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


                                FORM 10-KSB/A
                               AMENDMENT NO. 1

                                ANNUAL REPORT

                    PURSUANT TO SECTION 13 OR 15(d) OF THE
                     SECURITIES AND EXCHANGE ACT OF 1934

       Date of Report (Date of earliest event reported): March 26, 1997
                       Date of Amendment July 17, 1997


                   PROFESSIONAL BENEFITS INSURANCE COMPANY
            (Exact name of registrant as specified in its charter)

                        Commission File Number 0-22344


                 Texas                                    74-2072535
      (State of other jurisdiction of                   (I.R.S. employer
       incorporation or organization                  identification number)


                   10835 Rockley Road, Houston, Texas 77099
         (Address of principal executive offices, including ZIP code)

                                 281/721-1800
             (Registrant's telephone number, including area code)


================================================================================
================================================================================
<PAGE>   2
                    PROFESSIONAL BENEFITS INSURANCE COMPANY

        The undersigned registrant hereby amends the following items of its
Annual Report on Form 10-KSB dated March 26, 1997, as set forth in the pages
attached hereto:

        Item 1  -       DESCRIPTION OF BUSINESS

                A sentence was added to the end of the first paragraph of Item 
                1.

        Item 6  -       MANAGEMENT DECISION AND ANALYSIS
                          LIQUITY AND CAPITAL RESOURCES

                Explanation of Company's change in mix of insurance premiums
                written in 1996.

        Item 7  -       FINANCIAL STATEMENTS

                        Independent Account's Report
                Independent Accountant's Report, dated March 8, 1996 for the
                audit of the December 31, 1995 Financial Statements.

                Revised Report and Financial Statements for the fiscal years
                ended December 31, 1995 and December 31, 1996.

                Description of Depreciation Expense in Note 5 (Real Estate) to
                the Revised Report and Financial Statements for the fiscal 
                years ended December 31, 1995 and December 31, 1996.

                Summary Financial Information for the period ended December 31,
                1996.
                





                                      -2-
<PAGE>   3
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.



                                        PROFESSIONAL BENEFITS
                                        INSURANCE COMPANY
                                             (Registrant)



July 17, 1997                            By:  /s/ JERRY RAY
                                           ---------------------------







                                      -3-
                                                
<PAGE>   4

PART 1

ITEM 1.  DESCRIPTION OF BUSINESS.

         Professional Benefits Insurance Company ("Company") is a Texas
domestic stock life insurance company which has been doing business under the
Texas Board of Insurance for seventeen years.  Originally incorporated on July
31, 1979 as TDA Life  and Health Insurance Company, the corporation changed its
name in 1988 to Professional Benefits Insurance Company. The Company is subject
to Chapters 1, 3 and 21 of the Texas Insurance Code.

         The Company provides life and health insurance primarily serving
dental professionals in Texas, but including some professionals in adjoining
and nearby states.  Revenues from premiums and other considerations for 1996
totaled $9,602,613 with a net loss (after taxes) of $(457,785) and with total
assets of $5,610,994 as reflected in the 1996 audited Financial Statements.

         The Company is a licensed indemnity life insurance company.  Product
lines include term life and comprehensive major medical (accident and health)
insurance.

         The Company's reinsurance providers and respective A.M. Best Ratings
are as follows:

<TABLE>
<CAPTION>
                 Company                                        Rating                        Coverage
   <S>                                                      <C>                        <C>
   American United Life Insurance Company                   A+  (Superior)             Individual Life Business
   Life Reassurance Corp. of America                        A+  (Superior)             Individual & Group Life Business
   Washington National Insurance Company                    A-  (Excellent)            Disability
   Lone Star Life                                           B   (Adequate)             Income Assurance
   Manufacturers Life Co. of America                        A++ (Superior)             Major Medical
   BCS Life Insurance Co.                                   A-  (Excellent)            Medical
   IOA Reassurance Pool Company                             Non-rated Pooling Syn.     Medical
   Transamerica Occidental Life Insurance Co.               A+  (Superior)             Individual Life Business
   Connecticut General Life Insurance Co.                   A+  (Superior)             Accidental Death
</TABLE>

The maximum retention on one risk is as follows:
<TABLE>
                 <S>                                                <C>
                 Accident and Health (major medical)                $125,000/year
                 Life                                               $ 25,000/life
                 Disability & Income Assurance                      $    300/month
</TABLE>

INSURANCE IN FORCE

         Total insurance in force is as follows:

<TABLE>
<CAPTION>
                 INDIVIDUAL LIFE INSURANCE               GROUP LIFE INSURANCE
                 -------------------------               --------------------
                 # OF          $ AMOUNT OF               # OF             $ AMOUNT OF
         YEAR    POLICIES      INSURANCE                 CERTIFICATES     INSURANCE
         ----    --------      -----------               ------------     -----------
         <S>     <C>           <C>                       <C>              <C>
         1996    520           25,110,500                2,860            32,527,500
</TABLE>

<TABLE>
<CAPTION>
                 INDIVIDUAL ACCIDENT                     GROUP ACCIDENT
                 AND HEALTH INSURANCE                    AND HEALTH INSURANCE
                 $ AMT OF ANNUAL                         $ AMT OF ANNUAL
         YEAR    PREMIUMS                                PREMIUMS
         ----    --------------------                    --------------------
         <S>     <C>                                     <C>
         1996    $4,494,171                              $4,874,676
</TABLE>



                                       2
<PAGE>   5
ITEM 1.  DESCRIPTION OF BUSINESS. (CONTINUED)

DESCRIPTION OF STOCK

         The Company is authorized to issue 1,022,668 shares of Class A Common 
Stock and 73,524 shares of Class B Common Stock, each with a par value of $1.22
per share.  As of December 31, 1996, 587,129 shares of Class A Common Stock and
73,524 shares of Class B Common Stock were issued and outstanding.

         Class A Common Stock carries the right of one vote per share.  Each
share of Class A Common Stock will share in dividends and on dissolution
equally with every other share of Class A Common and Class B Common Stock.
Class B Common Stock is non-voting shares (but shares equal in value and
earnings with every other share of Class A Common or Class B Common Stock).
The Articles of Incorporation deny the preemptive right of a holder of stock to
acquire unissued or treasury shares of stock.  The right of cumulative voting
is further prohibited by the Articles of Incorporation.

