COMPENSATION
--------------------------------------------------------------------------------------------------------------------------
                                                                            AWARDS                  PAYOUTS
                                                                -------------------------  -------------------------------
                                                                                (G)
                                                                    (F)      SECURITIES         (H)
       (A)                                            (E)       RESTRICTED   UNDERLYING      LONG-TERM          (I)
     NAME AND                  (C)       (D)     OTHER ANNUAL      STOCK      OPTIONS/       INCENTIVE       ALL OTHER
    PRINCIPAL        (B)      SALARY    BONUS    COMPENSATION     AWARDS        SARS        PLAN PAYOUTS   COMPENSATION
     POSITION        YEAR      ($)       ($)          ($)           ($)        (#)(1)           ($)             ($)
--------------------------------------------------------------------------------------------------------------------------

<S>     <C>    <C>    <C>    <C>    <C>    <C>
Jim Nau,
  President            1996    220,000

Errol Bader,
  Executive
  Vice-President       1996    250,000
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Mr. Bader has been granted options to purchase shares of Holdings common
     stock. As any exercise of those options would not impact the Company's
     common shareholders' equities, they are not included in the summary
     compensation table.


                                      -43-
<PAGE>
<TABLE>
<CAPTION>

                                    TABLE 12
         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


                                                                              SHARES BENEFICIALLY OWNED
                                                                            -----------------------------
                                                                               NUMBER           PERCENT
                                                                            -----------        ----------
<S>                                                                          <C>                <C>   
Errol Bader........................................................          133,700 (1)        70.52%
       Suite 400
       4700 N.W. Boca Raton Blvd.
       Boca Raton, Fl 33431

James R. Harris ..................................................                --                --

Lawrence J. Marchbanks ...........................................           131,034 (1)        69.11%
       Suite 400
       4700 N.W. Boca Raton Blvd.
       Boca Raton, Fl 33431

Clifford G. Merritt .............................................                 --                --

James R. Nau ....................................................                 --                --

Frederick R. Prout ..............................................            105,367 (1)        55.58%
       Suite 400
       4700 N.W. Boca Raton Blvd.
       Boca Raton, Fl 33431

TIG Reinsurance Company.........................................              87,092 (2)        45.94%

Underwriters Reinsurance Co.....................................              11,389 (3)         5.67%

Daniel J. Webber ...............................................             105,367 (1)        55.58%
       Suite 400
       4700 N.W. Boca Raton Blvd.
       Boca Raton, Fl 33431

R. James Wiggins................................................                  --                --

James L. Wilson ................................................              59,033 (1)        31.14%

       Directors and executive officers as a group                            534,501           84.44%
</TABLE>

(1)  Under Holdings Stock Option Plan, the named executive officers and
     directors have the right to acquire beneficial ownership of the following
     number of shares within 60 calendar days: Mr. Bader - 91,200 shs.; Mr.
     Marchbanks - 101,867 shs.; Mr. Prout - 91,200 shs.; Mr. Webber - 91,200
     shs.; Mr. Wilson - 56,533 shs.; and all directors and executive officers as
     a group - 432,000. These shares are included in the totals shown for each
     individual and the group of all directors and executive officers.
(2)  TIG Reinsurance currently owns 87,092 shares and has the option to purchase
     such additional shares as may be necessary in order to own up to 49% of all
     issued shares, subject to Underwriters' option.
(3)  Underwriters' has the option to acquire 10% of the shares held by the
     Company's Founders and Directors.



                                      -44-
<PAGE>


                                     PART IV

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

                                    EXHIBITS

EXHIBIT NO.                     DESCRIPTION
-----------                     -----------

3.1   Amendments to Articles of Incorporation*
3.2   Bylaws*
3.3   Amendment to Articles of Incorporation
4.1   Series A Preferred certificate*
10.1  Associated Business & Commerce Insurance Corporation Equity Compensation
      Plan*
10.2  Exchange and Shareholders Agreement, dated as of March 23, 1995, among
      Holdings and its shareholders*
10.3  Florida Workers' Compensation Managed Care Agreement, effective as of
      August 4, 1994, between Associated Business and Commerce Workers'
      Compensation Self-Insurance Trust Fund and Humana Medical Plan, Inc.*
10.4  Form of Associated Business & Commerce Insurance Corporation
      Agency-Company Agreement*
10.7  Management Agreement, dated as of March 23, 1995, by and between
      Associated Business & Commerce Insurance Corporation and Associated
      Business & Commerce Holdings, Inc.*
10.8  Permit, dated May 5, 1994, issued by the Florida Department of Insurance*
10.9  Consent Order, dated October 19, 1995, issued by the Florida Department of
      Insurance*
10.10 Amendment to Escrow and Subscription Agent Agreement, dated as of November
      9, 1995, between Associated Business & Commerce Insurance Corporation and
      Southern Security Bank of Hollywood*
10.11 Form of Subscription Agreement*
10.15 Form of Agreement as to Reinsurance by and between Associated Business &
      Commerce Insurance Corporation and Underwriters Reinsurance Company*
10.16 Form of Option Agreement by and among Associated Business & Commerce
      Holdings, Inc., Underwriters Reinsurance Company, Errol Bader, Lawrence J.
      Marchbanks, Frederick R. Prout, Daniel J. Webber and James L. Wilson*
10.17 Amendment to Exchange and Shareholders' Agreement, dated November 27, 1996
10.18 Letter Agreement, dated August 9, 1996, extending Humana Managed Care
      contract for two years
10.19 Securities Purchase Agreement, dated as of December 4, 1996, by and among
      Associated Business and Commerce Holdings, Inc., Errol Bader, Lawrence J.
      Marchbanks, Frederick R. Prout, Daniel J. Webber and James L. Wilson and
      TIG Reinsurance Company
10.20 Term Loan Agreement, dated as of December 4, 1996, between Associated
      Business and Commerce Holdings, Inc. and TIG Reinsurance Company together
      with amendments dated February 24, 1997 and March 19, 1997, respectively
10.21 Pledge Agreement between Associated Business and Commerce Holdings, Inc.
      and TIG Reinsurance Company
10.22 Security Agreement between Associated Business and Commerce Holdings, Inc.
      and TIG Reinsurance Company
10.23 Agreement as to Reinsurance between Associated Business and Commerce
      Holdings, Inc. and TIG Reinsurance Company
23.1  Consent of Independent Accounts
27.1  Financial Data Schedule
28.1  Schedule P from the Statutory Annual Statement for 1996 - Analysis of
      Losses and Loss Expense

*     Incorporated by reference herein to Form S-1, Commission File No. 33-83116

                                     - 45 -
<PAGE>



FINANCIAL STATEMENTS

See the index included on page F-1 and the Financial Statements which being of
page F-2.

FINANCIAL SCHEDULES

All schedules are omitted because they are not applicable, not required, or the
information is included elsewhere in the financial statements or notes thereto.

REPORTS ON FORM 8-K

The Company did not file any Current Reports on Form 8-K with the Commission
during the fourth quarter of 1996.

REPORTS TO SECURITY HOLDERS

The Company has not prepared or sent an Annual Report or proxy materials to
security holders.

                                     - 46 -
<PAGE>



                                   SIGNATURES


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


                                            ASSOCIATED BUSINESS & COMMERCE
                                            INSURANCE CORPORATION



                                            /S/ LAWRENCE J. MARCHBANKS
                                           ---------------------------------
                                            Name:  Lawrence J. Marchbanks
                                            Title: Chairman of the Board
                                            Date:  April 14, 1997

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

<TABLE>
<CAPTION>

           Signature                                  Title                           Date
           ---------                                  -----                           ----
<S>                                         <C>                                   <C>

/s/ ERROL BADER                              
--------------------------------         Executive Vice President of              April 14, 1997   
Errol Bader                              Governmental Affairs and Director 


/s/ LAWRENCE J. MARCHBANKS
--------------------------------         Chairman of the Board and Director       April 14, 1997
Lawrence J. Marchbanks


/s/ CLIFFORD G. MERRITT
--------------------------------         Vice President, Finance (Principal       April 14, 1997     
Clifford G. Merritt                         Financial And Accounting Officer)


/s/ JAMES R. NAU
--------------------------------         President                                April 14, 1997   
James R. Nau                             (Principal Executive Officer)


/s/ FREDERICK R. PROUT
--------------------------------         Secretary and Director                   April 14, 1997
Frederick R. Prout


/s/ JAMES L. WILSON
--------------------------------         Director                                 April 14, 1997 
James L. Wilson

</TABLE>

                                      -47-
<PAGE>
<TABLE>
<CAPTION>


              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          INDEX TO FINANCIAL STATEMENTS

                                                                                       PAGE
                                                                                       ----

<S>                                                                                    <C>
THE COMPANY

Independent Accountants' Report                                                        F-2

Balance Sheets at December 31, 1996 and 1995                                           F-3

Statement of Operations  for the Years Ended December 31, 1996 and 1995 and for
 the period May 13, 1994 through December 31, 1994                                     F-4

Statement of Changes in Stockholders' Equity for the Years Ended December 31,
1996 and 1995 and for the Period May 13, 1994 through December 31, 1994                F-5
 
Statements of Cash Flows for the Years Ended December 31, 1996 and 1995 and for
the period May 13, 1994 through December 31, 1994.                                     F-6

Notes to Financial Statements                                                          F-8

THE FUND

Independent Accountants' Report                                                        F-28

Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993          F-29

Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993          F-30

Notes to Financial Statements                                                          F-32

</TABLE>

                                       F-1

<PAGE>
                         INDEPENDENT ACCOUNTANTS' REPORT

To the Directors
Associated Business & Commerce Insurance Corporation
Boca Raton, Florida

We have audited the accompanying balance sheets of Associated Business &
Commerce Insurance Corporation as of December 31, 1996 and 1995 and the related
statements of operations, changes in stockholders' equity and cash flows for the
years ended December 31, 1996 and 1995 and the period May 13, 1994 (inception)
through December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Associated Business & Commerce
Insurance Corporation as of December 31, 1996 and 1995 and the results of its
operations, and its cash flows for the years ended December 31, 1996 and 1995
and the period May 13, 1994 (inception) through December 31, 1994 in conformity
with generally accepted accounting principles.

                            SCHMIDT, RAINES, TRIESTE,
                             DICKENSON & ADAMS, P.L.

