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PRESENTATION TO
THE BOARD OF DIRECTORS OF
CROP GROWERS CORPORATION
DISCUSSION MATERIALS
--------------------
MARCH 5, 1997
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TABLE OF CONTENTS
SECTION
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Transaction Summary of Terms . . . . . . . . . . . . . . . . . . . . . . 1
Selected Crop Growers Corporation Information. . . . . . . . . . . . . . 2
Crop Growers Common Stock Performance Information. . . . . . . . . . . . 3
Publicly Traded Comparable Companies . . . . . . . . . . . . . . . . . . 4
Selected Comparable Non-Life Insurance Transactions. . . . . . . . . . . 5
Discounted Cash Flow Analysis. . . . . . . . . . . . . . . . . . . . . . 6
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TRANSACTION SUMMARY OF TERMS
ACQUIROR: Fireman's Fund Insurance Company ("FF").
TARGET: Crop Growers Corporation ("CG").
CONSIDERATION: $10.25 cash per common share.
FORM OF TRANSACTION: Proxy solicitation for reverse merger.
SHARES OUTSTANDING: 681,774 (8.6%) Xxxx Xxxxx Shares
1,145,703 (14.4%) Xxxx Xxxxxxxxxx Shares
6,130,774 (77.0%) Other Shareholder Shares
---------- -------
7,958,251 (100.0%) Total Shares Outstanding
VOTING RIGHTS: 681,774 (7.8%) Xxxx Xxxxx Shares
1,145,703 (13.2%) Xxxx Xxxxxxxxxx Shares
754,717 (8.7%) FF Series A Convertible Preferred
6,130,774 (70.3%) Other Shareholder Shares
---------- -------
8,712,968 (100.0%) Total Votes Outstanding
OPTIONS: Value of options (i.e. spread between exercise price
and $10.25 per share expected to be approximately
$850,000).
TRANSACTION VALUE: Approximately $82 million (includes purchase of Black
and Xxxxxxxxxx Shares at $10.00 per share).
FF PURCHASE: It is contemplated that FF will purchase Black and
Xxxxxxxxxx Shares for $10.00 per share shortly after
execution of the Acquisition Agreement.
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TRANSACTION SUMMARY OF TERMS
(CONTINUED)
CONSENT AGREEMENT: Upon signing, CG waives FF 20% standstill provision
subject to Voting Privilages below. FF exercises Right
of First Refusal to purchases Black and Xxxxxxxxxx
shares at $10.00 per share (will control 23% of common
stock outstanding and 29.7% of total vote). Board to
waive Delaware 203, allowing FF to go over 15% without
"complicating" acquisition by triggering Section 203 of
Delaware law.
OPPORTUNITY TO SHOP; CG may solicit interest from a specific list of
WINDOWSHOP: companies proposed by CG and agreed to by FF (see
below) until March 28, 1997. Thereafter, CG may
entertain unsolicited offers and continue dialogue with
interested parties.
TERMINATION FEE: $2.4 million upon termination of Agreement. If the
termination occurs after March 28, also includes FF
out-of-pocket expenses plus internal legal costs.
FIDUCIARY OUT: Anytime before closing.
VOTING PRIVILEGES: FF limited to 20% of Total Votes Outstanding as of
January 1, 1997 (1,742,593 votes) with regard to any
Transaction until December 31. Excess votes during
such period vote in proportion to non-interested
parties' voting distribution. Excess holdings
approximately 9.7% of Total Votes Outstanding assuming
Black and Xxxxxxxxxx Shares are acquired.
LINE OF CREDIT: FF guarantees to provide $15 mm revolver to CG in the
event that CG is unable to secure a working capital
facility from another source before March 28, 1997.
Committment expires in certain events.
PRESS RELEASE: Jointly and promptly after signing Agreement.
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PRELIMINARY SCHEDULE
DATE ACTIVITY
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March 5 Board review, and if appropriate, signing of Agreement
at market close.
Announcement prior to next day's market opening.
FF exercises Right of First Refusal.
Begin solicitation period.
March 28 End of solicitation period.
March 31 10-K filed.
Late March/Early April Proxy and Form A's on file.
Mid-May Shareholder vote.
Mid-June Regulatory approval and closing.
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MARKET SHARE
1996 Crop Year(1)
DIRECT % OF
RANK COMPANY NAME PREMIUMS TOTAL
---- ------------ -------- -----
1 Rain & Hail (CIGNA) 379.4 23.5%
2 Crop Growers 267.6 16.6%
3 RCIS (Norwest) 263.7 16.4%
4 Acceptance 243.5 15.1%
5 IGF (Symmons) 110.7 6.9%
6 Great American (AFG) 76.2 4.7%
7 Xxxxxxx 71.3 4.4%
8 North Central 62.1 3.9%
9 ITT Hartford 53.7 3.3%
10 American Ag 17.0 1.1%
11 Country Mutual 16.4 1.0%
12 IA Farm Bureau 15.3 0.9%
00 Xxxxxx Xxxxxx 13.3 0.8%
14 Producers Lloyds 10.9 0.7%
15 Millers International 7.2 0.4%
16 NE Farm Bureau 3.0 0.2%
-------- ----
Total Private Market $ 1,611.3 100.0%
---------- ------
---------- ------
(1)Source: FCIC, as of 1/6/97.
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CROP GROWERS
[GRAPH]
See pages 7-17 for plot points.
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RECENT ANNOUNCEMENTS
A: 2/26/96: Crop Growers target of U.S. Investigation into possible illegal
contributions to a congressional campaign of Xxxxx Xxxx.
B: 2/28/96: Crop Growers stake raised to 7.54% by Xxxxxx Xxxxxxxx Group. The
group purchased 131,400 shares at $7.93 to $15.75 a share between
Jan. 3 and Feb. 26, 1996.
C: 3/28/96: Crop Growers posts 4th quarter 1995 loss; CEO takes leave of
absence.
D: 5/13/96: Crop Growers reports record 1st quarter earnings of $7.0 million,
or $0.84 a share.
E: 5/30/96: Crop Growers and Firemans' Fund announce discussions regarding a
strategic alliance. Two ex-officials indicted in Espy probe.
F: 6/3/96: Crop Growers names Xxxxx Xxxxxxxx acting chief executive.
G: 7/10/96: Crop Growers and Fireman's Fund announce formation of new
strategic alliance.
H: 8/7/96: Crop Growers founder indicted in campaign-debt pay-off scheme.
Crop Growers reports 2nd quarter 1996 loss of $4.6 million or
$0.56 a share.
I: 12/20/96: Crop Growers former chairman, attorney convicted of money
laundering in Espy case.
J: 1/6/97: Crop Growers dismissed on 12 of 13 criminal charges.
K: 1/21/97: Crop Growers settles criminal case.
L: 2/13/97: Two former Crop Growers executives are acquitted on illegal
contribution charges.
M: 2/18/97: Former Crop Growers Chief Executive Xxxx Xxxxxxxxxx and Xxxx
Xxxxx agreed to sell their 1,145,703 and 681,744 common shares,
respectively, to Great American Insurance Co. of Cincinnati.
N: 2/19/97: Chicago Corp. lowers 1996 estimate from $0.70 to $0.38 per share.
Lowers 1997 estimate from $1.10 to $0.14 per share.
O: 3/3/97: Crop Growers agrees to pay $2.5 million to buyers of its stock
from Feb. 13 to May 16, 1995 as part of the settlement of a
class-action lawsuit filed against the company. $1.22 million
will hit 4th quarter 1996 earnings, with a directors' and
officers' insurance policy covering the remainder.