EMPLOYEES

        The Company has 26 full time employees and 1 part-time employee.

ITEM 2.  DESCRIPTION OF PROPERTY.

         The Company's executive offices are located at 10835 Rockley Road,
Houston, Texas.  The Company owns and occupies all of its home office building,
which has approximately 12,840 square feet of usable space.  This space is
adequate for the Company's current and planned needs.


ITEM 3.  LEGAL PROCEEDINGS.

         None.

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

         No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation 
of proxies or otherwise.

                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's stock is not actively being traded on any market.

         As of December 31, 1996 there were 699 persons or entities holding
587,129 shares of  Class A Common Stock, and one entity holding 73,524 shares
of Class B Common Stock.

         Dividends have not been paid in any of the last two fiscal years.




                                       3
<PAGE>   6
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                               FOR 1996 AND 1995


RESULTS OF OPERATIONS

         Changes in Company revenues for 1996 and 1995 are shown below:

<TABLE>
<CAPTION>
                                               1996               1995
                                               ----               ----
<S>                                         <C>                <C>       
         Total Revenues                     $9,602,613         $8,539,247
         Change in Revenues
            Compared to Preceding Year      $1,063,366           ($85,037)
                                                  12.5%              (1.0)%
</TABLE>

The primary components of the Company's revenue are premium and net investment
income.


         Changes in net premium revenue for 1996 and 1995 are shown below:

<TABLE>
<CAPTION>
                                            1996                 1995
                                            ----                 ----
<S>                                      <C>                  <C>       
         Total Premiums                  $9,126,520           $8,184,169
         Change in Premiums
            Compared to Preceding Year   $  942,351            ($197,705)
                                               11.5%                (2.4)%
</TABLE>

The increase in premium is due to increased marketing by the Company. The
Company continues to successfully pursue its niche marketing strategy of
targeting associations and the group dental market. Dental premium, on a cash
basis, increased by 206% over the prior year, with group life increasing by
32%.


         Components of the changes in net investment income for 1996 and 1995
are shown below:

<TABLE>
<CAPTION>
                                             1996              1995
                                             ----              ----
<S>                                        <C>               <C>     
         Total Net Investment Income       $349,998          $219,553
         Change in Net Investment
            Income                         $130,445          $ 64,894
                                                 59%               42%
</TABLE>


                                       1
<PAGE>   7



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                               FOR 1996 AND 1995
                                  (Continued)


The Company maintains a mix in its investment portfolio in the following
percentages: investment grade bonds 39.5%, bond mutual funds (government
obligation bonds) 34.2%, and money market funds 26.3%. Investment income
increased in 1996 due to significant gains which were realized from the
liquidation of the Company's equity mutual funds. The Company's investment
philosophy is one of preservation of capital while providing current income.


         General and administrative expenses for 1996 and 1995 are shown below:

<TABLE>
<CAPTION>
                                                1996             1995
                                                ----             ----
<S>                                          <C>              <C>       
         General and Administrative
            Expenses                         $2,100,777       $2,217,003
         Change in General and
            Administrative Expenses
            Compared to Preceding Year       $ (116,226)      $  193,396
                                                   (5.2)%            9.6%
</TABLE>


General and administrative expenses have decreased from the prior year due to a
decrease in accounting and actuarial fees. These fees have in aggregate
decreased by $146,000 from the prior year. There were abnormally high
accounting and actuarial fees in 1995 due to regulatory changes in 1995. This
decrease is due to the return to a normal operating and regulatory environment
in 1996.


         Total Commissions expense for 1996 and 1995 are shown below:

<TABLE>
<CAPTION>
                                                       1996           1995
                                                       ----           ----
<S>                                                  <C>            <C>     
         Total Commissions Expense                   $676,828       $376,867
         Change in Commissions Expense
            Compared to Preceding Year               $299,961       $ 45,548
                                                         79.6%          13.7%
</TABLE>


Commissions expense increased over 1995 due to increased sales of dental and
major medical insurance. First year commissions on major medical insurance are
higher than those paid in latter years. Therefore commissions on major medical
insurance written in 1996 should moderate in 1997. The commissions associated
with the Company's dental product are significantly higher than commissions for
major medical.



                                       2

<PAGE>   8


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                               FOR 1996 AND 1995
                                  (Continued)


LIQUIDITY AND CAPITAL RESOURCES

The Company requires cash for the payment of policy benefits, operating
expenses, commissions and funds for the purchase of assets for investment.
These needs have been met by the Company with funds generated by its
operations, from its reserves and liquid assets. Policy benefits as a
percentage of earned premium was above historical averages in 1996 and 1995.
The Company believes this is primarily due to the cyclical nature of policy
benefits and will correct itself in the normal course of business. As an
additional measure, the Company has imposed premium rate increases on some of
its' policyholders and is evaluating the need to impose further increases on
other policyholders to help cover the portion of the increased cost of policy
benefits which may not be temporary or cyclical in nature.

In addition to the Company's cash needs, the Company must maintain capital and
surplus levels, determined on a statutory accounting basis, in order to conduct
insurance business in the jurisdictions in which it is licensed. The Company is
in compliance with all such requirements.

The Company had total assets of $5,610,994 and $5,683,464 for the years ended
December 31, 1996 and 1995, respectively. The Company experienced cash flows
from operations of $(63,301) and $(152,744) in the years ended December 31,
1996 and 1995 respectively.

More specifically, four new associations were written during April 1996 which
increased the annual premium by $778,000. In November 1996 a new group was
enrolled which will produce annualized premium of $1,008,000. Additionally, the
Company wrote three large Dental cases along with approximately eighteen
smaller cases. The annual increase in Dental premium for 1996 was $590,000.

Commission payments to agents as well as claims will definitely impact the
Company operations. The commissions for Major Medical and Dental premium will
average about 10.5%. Commissions will not be paid on future rate increases for
individual policies, which represents 85% of the total Major Medical premium.
The claims during the first three quarters of 1996 were normal or slightly
below while the last quarter accelerated above our predicted target loss ratio
due to a few large claims and several claims that averaged between $12K to
$20K.