Boca Raton, Florida    
April 11, 1997

                                      F-2

<PAGE>
<TABLE>
<CAPTION>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                                 BALANCE SHEETS
                           DECEMBER 31,1996 AND 1995

                                     ASSETS
                                                                            1996             1995
                                                                   -------------      -----------
<S>                                     <C>                           <C>          <C>
Investments with fixed maturities
 (Note 2)                                        
                                                                       8,708,519       14,439,231
Cash and cash equivalents (Note 12)                                    2,155,583        2,242,245
Premiums receivable, less allowance for doubtful
          accounts 1996 $1,247,602; 1995 $613,125                      4,078,520        4,849,556

Reinsurance and related recoverables (Note 4)
          Paid loss recoverable                                               -0-          94,598
          Loss and loss ad ustment expenses                           21,516,000       14,471,111
          Prepaid reinsurance premiums                                    49,782          530,957
Advances receivable (Note 8)                                                  -0-         175,832
Accrued investment income                                                122,318          211,277
Prepaid expenses (Note 5)                                              3,200,485        1,821,000
Deferred and refundable income taxes (Note 6)                          1,474,093        1,084,000
Deferred policy acquisition costs                                        260,004          389,737
Equipment, less accumulated depreciation
          1996 $102,709; 1995 $47,465                                    640,202          289,871
Other assets, net                                                         76,948          101,202
                                                                   -------------      -----------
                                                                      42,282,454       40,700,617
                                                                   =============      ===========

                 RESERVES, LIABILITIES AND STOCKHOLDERS'EOUITY
Reserve for losses and loss ad ustinent expenses                                  
                                                                      31,982,392       28,306,416
Liabilities:
          Accounts payable (Note 8)                                      417,445          459,929
          Accrued expenses and other liabilities                       1,682,234        2,249,540
          Unearned premium                                             2,411,708        2,346,983
          Deferred gain on loss portfolio                                644,209          760,878
          transfer
          Accrued income taxes and special tax deposits (Note 6)              -0-       1,078,200
                                                                   -------------      -----------
          Total reserves and liabilities                              37,137,988       35,201,946
                                                                   =============      ===========

Commitments and contingencies (Notes 4, 10 and 12)
Stockholders' equity (Note 7):
          Convertible preferred stock series A, 6% cumulative,
          $1 par value, authorized shares 1,900,000; issued and
          outstanding 248,885 shares (aggregate liquidation
          preference of $2,488,850 at December 31,1996)                  248,885          221,805
          Additional paid-in capital, preferred series A               2,251,816        1,996,245
          Convertible preferred stock series B, $1 par value,
          authorized, issued and outstanding 3,600,000 shares          3,600,000        3,200,000
          Common stock, $1 par value, authorized 15,000,000
          shares; 102,501 shares issued and outstanding                  102,501          102,501 
          Retained earnings (deficit)                                 (1,058,736)         (21,880)
                                                                   -------------      -----------
                                                                       5,144,466        5,498,671
                                                                   -------------      -----------
                                                                      42,282,454       40,700,617
                                                                   =============      ===========
</TABLE>

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

                                      F-3
<PAGE>
<TABLE>
<CAPTION>


              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                            STATEMENTS OF OPERATIONS
             FOR THE YEARS ENDED DECEMBER 31,1996 AND 1995 AND THE
            PERIOD MAY 13,1994 (INCEPTION) THROUGH DECEMBER 31,1994



                                                             1996           1995             1994
                                                      -----------    -----------          ---------
<S>                                                     <C>            <C>                 <C>
Revenues:
          Standard premium earned, net of
          discounts                                    27,737,366     16,877,344               -0-
Less premium ceded for reinsurance                     19,587,560      1,741,757               -0-
                                                      -----------    -----------          ---------
          Net premium earned                            8,149,806     15,135,587               -0-
                                                      -----------    -----------          ---------
          Less loss and loss adjustment expenses        5,656,627     14,886,606               -O-
                                                      -----------    -----------          ---------
          Premiums available for operations             2,493,179        248,981               -0-

          Interest earnings                              (860,171)        73,455               -0-
          Net realized gains (losses)                     (27,740)          (404)              -0-
                                                      -----------    -----------          ---------

                                                        3,325,610        322,032               -0-
                                                      -----------    -----------          ---------
          Expenses:
          Policy acquisition and other 
          underwriting expense                          4,392,125        333,315           10,245
          Other expenses                                  111,105          6,152               -0-
                                                      -----------    -----------          ---------
                                                        4,503,230        339,467           10,245
                                                      -----------    -----------          ---------
          Income (loss) before income taxes            (1,177,620)       (17,435)         (l0,245)

Income taxes (Note 6)                                    (254,991)        (5,800)              -0-
                                                      -----------    -----------          ---------
          Net income (loss)                             ($922,629)      ($11,635)         (10,245)
                                                      ===========    ===========          =========
          Earnings (loss) per common share and
          common share equivalent                          (10.12)         (0.11)           (0.10)
                                                      ===========    ===========          =========

</TABLE>


The accompanying notes are an integral part of these financial statements.
                                      F-4

<PAGE>
<TABLE>
<CAPTION>


              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                  STATEMENTS OF CHANGES IN STOCKHOLDERS'EQUITY
             FOR THE YEARS ENDED DECEMBER 31,1996 AND 1995 AND THE
            PERIOD MAY 13,1994 (INCEPTION) THROUGH DECEMBER 31,1994



                                                                      ADDITIONAL
                                                                      PAID-IN
                                                                      CAPITAL                            RETAINED
                                      PREFERRED                       STOCK             COMMON            EARNINGS
                                      SERIES A        SERIES B        SERIES A          STOCK-           (DEFICIT)
                                    ------------    -----------    ------------      -----------        -----------
<S>                                   <C>      <C>  <C>       <C>     <C>     <C>              <C>                <C>
Balance, beginning of period          $       -0-   $        -0-    $        -0-     $        -0-       $        -0-
  
          Common stock issued
          for cash                                                                       102,501

          Net (loss)                                                                                       (10,245)

Balance, December 31, 1994                    -0-            -0-             -0-         102,501           (10,245)
                                    ------------    -----------    ------------      -----------        -----------
          Preferred stock issued         221,805      3,200,000       1,996,245
          for cash

          Net income (loss)                                                                                  11,635
                                    ------------    -----------    ------------      -----------        -----------
Balance, December 31, 1995               221,805      3,200,000       1,996,245          102,501             21,880

          Preferred stock issued
          for cash                        55,972        400,000         503,748

          Preferred stock cancelled      (28,892)                       248,177

          Preferred dividends paid                                                                         (114,227)

          Net income (loss)                                                                                (922,629)
                                    ------------    -----------    ------------      -----------        -----------
Balance, December 31, 1996            $  248,885    $ 3,600,000     $ 2,251,816      $   102,501        $ 1,058,736
                                    ------------    -----------    ------------      -----------        -----------

</TABLE>



The accompanying notes are an integral part of these financial statements.
                                      F-5
<PAGE>
<TABLE>
<CAPTION>


              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                            STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED DECEMBER 31,1996 AND 1995 AND FOR
          THE PERIOD MAY 13,1994 (INCEPTION) THROUGH DECEMBER 31,1994

                                                             1996           1995             1994
                                                      -----------     ----------         ---------
<S>                                                 <C>                 <C>                <C>
OPERATING ACTITIVIES
          Cash received for premiums                   27,679,531      1,341,812
          Cash received from reinsurers                 5,225,080        298,994
          Cash paid to reinsurers                     (19,961,034)    (2,213,424)
          Cash paid for claims                        (15,452,872)    (1,380,808)
          Cash (paid) reimbursed for operating         (3,465,898)       227,355           (10,245)
          expenses
          Income taxes paid                            (1,213,052)
          Investment income collected                     986,220         61,961
                                                      -----------     ----------         ---------
          Net cash and cash equivalents
          (used in) operating activities               (6,202,025)    (1,664,110)         (10,245)
                                                      -----------     ----------         ---------

INVESTING ACTIVITIES
          Purchase of investments                         (99,328)    (3,921,036)
          Sale of investments                           4,080,210      2,538,365
          Proceeds from investment maturities           1,685,000         28,237
          Purchase of equipment                          (455,382)            -0-
          (Receipts of) Payments for other assets          18,200         (31,790)       (41,895)
          Collections (Payments) of advances, net         175,832        (175,832)
                                                      -----------     ----------         ---------
          Net cash and cash equivalents
          (used in) investing activities                5,404,532      (1,562,056)       (41,895)
                                                      -----------     ----------         ---------

FINANCING ACTIVITIES
          Proceeds from issuance of preferred             959,720      5,418,050               -0-
          stock
          Repurchases of preferred stock                 (134,662)            -0-              -0-
          Proceeds from issuance of common stock               -0-            -0-         102,501
          Preferred dividends paid                       (114,227)            -0-              -0-
                                                      -----------     ----------         ---------
          Net cash and cash equivalents provided
          by financing activities                         710,831      5,418,050          102,501
                                                      -----------     ----------         ---------
Net increase in cash and cash equivalents                 (86,662)     2,191,884           50,361
Cash and cash equivalents, beginning of period          2,242,245         50,361               -0-
                                                      -----------     ----------         ---------
Cash and cash equivalanet, end of period                2,155,583      2,242,245           50,361
                                                      ===========     ==========         ========= 

</TABLE>

The accompanying notes are an integral part of these financial statements.
                                      F-6
<PAGE>
<TABLE>
<CAPTION>


              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                            STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED DECEMBER 31,1996 AND 1995 AND FOR
          THE PERIOD MAY 13,1994 (INCEPTION) THROUGH DECEMBER 31,1994


RECONCILIATION OF NET INCOME (LOSS) TO NET CASH AND
    CASH EOUIVALENTS (USED IN) OPERATING ACTI"TIES

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

<S>                                                                        <C>              <C>             <C>
Net income (loss)
                                                                               (922,629)      (11,635)       (10,245)
Adjustments to reconcile net income (loss) to net cash
          and cash equivalents (used in) operating activities:
          Depreciation                                                          105,051         4,837             -0-
          Amortization                                                            6,054         1,315             -0-
          Loss on sale of investments                                           (27,740)          404             -0-
          Net amortization of bond                                               37,090         4,230             -0-
          discounts/premiums 
          Amortization of defeffed gain                                        (116,669)      (75,070)            -0-
          (Increase) decrease, netted for effects
             of assets assumed, in:
             Premiums receivable                                                628,629       197,712             -0-
             Reinsurance and related recoverables                            (6,469,116)   (6,981,217)            -0-
             Accrued interest receivables                                        88,959       (15,724)            -0-
             Prepaid expenses                                                (1,379,485)     (122,342)            -0-
             Defeffed and refundable income taxes                              (390,093)   (1,084,000)            -0-
             Defeffed policy acquisitions costs                                 129,733        86,921             -0-
          Increase (decrease), netted for effects of
             liabilities assumed, in:
             Reserves for claims                                              3,675,976     6,057,569             -0-
             Accounts payable and accrued expenses                             (609,790)      342,846             -0-
             Advance premiums                                                    64,725    (1,148,156)            -0-
             Accrued income tax and special tax deposits                     (1,078,200)    1,078,200             -0-
                                                                          -------------    ----------    -----------
                 Net cash and cash equivalents
                (used in) operating activities                              $(6,202,025)  $(1,664,110)       (10,245)
                                                                          =============   ===========    ===========

</TABLE>

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

                                      F-7
<PAGE>



              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994



NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF BUSINESS

         Associated Business & Commerce Insurance Corporation (the Company) was
         incorporated on May 13, 1994 under the provisions of Florida law. The
         Company's activities through November 29, 1995 were limited to
         organization, licensing and other activities to enable it to become an
         insurance company specializing in workers' compensation insurance
         regulated by the Florida Department of Insurance (the "Department"). On
         December 7, 1995, the Department issued a certificate of authority
         after the Company successfully completed a plan of capitalization.
         Activity and operations then immediately commenced.

         In a transaction approved by the Florida Department of Insurance, the
         Company assumed the assets and liabilities of Associated Business &
         Commerce Workers' Compensation Self - Insurance Fund (the Fund) by
         virtue of a loss portfolio reinsurance transaction. By agreement with
         the Fund, the effective date of the transaction was November 30, 1995.
         Accordingly, premiums earned on the Fund's policies then in effect, and
         losses and underwriting expenses incurred subsequent to that date are
         reported by the Company. However, the Fund did not transfer liabilities
         not related to insurance.

