UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the fiscal year ended December 31, 1996

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _________ to ________

Commission file number 000-22142

OMNI INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)

Georgia 58-1680624
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1000 Parkwood Circle, Atlanta, Georgia 30339
(Address of Principal executive offices) (Zip Code)

(770)-952-4500
(Registrant's telephone number, including area code)

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

Title of each class Name of each exchange on which registered
None N/A

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

Common Stock, par value $.01
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

[X] Yes [ ] No

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 21, 1997 was approximately $21.7 million. The number of
shares of the registrant's Common Stock, par value $.01, outstanding as of
March 21, 1997 was 5,700,150.

DOCUMENTS INCORPORATED BY REFERENCE

Exhibits to Form S-1 Registration Statement Under the Securities Act of 1933
which has been filed with the Securities and Exchange Commission and declared
effective on July 29, 1993 (Commission file # 33-64346) are incorporated by
reference into Part IV - Item 14 of this Form 10-K.

Portions of the registrant's Proxy Statement sent to shareholders for the
Annual Meeting to be held on May 13, 1997 and filed with the Securities and
Exchange Commission within 120 days of December 31, 1996 ("Proxy") are
incorporated by reference into Part III of this Form 10-K.

Portions of the registrant's 1996 Annual Report to Shareholders ("Annual
Report") are incorporated by reference into Parts I and II of this Form 10-K.

TABLE OF CONTENTS

Part I: Page
----

Item 1. Business 3
Item 2. Properties 14
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14

Part II:
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 14
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 14

Part III:
Item 10. Directors and Executive Officers of the Registrant 15
Item 11. Executive Compensation 15
Item 12. Security Ownership of Certain Beneficial Owners
and Management 15
Item 13. Certain Relationships and Related Transactions 15

Part IV:
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 16

PART I
ITEM 1. BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

BACKGROUND

Omni Insurance Group, Inc. ("Company", "Omni") was organized in June 1986 by
Dudley L. Moore, Jr., an insurance executive with extensive experience in the
nonstandard automobile insurance industry, and Hannover Holdings, Inc.
("Hannover"), a subsidiary of Vereinigte Haftpflicht Versicherung ("VHV"), a
major property and casualty insurer in Germany, for the purpose of marketing
and underwriting nonstandard automobile insurance.

The Company consists of two property and casualty subsidiaries and a managing
general agency. Omni Insurance Company ("Omni Insurance"), which was acquired
by the Company soon after the Company was incorporated, was organized in June
1980 to serve as a reinsurance subsidiary of Hannover. Until acquired by the
Company, Omni Insurance's activity was limited to reinsuring a small portion of
the direct written premiums of VHV. All such reinsurance activity was
terminated prior to Omni Insurance's acquisition by the Company. Omni
Indemnity Company was an inactive subsidiary of Omni Insurance until it began
writing business in September 1993. During 1995, the Company began business in
Texas through the county mutual system. The county mutual system is unique to
Texas but provides for rate flexibility not afforded outside this system. This
system requires a county mutual insurance company to act as the "Insurer" and a
managing general agency to act as the selling agent for the Insurer. Omni
Insurance established Omni General Agency, Inc. ("Agency") to act as the
managing general agency. Since no new county mutual insurance companies can be
formed, Omni Insurance contracted with a company rated A+ by A.M. Best to
front this business. In turn, Omni Insurance assumes 100% of Agency's business
written through the Insurer.

SHARE PURCHASE

On June 8, 1993, the Company purchased 2,534,483 shares of Common Stock (42% of
all such shares then outstanding) from Hannover for cash consideration of $7.4
million and the repayment by the Company of indebtedness in the amount of $2.8
million owed to Dresdner Bank A.G., Grand Cayman Branch ("Dresdner
Indebtedness"). The consideration was determined based on arm's-length
negotiations between representatives of Hannover, VHV and the Company. The
Company acquired its shares from Hannover because management believed such
acquisition represented an opportunity to acquire the shares on advantageous
terms. The Company, Hannover and Dudley L. Moore, Jr., a principal stockholder
of the Company, were joint and several obligors with respect to the Dresdner
Indebtedness, which was originally incurred in March 1987 to provide the
Company with operating capital. The Dresdner Indebtedness was secured by a
pledge of all of the outstanding shares of the Company's Common Stock owned by
Mr. Moore and Hannover.