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CROP GROWERS PRICE / VOLUME ANALYSIS
JANUARY 22, 1996 TO PRESENT
CLOSE
HIGH LOW CLOSING TRADING AS A % OF
DATE PRICE PRICE PRICE VOLUME 1/22/96
--------------------- -------- -------- -------- --------- -----------
Jan. 22, 1996 $15.25 $13.50 $14.75 87,300 100.00%
23 16.00 14.88 15.50 127,200 105.10%
24 16.25 15.00 15.75 146,800 106.80%
25 16.25 15.75 16.00 37,200 108.50%
26 16.25 15.25 16.00 65,900 108.50%
29 16.25 15.50 15.63 17,500 105.90%
30 16.25 15.50 16.25 7,300 110.20%
31 16.25 15.50 16.25 17,000 110.20%
Feb. 1, 1996 16.25 15.25 15.44 22,300 104.70%
2 16.00 15.25 15.25 7,400 103.40%
5 15.75 14.50 14.50 60,200 98.30%
6 15.00 14.25 14.25 21,800 96.60%
7 15.00 14.25 15.00 29,900 101.70%
8 15.00 14.50 14.50 24,300 98.30%
9 15.00 14.00 14.00 23,100 94.90%
12 14.50 13.75 13.75 35,100 93.20%
13 14.00 13.50 13.50 52,500 91.50%
14 13.56 13.50 13.56 3,600 91.90%
15 13.75 13.00 13.75 66,200 93.20%
16 13.25 13.25 13.25 5,400 89.80%
19 13.25 13.25 13.25 NA 89.80%
20 13.88 13.00 13.25 20,800 89.80%
21 13.75 13.25 13.75 16,500 93.20%
22 13.75 13.13 13.13 26,200 89.00%
23 13.50 12.50 12.50 25,300 84.70%
26 12.50 6.00 8.50 1,172,400 57.60%
27 10.00 8.25 9.25 553,300 62.70%
28 10.75 9.25 9.75 292,000 66.10%
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CROP GROWERS PRICE / VOLUME ANALYSIS
JANUARY 22, 1996 TO PRESENT
CLOSE
HIGH LOW CLOSING TRADING AS A % OF
DATE PRICE PRICE PRICE VOLUME 1/22/96
--------------------- ------- ------- -------- --------- ---------
29 11.00 9.25 11.00 153,500 74.60%
Mar. 1, 1996 11.00 10.00 10.50 49,800 71.20%
4 10.50 9.50 9.75 108,700 66.10%
5 10.50 9.75 10.00 69,300 67.80%
6 11.25 10.00 10.50 92,700 71.20%
7 11.25 10.50 10.88 18,600 73.70%
8 11.00 9.50 10.00 40,600 67.80%
11 10.50 9.75 10.00 23,400 67.80%
12 10.50 9.75 10.25 8,400 69.50%
13 10.25 9.50 10.13 47,800 68.60%
14 10.50 9.50 9.63 24,600 65.30%
15 10.50 9.75 9.75 10,500 66.10%
18 10.50 9.63 10.25 17,400 69.50%
19 10.25 9.50 10.00 21,400 67.80%
20 10.00 9.50 9.50 21,700 64.40%
21 9.75 8.75 9.00 33,400 61.00%
22 9.50 9.00 9.50 5,100 64.40%
25 9.50 9.13 9.13 8,900 61.90%
26 9.50 9.00 9.02 4,400 61.10%
27 9.50 9.13 9.13 94,100 61.90%
28 9.50 9.00 9.13 12,600 61.90%
29 9.00 7.25 8.50 436,900 57.60%
Apr. 1, 1996 8.50 7.75 7.75 74,500 52.50%
2 8.25 7.00 7.75 383,800 52.50%
3 8.25 7.50 7.50 56,300 50.80%
4 8.25 7.00 8.25 45,300 55.90%
5 8.25 7.00 8.25 NA 55.90%
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CROP GROWERS PRICE / VOLUME ANALYSIS
JANUARY 22, 1996 TO PRESENT
CLOSE
HIGH LOW CLOSING TRADING AS A % OF
DATE PRICE PRICE PRICE VOLUME 1/22/96
-------------------- ------ ------ -------- --------- ---------
8 8.50 7.75 8.50 24,800 57.60%
9 8.50 7.75 8.25 1,500 55.90%
10 8.50 7.75 7.75 15,000 52.50%
11 8.25 7.75 8.00 4,900 54.20%
12 8.25 8.00 8.25 14,400 55.90%
15 8.25 7.75 8.00 3,700 54.20%
16 8.25 7.50 7.63 45,000 51.70%
17 8.00 7.25 7.63 23,100 51.70%
18 7.75 7.00 7.25 62,600 49.20%
19 8.00 7.25 8.00 46,200 54.20%
22 8.75 7.88 8.50 66,300 57.60%
23 8.38 8.00 8.13 24,900 55.10%
24 8.75 8.13 8.25 17,900 55.90%
25 8.88 8.13 8.50 27,200 57.60%
26 9.00 8.38 9.00 15,500 61.00%
29 9.25 8.63 9.00 38,900 61.00%
30 9.63 8.75 9.13 29,800 61.90%
May. 1, 1996 9.50 8.75 9.50 25,900 64.40%
2 9.50 8.75 9.38 10,500 63.60%
3 9.38 8.75 9.00 14,400 61.00%
6 9.50 9.00 9.38 39,500 63.60%
7 9.75 9.13 9.75 14,200 66.10%
8 9.75 9.13 9.63 58,700 65.30%
9 9.75 8.88 9.00 88,100 61.00%
10 9.25 8.88 9.13 49,300 61.90%
13 9.38 8.88 9.00 40,000 61.00%
14 9.63 9.00 9.25 30,600 62.70%
15 9.75 9.00 9.75 57,200 66.10%
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CROP GROWERS PRICE / VOLUME ANALYSIS
JANUARY 22, 1996 TO PRESENT
CLOSE
HIGH LOW CLOSING TRADING AS A % OF
DATE PRICE PRICE PRICE VOLUME 1/22/96
-------------------- ----- ----- ------- ------- ---------
16 11.00 9.25 10.00 211,700 67.80%
17 10.63 10.00 10.50 39,700 71.20%
20 10.50 10.13 10.25 67,800 69.50%
21 10.38 10.13 10.38 78,600 70.30%
22 10.50 10.25 10.50 33,800 71.20%
23 10.75 10.25 10.75 20,100 72.90%
24 11.00 10.38 11.00 27,700 74.60%
27 11.00 10.38 11.00 NA 74.60%
28 11.13 10.63 10.88 41,500 73.70%
29 11.13 10.63 11.00 18,400 74.60%
30 11.75 10.63 10.75 109,900 72.90%
31 10.63 9.75 10.38 115,900 70.30%
Jun. 3, 1996 10.50 9.75 10.50 19,700 71.20%
4 10.38 9.88 9.88 115,000 66.90%
5 10.38 9.88 10.06 20,300 68.20%
6 10.38 9.88 10.00 46,100 67.80%
7 10.50 9.88 10.25 36,800 69.50%
10 10.13 9.88 10.00 4,000 67.80%
11 11.25 10.25 10.38 101,200 70.30%
12 11.00 10.25 10.50 37,000 71.20%
13 11.00 10.00 10.00 33,500 67.80%
14 10.50 10.00 10.50 9,600 71.20%
17 10.00 9.88 9.88 7,200 66.90%
18 10.13 9.88 9.88 24,600 66.90%
19 10.50 9.63 10.25 7,000 69.50%
20 10.00 9.50 9.50 17,800 64.40%
21 10.00 9.50 10.00 27,700 67.80%
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CROP GROWERS PRICE / VOLUME ANALYSIS
JANUARY 22, 1996 TO PRESENT
CLOSE
HIGH LOW CLOSING TRADING AS A % OF
DATE PRICE PRICE PRICE VOLUME 1/22/96
---------------- ----- ----- ------- ------- ---------
24 10.00 9.50 9.75 6,100 66.10%
25 10.00 9.25 9.50 17,600 64.40%
26 9.50 9.00 9.50 38,200 64.40%
27 9.13 9.00 9.00 76,600 61.00%
28 9.63 9.00 9.50 34,700 64.40%
Jul. 1, 1996 9.25 8.75 9.00 8,700 61.00%
2 9.25 8.69 9.25 29,200 62.70%
3 9.25 8.63 8.88 8,200 60.20%
4 9.25 8.63 8.88 NA 60.20%
5 8.75 8.38 8.75 8,500 59.30%
8 9.00 8.25 9.00 7,100 61.00%
9 9.00 8.63 9.00 15,200 61.00%
10 8.75 8.50 8.50 1,700 57.60%
11 9.25 8.75 8.75 31,900 59.30%
12 9.75 8.75 9.75 7,800 66.10%
15 9.75 9.00 9.00 4,400 61.00%
16 9.38 9.00 9.00 5,000 61.00%
17 10.38 9.38 9.75 21,500 66.10%
18 10.50 9.75 10.25 7,200 69.50%
19 10.00 9.50 9.50 21,000 64.40%
22 10.00 9.25 9.25 5,600 62.70%
23 9.50 8.50 8.50 8,000 57.60%
24 9.00 8.25 9.00 17,400 61.00%
25 8.50 8.25 8.25 25,100 55.90%
26 8.75 8.25 8.38 6,500 56.80%
29 8.63 8.25 8.63 5,200 58.50%
30 9.00 8.25 8.75 1,600 59.30%
31 9.00 8.25 9.00 33,300 61.00%
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CROP GROWERS PRICE / VOLUME ANALYSIS
JANUARY 22, 1996 TO PRESENT
CLOSE
HIGH LOW CLOSING TRADING AS A % OF
DATE PRICE PRICE PRICE VOLUME 1/22/96
-------------------- ----- ----- ------- ------- ---------
Aug. 1, 1996 9.00 8.25 8.75 2,200 59.30%
2 9.00 8.25 8.25 5,000 55.90%
5 9.25 8.50 8.50 NA 57.60%
6 9.25 8.50 8.50 1,400 57.60%
7 9.25 8.50 9.25 300 62.70%
8 8.63 8.25 8.63 5,600 58.50%
9 9.00 8.25 8.63 1,800 58.50%
12 9.00 8.25 8.63 37,000 58.50%
13 8.50 8.25 8.50 88,000 57.60%
14 8.50 8.00 8.13 8,500 55.10%
15 8.50 8.00 8.13 23,500 55.10%
16 8.13 8.00 8.13 2,500 55.10%
19 8.50 8.13 8.13 5,200 55.10%
20 8.50 7.75 7.94 70,700 53.80%
21 8.13 7.75 8.00 21,100 54.20%
22 8.13 7.75 8.00 26,600 54.20%
23 8.00 7.75 7.75 9,200 52.50%
26 7.88 7.75 7.75 6,700 52.50%
27 8.00 7.75 7.75 45,900 52.50%
28 8.13 7.75 8.13 45,200 55.10%
29 8.13 7.88 8.13 10,100 55.10%
30 8.13 7.75 8.00 6,800 54.20%
Sep. 2, 1996 8.13 7.75 8.00 NA 54.20%
3 7.88 7.50 7.63 18,500 51.70%
4 7.75 7.50 7.63 11,600 51.70%
5 7.75 7.13 7.13 26,500 48.30%
6 7.63 7.13 7.38 28,200 50.00%
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CROP GROWERS PRICE / VOLUME ANALYSIS
JANUARY 22, 1996 TO PRESENT
CLOSE
HIGH LOW CLOSING TRADING AS A % OF
DATE PRICE PRICE PRICE VOLUME 1/22/96
-------------------- ----- ----- ------- ------- ---------
9 7.63 7.13 7.13 1,700 48.30%
10 7.38 7.13 7.25 5,600 49.20%