         The transaction described above together with other transactions and
         contractual arrangements between the Fund, the Company and other
         parties were contemplated by the Company in its long - term business
         plan with the primary objective of offering non - assessable policies
         of insurance to members of the Fund and to the general public.
         Employers insuring their worker's compensation risks with the Fund were
         assessable for any losses and related expenses not ultimately paid by
         the Fund. Such assessability created a contingent liability to the
         employers, which management considered detrimental to the continuing
         growth of the business. As part of the loss portfolio transfer, the
         Company indemnified the members of the Fund who elected to be insured
         by the Company against such assessments. Policies of insurance written
         by the Company, including renewals of coverage to former members of the
         Fund are non assessable.

         Only those members of the Fund who elected to be insured by the Company
         were retained by the Company. The Company did not assume any contingent
         assessment liabilities for members who left the Fund or who chose not
         to be insured by the Company.

                                      F-8
<PAGE>
              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION

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

         CASH EQUIVALENTS

              For purposes of the statements of cash flows, the Company
              considers all highly - liquid debt instruments purchased with a
              maturity of three months or less to be cash equivalents.

         RECOGNITION OF PREMIUM REVENUES AND UNEARNED PREMIUM

              Workers compensation and employers liability insurance premiums
              are recognized evenly over the life of the related policies
              (generally one year), including estimates of retrospectively -
              rated premiums based upon experience incurred under those
              contracts to date, with a liability for unearned premiums
              established for the premiums collected on the unexpired portion of
              those policies. It is the general policy of the Company to bill an
              amount approximating 10% to 20% of annual premium in advance of
              the effective date of insurance coverage which is held by the
              Company to insure performance of each insureds' annual premium
              obligation.

              Unearned premium also includes any return premium due the insured
              as a result of premium audits. Standard premium is computed on
              payroll and modified by an experience factor approved by the State
              of Florida via the National Council on Compensation Insurance
              (NCCI). Payroll and payroll classifications are subject to
              verification and revision after year end. Additional premiums
              based on payroll audits are recognized as revenue in the loss year
              for which coverage is provided.

                                      F-9
<PAGE>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         DEFERRED POLICY ACQUISITION COSTS

              Commissions and other costs of acquiring insurance that vary with
              and are primarily related to the production of new and renewal
              business are deferred and amortized over the terms of the policies
              to which they relate. It is the Company's policy to calculate and
              record deferred policy acquisition costs on a quarterly basis.
              Amortization expense for the year ended December 31, 1996
              approximated $1,371,000. There was no amortization for the year
              ended December 31, 1995.

         INVESTMENTS

              Investments consist of U.S. Treasury notes, federal government
              sponsored mortgage pools, and other U.S. government agency notes
              and are carried at cost plus or minus the unamortized portion of
              premiums or discounts paid to acquire such investments. The
              Financial Accounting Standards Board has issued SFAS 115
              "Accounting for Certain Investments in Debt and Equity
              Securities", which became effective with the fiscal year which
              began January 1, 1994, and has been implemented in the
              accompanying financial statements. This SFAS addresses the
              accounting and reporting for investments in equity securities that
              have readily determinable market values and for all investments in
              debt securities. Debt securities are to be classified as trading
              securities (reported at market value) and available - for - sale
              securities (reported at fair value with unrealized market gains
              and losses reported as a separate component of stockholders'
              equity).

              Fixed maturity investments are securities that mature at a
              specified future date more than one year after being issued. Fixed
              maturity securities that the Company intends to hold until
              maturity are classified as "fixed maturities held to maturity" and
              are carried at amortized cost. Amortized cost is based upon the
              purchase price and is adjusted periodically in order that the
              carrying value will equal the face or par value at maturity. Fixed
              maturity securities that may be sold prior to maturity due to
              changes in interest rates, prepayment risks, liquidity needs, tax
              planning purposes or other similar factors, have been classified
              as "available for sale", and are carried at fair value. The
              difference between aggregate carrying value for fixed maturities
              available for sale and the aggregate amortized cost of such
              securities is reported, net of related deferred income taxes, as a
              separate component of stockholders' equity.

              At December 31, 1996 and 1995, all of the Company's investments
              were in fixed maturity securities. At December 31, 1996 all
              investments are classified as held-to-maturity. At December 31,
              1995 investments were classified as available-for-sale and
              held-to-maturity. At December 31, 1995, aggregate carrying value
              approximated market for those securities classified as
              available-for-sale, therefore, there was no balance carried as a
              separate component of stockholders' equity.

                                      F-10
<PAGE>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

              Realized gains and losses on sales of investments are recognized
              on the specific identification basis.

         EQUIPMENT

              Equipment is recorded at cost and is depreciated using accelerated
              and straight - line methods over the respective assets' estimated
              useful lives which range from five to seven years.

         DIVIDEND PAYMENT RESTRICTIONS

              The Company is restricted from paying dividends in excess of a
              statutory formula on either common or preferred stock. No
              dividends on common stock may be paid until all of the accumulated
              and unpaid dividends, if any, on the Company's registered Series A
              Preferred stock have been paid in full.

              Notwithstanding the forgoing, the Company has agreed, as a
              condition of obtaining its certificate of authority, not to pay
              dividends on any class of stock until December 7, 2000 without
              prior written consent of the Florida Department of Insurance.

              In addition, as part of a term loan agreement of the Company's
              parent Corporation (Note 7), the Company has agreed to pay no
              dividends on any class of stock for so long as the parent remains
              indebted without the creditors approval. Moreover, if any
              dividends are approved, declared and paid on the common stock,
              such dividends are required to be used to retire any then
              remaining indebtedness of the parent under the term loan.

         INSURANCE LIABILITIES

              The liability for losses and loss adjustment expenses includes an
              amount determined from loss reports and individual cases and an
              amount, based on past and industry experience, for losses incurred
              but not reported and future development of existing cases. In
              establishing its liability for losses and loss adjustment
              expenses, the Company utilizes the findings of an independent
              actuary. Such liabilities are necessarily based on estimates and,
              while management believes that the amount is adequate, the
              ultimate liability may be in excess of or less than the amounts
              provided. The methods for making such estimates and for
              establishing the resulting liability are continually reviewed, and
              any adjustments are reflected in earnings currently. Although the
              Company believes that the estimate of the reserve for losses and
              loss adjustment expenses is reasonable in the circumstances, the
              Company's absence of a substantial period of loss experience to
              support the assumptions inherent in establishing the estimated
              reserves results in uncertainty as to the ultimate amount that
              will be required for the settlement of losses and claims.

                                      F-11
<PAGE>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

              Accordingly, the ultimate settlement of losses and the related
              loss adjustment expenses may vary, perhaps significantly, from the
              estimated amounts included in the accompanying financial
              statements.

              The "Reserves for Losses and Loss Adjustment Expenses (LAE)"
              section on pages 11-12 and Tables 2, 6, 7, and 8 include schedules
              of the development of the Company's loss reserves for the last
              three years and further discussion relating to the Company's
              reinsurance and related recoveries.

              Statutory reserves differ from GAAP reserves by inclusion of a
              reserve for unpaid unallocated loss adjustment expenses which
              approximated $464,000 at December 31, 1996.

         ORGANIZATION COSTS

              Included in other assets are organization costs consisting of
              certain costs associated with initial incorporation, registration
              and licensing activities. These costs are amortized by the
              straight line method over five years. Amortization expense totaled
              $6,504 and $1,315 for the years ended December 31, 1996and 1995,
              respectively.

         REINSURANCE

              Reinsurance premiums, commissions, and expense reimbursements
              related to reinsured business are accounted for on bases
              consistent with those used in accounting for the original policies
              issued and the terms of the reinsurance contracts. Premiums ceded
              to other companies have been reported as a reduction of premium
              income. The Company maintains specific and aggregate excess loss
              reinsurance with unaffiliated insurance companies. For 1996 and
              1995 the Company retained the first $350,000 of each loss under
              its specific reinsurance policies. For 1996, the Company entered
              into an aggregate excess loss policy for coverage of up to 70% of
              15% excess 75% of earned standard premium subject to a $4,500,000
              maximum limit.

              With the exception of the assumption of insurance liabilities and
              assets from the Fund in a one time only transaction, the Company
              does not assume reinsurance from other insurance funds or
              companies in the ordinary course of business. The Company has
              entered into a 70% proportional quota - share agreement with
              Underwriters Reinsurance Company ("Underwriters") (Note 4).

                                      F-12
<PAGE>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         INCOME TAXES

              The Company accounts for income taxes in accordance with Financial
              Accounting Standards Board Statement of Financial Standards No.
              109, "Accounting for Income Taxes" (SFAS109). Income taxes are
              provided for the tax effects of transactions reported in the
              financial statements and consist of taxes currently due plus
              deferred taxes related primarily to differences between the basis
              of premiums receivable, reinsurance and related receivables and
              insurance liabilities for financial and income tax reporting. The
              deferred tax assets and liabilities represent the future tax
              return consequences of those differences, which will be either
              taxable or deductible when the assets and liabilities are
              recovered or settled. Deferred taxes also are recognized for
              operating losses that are available to offset future taxable
              income and tax credits that may be available to offset future
              federal income taxes.

         EARNINGS PER SHARE

              Earnings per common share and common share equivalent were
              computed by dividing net income by the weighted average number of
              shares of common stock and common stock equivalents outstanding
              during the year. There was no change in the number of common
              shares outstanding during 1996. Also, no dilution of earnings per
              share is calculated because the Series A preferred stock is not
              convertible to common shares before January 1, 2000 and the
              Preferred series B preferred stock are not included in the
              calculation because of an anti - dilutive effect at December 31,
              1996 and 1995. Therefore, the basis for determining earnings per
              share at December 31, 1996 and 1995 was as follows:

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

              Net income (loss)                  $   (922,629)   $  (11,635)
              less preferred dividends               (114,227)           -0-
                                                  =============   ===========
              Net income (loss), as adjusted     $ (1,036,856)   $  (11,635)
                                                  =============   ===========

         ALLOWANCE FOR BAD DEBTS

              The bad debt allowance is based upon the Company's and the Fund's
              experience with uncollectible accounts receivable and represents
              the Company's estimate of the uncollectible amounts incurred
              through each year end. The following table summarizes the activity
              in the bad debt allowance for the years ended December 31, 1996
              and 1995 and the period ended December 31, 1994:

                                      F-13
<PAGE>

<TABLE>
<CAPTION>
              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

<S>                                                      <C>               <C>                <C>          
          Balance, beginning of period                   $    613,125      $        ----      $        ----

          Allowance assumed from the Fund                          -0-           560,094               ----

          Additions to the allowance                          634,477             53,031               ----

          Write-offs against the allowance                         -0-                -0-
                                                        -----------------  ----------------   ----------------

          Balance, end of period                         $  1,247,602      $     613,125      $        ----
                                                         =================  ================   ================
</TABLE>

NOTE 2 - INVESTMENTS IN SECURITIES

         Gross investment income for the periods ended December 31, 1996, 1995
         and 1994 totaled $860,171, $73,455 and none, respectively. There were
         no investment expenses for the same periods.