Funds utilized to purchase the Company's Common Stock from Hannover and to
retire the Dresdner Indebtedness were borrowed from First Union National Bank
of North Carolina ("First Union") under the terms of a loan agreement dated
June 8, 1993 ("Loan Agreement"), between the Company and First Union providing
for a line of credit in an amount up to $10.5 million ("First Union Loan"), of
which $10.2 million was drawn. The loan was repaid on August 5, 1993.

SHARE TRANSFER

Pursuant to a Share Transfer Agreement dated June 8, 1993 between the Company,
Mr. Moore, the chairman of the Board of Directors of the Company, and J. Paul
Kennedy, the Company's President, Mr. Moore transferred 451,434 shares of
Common Stock to Mr. Kennedy, effective for accounting purposes March 31, 1993,
as compensation for his services to the Company. Pursuant to such Share
Transfer Agreement, the Company paid to Mr. Kennedy an amount equal to the
reduction in the Company's federal and state income taxes resulting from this
transaction. In connection with the transfer, the Company recorded $1.3
million of nonrecurring, noncash compensation expense and $679,000 of
nonrecurring cash compensation expense (which represented the expected tax
benefits) for 1993. This transaction did not impact total stockholders'
equity.

INITIAL PUBLIC OFFERING

On July 29, 1993, the Company completed its initial public offering of
2,000,000 shares of common stock. After commissions, professional fees and
related expenses, the offering resulted in net proceeds to the Company of $25.5
million. The proceeds were utilized to repay the $10.2 million First Union
Loan and to increase the capital of Omni Insurance.

UNDERWRITER'S OVERALLOTMENT

On August 26, 1993, 200,000 shares were purchased under the terms of the
overallotment granted to the underwriter at the initial public offering price
of $14.00 per share. This resulted in net proceeds to the Company of $2.6
million and brought total shares outstanding to 5,700,000. These additional
proceeds were utilized to further increase the capital of Omni Insurance
Company.

NARRATIVE DESCRIPTION OF BUSINESS

OVERVIEW

The Company is a specialty insurer which markets and underwrites nonstandard
automobile insurance to individuals. Nonstandard automobile insurance is
designed for drivers who are unable to purchase insurance in the preferred or
standard insurance markets due to lapse of previous automobile insurance,
limited driving experience, unsatisfactory prior driving records or other
restrictive underwriting criteria. The Company's policyholders are ordinarily
charged higher rates and carry lower liability limits than preferred or
standard risk drivers.

The Company's business strategy is to be a low-cost provider of nonstandard
automobile insurance while providing superior service to agents and insureds.
The Company pursues this strategy by concentrating on the following:

- PRICING - Product pricing is a significant factor in the nonstandard
automobile segment of the insurance industry. The Company utilizes an
extensive proprietary database and specially designed software to
analyze a broad range of loss and expense-related variables to assist
the Company in establishing, monitoring and adjusting prices.

- AUTOMATION - A high degree of automation supports the activities of
agents and employees, helps maintain expenses lower than industry
averages and assists the Company in marketing its insurance products
at competitive rates, while maintaining desirable profit margins.

- MARKETING - The Company markets insurance directly to independent
agents, without relying on wholesale distributors such as managing
general agents, thereby maintaining a direct relationship with each
agent who represents the Company and a closer relationship with the
Company's policyholders.

- SERVICE - The Company emphasizes the quality and extent of its service
to independent agents as a means of assisting agents in lowering their
costs and increasing their profits. Service to policyholders is
intended to foster customer satisfaction and policy renewals.