11 7.13 7.13 7.13 2,000 48.30%
12 7.13 7.13 7.13 1,000 48.30%
13 7.13 7.13 7.13 500 48.30%
16 7.38 7.13 7.13 4,600 48.30%
17 7.13 7.00 7.13 11,600 48.30%
18 7.50 7.00 7.00 30,200 47.50%
19 7.50 6.88 6.88 10,900 46.60%
20 7.38 6.88 7.25 21,400 49.20%
23 7.38 7.00 7.00 3,800 47.50%
24 7.38 7.00 7.00 52,800 47.50%
25 7.63 7.00 7.63 20,200 51.70%
26 7.53 7.00 7.38 38,500 50.00%
27 7.63 7.25 7.25 5,500 49.20%
30 7.63 7.25 7.38 11,200 50.00%
Oct. 1, 1996 7.63 7.25 7.25 7,400 49.20%
2 7.63 7.13 7.13 7,400 48.30%
3 7.50 7.13 7.50 10,500 50.80%
4 7.75 7.38 7.38 10,400 50.00%
7 7.75 7.25 7.50 5,000 50.80%
8 7.88 7.25 7.25 4,600 49.20%
9 7.50 7.13 7.31 7,700 49.60%
10 7.50 7.13 7.13 5,100 48.30%
11 7.38 7.13 7.13 1,500 48.30%
14 7.50 7.13 7.50 9,500 50.80%
15 7.50 7.13 7.13 5,400 48.30%
16 7.50 7.13 7.38 5,200 50.00%
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CROP GROWERS PRICE / VOLUME ANALYSIS
JANUARY 22, 1996 TO PRESENT
CLOSE
HIGH LOW CLOSING TRADING AS A % OF
DATE PRICE PRICE PRICE VOLUME 1/22/96
-------------------- ----- ----- ------- ------- ---------
17 7.38 7.13 7.25 51,000 49.20%
18 7.75 7.13 7.25 91,900 49.20%
21 7.50 7.13 7.25 7,200 49.20%
22 7.25 7.25 7.25 17,300 49.20%
23 7.38 7.25 7.25 21,100 49.20%
24 7.38 7.25 7.38 32,200 50.00%
25 7.50 7.25 7.50 2,700 50.80%
28 7.50 7.25 7.25 5,300 49.20%
29 7.25 7.25 7.25 7,100 49.20%
30 7.38 7.00 7.13 17,400 48.30%
31 7.13 6.75 7.13 14,800 48.30%
Nov. 1, 1996 7.00 6.63 6.63 17,400 44.90%
4 6.75 6.63 6.63 9,400 44.90%
5 6.75 6.63 6.63 8,300 44.90%
6 7.00 6.50 6.50 80,700 44.10%
7 6.75 6.13 6.13 21,600 41.50%
8 6.25 5.88 6.00 110,000 40.70%
11 6.63 5.88 6.47 149,200 43.90%
12 7.00 6.25 6.63 6,300 44.90%
13 7.50 6.88 7.50 12,200 50.80%
14 7.31 6.88 7.31 12,000 49.60%
15 7.50 7.13 7.19 26,400 48.70%
18 7.13 7.13 7.13 1,700 48.30%
19 7.25 6.88 7.00 29,300 47.50%
20 7.13 6.88 7.00 13,000 47.50%
21 7.13 6.88 7.00 13,700 47.50%
22 7.13 6.88 7.00 43,200 47.50%
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CROP GROWERS PRICE / VOLUME ANALYSIS
JANUARY 22, 1996 TO PRESENT
CLOSE
HIGH LOW CLOSING TRADING AS A % OF
DATE PRICE PRICE PRICE VOLUME 1/22/96
-------------------- ----- ----- ------- ------- ---------
25 7.13 6.75 7.00 11,300 47.50%
26 7.13 6.88 7.13 35,500 48.30%
27 6.94 6.75 6.88 15,200 46.60%
28 6.94 6.75 6.88 NA 46.60%
29 6.88 6.75 6.88 4,800 46.60%
Dec. 2, 1996 7.00 6.75 6.75 15,300 45.80%
3 7.00 6.75 6.75 2,400 45.80%
4 7.13 6.63 6.63 21,100 44.90%
5 6.63 6.50 6.50 4,700 44.10%
6 6.75 6.25 6.50 18,000 44.10%
9 6.75 6.25 6.25 32,100 42.40%
10 6.50 6.25 6.38 55,600 43.20%
11 6.38 6.00 6.19 12,400 41.90%
12 6.50 6.13 6.50 21,500 44.10%
13 6.63 6.25 6.25 5,800 42.40%
16 6.75 6.25 6.25 7,200 42.40%
17 6.38 6.13 6.25 28,400 42.40%
18 6.63 6.25 6.50 21,900 44.10%
19 6.50 6.13 6.25 274,700 42.40%
20 6.63 6.25 6.25 28,600 42.40%
23 6.50 6.13 6.44 51,700 43.60%
24 6.44 6.13 6.25 10,400 42.40%
25 6.44 6.13 6.25 NA 42.40%
26 6.25 6.13 6.13 58,000 41.50%
27 6.38 6.13 6.13 27,100 41.50%
30 6.50 6.13 6.25 44,300 42.40%
31 7.00 6.13 7.00 101,000 47.50%
Jan. 1, 1997 7.00 6.13 7.00 NA 47.50%
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CROP GROWERS PRICE / VOLUME ANALYSIS
JANUARY 22, 1996 TO PRESENT
CLOSE
HIGH LOW CLOSING TRADING AS A % OF
DATE PRICE PRICE PRICE VOLUME 1/22/96
-------------------- ----- ----- ------- ------- ---------
2 6.63 6.25 6.25 1,100 42.40%
3 6.25 6.25 6.25 1,300 42.40%
6 7.00 6.25 6.25 6,000 42.40%
7 7.00 6.50 6.50 500 44.10%
8 7.13 6.63 7.00 6,900 47.50%
9 7.00 6.50 6.75 3,400 45.80%
10 6.75 6.50 6.50 5,400 44.10%
13 6.88 6.50 6.88 5,000 46.60%
14 6.88 6.50 6.50 1,800 44.10%
15 7.00 6.50 6.63 52,400 44.90%
16 7.00 6.50 6.50 48,600 44.10%
17 6.75 6.56 6.63 35,600 44.90%
20 7.00 6.50 6.63 2,100 44.90%
21 8.38 6.50 8.00 182,000 54.20%
22 8.25 7.50 7.50 117,200 50.80%
23 7.88 7.50 7.50 40,500 50.80%
24 7.88 7.38 7.50 16,600 50.80%
27 7.50 7.25 7.25 3,800 49.20%
28 7.63 7.25 7.25 21,900 49.20%
29 7.50 7.25 7.50 46,600 50.80%
30 7.50 7.25 7.25 31,800 49.20%
31 7.50 7.25 7.25 14,700 49.20%
Feb. 3, 1997 7.50 7.38 7.44 21,500 50.40%
4 7.50 7.00 7.00 18,200 100.00%
5 7.38 7.19 7.38 4,400 105.40%
6 7.38 7.00 7.25 2,900 103.60%
7 7.25 6.88 7.25 12,000 103.60%
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CROP GROWERS PRICE / VOLUME ANALYSIS
JANUARY 22, 1996 TO PRESENT
CLOSE
HIGH LOW CLOSING TRADING AS A % OF
DATE PRICE PRICE PRICE VOLUME 1/22/96
-------------------- ----- ----- ------- ------- ---------
10 7.25 7.00 7.00 1,000 100.00%
11 7.25 6.63 6.69 32,900 95.50%
12 7.00 6.63 7.00 32,700 100.00%
13 7.50 6.63 7.38 26,400 105.40%
14 8.00 7.00 7.50 20,600 107.10%
17 8.00 7.00 7.50 NA 107.10%
18 8.88 7.13 8.75 73,000 125.00%
19 9.13 8.50 8.75 50,900 125.00%
20 9.00 8.63 8.88 33,600 126.80%
21 9.00 8.25 8.38 14,000 119.60%
24 8.88 8.25 8.38 13,200 119.60%
25 8.88 8.50 8.88 18,900 126.80%
26 8.88 8.38 8.75 11,800 125.00%
27 8.88 8.50 8.88 7,600 126.80%
28 8.88 8.38 8.38 1,700 119.60%
Mar. 3, 1997 8.63 8.25 8.25 19,700 117.90%
-------------------------------------------
Source: IDD Information Services / Tradline
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[Logo] PAGE 17
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CROP GROWERS
13-F INSTITUTIONAL HOLDINGS BY QUARTER
9/30/95 TO 12/31/96
SHARES HELD AS OF:
--------------------------------------------------------------------
INSTITUTION 12/31/96 9/30/96 6/30/96 3/31/96 12/31/95 9/30/95
-------------------------- -------- -------- -------- -------- -------- --------
Xxxxxx Xxxxxxxx Xx 805,700 805,700 805,700 676,200 531,800 -
Xxxxx Fargo & Company 258,400 - - - - -
Dimensional Fund Advs. 150,600 150,600 106,400 97,900 95,400 12,000
Xxxxxxxxx, Xxxx X 138,500 102,700 50,000 - - -
Barclays Bank Plc 118,061 118,061 140,161 - - -
Prudential Ins Co/Amer 110,100 110,100 68,100 90,100 79,800 54,800
Wellington Management Co 94,000 94,000 84,000 70,000 104,800 35,000
Sit Investment Assocs. 87,500 - 87,500 119,500 20,000 -
Credit Suisse Fst Boston 48,600 63,600 53,900 - - -
Painewebber Group Inc 25,135 25,135 25,135 24,707 24,507 24,235
Mellon Bank Corporation 18,900 18,900 18,900 30,900 23,100 21,900
Panagora Asset Mgmt Inc 17,100 - - - - -
Harvard College 15,000 15,000 - - - -
Bear Xxxxxxx & Co 3,800 2,300 - - - -
World Asset Management 2,900 2,900 2,900 2,200 900 900
ANB Investment Mgmt & Tr 2,800 3,900 4,500 4,500 4,500 2,700
United States Trust/N Y 200 200 200 200 - -
Xxxxxxxxx Inst. Eq. Mgmt - 16,700 - - - -
New York St Teachers Ret - - 34,300 34,300 34,300 34,300
Bankers Trust N Y Corp - - 7,800 9,300 8,700 6,900
Travelers Inc - - 4,500 4,500 1,200 -
Bzw Barclays Glbl Invts - - - 128,567 106,967 101,967
Mackenzie Financial Corp - - - 41,000 126,000 126,000
Calif State Teachers Ret - - - 18,800 18,800 18,800
Xxxxxx Xxxx Equity Mgmt - - - 14,000 18,300 17,300
Xxxxxx Brothers Hldgs - - - 200 200 -
Essex Investment Mgmt Co - - - - 210,800 289,675
TCW Group Inc - - - - 168,500 214,000
First Bank System Inc - - - - 117,200 109,600
Fidelity Mgmt & Res Corp - - - - 30,000 188,000
American Bank St Xxxx - - - - 19,475 16,874
Xxxxxxxx Wertheim Invt - - - - 2,600 2,600
Great West Life Assur Co - - - - 500 -
Norwest Bk Minnesota N A - - - - 300 -
Wisconsin Investmt Board - - - - - 90,800
Xxxxxxxxxx Xxxxxxx H - - - - - 27,200
---------------
(1) Source: CDA Spectrum (December 31, 1996 Form 13-F filings.)