     Investments included in the accompanying balance sheet at December 31, 1996
     and 1995 are summarized as follows (there were no investments in securities
     at December 31, 1994):

                                      F-14
<PAGE>
<TABLE>
<CAPTION>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 2 - INVESTMENTS IN SECURITIES (CONTINUED)

                                                                              1996

                                             ------------------------------------------------------------------------
                                                AMORTIZED        UNREALIZED         UNREALIZED         EST. MARKET
                                                  COST          APPRECIATION       DEPRECIATION           VALUE
                                             ----------------  ----------------   ----------------   ----------------

<S>                                           <C>               <C>               <C>                 <C>
     Held to maturity:
         Fixed Maturities:

              U.S. Treasury Notes           $     2,452,739   $            -0-   $          ----     $     2,452,739

              U.S.    Government   agency
              notes,  various  maturities
              and interest rates                  2.503,278                -0-           (23,034)          2,480,244

              GNMA  and   FNMA   Mortgage
              pools,  various  maturities
              and interest rates                  3,752,502                -0-           (99,929)          3,652,573
                                             ----------------  ----------------   ----------------   ----------------

                  Total held to maturity

                                                  8,708,519               -0-           (119,713)         8,585,556
                                             ================  ================   ================   ================



                                      F-15
<PAGE>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 2 - INVESTMENTS IN SECURITIES (CONTINUED)

                                                                              1995

                                             ------------------------------------------------------------------------
                                                AMORTIZED        UNREALIZED         UNREALIZED         EST. MARKET
                                                  COST          APPRECIATION       DEPRECIATION           VALUE
                                             ----------------  ----------------   ----------------   ----------------

     Held to maturity:
         Fixed Maturities:

              U.S. Treasury Notes           $       500,224   $           711    $          ----    $       500,935

              U.S.    Government   agency
              notes,  various  maturities
              and interest rates                  1,996,310            13,190               ----          2,009,500

              GNMA  and   FNMA   Mortgage
              pools,  various  maturities
              and interest rates                  7,712,198            16,192            (57,865)         7,670,525
                                             ----------------  ----------------   ----------------   ----------------

                  Total held to 
                  maturity                       10,208,732            30,093            (57,865)        10,180,960
                                             ----------------  ----------------   ----------------   ----------------
     Available for sale:
         Fixed Maturities:

              U.S. Treasury notes                 4,230,499              ----               ----          4,230,499
                                             ----------------  ----------------   ----------------   ----------------

                  Total investments         $    14,439,231   $        30,093    $       (57,865)   $    14,411,459
                                             ================  ================   ================   ================
</TABLE>

The fair value of investments was determined using outside pricing services.

Estimated fair value of investments at January 31, 1997, the most recently
available date, approximated $8,571,000.

                                      F-16
<PAGE>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 2 - INVESTMENTS IN SECURITIES (CONTINUED)

     Following is a summary of investment purchases, sales and maturities for
     the years ended December 31, 1996 and 1995:

     PURCHASES:                             1996                1995
     ----------                       -----------------   -----------------
     Fixed maturities                $          99,328   $       -0-
                                      =================   =================
<TABLE>
<CAPTION>

                                                                     1996
     SALES:                                    -----------------------------------------------
     FIXED MATURITIES AVAILABLE FOR SALE          PROCEEDS          COST            GAIN (LOSS)
                                               ----------------  --------------- ------------
<S>                                           <C>               <C>             <C>          
     Sales                                    $        657,031  $       658,539 $     (1,508)
     Maturities                                      1,685,000        1,685,000           -0-
                                               ----------------  --------------- -------------
                                                     2,342,031        2,343,539       (1,508)
                                               ----------------  --------------- -------------
     FIXED MATURITIES HELD-TO-MATURITY
     Sales                                           3,333,859        3,360,091      (26,232)
     Maturities                                         89,320           89,320           -0-
                                               ----------------  --------------- -------------
                                                     3,423,179        3,449,411      (26,262)
                                               ----------------  --------------- -------------

         Totals                               $      5,765,210  $     5,792,950 $    (27,740)
                                               ================  =============== =============
</TABLE>

     Sale of held-to-maturity securities during 1996 was the result of the
     non-recurring and unanticipated rapid funding of liabilities arising from
     the quota share arrangement with Underwriters Reinsurance. As of December
     31, 1996, as a result of additional equity financing (Note 7), management
     has the positive intent to hold all investments to their respective
     maturities.

     During December 1995, the Company sold U.S. Treasury securities classified
     as available for sale with a carrying value of $2,539,173 for gross
     realized gains (losses) of $2,615 and $(3,019), respectively, for a net
     loss of $404.

                                      F-17
<PAGE>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 2- INVESTMENTS IN SECURITIES (CONTINUED)

     The carrying value and estimated market value of debt securities at
     December 31, 1996 by contractual maturity, are shown below. Actual
     maturities may differ from contractual maturities because certain borrowers
     have the right to call or prepay obligations without call or prepayment
     penalties.
<TABLE>
<CAPTION>

                                                                              ESTIMATED
                                                           CARRYING             MARKET
                                                             VALUE              VALUE
                                                       ------------------  -----------------

<S>                                                   <C>                 <C>            
         Due in one year or less                      $     2,353,230     $     2,353,230
         Due after one year through five years              1,596,050           1,586,333
         Due after five years through ten years             1,006,737             993,993
                                                       ------------------  -----------------
                                                            4,956,017           4,933,556
         GNMA and FNMA Mortgage pools                       3,752,502           3,652,000
                                                       ------------------  -----------------

                                                      $     8,708,519     $     8,585,556
                                                       ==================  =================
</TABLE>


     The Company does not have any material concentrations of credit risk in its
     portfolio as it consists entirely of U.S. Treasury and other federal
     government agency notes, GNMA's and FNMA's.

     The carrying value of securities on deposit with various governmental
     agencies at December 31, 1996 was $2,353,231.

NOTE 3 - STATE OF FLORIDA SPECIAL DISABILITY TRUST FUND

     The State of Florida operates and manages the Special Disabilities Trust
     Fund (SDTF) and reimburses employers and insurers for certain workers
     compensation benefits paid to employees when the employee is injured on the
     job and the resulting disability is as a result of or was related to a
     prior work related injury. The SDTF is funded through assessments upon all
     Florida workers' compensation insurers at a current level of 4.52% of
     premium written and distributes such sums among insurers whose policy
     holders have employed individuals with previously determined worker's
     compensation - related disabilities, and such individuals have filed a
     claim. The Company has included, as recoverables against losses and loss
     adjustment expenses, amounts submitted and to be submitted to SDTF. See
     also Note 4.

                                      F-18
<PAGE>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 4 - REINSURANCE AND RELATED RECOVERABLES

     Reinsurance contracts do not relieve the Company from its obligation to pay
     claims. However, the Company limits the maximum net loss that can arise
     from risks in its concentrated area of exposure by reinsuring (ceding)
     certain levels of risks with other insurers or reinsurers, on an automatic
     basis under general reinsurance contracts known as "treaties" or by
     negotiation on large individual risks. Ceded reinsurance is treated as the
     risk and liability of the assuming companies.

     Effective October 1, 1995, the Fund entered into a 70% proportional quota -
     share reinsurance treaty with Underwriters Reinsurance Company
     (Underwriters), which was assigned to the Company effective November 30,
     1995. Under the terms of the agreement, the Company cedes 70% of its net
     written premium to Underwriters with Underwriters assuming 70% of the
     Company's retained losses and loss adjustment expenses. To cover the costs
     of underwriting, Underwriters reimbursed the Company for certain direct
     expenses, including other reinsurance and managed care fees incurred, and
     paid the Company a ceding commission ultimately based on the Company's loss
     ratio, subject to certain adjustments and limits. Ceding commissions earned
     for the periods ended December 31, 1996, 1995 and 1994 approximated
     $4,786,000, $416,000 and none, respectively.

     The following table summarizes the effect of reinsurance on premiums earned
     and written for the periods ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>

                                               1996                       1995(a)             1994
                                -----------------------------------   ----------------   ----------------
                                       WRITTEN             EARNED
                                -----------------------------------

<S>                            <C>                <C>                <C>                <C>            
              Direct           $    27,685,422    $    27,620,697    $     2,420,743    $          ----
              Assumed                 116,669             116,669         14,456,601
              Ceded                 (19,629,696)      (19,587,560)        (1,741,757)
                                -----------------------------------   ----------------   ----------------

                  Net          $     8,172,395    $     8,149,806    $    15,135,587    $          ----
                                ===================================   ================   ================
</TABLE>

     The assumed premium is comprised entirely of the premium assumed from the
     Fund as a result of the loss portfolio transfer described in Note 1. The
     losses assumed by the Company of $14,456,601 were less than total premium
     on this transaction, which totaled $15,292,549. A deferred gain has
     therefore been recorded in the amount of $835,948. This gain is being
     amortized in proportion to the reduction in reserve for assumed losses.

     (a) For 1995, because of the common anniversary date of December 31, 1995
     of substantially all policies in force during 1995, earned and written
     premiums are not materially different.

     At December 31, 1996, 1995 and 1994, reinsurance and related recoverables
     consisted of none, $94,598 and none, respectively, of recoverables on paid
     claim and claim settlement expenses and

                                      F-19
<PAGE>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 4 - REINSURANCE AND RELATED RECOVERABLES (CONTINUED)

     $21,516,000, $14,471,111 and none, respectively, of estimated recoverables
     on unpaid claim and claim settlement expenses.

     Approximately $8,525,000 of the reinsurance and related recoverables at
     December 31, 1995 are from Score RE (formerly Allstate Reinsurance
     Company). Also, included in reinsurance and related recoverables at
     December 31, 1996 is approximately $8,937,000 related to the Company's
     quota share agreement with Underwriters. In addition, estimated
     undiscounted recoveries from the SDTF approximated $3,824,000 December 31,
     1996.

     The Special Disability Trust Fund was created in 1955 to provide a
     financial incentive for employers to hire previously injured workers. If
     the worker was injured a second time and the employer (or insurance
     carrier) could prove that the two injuries were related, the Trust Fund
     will reinburse the insurer for claims paid regarding the second or
     subsequent injuries.

     It has been reported that the Trust Fund is financially impaired with
     claims exceeding the Fund's ability to pay. The Florida Legislature is
     considering legislation to deal with the issue but no definite laws have
     yet been adopted. Proposals range from increased assessments to carriers to
     terminating the Fund at a date certain as a means of dealing with the
     problem.

     The Company is unable to ascertain with any certainty what, if any,
     legislation will be adopted regarding the Trust Fund. If terminated at a
     date certain or if assessments are increased, such actions could adversely
     impact the Company.

     In the event that all or any of the reinsuring companies or the SDTF might
     be unable to meet their obligations under existing reinsurance agreements
     or law, the Company would be liable for such defaulted amounts. The
     Company's management believes that all reinsurers are in sound financial
     condition, and include Score RE (formerly Allstate Reinsurance Company,
     Continental Casualty Company, and Underwriters Reinsurance Company, all "A"
     rated by A.M. Best.