The general course of the Company has been to offer and write Association Major
Medical and Life coverage while increasing our Group Major Medical and
concentrate more, compared to the past, on increasing Dental coverage to Group
employers. This same philosophy will continue to be the Company's direction.
The impact on future operations is targeted for the Company to successfully
profit from future and existing business in force.



                                       3
<PAGE>   9

                       [BAIRD, KURTZ & DOBSON LETTERHEAD]

Williams Center Tower
Suite 1700
1 West 3rd Street
Tulsa, Oklahoma 74103-3581
(918) 584-2900

Fax:  (918) 584-2931

                        Independent Accountants' Report



Board of Directors
Professional Benefits Insurance Company
Houston, Texas


         We have audited the accompanying consolidated balance sheets of
PROFESSIONAL BENEFITS INSURANCE COMPANY as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years then ended.  These financial statements are
the responsibility of the Company's management:  Our responsibility is to
express an opinion on these financial statements based on our audits.

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

         In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
PROFESSIONAL BENEFITS INSURANCE COMPANY as of December 31, 1995 and 1994, and
the results of its operations and its cash flows for each of the years then
ended in conformity with generally accepted accounting principles.

         As discussed in Note 13, in 1994 the Company changed its method of
accounting for investments.


Tulsa, Oklahoma
March 8, 1996

                                        /s/ Baird, Kurtz & Dobson
                                      -----------------------------------------
<PAGE>   10
                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                            ACCOUNTANTS' REPORT AND
                              FINANCIAL STATEMENTS

                           DECEMBER 31, 1996 AND 1995




                               CAUSON & WESTHOFF
                         CERTIFIED PUBLIC ACCOUNTANTS

<PAGE>   11


                    PROFESSIONAL BENEFITS INSURANCE COMPANY


                           DECEMBER 31, 1996 AND 1995




                                    CONTENTS

<TABLE>
<CAPTION>
                                                                                                           PAGE
                                                                                                           ----
<S>                                                                                                         <C>
INDEPENDENT ACCOUNTANTS' REPORT..............................................................................1

FINANCIAL STATEMENTS
      Balance Sheets.........................................................................................2
      Statements of Operations...............................................................................3
      Statements of Changes in Stockholders' Equity..........................................................4
      Statements of Cash Flows...............................................................................5
      Notes to Financial Statements.......................................................................6 - 16
</TABLE>




                                                        CAUSON & WESTOFF, CPA's
<PAGE>   12

                        [CAUSON & WESTHOFF LETTERHEAD]

                        INDEPENDENT ACCOUNTANTS' REPORT


Board of Directors
Professional Benefits Insurance Company
Houston, Texas


      We have audited the accompanying balance sheet of PROFESSIONAL BENEFITS
INSURANCE COMPANY as of December 31, 1996, and the related statements of
operations, stockholders' equity, and cash flows for year then ended. 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 audit. The financial statements of PROFESSIONAL BENEFITS INSURANCE COMPANY
as of December 31, 1995 were audited by other accountants whose report dated
March 8, 1996, expressed an unqualified opinion on those statements.

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

      In our opinion, the 1996 financial statements referred to above present
fairly, in all material respects, the financial position of PROFESSIONAL
BENEFITS INSURANCE COMPANY as of December 31, 1996, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

      As discussed in Note 14 to the financial statements, the Company's 1996
policy claim liability previously reported as $1,905,000 should have been
$2,160,000. This discovery was made subsequent to the issuance of the financial
statements. The financial statements have been restated to reflect this
correction.




Tulsa, Oklahoma
March 7, 1997, except for Note 14, as to which the date is May 29, 1997.


<PAGE>   13

                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                                 BALANCE SHEETS

                           DECEMBER 31, 1996 AND 1995



                                     ASSETS

<TABLE>
<CAPTION>
                                                      1996           1995
                                                      ----           ----
<S>                                                <C>            <C>       
INVESTMENTS
    Fixed maturities, at market (amortized         $1,927,526     $1,220,642
        cost - $1,935,408 - 1996 and
        $1,230,621 - 1995)
    Common stock mutual funds, at market              856,389
    Short-term investments (cost approximating
        market)                                       830,898      1,420,523
                                                   ----------     ----------
                                                    2,758,424      3,497,554

CASH                                                  729,252         37,252

REINSURANCE RECOVERABLE
    Current recoverable                                52,084         16,590
    Future recoverable                                839,100        990,166

ACCRUED INVESTMENT INCOME                              10,763         47,643


PREMIUMS DUE AND UNCOLLECTED                          179,836         28,551

ACCOUNTS AND NOTE RECEIVABLE                           58,051         36,584

LAND AND BUILDING, AT COST
    (net of accumulated depreciation -
        $454,906 - 1996 and $376,794 - 1995)          497,882        575,994

FURNITURE AND EQUIPMENT, AT COST
    (net of accumulated depreciation -
        $328,861 - 1996 and $529,326 - 1995)          226,940        217,139

GUARANTY FUND ASSESSMENTS                               3,654         10,361

DEFERRED TAX BENEFIT                                   28,000

FEDERAL INCOME TAX RECEIVABLE                         294,000        188,000

OTHER ASSETS, AT COST                                  20,008         37,630
                                                   ----------     ----------


                                                   $5,697,994     $5,683,464
                                                   ==========     ==========
</TABLE>

See Notes to Financial Statements


                                      -2-

                                                        CAUSON & WESTOFF, CPA's
<PAGE>   14

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                        1996                1995
                                                                        ----                ----
<S>                                                                <C>                 <C>       
LIABILITIES
    Future policy benefits                                          $1,048,334          $1,052,509
    Policy claims                                                    2,160,000           1,623,000
    Premiums received in advance                                       185,706             100,488
    Unearned premiums                                                   56,324
                                                                   -----------         -----------
                                                                     3,450,364           2,775,997