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CGRO ANNOUNCES FORMER EXECUTIVE TO SELL SHARES
ABN AMRO CHICAGO CORPORATION -- RESEARCH NOTES
Subject: Crop Growers Corporation Opinion
(CGRO -- 8 1/2) -- *$Nsdq -------
-------
Current: HOLD
-------
Analyst: Xxxxxx X. Xxxxxxxx, CPA (000) 000-0000 Prior: HOLD
Xxxxxxx X. Xxxxxxx (000) 000-0000
----------------------------------------------------------------------
----------------------------------------------------------------------
Date: February 19, 1997
--------------------------------------------------------------------------------
Earnings Per Share Cal. Lt. Shares 52-
-------------------------- P/E Grth. O/S Week
12/95 12/96E 12/97E 1996E Rate Yield (Mil.) Range
-------- ----- ------ ------ ----- ----- ----- ------- -----
Current: $0.51 $0.38 $0.14 21.1x 20% 0.0% 8.2 30-6
Prior: $0.70 $1.10
--------------------------------------------------------------------------------
1Q/Mar 2Q/Jun 3Q/Sep 4Q/Dec Total
------ ------ ------ ------ -----
1995A $0.63 0.03 0.41 (0.55) 0.51
1996E 0.88 (0.41) 0.19 (0.31) 0.38
1997E 0.54 (0.42) 0.03 (0.01) 0.14
--------------------------------------------------------------------------------
Lowering Estimates to Reflect Competitive Environment
Great American Agrees to Buy Shares of Former Executives
Great American Offer Highlights Value Inherent in CGRO's Control of Large MPCI
Book of Business
Rating Remains HOLD
--------------------------------------------------------------------------------
Updating CGRO 1996 and 1997 EPS Estimates
Following recent discussions with management, we are lowering our 1996 earnings
estimates for CGROs for the following reasons;
First, indications are that CNA Insurance has been very aggressive in targeting
its former accounts serviced by Crop Growers, and that in certain areas, CNA has
been successful. As such, we now expect premium serviced to decline for the
year rather than increase.
Second, commission rates paid to retailers are proving sticky. We had
previously assumed that mandated cuts in the service fee percentage paid to crop
insurers would be offset in part by cuts in the rate paid to retail agents. Due
to increasing competition, we expect retail commission rates to decline
slightly, if at all.
Third, our previous estimates assumed general expenses would decline relative to
premium service year over year. However, given the now expected decline in
premium, we believe that general expenses will increase relative to premiums in
1997 putting further stress on margins.
Fourth, because of the reduction in our premium projection our estimate for
profit sharing income has been slashed as well.
For 1996 and 1997 we now expect CGRO to report operating EPS of $0.38 and $0.14,
respectively. Our admittedly stale 1996 and 1997 estimates had been $0.70 and
$1.10.
Our earnings estimate assume that the service fee percentage falls to 28% for
crop year 1998 from the current 29% as expected. However, we note that the
Clinton administration has proposed within its budget that the rate be lowered
to 24%. If this were in fact to happen, we would expect a significantly worse
deterioration in margins.
Crop Growers Former Executives To Sell Shares
Crop Growers reported that former CEO, Xxxx Xxxxxxxxxx, has entered into an
agreement with Great American Insurance Company of Cincinnati, OH, a subsidiary
of American Financial Group (APG-NYSE-37 1/8) to purchase his stake remaining
stake in CGRO. In addition, Great American has also agreed to purchase shares
held by former CEO, Xxxx Xxxxx. On a combined basis, the two transactions would
accumulate to 22.9% of the company's outstanding common shares.
Notice was given under terms of an agreement between Xxxxxxxxxx and Firemen's
Fund Insurance Company, pursuant to which Fireman's Fund has a right of first
refusal to purchase Xxxxxxxxxx'x shares. Fireman's Fund has until March 6, 1997
to determine whether to exercise its rights.
Given the current earnings outlook of Crop Growers, we believe Great American's
interest is not so much the profitability of CGRO but rather CGRO's book of
business (after all as a small player in the crop insurance market. Great
American should be aware of the deteriorating fundamentals). Given the
actuarial pricing models of the federal government, we know that in an average
year, a crop insurer should make approximately 11% on premium written. On $230
million of premium, the expected profit from the CGRO's expected 1997 CGRO book
would be $25.3 million. Even after CGRO's share, the remaining profit would be
$16.0 million pre-tax or $10.4 million after taxes. If Great American could
swing the book of business to itself for only $18 million, such a transaction
should prove very attractive, even if Great American would have to wait three
years until CGRO's managing general agency agreement with Fireman's Fund lapses.
As a manager of a large, apparently profitable book of business, CGRO controls
significant intrinsic value. The question is who will ultimately control that
value and whether it will be used to benefit current shareholders. Unless Crop
Growers Board of Directors believe, that despite inherent conflicts of interest,
that either Fireman's Fund or Great American will work to maximize that value
for the benefit of all shareholders, we believe the Board should seek to
maximize value by offering the company in an auction process to the buyer who
values it most - whether it be the Fund, Great American or some other party.
Rating Remains HOLD
In the face of significant uncertainties surrounding the ultimate outcome of
Great American's bid, we are leaving our rating unchanged at HOLD. A purchase
of Xxxxxxxxxx'x and Black's stock by either Fireman's Fund or Great American
could make it difficult for the intrinsic value controlled by CGRO to be
realized given the inherent conflicts of interest between either of these two
companies and other shareholders.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHARE PRICE ANALYSIS
($ MILLIONS, EXCEPT PER SHARE AMOUNTS)
POTENTIAL SHARE PURCHASE PRICES
CGRO ------------------------------------------------------------------------
VALUE $ 7.00 $ 8.00 $ 9.00 $ 10.00 $ 10.25 $ 11.00 $ 12.00
-------- ------- ------- ------- ------- ------- ------- -------
PREMIUM TO:
-----------
CURRENT PRICE (3/3/97) $ 8.250 -15.2% -3.0% 9.1% 21.2% 24.2% 33.3% 45.5%
- 1 WEEK PRIOR 8.375 -16.4% -4.5% 7.5% 19.4% 22.4% 31.3% 43.3%
- 4 WEEKS PRIOR 7.438 -5.9% 7.6% 21.0% 34.5% 37.8% 47.9% 61.3%
- 60 DAYS PRIOR 7.000 0.0% 14.3% 28.6% 42.9% 46.4% 57.1% 71.4%
52 WEEK HIGH (AS OF 3/3/97) $ 11.750 -40.4% -31.9% -23.4% -14.9% -12.8% -6.4% 2.1%
52 WEEK LOW (AS OF 3/3/97) 5.875 19.1% 36.2% 53.2% 70.2% 74.5% 87.2% 104.3%
IPO PRICE (6/23/94) 7.500 -6.7% 6.7% 20.0% 33.3% 36.7% 46.7% 60.0%
SECONDARY OFFERING PRICE 14.000 -50.0% -42.9% -35.7% -28.6% -26.8% -21.4% -14.3%
(11/29/94)
MULTIPLE TO EPS: (a)
----------------
1996 E $ 0.12 58.3 x 66.7 x 75.0 x 83.3 x 85.4 x 91.7 x 100.0 x
1997 E 0.49 14.3 16.3 18.4 20.4 20.9 22.4 24.5
1998 E 0.39 17.9 20.5 23.1 25.6 26.3 28.2 30.8
% OF VOLUME TRADED ABOVE DAILY CLOSING PRICE SINCE:
---------------------------------------------------
LTM 82.6% 54.9% 35.7% 18.5% 11.6% 0.6% 0.0%
IPO (EXCLUDING FIRST TRADING DAY) 96.2% 88.4% 79.1% 72.6% 70.3% 66.3% 62.7%
(a) Adjusted earnings estimates provided by Crop Growers. Core operating
earnings only. Excludes non-core expenses.
(b) LTM earnings per share excludes substantial one-time charges and legal
expenses.
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
CROP GROWERS TRADED VOLUME ANALYSIS
LATEST TWELVE MONTHS
Percent of Total Volume Traded at Specified Prices
March 4, 1996 to February 28, 1997
[GRAPH]
DAILY CLOSING PRICE PERCENT TRADED
6-7 17.44
7-8 27.67
8-9 19.19
9-10 17.19
10-11 18.51
Graph shows 7,859,600 cumulative shares, 96% of the 8,149,000 shares outstanding
as reported on 2/28/97.
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CROP GROWERS TRADED VOLUME ANALYSIS
LATEST TWELVE MONTHS
PRICE GREATER NUMBER OF TRADED VOLUME % OF TOTAL
THAN OR EQUAL TO SHARES TRADED IN PRICE RANGE SHARES
----------------- ----------------- ----------------- -----------
$ 11.00 46,100 46,100 0.6%
10.50 468,700 422,600 6.0%
10.00 1,454,800 986,100 18.5%
9.50 2,092,900 638,100 26.6%
9.00 2,805,700 712,800 35.7%
8.50 3,757,800 952,100 47.8%
8.00 4,313,600 555,800 54.9%
7.50 5,375,500 1,061,900 68.4%
7.00 6,488,500 1,113,000 82.6%
6.50 6,934,100 445,600 88.2%
6.00 7,859,600 925,500 100.0%
-------------
7,859,600
-------------
-------------
$ 10.25 909,000 11.6%
--------------------------------------------------------------------------------
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CROP GROWERS TRADED VOLUME ANALYSIS
IPO TO PRESENT EXCLUDING FIRST TRADING DAY
Percent of Total Volume Traded at Specified Prices
June 23, 1994 to February 28, 1997
[GRAPH]
DAILY CLOSING PRICE PERCENT TRADED
6-9 20.87
9-12 16.39
12-15 36.80
15-18 14.40
18-21 3.05
21-24 1.52
24-27 3.55
27-30 1.73
30-33 1.70
DAILY CLOSING PRICE
Graph shows 35,829,000 cumulative shares, 440% of the 8,149,000 shares
outstanding as reported on 2/28/97.
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
CROP GROWERS TRADED VOLUME ANALYSIS
IPO TO PRESENT EXCLUDING FIRST TRADING DAY
-------------------------------------------
Price Greater Number of Traded Volume % of Total
Than or Equal To Shares Traded in Price Range Shares
---------------- ------------- -------------- ----------
$ 32.00 208,000 208,000 0.6%
31.00 439,000 231,000 1.2%
30.00 608,300 169,300 1.7%
29.00 1,055,300 447,000 2.9%
28.00 1,055,300 - 2.9%
27.00 1,226,400 171,100 3.4%
26.00 1,468,700 242,300 4.1%
25.00 1,828,300 359,600 5.1%
24.00 2,497,700 669,400 7.0%
23.00 2,831,300 333,600 7.9%
22.00 2,914,300 83,000 8.1%
21.00 3,043,400 129,100 8.5%
20.00 3,365,000 321,600 9.4%
19.00 3,568,000 203,000 10.0%
18.00 4,134,500 566,500 11.5%
17.00 5,637,600 1,503,100 15.7%
16.00 7,201,000 1,563,400 20.1%
15.00 9,292,800 2,091,800 25.9%
14.00 12,554,800 3,262,000 35.0%
13.00 16,921,600 4,366,800 47.2%
12.00 22,476,900 5,555,300 62.7%
11.00 23,747,200 1,270,300 66.3%
10.00 25,998,900 2,251,700 72.6%
9.00 28,350,600 2,351,700 79.1%
8.00 31,686,800 3,336,200 88.4%
7.00 34,457,900 2,771,100 96.2%
6.00 35,829,000 1,371,100 100.0%
-------------
35,829,000
-------------
-------------
$ 10.25 25,188,800 70.3%
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SERVICE COMPANY AND BROKER INDUSTRY VALUATIONS AND MARKET PERFORMANCE
PRICING MULITPLES 5 YR.