NOTE 5 - MANAGED CARE

     During 1994, the Fund entered into a managed care arrangement with Humana
     under which Humana is to provide medical services to workers whose
     employers were participating in the voluntary managed care arrangement. The
     terms of the agreement with Humana, which was assigned to the Company
     effective November 30, 1995, provide for the payment of a capitation fee in
     exchange for which Humana covers all the medical cost associated with a
     claim for a period of three years after the date the claim is reported.
     Fees paid to Humana are recognized as prepaid expenses and unpaid claim and
     claim settlement expenses to the extent that unpaid claims and claim
     settlement expenses exist for managed care covered claims. Prepaid expenses
     at December 31, 1996 and 1995 includes $3,129,000

                                      F-20
<PAGE>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 5 - MANAGED CARE (CONTINUED)

     and $1,821,000, respectively, of fees paid to Humana under this agreement,
     including amounts assumed from the Fund in the loss portfolio transfer.

     To the extent that Humana is unable to meet their contractual obligation
     under the agreement, the Company is liable for unpaid claim and claim
     settlement expenses. However, as part of the agreement, Humana has issued a
     letter of credit to the benefit of the Company in the amount of $3,500,000,
     which expires December 15, 1997.

NOTE 6 - INCOME TAXES

     Temporary differences giving rise to deferred tax assets consist primarily
     of a discount on the reserve for loss and loss adjustment expenses for tax
     purposes and on reinsurance and related receivables, accounting for earned
     premiums differently for tax purposes than for financial reporting
     purposes, expensing for tax purposes internal underwriting costs
     attributable to policy acquisitions, accounting for other policy
     acquisition costs differently for tax purposes than for financial reporting
     purposes, and the recording of an allowance for uncollectible premiums
     receivable for financial reporting purposes but not for tax purposes.

     The provision for income taxes are as follows for the periods ended
     December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>

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

<S>                            <C>              <C>               <C>      
         Current               $    (304,991)   $   1,078,200     $    ----
         Deferred                     50,000       (1,084,000)
                                ---------------  ---------------   -----------

                               $    (254,991)   $      (5,800)    $    ----
                                ===============  ===============   ===========
</TABLE>

     The effective tax rate of 21.7% for 1996 differs from the statutory income
     tax rate of 34% due to the effects during 1996 of underestimated 1995
     income taxes approximating $135,000.

     The tax effects of temporary differences that give rise to significant
     portions of the deferred tax assets and liabilities at December 31, 1996,
     1995 and 1994 are as follows:

                                      F-21
<PAGE>
<TABLE>
<CAPTION>


              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 6 - INCOME TAXES (CONTINUED)

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

<S>                                                   <C>                 <C>             <C> 
         Deferred tax assets:
              Discount on net loss reserves          $     515,000           706,000     $        ----
              Deferred charge                              219,000           259,000
              Unearned premium                             227,000           159,000
              Net operating loss                           319,000                -0-
              Other                                             -0-           12,000
                                                      ----------------  ---------------   ---------------
                  Total deferred tax assets              1,280,000         1,136,000              ----

              Deferred tax liabilities:

                  Loss reserves                            158,000                -0-
                  Policy acquisition costs                  88,000            52,000
                                                      ----------------  ---------------   ---------------
                                                           246,000            52,000              ----
                                                      ----------------  ---------------   ---------------
                                                     $   1,034,000         1,084,000     $        ----
                                                      ================  ===============   ===============
</TABLE>

     Management believes it is more likely than not that the deferred tax assets
     will be realized due to the Company's tax planning strategies and future
     taxable income. Accordingly, no valuation allowance has been established.

NOTE 7 - STOCKHOLDERS' EQUITY AND SUBSEQUENT EVENT

     The Company has authorized a total of 10,000,000 shares of preferred stock,
     available to be issued in any series as determined by the board of
     directors. During 1996, the board increased the authorized series A 6%
     cumulative Convertible Preferred Series A shares from 900,000 to 1,900,000.
     At December 31, 1996 and 1995, 248,885 and 221,805 shares, respectively,
     have been issued and have been registered with the U.S. Securities and
     Exchange Commission. At December 31, 1996 and 1995, 3,600,000 and 3,200,000
     shares, respectively are authorized and have been issued of Convertible
     Preferred Series B, which are unregistered. Accordingly, a total of
     6,151,115 shares of preferred stock are authorized and unissued.

     Each share of the 6% Cumulative Convertible Series A Preferred Stock is
     convertible to 2 shares of common stock after December 31, 2000. The
     Company may, after December 31, 1998, and upon thirty days written notice,
     redeem the Series A preferred shares at $10 per share plus unpaid and
     accrued dividends. The Series A preferred shares also carry a liquidation
     value of $10 per share. Accordingly, at December 31, 1996 the aggregate
     liquidation preference is $2,488,850.

                                      F-22
<PAGE>
              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994



NOTE 7 - STOCKHOLDERS' EQUITY AND SUBSEQUENT EVENT (CONTINUED)

     The Company's originally filed articles of incorporation provided for
     5,000,000 shares of authorized common stock. During November, 1994, the
     articles of incorporation were amended to allow for an additional
     10,000,000 shares of common stock to bring the total authorized common
     stock to 15,000,000 shares.

     During March 1995, the founding stockholders of the Company entered into a
     stock exchange agreement with Associated Business & Commerce Holdings, Inc.
     (Holdings) whereby they exchanged all outstanding common stock of the
     Company for an equal number of shares of Holdings, in direct proportion to
     the existing stock ownership of common stock in the Company. As a result,
     the Company became a wholly owned subsidiary of Holdings. Holdings was
     organized solely for the purpose of providing financing for the Company and
     performing certain management services for the Company under a Management
     Agreement between the Company and Holdings (the "Management Agreement").
     Holdings does not carry on any other business activities. The employees of
     Holdings devote their full business time to the business and affairs of the
     Company pursuant to the terms of the Management Agreement.

     Holdings obtained the funds for the funds for the initial purchase of the
     3,200,000 shares of Series B preferred stock by entering into a term loan
     agreement with one of the Company's quota share reinsurers, Underwriters
     Reinsurance Company ("Underwriters"). The loan bore interest at 12.75% per
     annum, and, if not earlier prepaid, was due on September 30, 2000. Holdings
     pledged as collateral for the loan, among other things, all the Common and
     Series B Preferred Stock of the Company held by Holdings. Holdings has also
     granted Underwriters options to purchase common stock of Holdings in an
     amount, after issuance, up to a maximum of 49% of the number of outstanding
     common shares of Holdings. The number of shares subject to option is based 
     upon the date on which the final payment to Underwriters was made.

     In order to relieve the debt service burden created by the Underwriters
     loan, improve the financing terms, increase the quota share reinsurance
     ceding commission and generate more capital available to the Company,
     Holdings, on December 4, 1996, entered into a Term Loan Agreement and
     Securities Purchase Agreement with TIG Reinsurance Company (hereinafter
     "TIG" or the "TIG Loan").

     Because the voting securities purchase aspect of the entire TIG transaction
     required prior approval by the Florida Department of Insurance, closing
     occurred in two phases.

     The first closing occurred on December 4, 1996. At this first closing,
     Holdings entered into a loan agreement with TIG evidenced by two promissory
     notes (Note A and Note B). Note A is in the principal amount of $3 million,
     bears interest at 10% per annum, payable interest only and, if not earlier
     prepaid, is due December 4, 2003. Note B was in the principal amount of
     $912,908, bears interest at 6% per annum, payable interest only and, if not
     earlier prepaid, was due December 4, 2003,

                                      F-23
<PAGE>
              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994



NOTE 7 - STOCKHOLDERS' EQUITY AND SUBSEQUENT EVENT (CONTINUED)

     provided however, that upon approval of the proposed securities purchase by
     the Florida Department of Insurance Note B was to be canceled and returned
     to Holdings. The principal amount of the B Note would then be credited by
     Holdings toward the acquisition by TIG of 2,912,908 shares of Holdings

     Series I Preferred Stock. Upon approval by the Department of Insurance, TIG
     was also required to complete its purchase of 2,912,908 shares of Series I
     Preferred by the payment to Holdings of an additional $2 million (the
     "second" closing).

     The proceeds of the TIG loan from the first closing were used by Holdings
     to retire in full the Underwriters' loan (approximately $3.6 million) and
     to purchase an additional 400,000 shares of the Company's Series B
     Convertible Preferred Stock. This refinance and payment in full to
     Underwriters served to reduce the Underwriters quota share to 20% of net
     written premium and limited Underwriters' options to approximately 5%.

     The second closing occurred on March 31, 1997, after receipt of approval of
     the entire transaction by the Department of Insurance. At the second
     closing, TIG surrendered the B Note and paid the $2 million due for the
     purchase of Holdings' Series I Preferred. Holdings canceled the B Note and
     issued to TIG 87,092 shares of Holdings' Common Stock and 2,912,908 shares
     of Holdings' Series I Preferred Stock. The $2 million proceeds of the
     second closing were used by Holdings to purchase an additional 1.5 million
     shares of the Company's Series B Preferred Stock and $500,000 was advanced
     to the Company as working capital.

     Unaudited statutory policyholders' surplus as of December 31, 1996 and 1995
     and unaudited statutory net income (loss) for the periods ended December
     31, 1996 and 1995 are $4,300,000 and $4,800,000 and $(430,000) and
     $(375,000), respectively. Statutory minimum surplus is $4,000,000.

     In order to enhance the regulation of insurer solvency, the National
     Association of Insurance Commissioners (NAIC) issued a model law to
     implement risk - based capital (RBC) requirements for property and casualty
     insurers, which are designed to assess capital adequacy and raise the level
     of protection that statutory surplus provides for policyholder obligations.
     Under the model law, insurers who have less statutory surplus than is
     required by the RBC calculations will be subject to varying degrees of
     regulatory action, depending on the level of capital inadequacy. Since the
     Company is domiciled and issues policies exclusively in the state of
     Florida, and Florida has not yet adopted the model RBC law, the Company has
     not calculated the RBC statutory surplus. However, management believes that
     it has statutory surplus in excess of the RBC amounts.

                                      F-24
<PAGE>
              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994



NOTE 8 - RELATED PARTY TRANSACTIONS

     The Company receives legal services from a firm which employs a director.
     Fees paid to this firm for the periods ended December 31, 1996, 1995 and
     1994approximated $233,000, $21,000 and none, respectively. At December 31,
     1996 and 1995 accounts payable includes the $59,000 and $21,000 of legal
     fees payable.

     The Company is affiliated with the Fund through common management and some
     common directors. During 1995 and 1994, the Fund paid $58,000 and $76,000
     of organization costs of the Company of which $12,000 was reimbursed during
     1994. The Fund is not seeking reimbursement from the Company for the
     organizational costs incurred by the Fund on behalf of the Company.
     Included in premiums receivable at December 31, 1995 is approximately
     $1,900,000 due from the Fund in connection with the loss portfolio
     transaction.

     The Fund repaid the Company the balance of the $1,900,000 immediately upon
     its receipt of an expected income tax refund during 1996.

     All of the Company's' outstanding common stock as well as all of the
     outstanding Series B preferred stock are owned by Holdings. Holdings
     performs certain administrative functions and pays certain costs for the
     Company under a management agreement. The management agreement calls for
     the Company to pay up to 14.1% of written premium to Holdings. Management
     fee expense incurred by the Company under the terms of this agreement
     approximated $3,847,000 and $345,000 for the years ended December 31, 1996
     and 1995, respectively. The advances receivable at December 31, 1995 of
     $175,832 represents working capital advances to Holdings which are non -
     interest bearing and will be repaid as cash flow of Holdings permits.