    Reinsurance payable                                                 57,463              31,820
    Deferred tax liability                                               5,000
    Other liabilities                                                  311,397             300,951
                                                                   -----------         -----------
                                                                     3,819,224           3,113,768
                                                                   -----------         -----------
STOCKHOLDERS' EQUITY
    Common stock
        Class A voting, $1.22 par value; 1,022,668
           authorized shares; 587,129 issued and
           outstanding in 1996 and 1995                                716,297             716,297
        Class B nonvoting, $1.22 par value; 136,720
           authorized shares; 73,524 issued and
           outstanding in 1996 and 1995                                 89,699              89,699
    Additional paid-in capital                                         536,214             536,214
    Unrealized gain (loss) on investments
        (net of deferred income tax benefits (liabilities)
        of $2,600 - 1996; $(21,200) - 1995)                             (5,182)             41,959
    Retained earnings                                                  541,742           1,185,527
                                                                   -----------         -----------
                                                                     1,878,770           2,569,696
                                                                   -----------         -----------



                                                                   $ 5,697,994         $ 5,683,464
                                                                   ===========         ===========
</TABLE>



<PAGE>   15

                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                            STATEMENTS OF OPERATIONS

                     YEARS ENDED DECEMBER 31, 1996 AND 1995

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

<S>                                                    <C>                    <C>        
REVENUES
    Premiums earned                                    $  9,617,689           $ 8,725,826
    Reinsurance ceded                                      (491,169)             (541,657)
                                                       ------------           -----------
        Net premiums earned                               9,126,520             8,184,169
    Net investment income                                   349,998               219,553
    Other income                                            126,095               135,525
                                                       ------------           -----------
                                                          9,602,613             8,539,247
                                                       ------------           -----------


BENEFITS, CLAIMS, AND EXPENSES
    Benefits and claims                                   8,037,007             6,895,595
    Reinsurance recoverable                                (278,214)             (382,488)
                                                       ------------           -----------
        Net benefits and claims                           7,758,793             6,513,107
    Commissions                                             676,828               376,867
    Underwriting, acquisition, insurance, and
        administrative expenses                           2,100,777             2,217,003
                                                       ------------           -----------
                                                         10,536,398             9,106,977
                                                       ------------           -----------


INCOME (LOSS) BEFORE INCOME TAXES                          (933,785)             (567,730)


INCOME TAX PROVISION (CREDIT)                              (290,000)             (185,000)
                                                       ------------           -----------


NET INCOME (LOSS)                                      $   (643,785)          $  (382,730)
                                                       ============           ===========


NET INCOME PER SHARE                                   $       (.97)          $      (.58)
                                                       ============           ===========
</TABLE>

See Notes to Financial Statements



                                      -3-
                                                        CAUSON & WESTOFF, CPA's
<PAGE>   16

                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                     YEARS ENDED DECEMBER 31, 1996 AND 1995


<TABLE>
<CAPTION>                                                  
                                                                            COMMON STOCK
                                                           --------------------------------------
                                               TOTAL           CLASS  A                CLASS B              
                                            STOCKHOLDERS   ------------------    ----------------           
                                               EQUITY      SHARES      AMOUNT    SHARES    AMOUNT           
                                            ------------   ------      ------    ------    ------           
<S>                                         <C>            <C>       <C>         <C>      <C>               
BALANCE, DECEMBER 31, 1994                  $ 2,802,794    587,329   $ 716,594  73,524   $89,699            
                                                                                                  
NET INCOME                                     (382,730)                                                    
                                                                                                            
TRANSFERS                                                     (200)       (297)                             
                                                                                                            
CHANGE IN UNREALIZED APPRECIATION                                                                           
(DEPRECIATION) ON AVAILABLE-FOR-SALE                                                                        
SECURITIES, NET OF INCOME TAXES OF $77,000      149,632                                                     
                                            -----------   --------   ---------  ------   -------            
                                                                                                            
BALANCE, DECEMBER 31, 1995                    2,569,696    587,129     716,297  73,524    89,699            
                                                                                                            
NET INCOME                                     (643,785)                                                    
                                                                                                            
CHANGE IN UNREALIZED APPRECIATION                                                                           
(DEPRECIATION) ON AVAILABLE-FOR-SALE                                                                        
SECURITIES, NET OF INCOME TAXES OF $24,000      (47,141)                                                    
                                            -----------   --------   ---------  ------   -------            
                                                                                                            
BALANCE, DECEMBER 31, 1996                  $ 1,878,770    587,129   $ 716,297  73,524   $89,699            
                                            ===========   ========   =========  ======   =======             


<CAPTION>                                                                   

                                            
                                                            UNREALIZED
                                             PAID-IN      DEPRECIATION ON      RETAINED
                                             CAPITAL        INVESTMENTS        EARNINGS
                                             -------      ---------------      --------
<S>                                          <S>            <C>               <C>
BALANCE, DECEMBER 31, 1994                  $536,464        $(107,673)        $ 1,567,710

NET INCOME                                                                       (382,730)

TRANSFERS                                       (250)                                 547

CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON AVAILABLE-FOR-SALE
SECURITIES, NET OF INCOME TAXES OF $77,000                     149,632
                                            --------      ------------         ----------
                                             536,214            41,959          1,185,527
BALANCE, DECEMBER 31, 1995
                                                                                 (643,785)
NET INCOME

CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON AVAILABLE-FOR-SALE
SECURITIES, NET OF INCOME TAXES OF $24,000                    (47,141)
                                            --------      ------------         ----------

BALANCE, DECEMBER 31, 1996                  $536,214      $    (5,182)         $  541,742
                                            ========      ============         ==========
</TABLE>



See Notes to Financial Statements                                            
                                                                             




                                      -4-
                                                        CAUSON & WESTOFF, CPA's
<PAGE>   17


                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                            STATEMENTS OF CASH FLOWS