MARKET TOTAL ------------------------------------- PROJ.
3/3/97 VALUE ASSETS 0000 X 0000 X 1998 E MKT. / DIV. EPS
PRICE ($ MIL) ($ MIL) P/E (1) P/E (1) P/E (1) BOOK (2) YIELD GROWTH
-------- -------- --------- ------- ------- ------- -------- ----- -------
CROP GROWERS $ 8.250 $ 66.0 $ 370.6 21.7 X 58.9 X N/A X 1.5 X 0.0% 20.0%
COMPANY MODEL DATA 68.8 (4) 16.8 (4) 21.2 (4)
-----------------------------------------------------------------------------------------------------------------------
CROP INSURANCE PARTICIPANTS
------------------------------
Acceptance Insurance $ 21.250 $ 324.0 $ 1,077.4 11.1 X 9.4 X N/A X 1.6 X 0.0% N/A
Xxxxxx International 16.125 112.9 398.5 8.7 8.0 N/A 2.8 0.0% N/A
-----------------------------------------------------------------------------------------------------------------------
BROKERS
------------------------------
Acordia, Inc. $ 31.750 $ 446.4 $ 752.9 16.0 X 14.4 X 13.4 X 2.0 X 2.5% 15.0%
X.X. Xxxxxx Holdings 23.000 304.9 529.5 15.0 12.2 10.6 3.9 1.7% 15.0%
X.X. Xxxxxxxxx (5) 30.875 501.0 561.5 11.7 11.3 10.1 4.0 4.0% 9.5%
Hilb, Xxxxx & Xxxxxxxx 13.250 178.9 166.1 15.6 14.4 14.7 3.3 4.7% N/A
Xxxxx & McLennan 117.250 8,420.6 4,300.8 18.6 16.6 14.7 5.4 3.1% 10.3%
Xxx & Xxxxx 27.250 237.0 164.3 14.3 12.4 10.8 4.1 1.9% N/A
MEAN 15.2 X 13.6 X 12.4 X 3.8 X 3.0% 12.5%
ADJUSTED MEAN (6) 15.2 13.4 12.4 3.8 2.9% 12.7%
MEDIAN 15.3 13.4 12.1 3.9 2.8% 12.7%
HIGH 18.6 16.6 14.7 5.4 4.7% 15.0%
LOW 11.7 11.3 10.1 2.0 1.7% 9.5%
-----------------------------------------------------------------------------------------------------------------------
PRICE PERFORMANCE % OF
----------------- 52-WEEK RANGE 52
30 60 -------------------- WEEK
DAYS DAYS LOW HIGH RANGE
------ ----- -------- -------- -----
CROP GROWERS 24.5% 32.0% $ 5.875 $ 11.750 40.4%
COMPANY MODEL DATA
--------------------------------------------------------------------------------
CROP INSURANCE PARTICIPANTS
------------------------------
Acceptance Insurance 9.7% 3.7% $ 14.125 $ 22.500 85.1%
Xxxxxx International -3.7% N/A 13.375 18.000 59.5%
--------------------------------------------------------------------------------
BROKERS
------------------------------
Acordia, Inc. 13.9% 7.6% $ 27.250 $ 33.750 69.2%
X.X. Xxxxxx Holdings 15.0% 21.1% 17.750 25.500 67.7%
X.X. Xxxxxxxxx (5) 2.9% 2.9% 29.125 39.250 17.3%
Hilb, Xxxxx & Xxxxxxxx -0.9% -0.9% 11.375 14.000 71.4%
Xxxxx & McLennan 10.0% 5.9% 88.000 123.000 83.6%
Xxx & Xxxxx 1.4% 1.9% 22.750 27.500 94.7%
MEAN 7.0% 6.4% 67.3%
ADJUSTED MEAN (6) 7.0% 4.6% 73.0%
MEDIAN 6.4% 4.4% 70.3%
HIGH 15.0% 21.1% 94.7%
LOW -0.9% -0.9% 17.3%
--------------------------------------------------------------------------------
(1) BASED ON FIRST CALL EARNINGS ESTIMATES. 1996 EARNINGS ARE ACTUAL EXCEPT IN
INSTANCES WHERE 1998 ESTIMATES ARE NOT AVAILABLE.
(2) BOOK VALUE IS PRE-FASB 115.
(3) ESTIMATES ARE FROM S & P EARNINGS GUIDE.
(4) PRELIMINARY COMPANY MODEL BASED ON CFO'S MODEL FOR EVALUATING FINANCING
ALTERNATIVES. CORE OPERATING EARNINGS ONLY. EXCLUDES NON-CORE EXPENSES.
(5) FOCUSES ON NON-TRADITIONAL ALTERNATIVE RISK INSURANCE PRODUCTS.
(6) EXCLUDES HIGH AND LOW.
--------------------------------------------------------------------------------
[Logo] PAGE 24
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--------------------------------------------------------------------------------
EXCESS AND SURPLUS LINES INSURANCE INDUSTRY VALUATIONS AND MARKET PERFORMANCE
PRICING MULTIPLES 5 YR.
MARKET TOTAL --------------------------------------- PROJ.
3/3/97 VALUE ASSETS 0000 X 0000 X 1998 E MKT. / DIV. EPS
PRICE ($ MIL) ($ MIL) P/E (1) P/E (1) P/E (1) BOOK (2) YIELD GROWTH
--------- --------- --------- ------ ------- ------- -------- ----- ------
Acceptance Insurance $ 21.250 $ 324.0 $ 1,077.4 11.1 X 9.4 X N/A X 1.6 X 0.0% N/A
Xxxxxxx, X.X. Corp. 53.000 1,040.1 3,814.0 14.7 12.3 10.6 1.2 1.0% 7.0%
Capsure Holdings 10.875 171.3 408.2 9.9 13.9 11.7 1.4 0.0% 13.0%
Exel Ltd. 44.500 3,881.1 4,549.5 14.2 12.5 11.4 2.1 2.2% 11.0%
Gainsco, Inc. 9.250 198.4 289.4 12.5 9.8 8.6 1.8 0.6% 7.0%
HCC Insurance Holdings (3) 23.500 815.0 743.2 19.4 17.0 13.3 3.6 0.3% 23.3%
Xxxxxx Corp. 109.250 597.2 1,388.1 19.1 16.0 12.8 2.4 0.0% 23.0%
NYMAGIC, Inc. 20.750 215.5 700.3 11.0 10.4 N/A 1.2 1.9% -3.0%
RLI Corp. 34.625 271.5 836.6 12.1 11.2 10.2 1.5 1.6% 12.0%
MEAN 13.8 X 12.5 X 11.2 X 1.9 X 0.9% 11.7%
ADJUSTED MEAN (4) 13.5 12.3 11.3 1.7 0.8% 12.2%
MEDIAN 12.5 12.3 11.4 1.6 0.6% 11.5%
HIGH 19.4 17.0 11.3 3.6 2.2% 23.3%
LOW 9.9 9.4 8.6 1.2 0.0% -3.0%
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
PRICE PERFORMACE % OF
----------------- 52-WEEK RANGE 52
30 60 ------------------- WEEK
DAYS DAYS LOW HIGH RANGE
------ ------ -------- -------- ------
Acceptance Insurance 9.7% 3.7% $ 14.125 $ 22.500 85.1%
Xxxxxxx, X.X. Corp. 14.3% 0.2% 40.250 53.500 96.2%
Capsure Holdings 1.2% 4.8% 8.000 18.875 26.4%
Exel Ltd. 11.9% 18.3% 31.750 45.125 95.3%
Gainsco, Inc. 1.4% 1.4% 8.750 11.750 16.7%
HCC Insurance Holdings (3) -17.2% -10.5% 19.125 32.750 32.1%
Xxxxxx Corp. 15.0% 27.8% 78.000 111.750 92.6%
NYMAGIC, Inc. 13.7% 11.4% 17.000 20.750 100.0%
RLI Corp. 6.5% 6.9% 22.375 36.625 86.0%
MEAN 6.3% 7.1% 70.0%
ADJUSTED MEAN (4) 8.4% 6.7% 73.4%
MEDIAN 9.7% 4.8% 86.0%
HIGH 15.0% 27.8% 100.0%
LOW -17.2% -10.5% 16.7%
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
(1) BASED ON FIRST CALL EARNINGS ESTIMATES. 1996 EARNINGS ARE ACTUAL EXCEPT
IN INSTANCES WHERE 1998 ESTIMATES ARE NOT AVAILABLE.
(2) BOOK VALUE IS PRE-FASB 115.
(3) ON JANUARY 17, 1997, HCC AGREED TO ACQUIRE AVEMCO CORP. FOR $237 MILLION IN
STOCK.
(4) EXCLUDES HIGH AND LOW.
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[Logo] PAGE 25
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SELECTED PROPERTY & CASUALTY INSURANCE MERGER & ACQUISITION ACTIVITY
PUBLIC TARGETS: 1992 TO PRESENT
PENDING DEALS GREATER THAN $50 MILLION
DEAL DATE DATE
# ANNOUNCED EFFECTIVE TARGET NAME TARGET BUSINESS DESCRIPTION
---- --------- --------- ----------- ---------------------------
PENDING TRANSACTIONS
--------------------
1 01/17/97 Avemco Corp Fire, marine and casualty insurance
2 12/11/96 Alexander & Alexander Services Insurance brokerage services
3 09/16/96 Pac Rim Holding Corp Workers' compensation services
4 02/20/96 Financial Institutions Insurance Group D&O, prof liab, fidelity, bond
WITHDRAWN TRANSACTIONS
----------------------
1 02/27/96 (b) Midland Financial Group Inc Substandard auto
ALL DEALS
VALUE
OF
DEAL DEAL TRANSACTION TRANSACTION
# ACQUIROR NAME ($MIL) CONSIDERATION FORM CY P/E NY P/E
---- ------------- ----- ------------- ---- ----------- -----------
1 HCC Insurance Holdings Inc. $236.6 1 share common/share common Merger 23.3 x 18.0 x
2 Aon Corp. 1,227.5 $17.5 cash/sh com; $17.5 cash/Class A sh Merger 21.3 18.2
com; $17.5 cash/Class C sh com; $120 mil
cash/ Series A convertible pfd; $317.5 mil
cash/Series B cumulative convertible pfd
3 Superior National Insurance Group 54.0 $3 cash/sh com; cash/warrant; plus the Merger 17.6 (a) N/A
assumption approximately $25.5 mil in
liabilities
4 Xxxx Xxxx (Co. Pres) and Castle 54.1 $54.1 mm or $16/share accounting for the Acq. of 12.3 (a) N/A
Xxxxxx 20% stock div payable 2/22 Assets
1 Xxxxxxxxx Holding Corp 80.0 $14.50 cash and shs com & pfd/sh com, Merger 9.0 N/A
whereby 50% of consideration to be paid in
cash, 40% in com and 10% in pfd
MEAN 16.7 x 18.1 x
ADJUSTED MEAN (EXCLUDES HIGH & LOW) 17.1 NMF
HIGH 23.3 18.2
LOW 9.0 18.0
----------------------------------------------------------
(a) TRANSACTION MULTIPLES FOR PAC RIM AND FINANCIAL INSTITUTIONS INSURANCE ARE
BASED ON ACTUAL LTM EARNINGS.