NOTE 9 - STOCK OPTION PLAN

     The Company has established a compensatory stock option plan called the
     Equity Compensation Plan (the Plan). The Plan allows for the granting to
     officers, key employees, eligible directors and independent contractors the
     incentive stock options, non - qualified stock options, stock appreciation
     rights, and restricted stock. The exercise price of the stock options may
     not be less than 100% of the fair market value of the common stock on the
     date of the grant of the stock option. The term of the option may not be
     greater than ten years. Incentive stock options granted to a greater than
     10% owner shall have an option exercise price of not less than 110% of the
     fair market value of the stock on the date of the grant and the exercise
     period will not be greater than five years. Stock appreciation rights may
     only be granted in conjunction with a related stock option. Stock
     appreciation rights call for the payment of cash or common stock equal in
     value to the excess of the fair market value of the common stock over the
     stock option exercise price.

     The Board has reserved 2,000,000 shares of common stock for issuance under
     the Plan. There are no outstanding options at December 31, 1996.

                                      F-25
<PAGE>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 10 - LEGAL PROCEEDINGS

     From time to time, the Company may be involved in workers' compensation
     proceedings relating to claims arising out of its operations in the normal
     course of business. As of the date of the accountants' report, the Company
     is not a party to any legal proceedings, other than those initiated by the
     Company relating to the recovery of accounts receivable, with the exception
     of the matter described below.

     In July, 1992, the Fund filed a lawsuit in the State Circuit Court of Palm
     Beach County, Florida, for breach of contract against Advanced Risk
     Management Incorporated ("ARMI") claiming damages for excess fees and
     advances collected by ARMI, the former service company of the Fund. A
     counterclaim was filed by ARMI alleging breach of contract, breach of
     fiduciary duty and fraud. On January 2, 1994, the court granted summary
     judgment in favor of the Fund with respect to all of the counterclaims made
     by ARMI. The Summary judgment was appealed by ARMI and reversed by the
     Fourth District Court of Appeal, which remanded the matter back to the
     trial court to resolve specific issues. On December 15, 1995, the trial
     court granted the Fund's renewed motion for summary judgment. ARMI filed an
     appeal as to this judgment as well. On or about April 10, 1997, the Fourth
     District Court of Appeal rendered its decision affirming the final judgment
     of the Trial Court. The appellate decision is not final until the time
     period (15 days) for filing motions to rehear has passed. Although ARMI may
     appeal this decision to the Florida Supreme Court, it is unlikely that the
     Supreme Court will assume jurisdiction. The Fund intends to continue to
     defend this claim, in the event further proceedings occur, on its own
     behalf. There can be no assurance however, that, in the event of an
     unfavorable ruling against the Fund, recovery would not be sought from the
     Company. In the event there is an unfavorable outcome, which management
     believes at this time to be extremely unlikely, the Fund's liability is
     estimated at less than $1,000,000.

NOTE 11 - NON - CASH INVESTING AND FINANCING ACTIVITIES

     During 1996, the Company foreclosed $142,000 of Series A Preferred Stock
     and applied the balance to unpaid premiums receivable.

     Effective November 30, 1995, the Company received all of the insurance
     related assets and assumed all of the insurance related liabilities from
     the Fund by virtue of a loss portfolio reinsurance arrangement. Non cash
     investing activities associated with this transaction are as follows:

                  Investments received                  $    13,089,432
                                                         =================

                  Equipment received                    $       294,707
                                                         =================

                  Other assets received                 $        28,834
                                                         =================

                                      F-26
<PAGE>

              ASSOCIATED BUSINESS & COMMERCE INSURANCE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


NOTE 12 - CONCENTRATIONS AND CASH RESTRICTION

     The Company routinely maintains cash balances in excess of the federally
     insured limit of $100,000 at its financial institutions. Uninsured balances
     at December 31, 1996 approximated $1,706,000. In addition, the Company had
     $250,000 cash on deposit with a governmental agency.

     All of the Company's revenues are derived from within the state of Florida.
     Accordingly, the Company could be adversely affected by economic downturns,
     significant unemployment, and other conditions that may occur from time to
     time in Florida, which may not have as much of an impact on more
     geographically diversified competitors.

NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used to estimate the fair value
     of each class of financial instruments for which it is practicable to
     estimate that value:

     Cash and cash equivalents: The carrying amount is a reasonable estimate of
     fair value.

     Investments in securities: Fair values are based upon quoted market prices
     or dealer quotes, if available.

NOTE 14- COMMITTMENTS

     During 1996, the Company entered into an agreement for new operating,
     policy, and claims administration software for a total contract amount
     approximating $525,000. As of December 31, 1996, approximately $130,000 of
     the contract is still outstanding.

                                      F-27
<PAGE>

                       INDEPENDENT ACCOUNTANTS' REPORT 

To the Trustees 
Associated Business and Commerce Workers' Compensation 
 Self-Insurance Fund 
Boca Raton, Florida 

   We have audited the accompanying statements of operations and cash flows 
of Associated Business and Commerce Workers' Compensation Self-Insurance Fund 
for the years ended December 31, 1995, 1994 and 1993. These financial 
statements are the responsibility of the Fund's management. Our 
responsibility is to express an opinion on these financial statements based 
on our audits. 

   We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audits 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 results of operations and cash flows of 
Associated Business and Commerce Workers' Compensation Self-Insurance Fund 
for the years ended December 31, 1995, 1994 and 1993 in conformity with 
generally accepted accounting principles. 

                                      SCHMIDT, RAINES, TRIESTE, 
                                      DICKENSON & ADAMS, P.L. 


Boca Raton, Florida 
March 20, 1996 

                               F-28           
<PAGE>
                       ASSOCIATED BUSINESS AND COMMERCE 
                  WORKERS' COMPENSATION SELF-INSURANCE FUND 
                           STATEMENTS OF OPERATIONS 
             FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 

<TABLE>
<CAPTION>
                                                               1995            1994             1993 
                                                         --------------- --------------  --------------
<S>                                                      <C>              <C>              <C>
Revenues: 
 Standard premium earned, net of discounts ............    $25,498,312      $24,703,624     $21,821,933 
 Less premium ceded for reinsurance ...................     20,529,657        2,186,254       1,969,437 
                                                         --------------- --------------  --------------
  Net premium earned ..................................      4,968,655       22,517,370      19,852,496 
                                                         --------------- --------------  --------------
 Less loss and loss adjustment expenses ...............         --          13,724,001      14,722,513 
                                                         --------------- --------------  --------------
  Premiums available for operations ...................      4,968,655       8,793,369       5,129,983 
                                                         --------------- --------------  --------------
 Interest earnings ....................................        772,424         605,901         283,535 
                                                         --------------- --------------  --------------
 Net realized gains (losses) on investment 
   transactions .......................................        115,019         (30,911)          2,113 
                                                         --------------- --------------  --------------
                                                             5,856,098       9,368,359       5,415,631 
                                                         --------------- --------------  --------------
Expenses: 
 Policy acquisition and other underwriting expenses  ..      7,143,265       7,249,750       5,657,381 
 Depreciation and amortization ........................        103,790          70,100          45,235 
                                                         --------------- --------------  --------------
                                                             7,247,055       7,319,850       5,702,616 
                                                         --------------- --------------  --------------
   Income (loss) before income taxes ..................     (1,390,957)      2,048,509        (286,985) 
                                                         --------------- --------------  --------------
Income taxes (Note 7) .................................       (316,407)        619,997         (40,605) 
                                                         --------------- --------------  --------------
  Net income (loss) ...................................    $(1,074,550)    $ 1,428,512     $  (246,380) 
                                                         ===============  ==============   ============== 
</TABLE>

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

                               F-29           
<PAGE>
                       ASSOCIATED BUSINESS AND COMMERCE 
                  WORKERS' COMPENSATION SELF-INSURANCE FUND 
                           STATEMENTS OF CASH FLOWS 
             FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 

<TABLE>
<CAPTION>
                                                          1995             1994             1993 
                                                    --------------- ---------------  --------------
<S>                                                 <C>              <C>               <C>
OPERATING ACTIVITIES 
 Cash received for premiums and other income  ....    $ 26,275,001     $ 24,327,795     $22,119,355 
 Cash paid to reinsurers .........................      (6,404,993)      (2,238,406)     (2,471,887) 
 Cash received from reinsurers ...................         567,590          379,760         297,721 
 Cash paid for claims ............................     (11,850,932)     (13,589,168)     (6,738,547) 
 Cash paid for operating expenses ................      (8,427,586)      (7,602,237)     (5,510,092) 
 Investment income collected .....................         713,418          586,579         341,905 
 Income taxes and special tax deposits paid  .....        (735,500)        (800,000)       (371,528) 
                                                    --------------- ---------------  --------------
  Net cash and cash equivalents provided by 
    operating activities .........................         136,998        1,064,323       7,666,927 
                                                    --------------- ---------------  --------------
INVESTING ACTIVITIES 
 Purchase of investments .........................      (2,647,840)      (6,110,754)     (8,064,795) 
 Sale of investments .............................       1,792,081        2,721,518       1,400,705 
 Proceeds from investment maturities .............         561,304        1,265,849          --
 Purchase of equipment ...........................        (212,956)        (125,080)        (69,349) 
 Proceeds from life insurance and annuity deposit           41,296          --              --
 Payments for other assets .......................         (19,206)         (12,990)         (4,573) 
                                                    --------------- ---------------  --------------
  Net cash and cash equivalents (used in) 
    investing activities .........................        (485,321)      (2,261,457)     (6,738,012) 
                                                    --------------- ---------------  --------------
Net increase (decrease) in cash and 
cash equivalents .................................        (348,323)      (1,197,134)        928,915 
                                                    --------------- ---------------  --------------
Cash and cash equivalents, beginning of year  ....         348,323        1,545,457         616,542 
                                                    --------------- ---------------  --------------
                                                      $ 
Cash and cash equivalents, end of year ...........         --         $    348,323     $ 1,545,457 
                                                    ===============  ===============   ============== 
</TABLE>

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

                               F-30           
<PAGE>
                       ASSOCIATED BUSINESS AND COMMERCE 
                  WORKERS' COMPENSATION SELF-INSURANCE FUND 
                           STATEMENTS OF CASH FLOWS 
             FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 

<TABLE>
<CAPTION>
                                                               1995            1994             1993 
                                                         --------------- --------------  --------------
<S>                                                      <C>              <C>              <C>
RECONCILIATION OF NET INCOME TO NET CASH AND CASH 
  EQUIVALENTS PROVIDED BY OPERATING ACTIVITIES 
   Net income (loss) ..................................    $ (1,074,550)    $ 1,428,512     $  (246,380) 
 Adjustments to reconcile net income (loss) to net 
   cash and cash equivalents provided by operating 
   activities: 
     Depreciation .....................................          93,196          64,046          39,181 
  Amortization ........................................          10,594           6,054           6,054 
  Loss (gain) on sale of investments ..................        (115,019)         30,911          (2,112) 
  Net amortization of bond discounts/premiums  ........         (48,963)         27,123          75,984 
  Advances repaid through expense recognition  ........           --              --            107,582 
  (Increase) decrease in: 
   Premiums receivable ................................       7,231,708        (878,909)       (900,112) 
   Reinsurance and related recoverables ...............      17,839,221      (2,807,870)     (2,958,251) 
   Accrued investment and other recoverables  .........         (10,043)        (68,865)        (55,263) 
   Refundable income taxes and prepaid expenses  ......      (1,902,907)         27,586         (50,829) 
   Deferred income taxes ..............................       1,227,000          --            (854,000) 
   Deferred policy acquisition costs ..................         330,693         (26,738)       (198,008) 
   Prepaid and other assets ...........................         297,614        (260,759)         --
  Increase (decrease) in: 
   Reserves for claims ................................     (19,184,520)      2,531,779      10,481,137 
   Accounts payable and accrued expenses ..............       2,587,522         575,706         (83,978) 
   Advance premiums ...................................      (6,768,548)        595,747       1,863,514 
   Accrued income tax and special tax deposits  .......        (376,000)       (180,000)        442,408 
                                                         --------------- --------------  --------------
    Net cash and cash equivalents provided by 
      operating activities ............................    $    136,998     $ 1,064,323     $ 7,666,927 
                                                         ===============  ==============   ============== 
</TABLE>