                     YEARS ENDED DECEMBER 31, 1996 AND 1995



<TABLE>
<CAPTION>
                                                      1996             1995
                                                      ----             ----
<S>                                               <C>              <C>        
CASH FLOWS FROM OPERATING ACTIVITIES
    Gross premiums                                $ 9,607,947      $ 8,637,588
    Reinsurance ceded                                (465,526)        (549,699)
    Net investment income                             230,372          193,106
    Other income                                       90,831          130,002
    Gross benefits and claims                      (7,504,182)      (6,703,021)
    Reinsurance recoveries                            393,786          335,097
    Commissions                                      (726,699)        (374,904)
    Underwriting, acquisition, insurance, and
        administrative expenses                    (1,873,455)      (1,802,913)
    Income taxes                                      188,000          (18,000)
    Deposits                                           (4,375)
                                                  -----------      -----------
               Net cash provided by (used in)         (63,301)        (152,744)
                                                  -----------      -----------
                  operating activities

CASH FLOWS FROM INVESTING ACTIVITIES
    Proceeds from the maturing of investments       2,215,013          978,787
    Proceeds from the sale of furniture and
        equipment                                         757
    Purchase of investments                        (1,389,720)        (940,000)
    Purchase of furniture and equipment               (69,992)        (106,492)
                                                  -----------      -----------
               Net cash provided by (used in)
                  investing activities                755,301          (66,948)
                                                  ===========      ===========
CASH FLOWS FROM FINANCING ACTIVITIES

INCREASE (DECREASE) IN CASH                           692,000         (219,692)

CASH, BEGINNING OF YEAR                                37,252          256,944
                                                  -----------      -----------

CASH, END OF YEAR                                 $   729,252      $    37,252
                                                  ===========      ===========
</TABLE>

See Notes to Financial Statements



                                      -5-

                                                        CAUSON & WESTOFF, CPA's
<PAGE>   18

                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                         NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1996 AND 1995


NOTE 1:    NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
           ACCOUNTING POLICIES

NATURE OF OPERATIONS

    Professional Benefits Insurance Company is a stock life, accident, and
health insurance company organized under the laws of the state of Texas. The
Company's principal lines of business consist primarily of marketing,
underwriting, and servicing of group accident and health insurance policies.
The Company also markets, underwrites, and services dental, disability,
professional overhead, and group life insurance policies. This insurance is
primarily sold to members of various professional organizations throughout the
southwest United States.

    The Company also prepares financial statements on the basis of statutory
accounting principles for the purpose of filing with state insurance
departments.


USE OF ESTIMATES

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


INVESTMENTS

    Fixed maturity investments, all of which are considered to be
available-for-sale, are reported at fair value, with net unrealized gains and
losses included in equity, net of applicable income taxes. Unrealized losses
which are other than temporary are recognized in earnings. Premiums and
discounts are amortized and accreted, respectively, to interest income using
the level-yield method over the period to maturity. Realized gains and losses
are included in net investment income.



                                      -6-

                                                        CAUSON & WESTOFF, CPA's
<PAGE>   19

                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                         NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1996 AND 1995


NOTE 1:    NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
           ACCOUNTING POLICIES (Continued)

INVESTMENTS (Continued)

    Common stock mutual funds were entirely disposed during 1996. The realized
gain on the disposal thereof is included in net investment income. In 1995,
common stock mutual funds were recorded at current market value. Net unrealized
gains and losses were included in equity, net of applicable income taxes.

    Short-term investments represent investments in short-term money market
funds and certificates of deposit which mature at specific future dates of less
than one year. Interest on certificates of deposit and other short-term
investments is recorded as revenue when it is earned.

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


RECOGNITION OF PREMIUM REVENUES, RELATED EXPENSES, AND FUTURE POLICY BENEFITS

    Premiums on life insurance policies are reported as earned when due. The
liabilities for future policy benefits and expenses are computed using the
Commissioner's reserve valuation method including assumptions as to investment
yields and mortality. Policies issued prior to 1985 are based upon the 1958
Commissioner's standard ordinary mortality table, assuming interest rates from
3% to 4.5%. Policies issued during 1985 and thereafter are based upon the 1980
Commissioner's standard ordinary mortality table, assuming interest rates from
4.5% to 5.5%. There is no material difference between future life insurance
policy benefit liabilities for financial reporting and statutory purposes
inasmuch as such policies consist only of term coverages with no cash values
accruing.

    Premiums for accident and health policies are recognized ratably over the
period of insurance coverage. The liabilities for insurance claims are
determined using statistical analyses and represent estimates of the ultimate
net cost of all reported and unreported claims which are unpaid at year end,
including provisions for extended benefits. Although it is not possible to
measure the degree of variability inherent in such estimates, management
believes the liabilities for insurance claims are adequate. The estimates are
reviewed periodically by management, and, as adjustments to these liabilities
become necessary, such adjustments are reflected in current operations.




                                      -7-

                                                        CAUSON & WESTOFF, CPA's
<PAGE>   20

                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                         NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1996 AND 1995


NOTE 1:    NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
           ACCOUNTING POLICIES (Continued)

REINSURANCE

    In the normal course of business, the Company seeks to limit its exposure
to loss on any single insured and to recover a portion of benefits paid by
ceding reinsurance to other insurance enterprises or reinsurers under excess
coverage and coinsurance contracts. The Company retains a maximum of $125,000
of coverage per individual on major medical policies and $25,000 of coverage
per individual life policies. The Company maintains a separate major medical
reinsurance treaty with a $0 deductible (zero retention) to cover organ
transplants.


REAL ESTATE

    Real estate is recorded at cost and represents the Company's home office,
land and building. Depreciation has been provided on the straight-line method
over the useful life of the building. Maintenance and repairs which do not
materially extend the useful life are charged to expense as incurred.
Depreciation expense recognized during 1996 and 1995 was $78,112 and $35,031,
respectively.


FURNITURE AND EQUIPMENT

    Furniture and equipment are recorded at cost. Depreciation is provided on
the straight-line method over estimated useful lives of three to seven years.
Depreciation expense recognized during 1996 and 1995 was $56,438 and $44,676,
respectively.


INCOME TAXES

    Deferred tax assets and liabilities are recognized for the tax effect of
temporary differences between the financial reporting and tax bases of assets
and liabilities. A valuation allowance is established to reduce deferred tax
assets if it is more likely than not that a deferred tax asset will not be
realized. Such temporary differences are principally related to the deferral of
accrued premiums and losses as defined under the Internal Revenue Code, and
depreciation, as well as unrealized gains and losses, on investments.