(b) ON JULY 25, 1996, XXXXXXXXX ANNOUNCED THAT THE MERGER HAD BEEN WITHDRAWN.
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
SELECTED PROPERTY & CASUALTY INSURANCE MERGER & ACQUISITION ACTIVITY
PUBLIC TARGETS: 1992 TO PRESENT
PENDING DEALS GREATER THAN $50 MILLION
(CONTINUED)
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
1 DAY 1 WEEK 4 WEEKS 6 MONTHS 1 YEAR PRIOR
DEAL DATE DATE PRIOR TO PRIOR TO PRIOR TO PRIOR TO PRIOR TO
# ANNOUNCED EFFECTIVE TARGET NAME XXX DATE XXX DATE XXX DATE XXX DATE XXX DATE
---- --------- --------- ------------------------- -------- -------- -------- -------- --------
PENDING TRANSACTIONS
--------------------
1 01/17/97 Avemco Corp. 46.7% 49.7% 81.8% 83.3% 80.3%
2 12/11/96 Alexander & Alexander Services 23.9% 25.0% 17.6% -16.2% -16.7%
3 09/16/96 Pac Rim Holding Corp. 0.0% 14.3% 14.3% 26.3% 4.3%
4 02/20/96 Financial Institutions Insurance Group 10.3% 6.7% 14.3% 18.2% 77.2%
WITHDRAWN TRANSACTIONS
----------------------
1 02/27/96 (a) Midland Financial Group Inc 22.1% 23.4% 26.1% -22.7% -19.4%
ALL DEALS MEAN 20.6% 23.8% 30.8% 17.8% 25.2%
ADJUSTED MEAN (EXCLUDES HIGH & LOW) 18.8% 20.9% 19.3% 9.4% 21.6%
HIGH 46.7% 49.7% 81.8% 83.3% 80.3%
LOW 0.0% 6.7% 14.3% -22.7% -19.4%
---------------
(a) ON JULY 25, 1996, XXXXXXXXX ANNOUNCED THAT THE MERGER HAD BEEN WITHDRAWN.
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SELECTED PROPERTY & CASUALTY INSURANCE MERGER & ACQUISITION ACTIVITY
PUBLIC TARGETS: 1992 TO PRESENT
COMPLETED DEALS GREATER THAN $50 MILLION
DEAL DATE DATE
# ANNOUNCED EFFECTIVE TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME
---- --------- --------- ------------------------- ------------------------------ --------------------
COMPLETED TRANSACTIONS
----------------------
1 07/31/96 (a) 11/25/96 American Re Corp P&C reinsurance Muenchener
Rueckversicherungs
2 07/01/96 10/02/96 National Re P&C reinsurance General Re
3 08/18/95 12/20/95 Capital Guaranty Municipal bond insurer Financial Security
Assurance
4 06/19/95 10/03/95 Milwaukee Insurance Group Automobile insurance Unitrin Inc
5 06/13/95 11/01/95 CII Financial Inc Workers compensation ins svcs Sierra Health Services Inc
6 05/11/95 10/19/95 Employee Benefits Plans Inc Services to self funded program First Financial Management
7 04/10/95 01/04/96 Xxxxxx Corp Securities brokerage firm Investor Group - Zurich
Insurance Group & Insurance
Partners
8 01/12/95 04/26/95 Re Capital Corp Reinsurance company Zurich Reinsurance Centre
9 12/19/94 05/22/95 Victoria Financial Corp Non-standard auto USF&G Corp
10 10/18/93 01/20/94 UniCare Financial Corp Insurance underwriting svcs Wellpoint Health
Networks Inc
ALL DEALS MEAN
ADJUSTED MEAN (EXCLUDES
HIGH & LOW)
HIGH
LOW
VALUE
OF
DEAL DEAL TRANSACTION TRANSACTION
# ($MIL) CONSIDERATION FORM CY P/E NY P/E
---- ----------- ---------------------------------------- --------------- ----------- ------------
1 $ 3,058.4 $65 cash/sh com Merger 16.2 x 14.4 x
2 940.0 $53/share in cash and General Re stock Acq of Assets 16.8 15.1
2 Stock component must total at least 50%
3 197.7 6716 sh com plus $5.69 Merger 13.5 12.1
4 94.0 $22 cash/sh com Merger 21.6 N/A
5 78.3 .37 shs com/sh com Merger N/A N/A
6 170.0 .1975 shs com/sh com Merger 14.6 N/A
7 1,666.9 $49.50 cash/sh com, revised from $47.50 Merger 13.8 10.8
cash + $2 perf/sh com
8 199.4 $18.5 cash/sh com, plus $69 mil in asspmtn Merger 12.7 N/A
of 5.5% conv debenture
9 53.1 .91572 sh com/sh com Merger 21.9 12.2
10 145.9 $29 cash/sh com Merger 15.9 13.2
16.3 X 13.0 X
16.1 13.0
21.9 15.1
12.7 10.8
---------------
(a) ON JULY 31, 1996 THE FIRST PUBLIC REPORTS OF MUNICH RE'S INTEREST IN
AMERICAN RE WERE PUBLISHED. THE MERGER WAS PUBLICLY ANNOUNCED ON AUGUST
14, 1996.
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SELECTED PROPERTY & CASUALTY INSURANCE MERGER & ACQUISITION ACTIVITY
PUBLIC TARGETS: 1992 TO PRESENT
COMPLETED DEALS GREATER THAN $50 MILLION
(CONTINUED)
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
1 DAY 1 WEEK 4 WEEKS 6 MONTHS 1 YEAR PRIOR
DEAL DATE DATE PRIOR TO PRIOR TO PRIOR TO PRIOR TO PRIOR TO
# ANNOUNCED EFFECTIVE TARGET NAME XXX DATE XXX DATE XXX DATE XXX DATE XXX DATE
---- --------- --------- -------------------- -------- -------- -------- -------- -------------
COMPLETED TRANSACTIONS
----------------------
1 07/31/96 (a) American Re Corp 27.8% 41.7% 41.7% 53.8% 72.8%
2 07/01/96 National Re 40.4% 57.6% 60.6% 39.5% NA
3 08/18/95 12/20/95 Capital Guaranty 13.0% 18.0% 28.3% 45.0% 55.7%
4 06/19/95 10/03/95 Milwaukee Insurance Group 63.0% 63.0% 91.3% 131.6% NA
5 06/13/95 11/01/95 CII Financial Inc 51.0% 62.5% 77.4% NA NA
6 05/11/95 10/19/95 Employee Benefits 57.2% 63.8% 63.8% 68.4% 6.2%
Plans Inc
7 04/10/95 01/04/96 Xxxxxx Corp 20.0% 23.8% 20.7% -14.1% -14.7%
8 01/12/95 04/26/95 Re Capital Corp 51.0% 45.1% 49.5% 46.5% 39.6%
9 12/19/94 05/22/95 Victoria Financial Corp 49.7% 58.3% 81.3% 75.1% NA
10 10/18/93 01/20/94 UniCare Financial Corp 46.8% 41.5% 38.1% NA NA
ALL DEALS MEAN 42.0% 47.5% 55.3% 55.7% 31.9%
ADJUSTED MEAN (EXCLUDES HIGH & LOW) 43.0% 49.2% 55.1% 54.7% 33.8%
HIGH 63.0% 63.8% 91.3% 131.6% 72.8%
LOW 13.0% 18.0% 20.7% -14.1% -14.7%
-----------------------------------
(a) ON JULY 31, 1996 THE FIRST PUBLIC REPORTS OF MUNICH RE'S INTEREST IN
AMERICAN RE WERE PUBLISHED. THE MERGER WAS PUBLICLY ANNOUNCED ON AUGUST
14, 1996.
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SELECTED CROP INSURANCE MERGER & ACQUISITION ACTIVITY
1993 TO PRESENT
DEAL DATE DATE
# ANNOUNCED EFFECTIVE TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME
---- --------- --------- -------------------------------- --------------------------- -------------------
1 03/15/95 07/14/95 Xxxxxx Hail Insurance Company Crop insurance Crop Grower Corp.