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

                               F-31           
<PAGE>
                       ASSOCIATED BUSINESS AND COMMERCE 
                  WORKERS' COMPENSATION SELF-INSURANCE FUND 
                        NOTES TO FINANCIAL STATEMENTS 
                       DECEMBER 31, 1995, 1994 AND 1993 

NOTE 1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES 

NATURE OF BUSINESS 

   Associated Business and Commerce Worker's Compensation Self-Insurance Fund 
(the Fund) was created in 1991 under the provisions of Florida law. The Fund 
is regulated by the Florida Department of Labor and Employment Security 
(DLES) and provides worker's compensation insurance to its members. Through 
June 30, 1994, the Fund was regulated by the DLES. Effective July 1, 1994, 
monitoring of regulatory matters was transferred to the Florida Department of 
Insurance (DOI). However, the Fund is still subject to rules and regulations 
promulgated by DLES. 

LOSS PORTFOLIO TRANSFER 

   In a transaction approved by the Florida Department of Insurance, the Fund 
entered into a loss portfolio reinsurance treaty with Associated Business & 
Commerce Insurance Corporation (ABCIC). Under the terms of the treaty, the 
premium paid by the Fund to ABCIC consisted of all of the net assets of the 
Fund (assets less liabilities, excluding loss reserves) in exchange for the 
assumption, by the ABCIC, of the Fund's unpaid claims liabilities (loss 
reserves). By agreement with ABCIC, the effective date of the transaction was 
November 30, 1995. Accordingly, premiums earned on the Fund's policies then 
in effect, and losses and underwriting expenses incurred subsequent to that 
date are reported by ABCIC. However, the Fund did not transfer liabilities 
not related to insurance. 

   The transaction described above together with other transactions and 
contractual arrangements between the Fund, ABCIC and other parties were 
contemplated by the Fund in its long-term business plan with the primary 
objective of offering non-assessable policies of insurance to members of the 
Fund and to the general public. Employers insuring their worker's 
compensation risks with the Fund were assessable for any losses and related 
expenses not ultimately paid by the Fund. Such assessability created a 
contingent liability to the employers, which management considered 
detrimental to the continuing growth of the business. As part of the loss 
portfolio transfer, ABCIC indemnified the members of the Fund who elected to 
be insured by the Company against such assessments. Policies of insurance 
written by ABCIC, including renewals of coverage to former members of the 
Fund are non-assessable. 

   Only those members of the Fund who elected to be insured by ABCIC were 
retained by ABCIC. ABCIC did not assume any contingent assessment liabilities 
for members who left the Fund or who chose not to be insured by ABCIC. The 
Fund will maintain its legal existence until such time as the Florida 
Department of Insurance permits otherwise, however, the Fund no longer offers 
workers compensation insurance coverage. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

BASIS OF PRESENTATION 

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

                               F-32           
<PAGE>
CASH EQUIVALENTS 

   For purposes of the statement of cash flows, the Fund considers all 
highly-liquid debt instruments purchased with a maturity of three months or 
less to be cash equivalents. 

RECOGNITION OF PREMIUM REVENUES AND MEMBER PREMIUM DEPOSITS 

   Insurance premiums are recognized evenly over the life of the related 
policies (generally one year) with a liability for unearned premiums 
established for the premiums collected on the unexpired portion of those 
policies. It is the policy of the Fund to bill a deposit equal to two months 
of annual premium in advance of the effective date of insurance coverage 
which is held by the Fund to insure performance of each member's annual 
premium obligation. Member premium deposits also include any return premium 
due the insured as a result of premium audits. Standard premium is computed 
on payroll and modified by an experience factor provided by the State of 
Florida via the National Council on Compensation Insurance (NCCI). Payroll 
and payroll classifications are subject to verification and revision after 
year end. Deferred expenses for self-insurer's assessments, administrator 
fees and commissions to agents have been accrued, based upon premium 
collected. Additional premiums based on payroll audits are recognized as 
revenue in the Fund year for which coverage is provided. 

DEFERRED POLICY ACQUISITION COSTS 

   Commissions and other costs of acquiring insurance that vary with and are 
primarily related to the production of new and renewal business are deferred 
and amortized over the terms of the policies to which they relate. It is the 
Fund's policy to calculate and record deferred policy acquisition costs on a 
quarterly basis. 

   Amortization expense for the years ended December 31, 1995, 1994 and 1993 
approximated $1,900,000, $833,000 and $762,000, respectively. 

INVESTMENTS 

   Investments consist of U.S. Treasury notes, U. S. Treasury Strips, GNMA 
mortgage pools, and other U.S. government notes and are carried at cost plus 
or minus the unamortized portion of premiums or discounts paid to acquire 
such investments. The Financial Accounting Standards Board has issued SFAS 
115 "Accounting for Certain Investments in Debt and Equity Securities", which 
became effective with the fiscal year which began January 1, 1994, and has 
been implemented in the accompanying financial statements. This SFAS 
addresses the accounting and reporting for investments in equity securities 
that have readily determinable market values and for all investments in debt 
securities. Debt securities are to be classified as trading securities 
(reported at market value), available-for-sale securities (reported at fair 
value with unrealized market gains and losses reported as a separate 
component of surplus) and held to maturity (reported at amortized cost). 

   Realized gains and losses on sales of investments are recognized on the 
specific identification basis. 

EQUIPMENT 

   Equipment is recorded at cost and is depreciated using accelerated methods 
over the respective assets' estimated useful lives which range from five to 
seven years. 

                               F-33           
<PAGE>
DIVIDEND PAYMENT RESTRICTIONS 

   The Fund must obtain approval from DLES prior to the declaration and 
payment of dividends to members. 

INSURANCE LIABILITIES 

   The liability for losses and loss adjustment expenses includes an amount 
determined from loss reports and individual cases and an amount, based on 
past and industry experience, for losses incurred but not reported and future 
development of existing cases. In establishing its liability for losses and 
loss adjustment expenses, the Fund utilizes the findings of an independent 
actuary. Such liabilities are necessarily based on estimates and, while 
management believes that the amount is adequate, the ultimate liability may 
be in excess of or less than the amounts provided. The methods for making 
such estimates and for establishing the resulting liability are continually 
reviewed, and any adjustments are reflected in earnings currently. 

   Although the Fund believes that the estimate of the reserve for losses and 
loss adjustment expenses is reasonable in the circumstances, the Fund's 
absence of a substantial period of loss experience to support the assumptions 
inherent in establishing the estimated reserves results in uncertainty as to 
the ultimate amount that will be required for the settlement of losses and 
claims. Accordingly, the ultimate settlement of losses and the related loss 
adjustment expenses may vary, perhaps significantly, from the estimated 
amounts included in the accompanying financial statements. 

   The Fund has accounted for loss and loss adjustment expenses on an 
undiscounted basis for the years ended December 31, 1995, 1994 and 1993. For 
all prior years, including its annual report for the year ended December 31, 
1993 issued to its members and others, the Fund discounted its insurance 
liabilities to give effect to the anticipated investment income on loss and 
loss adjustment expenses. The Fund made this accounting change to be 
consistent with the accounting treatment adopted by ABCIC for accounting for 
loss and loss adjustment expenses in ABCIC's financial statements filed with 
the federal Securities and Exchange Commission. 

REINSURANCE 

   Reinsurance premiums, commissions, and expense reimbursements related to 
reinsured business are accounted for on bases consistent with those used in 
accounting for the original policies issued and the terms of the reinsurance 
contracts. Premiums ceded to other companies have been reported as a 
reduction of premium income. The Fund maintains specific excess loss 
reinsurance with unaffiliated insurance companies. For the 1995, 1994 and 
1993 fund years, the Fund retained the first $350,000 of each loss. 

   The Fund does not assume reinsurance from other insurance funds or 
companies. Effective October 1, 1995, the Fund entered into a 70% 
proportional quota-share agreement with Underwriters Reinsurance Company 
("Underwriters") (Note 5). 

INCOME TAXES 

   Income taxes are provided for the tax effects of transactions reported in 
the financial statements and consist of taxes currently due plus deferred 
taxes related primarily to differences between the basis 

                               F-34           
<PAGE>
of premiums receivable, reinsurance and related receivables and insurance 
liabilities for financial and income tax reporting. The deferred tax assets 
and liabilities represent the future tax return consequences of those 
differences, which will be either taxable or deductible when the assets and 
liabilities are recovered or settled. Deferred taxes also are recognized for 
operating losses that are available to offset future taxable income and tax 
credits that may be available to offset future federal income taxes. 
Effective January 1, 1992, the Fund adopted Statement of Financial Accounting 
Standards Number 109, Accounting for Income Taxes. 

ALLOWANCE FOR BAD DEBTS 

   The bad debt allowance is based upon the Fund's experience with 
uncollectible accounts receivable and represent the Fund's estimate of the 
uncollectible amounts incurred through each fund year end. 

RECLASSIFICATIONS 

   Certain reclassifications have been made to the 1994 and 1993 financial 
statements to conform to the 1995 presentation. 

NOTE 2--MEMBER INDEMNIFICATION 

   As is required of every fund regulated by DLES, the members of the Fund 
have jointly and severally agreed to assume and discharge the obligations of 
the Fund in the event any claims or expenses may remain unpaid after 
available reserves and reinsurance have been exhausted. Given the nature of 
the Fund's reinsurance arrangements, the Board of Trustees believes the 
likelihood of additional assessments upon members relating to this indemnity 
to be remote. 

NOTE 3--INVESTMENT EARNINGS 

   Gross investment income for the years ended December 31, 1995, 1994 and 
1993 totaled $772,424, $615,938 and $317,010 respectively. Investment 
expenses for the same periods totaled $0, $10,037 and $33,475, respectively. 

   During September, 1994, the Fund sold U.S. Treasury securities classified 
as held-to-maturity with an amortized cost of $2,752,429 for a realized loss 
of $30,911. The decision to sell these securities was based upon a change in 
statutory requirements significantly modifying permissible investments of the 
Fund. 

NOTE 4--STATE OF FLORIDA SPECIAL DISABILITY TRUST FUND 

   The Special Disabilities Trust Fund of the Bureau of Workers Compensation 
makes assessments upon all Florida workers compensation insurers at a current 
level of 4.52% of premium collected and distributes such sums among insurers 
whose policy holders have employed individuals with previously determined 
worker's compensation-related disabilities, and such individuals have filed a 
claim. The Fund has included, as recoverables against losses and loss 
adjustment expenses, amounts submitted and to be submitted to the Bureau. 