                                      -8-

                                                        CAUSON & WESTOFF, CPA's
<PAGE>   21

                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                         NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1996 AND 1995


NOTE 1:    NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
           ACCOUNTING POLICIES (Continued)

NET INCOME PER SHARE OF COMMON STOCK

    Net income per share of common stock is based on the weighted average
number of shares of common stock and common stock equivalents outstanding
during each year. Stock options are common stock equivalents but have no
material impact on the total weighted number of shares outstanding.


NOTE 2:    INVESTMENTS IN DEBT AND EQUITY SECURITIES

    The amortized cost and approximate fair value of fixed-maturity securities
are as follows:

<TABLE>
<CAPTION>
                                                               DECEMBER 31, 1996
                                                      --------------------------------------
                                                            GROSS          GROSS          APPROXIMATE
                                            AMORTIZED     UNREALIZED     UNREALIZED           FAIR
                                               COST         GAINS         (LOSSES)           VALUE
                                           ----------     ---------      -----------      ----------
<S>                                       <C>            <C>               <C>            <C>
Fixed-maturity securities
    U. S. Treasury bond funds              $  899,382     $   1,573      $                $  900,955
    U. S. Treasury and other U.S. 
       government corporations and
       agencies                               746,065        (9,124)         736,941
    Mortgage-backed securities (FHLMC)        289,961          (331)         289,630
                                           ----------     ---------      -----------      ----------
                                            1,935,408         1,573           (9,455)      1,927,526
Short-term investments                        830,898       830,898
                                           ----------     ---------      -----------      ----------

                                           $2,766,306     $   1,573      $    (9,455)     $2.758,424
                                           ==========     =========      ===========      ==========

</TABLE>

<TABLE>
<CAPTION>
                                                               DECEMBER 31, 1995
                                                      --------------------------------------
                                                            GROSS          GROSS          APPROXIMATE
                                            AMORTIZED     UNREALIZED     UNREALIZED          FAIR
                                              COST          GAINS         (LOSSES)          VALUE
                                           ----------     ---------      -----------      ----------
<S>                                       <C>            <C>               <C>            <C>
Fixed-maturity securities
    U. S. Treasury and other U.S.
       government corporations and
       agencies                            $  873,633     $   9,586      $                $  883,219
    Mortgage-backed securities (FHLMC)        356,988                         (19,565)       337,423
                                            
                                            1,230,621         9,586           (19,565)     1,220,642
Common stock mutual funds                     783,251        73,138                          856,389
                                            ---------     ---------      -------------     ---------
                                            2,013,872        82,724           (19,565)     2,077,031
Short-term investments                      1,420,523                                      1,420,523
                                            

                                           $ 3,434,395    $  82,724      $    (19,565)    $3,497,554
                                           ===========    =========      ============     ==========

</TABLE>


                                      -9-

                                                        CAUSON & WESTOFF, CPA's
<PAGE>   22

                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                         NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1996 AND 1995


NOTE 2:    INVESTMENTS IN DEBT AND EQUITY SECURITIES (Continued)

    Maturities of fixed-maturity securities at December 31, 1996:

<TABLE>
<CAPTION>
                                                                 AMORTIZED                   APPROXIMATE
                                                                   COST                      FAIR VALUE
                                                                 ---------                  ------------
           <S>                                                   <C>                          <C>    

           One year or less                                      $   899,382                  $   900,955
           After one through five years                              746,065                      736,941
           After five through ten years
           Mortgage-backed securities not due
               on a single maturity date                             289,961                      289,630
                                                                 -----------                  -----------

                                                                 $ 1,935,408                  $ 1,927,526
                                                                 ===========                  ===========
</TABLE>

    Major categories of investment income are summarized as follows:

<TABLE>
<CAPTION>

                                                                      1996                          1995
                                                                      ----                          ----
           <S>                                                  <C>                           <C>
           Fixed maturities                                      $    57,423                  $    76,574
           Common stock mutual funds                                 206,083                       66,430
           Short-term investments                                     86,492                       76,549
                                                                 -----------                  -----------
                                                                 $   349,998                  $   219,553
                                                                 ===========                  ===========

</TABLE>

    The Company has certificates of deposits totaling $700,000 and $600,00 on
deposit with regulatory authorities to meet statutory requirements as of
December 31, 1996 and 1995, respectively.


NOTE 3:    SIGNIFICANT ESTIMATES AND CONCENTRATIONS

    Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain
concentrations. Those matters include the following:

INSURANCE CLAIM LIABILITIES

    The Company has recorded future policy benefits of $1,048,334 and
$1,052,509 and policy claims of $2,160,000 and $1,623,000 at December 31, 1996
and 1995, respectfully. Management currently believes the accruals for
liabilities associated with the insurance claims are adequate. However, the
ultimate claim expense will depend on actual claims paid. Consequently, it is
possible the estimated liability accrued for claims during the policy period
covered by the financial statements may materially change.


                                     -10-

                                                        CAUSON & WESTOFF, CPA's
<PAGE>   23

                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                         NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1996 AND 1995


NOTE 3:    SIGNIFICANT ESTIMATES AND CONCENTRATIONS (Continued)

REVENUES FROM TRADE ASSOCIATIONS

    The Company sells group accident and health insurance to trade
associations. Approximately 31%, 14%, and 24% of the Company's premium revenues
for the year ended December 31, 1996, and approximately 33%, 30%, and 19% of
the Company's premium revenues for the year ended December 31, 1995, were from
three unrelated individual associations.


REVENUES FROM GROUP ACCIDENT AND HEALTH INSURANCE

    The Company derived approximately 75% and 90% of its revenues in 1996 and
1995, respectfully, from sales of group accident and health insurance,
principally to trade associations located in the southwest United States.


NOTE 4:    PRINCIPLES OF CONSOLIDATIONS

    The 1995 financial statements presented herein were consolidated to include
the accounts of the Company and its 100% owned subsidiary, Direct Reimbursement
Services, Inc. The accounts of Direct Reimbursement Services, Inc. reflected no
assets, liabilities, revenues, expenses or cash flows as of and for the year
ended December 31, 1995. Therefore, the consolidated statements were identical
to the Company's financial statements before consolidation. During 1996, Direct
Reimbursement Services, Inc. was officially dissolved. Therefore, the December
31, 1996 data reflected in these financial statements are Company balances, are
not consolidated, and are comparable to the December 31, 1995 data presented
herein.