2 03/29/93 08/13/93 Redland Group Inc Crop insurance Acceptance Insurance Companies
VALUE
OF
DEAL DEAL
# ($MIL) CONSIDERATION FORM
---- --------- ----------------------------------- ---------------
1 $ 11.4 $7 mil cash plus 42,554 shs plus Merger
$3.4 mil earnout/stock
2 20.1 1,339 mil shs com plus earnout of 240,000 Merger
shs com/com
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SELECTED CROP INSURANCE MERGER & ACQUISITION ACTIVITY
1993 TO PRESENT
(CONTINUED)
Aggregate Value to Statutory Data ($ mil)
------------------------------------ ----------------------------------
Net Income Net Income
-------------- Policy -------------- Policy
Deal Date Date Prior Current Direct holders' Prior Current Direct holders'
# Announced Effective Target Name Year Year Premiums Surplus Year Year Premiums Surplus
---- --------- --------- ----------------------------- ---- ------- -------- -------- ----- ------- -------- --------
1 03/15/95 07/14/95 Xxxxxx Hail Insurance Company 8.9 x 4.1 x 0.3 x 1.4 x 1.280 2.793 44.164 8.204
2 03/29/93 08/13/93 Redland Group Inc. NMF NMF 0.2 1.4 (3.806) (4.963) 112.654 14.719
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DISCOUNTED CASH FLOW ANALYSIS
EXIT AT YEAR 10
DOLLARS IN MILLIONS
Terminal Value Multiple to Net Earnings
-------------------------------------------------
8.0 x 8.5 x 9.0 x 9.5 x 10.0 x
-------------------------------------------------
13% $ 61.7 $ 63.9 $ 66.1 $ 68.3 $ 70.5
Discount 14% 57.3 59.3 61.3 63.3 65.3
Rate 15% 53.3 55.1 57.0 58.8 60.7
16% 49.6 51.3 53.0 54.7 56.4
17% 46.3 47.8 49.4 50.9 52.4
Terminal Value Multiple to Book Value
-------------------------------------------------
1.00 x 1.25 x 1.50 x 1.75 x 2.00 x
-------------------------------------------------
13% $ 57.4 $ 65.1 $ 72.7 $ 80.4 $ 88.1
Discount 14% 53.4 60.4 67.4 74.5 81.5
Rate 15% 49.7 56.1 62.6 69.0 75.4
16% 46.3 52.2 58.1 64.0 69.9
17% 43.2 48.6 54.1 59.5 64.9
PER SHARE
Terminal Value Multiple to Net Earnings
------------------------------------------------
8.0 x 8.5 x 9.0 x 9.5 x 10.0 x
------------------------------------------------
13% $ 7.75 $ 8.03 $ 8.30 $ 8.58 $ 8.86
Discount 14% 7.20 7.46 7.71 7.96 8.21
Rate 15% 6.70 6.93 7.16 7.39 7.62
16% 6.24 6.45 6.66 6.87 7.08
17% 5.81 6.01 6.20 6.40 6.59
Terminal Value Multiple to Book Value
---------------------------------------------------
1.00 x 1.25 x 1.50 x 1.75 x 2.00 x
---------------------------------------------------
13% $ 7.21 $ 8.18 $ 9.14 $ 10.11 $ 11.07
Discount 14% 6.71 7.59 8.47 9.36 10.24
Rate 15% 6.24 7.05 7.86 8.67 9.48
16% 5.82 6.56 7.30 8.05 8.79
17% 5.43 6.11 6.79 7.47 8.15
Note:
--------------------------------------------------------------------------------
Based on CFO's model for evaluating financing alternatives.
1997 projections adjusted to reflect settlement of shareholder litigation
reported in 1996 results.
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[Logo] PAGE 32
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CHIEF FINANCIAL OFFICER'S
MODEL FOR EVALUATING
FINANCING ALTERNATIVES
AT FEBRUARY 28, 1997
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BALANCE SHEET
(IN THOUSANDS, EXPECT PER SHARE DATA)
1995 1996 1997 1998 1999
------- ------- ------- ------ -------
ASSETS
Cash 6,316 9,259 16,005 18,482 20,628
Restricted cash 665 5,150 - - -
Investments 9,907 6,808 - - -
Receivables - Due carrier 24,571 20,549 19,134 20,090 22,100
Commissions receivable 12,695 9,590 11,559 11,802 12,615
Financed premium receivables 23,678 24,101 24,076 23,602 24,782
Other receivables 44,705 53,523 - - -
Property and equipment, net 11,687 5,242 5,667 6,092 6,438
Intangibles, net 9,265 8,662 8,142 7,622 6,941
Other assets 8,557 10,632 10,632 10,632 10,632
------- ------- ------- ------ -------
152,045 153,516 95,216 98,322 104,136
------- ------- ------- ------ -------
------- ------- ------- ------ -------
LIABILITIES AND EQUITY
Short - term debt 32,246 24,951 20,465 20,062 21,065
Long - term debt 4,189 3,291 2,491 1,691 891
Premiums - Due carrier 24,571 20,549 19,134 20,091 22,100
Commissions payable 9,419 7,535 7,969 8,248 8,876
Other liabilities 37,279 52,949 - - -
Preferred stock - 10,000 10,000 10,000 10,000
Equity 44,342 34,241 35,157 38,230 41,204
------- ------- ------- ------ -------
152,045 153,516 95,216 98,322 104,136
------- ------- ------- ------ -------
------- ------- ------- ------ -------
0 (0) (0) (0) (0)
Outstanding shares 8,173 7,970 7,970 7,970 7,970
------- ------- ------- ------ -------
------- ------- ------- ------ -------
Book value per share 5.43 4.30 4.41 4.80 5.17
------- ------- ------- ------ -------
------- ------- ------- ------ -------
2000 2001 2002 2003 2004 2005 2006
------- ------- ------- ------ ------- ------- -------
ASSETS
Cash 23,487 28,634 35,045 42,311 51,318 61,717 74,985
Restricted cash - - - - - - -
Investments - - - - - - -
Receivables - Due carrier 24,310 26,741 29,414 32,356 35,592 39,151 43,066
Commissions receivable 13,470 14,818 16,299 17,929 19,722 21,694 23,863
Financed premium receivables 27,260 29,987 32,985 36,284 39,912 43,903 48,294
Other receivables - - - - - - -
Property and equipment, net 6,702 6,879 7,379 7,879 8,379 8,879 9,379
Intangibles, net 5,596 4,184 3,084 2,584 2,184 1,934 1,684
Other assets 10,632 10,632 10,632 10,632 10,632 10,632 10,632
------- ------- ------- ------- ------- ------- -------
111,458 121,875 134,838 149,975 167,739 187,911 211,903
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
LIABILITIES AND EQUITY
Short - term debt 23,171 25,489 28,037 30,841 33,925 37,318 41,050
Long - term debt 91 - - - - - -
Premiums - Due carrier 24,310 26,741 29,414 32,356 35,592 39,151 43,066
Commissions payable 9,346 10,094 11,281 12,396 13,623 14,972 16,456
Other liabilities - - - - - - -
Preferred stock 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Equity 44,539 49,551 56,105 64,381 74,599 86,470 101,331
------- ------- ------- ------- ------- ------- -------
111,458 121,875 134,838 149,975 167,740 187,911 211,903
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
(0) (0) (0) (0) (0) (0) (0)
Outstanding shares 7,970 7,970 7,970 7,970 7,970 7,970 7,970
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Book value per share 5.59 6.22 7.04 8.08 9.36 10.85 12.71
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
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STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1996 1997 1998 1999 2000 2001
------- ------- ------- ------- ------- -------
REVENUES
Service fees and sales 105,198 90,285 91,384 95,617 102,965 111,273
Investment income 2,228 1,000 1,000 1,050 1,100 1,150
Other 4,334 - - - - -
------- ------- ------- ------- ------- -------
111,760 91,285 92,384 96,667 104,065 112,423
COSTS AND EXPENSES
Agent commissions and
Other direct costs 72,690 56,110 58,310 61,389 66,762 70,868
General and administrative 34,469 26,541 26,541 27,868 29,261 30,724
Interest 1,478 1,675 1,675 1,715 1,755 1,795
Other 14,551 4,500 - - - -
------- ------- ------- ------- ------- -------
123,188 88,826 86,526 90,972 97,778 103,387
------- ------- ------- ------- ------- -------
Net earnings (loss) before taxes (11,428) 2,459 5,858 5,695 6,287 9,036
Income taxes 3,715 (959) (2,285) (2,221) (2,452) (3,524)
------- ------- ------- ------- ------- -------
Net earnings (loss) (7,713) 1,500 3,573 3,474 3,835 5,512
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Preferred stock dividend 239 500 500 500 500 500
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
2002 2003 2004 2005 2006
------- ------- ------- ------- -------
REVENUES
Service fees and sales 122,401 134,608 148,034 162,802 179,044
Investment income 1,200 1,250 1,300 1,350 1,400
Other - - - - -
------- ------- ------- ------- -------
123,601 135,858 149,334 164,152 180,444
COSTS AND EXPENSES
Agent commissions and
other direct costs 77,942 85,723 94,282 104,572 114,054
General and administrative 32,260 33,873 35,567 37,345 39,213
Interest 1,835 1,875 1,915 1,955 1,995
Other - - - - -
------- ------- ------- ------- -------
112,037 121,471 131,764 143,872 155,262
------- ------- ------- ------- -------
Net earnings (loss) before taxes 11,564 14,387 17,570 20,280 25,182
Income taxes (4,510) (5,611) (6,852) (7,909) (9,821)
------- ------- ------- ------- -------
Net earnings (loss) 7,054 8,776 10,718 12,371 15,361
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Preferred stock dividend 500 500 500 500 500
------- ------- ------- ------- -------
------- ------- ------- ------- -------
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CASH FLOWS
(IN THOUSANDS)
1996 1997 1998 1999 2000 2001
------ ------ ------ ------ ------ ------
Net earnings (loss) (7,713) 1,500 3,573 3,474 3,835 5,512
Depreciation and amortization 3,273 2,795 2,795 2,935 3,081 3,235
Capital expenditures (3,225) (2,700) (2,700) (2,600) (2,000) (2,000)
Dividends (239) (500) (500) (500) (500) (500)
Investments 3,099 6,808 - - - -
Changes in long-term debt (898) (800) (800) (800) (800) (91)
Changes in short-term debt (7,295) (4,486) (403) 1,003 2,107 2,317
Preferred stock 10,000 - - - - -
Stock transactions (2,387) (84) - - - -
Change in receivables (2,115) 52,994 (725) (4,002) (5,544) (6,504)
Change in payables 9,765 (53,930) 1,236 2,637 2,680 3,179
Other 5,164 - - - - -
------ ------ ------ ------ ------ ------
7,429 1,596 2,476 2,147 2,859 5,147
Cash, Beg of Year 6,981 14,409 16,005 18,482 20,628 23,487
------ ------ ------ ------ ------ ------
Cash, End of Year 14,410 16,005 18,482 20,628 23,487 28,634
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
1 -
Property and equipment
Beginning balance 11,687 5,242 5,667 6,092 6,438 6,702
Additions 2,313 2,000 2,000 2,000 2,000 2,000
Depreciation (1,758) (1,575) (1,575) (1,654) (1,736) (1,823)
Net sales (7,000) - - - - -
------ ------ ------ ------ ------ ------
Ending balance 5,242 5,667 6,092 6,438 6,702 6,879
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Intangibles
Beginning balance 9,265 8,662 8,142 7,622 6,941 5,596
Additions 912 700 700 600 - -
Amortization (1,515) (1,220) (1,220) (1,281) (1,345) (1,412)
Other - - - - - -
------ ------ ------ ------ ------ ------
Ending balance 8,662 8,142 7,622 6,941 5,596 4,184
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
2002 2003 2004 2005 2006
------ ------ ------ ------- ------
Net earnings (loss) 7,054 8,776 10,718 12,371 15,361
Depreciation and amortization 2,600 2,000 1,900 1,750 1,750
Capital expenditures (2,000) (2,000) (2,000) (2,000) (2,000)
Dividends (500) (500) (500) (500) (500)
Investments - - - - -
Changes in long-term debt - - - - -
Changes in short-term debt 2,549 2,804 3,084 3,392 3,732
Preferred stock - - - - -