                               F-35           
<PAGE>
NOTE 5--REINSURANCE AND RELATED RECOVERABLES 

   Reinsurance contracts do not relieve the Fund from its obligation to pay 
claims. However, the Fund limits the maximum net loss that can arise from 
risks in its concentrated area of exposure by reinsuring (ceding) certain 
levels of risks with other insurers or reinsurers, on an automatic basis 
under general reinsurance contracts known as "treaties" or by negotiation on 
large individual risks. Ceded reinsurance is treated as the risk and 
liability of the assuming companies. 

   Effective October 1, 1995, the Fund entered into a 70% proportional 
quota-share reinsurance treaty with Underwriters Reinsurance Company 
("Underwriters"), which was assigned to ABCIC effective November 30, 1995. 
Under the terms of the agreement, the Fund ceded 70% of its net written 
premium to Underwriters with Underwriters assuming 70% of the Fund's retained 
losses and loss adjustment expenses. To cover the costs of underwriting, 
Underwriters reimbursed the Fund for certain direct expenses incurred and 
paid the Fund a ceding commission totaling $810,072 during the year ended 
December 31, 1995 to cover other general expenses. This amount is reported on 
the statement of operations for the year ended December 31, 1995 as a 
reduction of policy acquisition and other underwriting expenses. Underwriters 
is rated A+ by A.M. Best. 

   In the event that all or any of the reinsuring companies might be unable 
to meet their obligations under existing reinsurance agreements, the Fund 
would be liable for such defaulted amounts. The Fund's Trustees believe that 
all reinsurers are in sound financial condition, and include (in addition to 
Underwriters) Allstate Insurance Company and Continental Casualty Company, 
both "A" rated by A.M. Best. In addition, all of the Fund's reinsurers have 
been approved by DLES. 

NOTE 6--MANAGED CARE 

   In August, 1994, the Fund entered into a managed care arrangement with 
Humana to provide medical services to workers whose employers were 
participating in the voluntary managed care arrangement. The terms of the 
agreement with Humana, which was assigned to ABCIC effective November 30, 
1995, provide for the payment of a capitation fee in exchange for which 
Humana covers all the medical cost associated with a claim for a period of 
three years after the date the claim is reported. 

NOTE 7--INCOME TAXES 

   Temporary differences giving rise to deferred tax assets consist primarily 
of a discount on the reserve for loss and loss-adjustment expenses for tax 
purposes and on reinsurance and related receivables, accounting for earned 
premiums differently for tax purposes than for financial reporting purposes, 
expensing for tax purposes internal underwriting costs attributable to policy 
acquisitions, accounting for other policy acquisition costs differently for 
tax purposes than for financial reporting purposes, and the recording of an 
allowance for uncollectible premiums receivable for financial reporting 
purposes but not for tax purposes. 

   In addition, certain provisions of the Internal Revenue Code allow the 
Fund to deduct from taxable income the difference between the required 
discounted reserve for claims and the undiscounted reserve for claims 
provided, however, that the Fund pay a special estimated tax deposit. The 
special tax deposit payable with the Funds income tax return is accounted for 
as current income tax expense. However, the special tax deposit will be 
applied to regular income taxes resulting from the inclusion in gross income 
of any future reduction of the initial difference between the income tax 
basis discounted 

                               F-36           
<PAGE>
and undiscounted reserves for claims. Any special tax deposits not utilized 
within 15 years will be applied to any regular income tax liability. The 
special tax deposit method is subject to an annual election on the Fund's 
Federal income tax return. The Fund elected the special tax method for 1995, 
1994 and 1993. 

   As a result of the loss portfolio transfer, the reserves for losses which 
gave rise to the Fund's special tax deposit requirement were eliminated. The 
Fund made application to the Internal Revenue Service for refund of the 
special tax deposits in the amount of $1,376,561. 

   The provision for income taxes are as follows for the years ended December 
31, 1995, 1994 and 1993: 

                   1995           1994          1993 
             --------------- -----------  ------------
Current  ..    $(1,543,407)     $619,997     $ 823,336 
Deferred  .      1,227,000           -0-     (863,941) 
             --------------- -----------  ------------
               $  (316,407)     $619,997     $ (40,605) 
             ===============  ===========   ============ 

   The differences between taxes at the statutory rate and the recorded 
current tax expense (benefit) are as follows for the years ended December 31, 
1995, 1994 and 1993: 

<TABLE>
<CAPTION>
                                                       1995          1994          1993 
                                                  ------------- -----------  ------------
<S>                                               <C>            <C>           <C>
Tax at statutory rate ..........................    $(472,925)     $695,263      $(97,575) 
Underestimated current income tax of prior year       130,000           -0-        37,095 
State taxes under Federal benefit ..............          -0-      (23,760)          -0-
Other ..........................................       26,518      (51,506)        19,875 
                                                  ------------- -----------  ------------
 Income tax expense (benefit) ..................    $(316,407)    $619,997       $(40,605) 
                                                  =============  ===========   ============ 
</TABLE>

NOTE 8--LEASE COMMITMENT AND TOTAL RENTAL EXPENSE 

   The Fund leased its office space on a month-to-month basis for $9,973 per 
month including sales tax, its pro rata share of the property taxes, 
utilities, normal maintenance, and specified percentages of common-area 
expenses. This lease was assigned to the Company effective December 1, 1995. 

   During 1994 and 1993, the Fund subleased one-twelfth of this office space 
to its administrator on a month-to-month basis for one-twelfth of the total 
cost to the Fund. Sublease income totaled $10,174 for each of the years ended 
December 31, 1994 and 1993. 

   The total rental expense included in the statement of operations for the 
years ended December 31, 1995, 1994 and 1993 totaled $119,845, $119,671 and 
$111,072, respectively. Net rental expense, after deducting sub-lease income 
was $119,845, $109,497 and $100,898 for the years ended December 31, 1995, 
1994 and 1993, respectively. 

NOTE 9--OTHER COMMITMENTS 

   The Fund employed an administrator to manage the day-to-day affairs of the 
Fund under a 5-year agreement which became effective October 1, 1991. The 
agreement is automatically renewable every 

                               F-37           
<PAGE>
five years thereafter but can be terminated by the trustees in accordance 
with various provisions in the agreement. Under a revision to this agreement 
effective April 1, 1993, as compensation for these services, the 
administrator is to receive monthly four percent of the audited standard 
premium, less any allowed discounts, collected by the Fund. From this fee, 
throughout the entirety of the agreement, the administrator is required to 
pay certain expenses of the Fund, including accounting and actuarial 
expenses, trustees fees, dues and convention expenses, incentive fees and 
bonuses, and other miscellaneous expenses. Effective January 1, 1995, this 
agreement was terminated by mutual agreement and the Administrator became an 
employee of the Fund. 

   To process claims on behalf of the Fund, a servicing agreement has been 
executed with an unrelated company. For the claims management services, the 
Fund pays the claims processor 2.5% of earned premium plus 25% of recoveries 
collected from the SDTF. As part of the loss portfolio transfer, this 
agreement was assigned to ABCIC. 

NOTE 10--RELATED-PARTY TRANSACTIONS 

   The Fund receives legal services from a firm which employs a trustee. Fees 
paid to this firm for the years ended December 31, 1995, 1994 and 1993 
totaled $481,932, $443,441 and $140,080, respectively. In addition, during 
1995 the Fund incurred $12,971 for consulting services provided by a trustee. 

   Included in the allowance for doubtful accounts at December 31, 1993 was 
$204,747 due from a member which has entered bankruptcy proceedings and 
formerly employed a trustee. 

NOTE 11--LEGAL PROCEEDINGS 

   In July, 1992, the Fund filed a lawsuit in the State Circuit Court of Palm 
Beach County, Florida, for breach of contract against Advanced Risk 
Management Incorporated ("ARMI") claiming damages for excess fees and 
advances collected by ARMI, the former service company of the Fund. A 
counterclaim was filed by ARMI alleging breach of contact, breach of 
fiduciary duty and fraud. On January 2, 1994, the court granted summary 
judgment in favor of the Fund with respect to all of the counterclaims made 
by ARMI. The summary judgment was appealed by ARMI and reversed by the Fourth 
District Court of Appeal, which remanded the matter back to the trial court 
to resolve specific issues. On December 15, 1995 the trial court granted the 
Fund's renewed motion for summary judgment. ARMI has filed an appeal as to 
this judgment as well. The Fund intends to continue to pursue and defend this 
claim on its own behalf. There can be no assurance however, that, in the 
event of an unfavorable ruling against the Fund, recovery would not be sought 
from ABCIC. In the event there is an unfavorable outcome, which management 
believes to be unlikely, the Fund's liability is estimated at less than 
$1,000,000. 

                               F-38           
<PAGE>
NOTE 12--NON-CASH INVESTING ACTIVITIES 

   Effective November 30, 1995, the Fund transferred all of its insurance 
related assets and liabilities to ABCIC by virtue of a loss portfolio 
reinsurance treaty. Non-cash investing activities associated with this 
transaction are as follows: 

Investments transferred      $13,089,432 
                           ============== 
Equipment transferred  ..    $   294,707 
                           ============== 
Other assets transferred     $    28,834 
                           ============== 

NOTE 13--STATUTORY INCOME (LOSS) AND SURPLUS (DEFICIT) 

   Through December 31, 1993, the Fund's GAAP and statutory accounting 
principles (SAP) were the same with the exception of recording future 
investment income on the liability for loss and loss adjustment expenses for 
SAP. Due to legislative changes effective January 1, 1994, additional 
variances between GAAP and SAP include deferred income taxes, deferred 
acquisition costs and certain other assets of the Fund. 

   Net income (loss) of the Fund for the years ended December 31, 1995, 1994 
and 1993 under SAP are as follows: 

 1995 (UNAUDITED)    $(1,368,811) 
                   =============== 
1994 ............    $ 1,090,325 
                   =============== 
1993 ............    $  (246,380) 
                   =============== 

                               F-39           

<PAGE>

                               INDEX TO EXHIBITS

EXHIBIT NO.                     DESCRIPTION
-----------                     -----------

3.3            Amendment to Articles of Incorporation

10.17          Amendment to Exchange and Shareholders' Agreement, dated November
               27, 1996

10.18          Letter Agreement, dated August 9, 1996, extending Humana Managed
               Care contract for two years

10.19          Securities Purchase Agreement, dated as of December 4, 1996 by
               and among Associated Business and Commerce Holdings, Inc., Errol
               Bader, Lawrence J. Marchbanks, Frederick R. Prout, Daniel J.
               Webber and James L. Wilson and TIG Reinsurance Company

10.20          Term Loan Agreement, dated as of December 4, 1996, between
               Associated Business and Commerce Holdings, Inc. and TIG
               Reinsurance Company together with amendments dated February 24,
               1997 and March 19, 1997, respectively

10.21          Pledge Agreement between Associated Business and Commerce
               Holdings, Inc. and TIG Reinsurance Company

10.22          Security Agreement between Associated Business and Commerce
               Holdings, Inc. and TIG Reinsurance Company

10.23          Agreement as to Reinsurance between Associated Business and
               Commerce Holdings, Inc. and TIG Reinsurance Company

23.1           Consent of Independent Accounts

27.1           Financial Data Schedule

28.1           Schedule P from the Statutory Annual Statement for 1996 -
               Analysis of Losses and Loss Expense