NOTE 5:    REINSURANCE

    Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result in
losses to the Company; consequently, allowances are established for amounts, if
any, deemed uncollectible. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of the reinsurers
to minimize its exposure to significant losses from reinsurer insolvencies.


                                     -11-

                                                        CAUSON & WESTOFF, CPA's
<PAGE>   24
                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                         NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1996 AND 1995


NOTE 6:    LEASES

    The Company entered into a capital lease for computer equipment effective
January 1, 1995.

    Future minimum lease payments as of December 31, 1996, were:

<TABLE>
     <S>                                                  <C>

     1997                                                 $ 19,463
     1998                                                   19,463
     1999                                                   19,463
                                                          --------
Future minimum lease payments                               58,389
Less amount representing interest                           12,814
                                                          --------
                                                          $ 45,575
                                                          ========
</TABLE>

NOTE 7:    STOCKHOLDERS' EQUITY AND RESTRICTIONS

    Generally, dividends to stockholders are limited to amounts which exceed
minimum capital and surplus requirements determined in accordance with
statutory accounting principles. Under the Texas Insurance Code, the Company
must maintain minimum capital of the greater of $100,000 or par value of the
outstanding common stock and minimum surplus of $100,000.

    The Company must additionally comply with minimum statutory capital and
surplus requirements in the various states in which it is currently licensed.
These minimum combined statutory capital and surplus requirements range between
$500,000 and $1,200,000.

    Net income and stockholders' equity, as determined in accordance with
statutory accounting practices based upon audited reports, are as follows:

<TABLE>

     
                                           1996                      1995
                                           ----                      ----
     <S>                                <C>                      <C>
     Net Income (Loss)                  $ (562,960)               $  (365,165)
                                        ===========               ===========

     Stockholders' Equity               $ 1,572,531               $  2,165,665
                                        ===========               ============

</TABLE>

                                     -12-

                                                        CAUSON & WESTOFF, CPA's
<PAGE>   25

                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                         NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1996 AND 1995


NOTE 8:    INCOME TAXES

    The tax effects of temporary differences related to deferred taxes shown on 
the balance sheets were:
<TABLE>
<CAPTION>
                                                                   1996                       1995
                                                                   -----                      ----
          <S>                                                    <C>                      <C>
           Deferred tax assets:
               Discounted future claims                          $ 23,000                   $ 18,500
               Policy acquisition costs                             2,000                      1,700
               Unrealized loss on investments                       2,600
               Accumulated depreciation                             1,400
               Other                                                                             500
                                                                 --------                   --------
                                                                   29,000                     20,700
                                                                 --------                   --------
           Deferred tax liabilities:
               Unrealized gain on investments                                                (21,200)
               Accumulated depreciation                                                       (4,500)
               Other                                               (1,000)
                                                                 --------                   --------
                                                                   (1,000)                   (25,700)
                                                                 --------                   --------

                  Net deferred tax asset (liability)             $ 28,000                   $ (5,000)
                                                                 ========                   ========

</TABLE>

    The provision for income taxes includes these components:

<TABLE>
<CAPTION>
                                                                   1996                         1995
                                                                   -----                        ----
          <S>                                                    <C>                      <C>

           Tax currently receivable                              $ (294,000)                $ (188,000)
           Deferred income tax liability                              4,000                      3,000
                                                                 -----------                ----------

                                                                 $ (290,000)                $ (185,000)
                                                                 ===========                ==========

</TABLE>

    A reconciliation of the income tax expense (refund) at the statutory rate
to income tax expense at the Company's effective tax rate is shown below:

<TABLE>
<CAPTION>
                                                                   1996                         1995
                                                                   -----                        ----
          <S>                                                    <C>                      <C>

           Computed at the statutory rate of 34%                 $  (294,000)               $ (193,028)
           Increase (decrease) in tax resulting from:
               Nondeductible expenses                                  4,000                     3,000
               Other                                                                             5,028
                                                                 -----------                ----------
                                                                 $ (290,000)                $ (185,000)
                                                                 ===========                ==========

</TABLE>

    Deferred income taxes related to the change in unrealized appreciation
(depreciation) on available-for-sale securities, shown in stockholders' equity,
were $2,600 and $(21,200) for 1996 and 1995, respectively.


                                     -13-

                                                        CAUSON & WESTOFF, CPA's
<PAGE>   26
                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                         NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1996 AND 1995


NOTE 9:    DEFINED CONTRIBUTION EMPLOYEE BENEFIT PLAN

    The Company has a noncontributory 401(k) plan which provides for employer
contributions to be made only from current or accumulated net profits not to
exceed the maximum amount deductible for federal income tax purposes. To be
eligible for participation, an employee must be at least 21 years of age and
have accumulated 1,000 hours of service as of the anniversary date of the plan
nearest the date eligibility requirements are met. Participant interests in
employer contributions are vested over a period from two to six years. No
contributions were made by the Company in 1996. Contributions of $7,366 were
made by the Company in 1995.


NOTE 10:   STOCK OPTIONS

    On July 14, 1990, the Board of Directors of Professional Benefits Insurance
Company authorized the granting of stock options to Board members and certain
key employees. The stock options were immediately exercisable upon grant and
enable the grantees to purchase Class A common stock at a price of $2 per
share. The July 14, 1990 stock options expired during 1996. On December 30,
1996, the Board of Directors authorized the granting of 5,000 new stock options
to each of the Directors. The new options are exercisable at the same price and
terms as the expired options. The new options are currently scheduled to expire
December 30, 2001.