Stock transactions - - - - -
Change in receivables (7,153) (7,870) (8,657) (9,522) (10,475)
Change in payables 3,861 4,057 4,463 4,908 5,399
Other - - - - -
------ ------ ------ ------- ------
6,410 7,267 9,007 10,399 13,267
Cash, Beg of Year 28,634 35,045 42,311 51,318 61,717
------ ------ ------ ------- ------
Cash, End of Year 35,045 42,311 51,318 61,717 74,985
------ ------ ------ ------- ------
------ ------ ------ ------- ------
Property and equipment
Beginning balance 6,879 7,379 7,879 8,379 8,879
Additions 2,000 2,000 2,000 2,000 2,000
Depreciation (1,500) (1,500) (1,500) (1,500) (1,500)
Net sales - - - - -
------ ------ ------ ------- ------
Ending balance 7,379 7,879 8,379 8,879 9,379
------ ------ ------ ------- ------
------ ------ ------ ------- ------
Intangibles
Beginning balance 4,184 3,084 2,584 2,184 1,934
Additions - - - - -
Amortization (1,100) (500) (400) (250) (250)
Other - - - - -
------ ------ ------ ------- ------
Ending balance 3,084 2,584 2,184 1,934 1,684
------ ------ ------ ------- ------
------ ------ ------ ------- ------
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1997 SUMMARY
Agency Corporate Consolidated
operations operations operations
---------- ---------- ----------
Service fees and sales 90,285,348 0 90,285,348
Investment income 1,000,000 0 1,000,000
---------- ---------- ----------
Total revenues 91,285,348 0 91,285,348
Agent commissions and other direct costs 56,110,405 0 56,110,405
General and administrative costs 21,857,943 4,682,752 26,540,695
Non-core expenses 0 0 4,500,000
ESOP contribution 0 0 0
Interest expense 1,553,000 122,000 1,675,000
---------- ---------- ----------
Total expenses 79,521,348 4,804,752 88,826,100
---------- ---------- ----------
Net contribution 11,764,000 (4,804,752) 2,459,248
---------- ----------
---------- ----------
Income taxes (959,107) 39.0%
----------
Net earnings 1,500,141
Preferred stock dividends 500,000
----------
Net earnings available to common stockholders 1,000,141
----------
----------
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1998 SUMMARY
Agency Corporate Consolidated
operations operations operations
---------- ---------- ----------
Service fees and sales 91,384,037 0 91,384,037
Investment income 1,000,000 0 1,000,000
---------- ---------- ----------
Total revenues 92,384,037 0 92,384,037
Agent commissions and other direct costs 58,310,022 0 58,310,022
General and administrative costs 21,857,943 4,682,752 26,540,695
ESOP contribution 0 0 0
Interest expense 1,553,000 122,000 1,675,000
---------- ---------- ----------
Total expenses 81,720,965 4,804,752 86,525,717
---------- ---------- ----------
Net contribution 10,663,072 (4,804,752) 5,858,320
---------- ----------
---------- ----------
Income taxes (2,284,745) 39.0%
----------
Net earnings 3,573,575
Preferred stock dividends 500,000
----------
Net earnings available to common stockholders 3,073,575
----------
----------
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-------------------------------------------------------------------------------
1999 SUMMARY
Agency Corporate Consolidated
operations operations operations
---------- ---------- ----------
Service fees and sales 95,616,548 0 95,616,548
Investment income 1,050,000 0 1,050,000
---------- ---------- ----------
Total revenues 96,666,548 0 96,666,548
Agent commissions and other direct costs 61,388,634 0 61,388,634
General and administrative costs 22,950,840 4,916,890 27,867,730
ESOP contribution 0 0 0
Interest expense 1,603,000 112,000 1,715,000
---------- ---------- ----------
Total expenses 85,942,474 5,028,890 90,971,364
---------- ---------- ----------
Net contribution 10,724,074 (5,028,890) 5,695,184
---------- ----------
---------- ----------
Income taxes (2,221,122) 39.0%
----------
Net earnings 3,474,062
Preferred stock dividends 500,000
----------
Net earnings available to common stockholders 2,974,062
----------
----------
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-------------------------------------------------------------------------------
2000 SUMMARY
Agency Corporate Consolidated
operations operations operations
---------- ---------- ----------
Service fees and sales 102,964,712 0 102,964,712
Investment income 1,100,000 0 1,100,000
---------- ---------- ----------
Total revenues 104,064,712 0 104,064,712
Agent commissions and other direct costs 66,761,628 0 66,761,628
General and administrative costs 24,098,382 5,162,734 29,261,116
ESOP contribution 0 0 0
Interest expense 1,653,000 102,000 1,755,000
---------- ---------- ----------
Total expenses 92,513,011 5,264,734 97,777,745
---------- ---------- ----------
Net contribution 11,551,702 (5,264,734) 6,286,967
---------- ----------
---------- ----------
Income taxes (2,451,917) 39.0%
----------
Net earnings 3,835,050
Preferred stock dividends 500,000
----------
Net earnings available to common stockholders 3,335,050
----------
----------
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-------------------------------------------------------------------------------
2001 SUMMARY
Agency Corporate Consolidated
operations operations operations
---------- ---------- ----------
Service fees and sales 111,273,373 0 111,273,373
Investment income 1,150,000 0 1,150,000
---------- ---------- ----------
Total revenues 112,423,373 0 112,423,373
Agent commissions and other direct costs 70,868,101 0 70,868,101
General and administrative costs 25,303,301 5,420,871 30,724,172
ESOP contribution 0 0 0
Interest expense 1,703,000 92,000 1,795,000
---------- ---------- ----------
Total expenses 97,874,402 5,512,871 103,387,273
---------- ---------- ----------
Net contribution 14,548,971 (5,512,871) 9,036,100
---------- ----------
---------- ----------
Income taxes (3,524,079) 39.0%
----------
Net earnings 5,512,021
Preferred stock dividends 500,000
----------
Net earnings available to common stockholders 5,012,021
----------
----------
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-------------------------------------------------------------------------------
2002 SUMMARY
Agency Corporate Consolidated
operations operations operations
---------- ---------- ----------
Service fees and sales 122,400,710 0 122,400,710
Investment income 1,200,000 0 1,200,000
---------- ---------- ----------
Total revenues 123,600,710 0 123,600,710
Agent commissions and other direct costs 77,941,913 0 77,941,913
General and administrative costs 26,568,466 5,691,914 32,260,381
ESOP contribution 0 0 0
Interest expense 1,753,000 82,000 1,835,000
---------- ---------- ----------
Total expenses 106,263,379 5,773,914 112,037,293
---------- ---------- ----------
Net contribution 17,337,331 (5,773,914) 11,563,417
---------- ----------
---------- ----------
Income taxes (4,509,733) 39.0%
----------
Net earnings 7,053,684
Preferred stock dividends 500,000
----------
Net earnings available to common stockholders 6,553,684
----------
----------
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-------------------------------------------------------------------------------
2003 SUMMARY
Agency Corporate Consolidated
operations operations operations
---------- ---------- ----------
Service fees and sales 134,608,023 0 134,608,023
Investment income 1,250,000 0 1,250,000
---------- ---------- ----------
Total revenues 135,858,023 0 135,858,023
Agent commissions and other direct costs 85,723,106 0 85,723,106
General and administrative costs 27,896,890 5,976,510 33,873,400
ESOP contribution 0 0 0
Interest expense 1,803,000 72,000 1,875,000
---------- ---------- ----------
Total expenses 115,422,996 6,048,510 121,471,506
---------- ---------- ----------
Net contribution 20,435,027 (6,048,510) 14,386,517
---------- ----------
---------- ----------
Income taxes (5,610,742) 39.0%
----------
Net earnings 8,775,776
Preferred stock dividends 500,000
----------
Net earnings available to common stockholders 8,275,776
----------
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2004 SUMMARY
Agency Corporate Consolidated
operations operations operations
---------- ---------- ----------
Service fees and sales 148,034,430 0 148,034,430
Investment income 1,300,000 0 1,300,000
---------- ---------- ----------
Total revenues 149,334,430 0 149,334,430
Agent commissions and other direct costs 94,282,419 0 94,282,419
General and administrative costs 29,291,734 6,275,336 35,567,070
ESOP contribution 0 0 0
Interest expense 1,853,000 62,000 1,915,000
---------- ---------- ----------
Total expenses 125,427,153 6,337,336 131,764,489
---------- ---------- ----------
Net contribution 23,907,276 (6,337,336) 17,569,941
---------- ----------
---------- ----------
Income taxes (6,852,277) 39.0%
----------
Net earnings 10,717,664
Preferred stock dividends 500,000
----------
Net earnings available to common stockholders 10,217,664
----------
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2005 SUMMARY
Agency Corporate Consolidated
operations operations operations
---------- ---------- ----------
Service fees and sales 162,801,757 0 162,801,757
Investment income 1,350,000 0 1,350,000
---------- ---------- ----------
Total revenues 164,151,757 0 164,151,757
Agent commissions and other direct costs 104,572,089 0 104,572,089
General and administrative costs 30,756,321 6,589,102 37,345,423
ESOP contribution 0 0 0
Interest expense 1,903,000 52,000 1,955,000
---------- ---------- ----------
Total expenses 137,231,410 6,641,102 143,872,512
---------- ---------- ----------
Net contribution 26,920,347 (6,641,102) 20,279,245
---------- ----------
---------- ----------
Income taxes (7,908,906) 39.0%
----------
Net earnings 12,370,339
Preferred stock dividends 500,000
----------
Net earnings available to common stockholders 11,870,339
----------
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2006 SUMMARY
Agency Corporate Consolidated
operations operations operations
---------- ---------- ----------
Service fees and sales 179,044,012 0 179,044,012
Investment income 1,400,000 0 1,400,000
---------- ---------- ----------
Total revenues 180,444,012 0 180,444,012
Agent commissions and other direct costs 114,054,432 0 114,054,432
General and administrative costs 32,294,137 6,918,557 39,212,694
ESOP contribution 0 0 0
Interest expense 1,953,000 42,000 1,995,000
---------- ---------- ----------
Total expenses 148,301,569 6,960,557 155,262,127
---------- ---------- ----------
Net contribution 32,142,443 (6,960,557) 25,181,885
---------- ----------
---------- ----------
Income taxes (9,820,935) 39.0%
----------
Net earnings 15,360,950
Preferred stock dividends 500,000
----------
Net earnings available to common stockholders 14,860,950
----------
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