<TABLE>
<CAPTION>
                                                                  1996                   1995
                                                                  ----                   ----
          <S>                                                    <C>                    <C>
           Options outstanding, beginning of year                60,000                 85,000
           Granted                                               30,000
           Expired                                               60,000                 25,000
           Exercised                                             ------                 ------

           Options outstanding, end of year                      30,000                 60,000
                                                                 ======                 ======

</TABLE>


                                     -14-

                                                        CAUSON & WESTOFF, CPA's
<PAGE>   27

                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                         NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1996 AND 1995


NOTE 11:   ADDITIONAL CASH FLOW INFORMATION

   RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES

<TABLE>
<CAPTION>
                                                                                     1996             1995
                                                                                     ----             ----
<S>                                                                               <C>             <C>
Net income (loss)                                                                  $(643,785)     $(382,730)
Adjustments to reconcile net income to net cash provided by operating
activities
    Depreciation and amortization                                                    138,303         79,372
    Amortization from investments                                                        726           (731)
    Realized gain from investments                                                  (157,232)
    Provision for deferred income taxes                                               (9,800)         3,000
    Decrease (increase) in receivables                                               (21,466)        (5,523)
    Decrease (increase) in premiums due                                             (151,284)         4,768
    Decrease (increase) in accrued investment income                                  36,880        (25,716)
    Decrease (increase) in amounts recoverable and                                   139,899        134,765
       due from reinsurers and other assets
    Increase (decrease) in future policy benefits                                     (4,175)         3,574
    Increase (decrease) in other policy claims and
       benefits payable                                                              537,000        189,000
    Increase (decrease) in unearned premiums and advance
       premiums                                                                      141,542        (88,238)
    Increase (decrease) current income taxes payable or
       receivable                                                                   (106,000)      (206,000)
    Decrease in accounts payable, accrued expenses,
       and amounts due reinsurers                                                     36,091        141,715
                                                                                   ---------      ---------

           Net cash provided by (used in) operations                               $ (63,301)     $(152,744)
                                                                                   =========      =========

</TABLE>

NOTE 12:   CONTINGENCIES

    The Company is a defendant in, and is threatened with, various legal
proceedings with respect to claims arising from insurance coverages. Such
litigation is taken into account in establishing claim reserves. Management,
after consultation with legal counsel, is of the opinion that the ultimate
liability, to the extent not provided for, is not likely to have a material
effect on the financial position or results of operations of the Company.


                                     -15-

                                                        CAUSON & WESTOFF, CPA's
<PAGE>   28

                    PROFESSIONAL BENEFITS INSURANCE COMPANY

                         NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1996 AND 1995


NOTE 13:   COMMISSIONS

    Commissions expense is calculated as a percentage of written premium.
Commission rates vary based on the type of insurance policy written and for
first year policies versus subsequent renewals. As discussed in Note 3, the
Company's mix between accident and health insurance and other insurance changed
during 1996 to reflect a larger percentage of other types of insurance. A large
component of the other insurance during the 1996 is dental insurance. Dental
insurance has a higher commission structure than other policy lines which the
Company markets. The mix of first year premium as a percentage of total premium
was 40% and 21% in 1996 and 1995, respectively. Commission expense was $676,828
and $376,867 in 1996 and 1995, respectively


NOTE 14:  SUBSEQUENT EVENTS

    Subsequent to March 7, 1997 it was discovered the estimated loss reserves
were materially understated as of December 31, 1996. The originally reported
policy claim liability was $1,905,000. The Company's independent actuary
reviewed the actual claim payments related to 1996 through April 30, 1997 and
determined an estimated deficiency of $255,000 at December 31, 1996. Company
management determined this amount should be reflected in restated 1996
financial statements. Additionally, the necessary changes to claim expense,
income tax expense(refund) and income tax recoveries have been reflected in
these restated financial statements.



                                     -16-

                                                        CAUSON & WESTOFF, CPA's
<PAGE>   29





                    PROFESSIONAL BENEFITS INSURANCE COMPANY

This schedule contains summary financial information extracted from the balance
sheets and statements of operations from the Company's report on Form 10-KSB
for the period ended December 31, 1996 and is qualified in its entirety by
reference to such financial statements.

<TABLE>
          <S>                                                                       <C>
          Fixed maturities held for sale                                            1,927,526
          Fixed maturities held to maturity - carrying value                                0
          Fixed maturities held to maturity - market value                                  0
          Investment in equity securities                                                   0
          Mortgage loans on real estate                                                     0
          Investment in real estate                                                   497,882
          Total investments                                                         2,758,424
          Cash and cash equivalents                                                 1,560,150
          Reinsurance recoverable on paid losses                                       52,084
          Deferred policy acquisition costs                                                 0
          Total assets                                                              5,697,994
          Policy liabilities - future benefits, losses, claims                      1,048,334
          Policy liabilities - unearned premiums                                       56,324
          Policy liabilities - other claims and benefits                            2,160,000
          Other policyholder funds                                                          0
          Notes payable, bonds, mortgages and similar debt                                  0
          Preferred stocks mandatory redemption                                             0
          Preferred stock - not mandatory                                                   0
          Common stock                                                                805,996
          Other stockholders' equity                                                1,072,774
          Total liabilities and stockholders' equity                                5,697,994
          Premiums                                                                  9,126,520
          Net investment income                                                       349,998
          Realized investment gains and losses                                        196,835
          Other income                                                                126,095
          Benefits, claims, losses and settlement expenses                          7,758,793
          Underwriting acquisition and insurance expenses - amortization of
              deferred policy acquisition costs                                             0
          Underwriting acquisition and insurance  expense - other                   2,100,777
          Income or (loss) before income taxes                                      (933,785)
          Income tax expense/(credit)                                               (290,000)
          Income/(loss) continuing operations                                       (643,785)
          Discontinued operations                                                           0
          Extraordinary items                                                               0
          Cumulative effect - changes in accounting principles                              0
          Net income or (loss)                                                      (643,785)
          Earnings per share - primary                                                  (.97)
          Earnings per share - fully diluted                                            (.93)
          Reserves for unpaid claims - beginning of year                            2,675,509
          Provision for insured events - current year                                 625,988
          Provision for insured events - prior years                                        0
          Payments of claims - current year                                         2,401,031
          Payments of claims - prior years                                          4,731,774
          Reserves for unpaid claims - end of year                                  3,208,334
          Deficiency/redundancy in restated reserve                                    93,163
</TABLE>