The Company operates through approximately 3,200 independent agents located in
Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, Tennessee, Texas
and Virginia. The following table sets forth, for each of the years indicated,
the amount of gross premiums written by state:

Gross Premiums Written

Years Ended December 31,

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

Alabama................... $17,586,499 20,076,197 17,172,069

Florida................... 31,139,958 35,619,209 39,435,554

Georgia................... 2,349,765 3,975,869 5,483,472

Kentucky.................. 9,167,214 10,728,724 14,937,492

Louisiana................. 2,886,632 1,905,015 969,795

Mississippi............... 3,655,308 3,149,226 3,964,460

Tennessee................. 4,405,207 954,494 415,159

Texas..................... 23,527,196 3,231,103 --

Virginia.................. 20,673,725 12,266,295 13,517,737
------------ ------------ ----------

$115,391,504 91,906,132 95,895,738
============ ============ ============

GROWTH STRATEGY

Management believes the Company's future growth will depend primarily upon the
continuation of the same products and marketing methods employed by the Company
since it was organized. The Company's ability to achieve additional growth and
profitability will depend, in the opinion of management, upon the Company's
ability to increase sales of its products within the states in which the
Company presently operates and upon the Company's ability to enter successfully
the market for its products in additional states. Besides the states in which
it is presently engaged in business, the Company was licensed in the District
of Columbia and the following fifteen states at December 31, 1996: Arkansas,
California, Connecticut, Illinois, Indiana, Missouri, Nevada, North Carolina,
Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Washington and Wisconsin.

Although management of the Company believes significant opportunities for
growth continue to exist within its current marketing territories, the Company
intends to seek entry into selected additional states based upon a number of
factors. Such factors include the size of the nonstandard automobile market,
the history and profitability of insurance companies presently operating in
such states, geographic proximity to the Company's present marketing
territories, management's prior experience with the state, where applicable,
and the legislative climate affecting the Company's business.

The Company will continue its efforts to provide superior service to agents and
policyholders while seeking to further improve operating efficiencies and lower
costs. The Company intends to accomplish these objectives by continuing to
stress reliance on efficiency and automation of the Company's pricing,
underwriting, administrative, marketing and claims activities.

While the Company has always considered acquisitions to be one element of its
growth strategy, the Company has not been an aggressive acquiror to date. With
the trend toward consolidation in the industry and with the Company's modest
levels of reinsurance and no debt, acquisitions provide opportunities to
further leverage results. The Company has clearly defined acquisition criteria
and will selectively pursue opportunities in the future.

NONSTANDARD AUTOMOBILE INSURANCE

The nonstandard automobile insurance business is influenced by many factors,
including state insurance laws, market conditions for standard automobile
insurance and state assigned risk and residual market plans. Underwriting
standards for preferred and standard risks have become more restrictive,
thereby requiring more drivers to seek coverage in the nonstandard market.
These factors have contributed to an increase in the size of the nonstandard
automobile market. Based on information provided by A.M. Best Company, Inc.
("Best"), from 1985 through 1995, the nonstandard automobile segment grew from
approximately $5.1 billion annually to approximately $17.4 billion annually of
direct premiums written, and from 10.3% to 16.7% of the total private passenger
automobile insurance market. Best is an independent insurance financial rating
agency which rates all significant U.S. property and casualty insurers based on
such factors of concern to policyholders as financial condition and solvency.

MARKETING

Management believes the Company's utilization of independent agents enables it
to maintain more direct contact with agents and policyholders, provides for
greater operating efficiencies and reduces the risks of concentration of
business. A sizable portion of the Company's Texas business has been written
through an independent agency which has multiple branch offices controlled by
common ownership. For the year ended December 31, 1996, this agency produced
11.8% of the Company's total gross premiums written and 8.7% of net premiums
earned.

Selection of agents is a significant factor in the Company's marketing
strategy. Independent agents usually represent more than one nonstandard
insurance company. Although certain of the Company's agents specialize in
nonstandard automobile insurance, the Company seeks to identify and appoint
agents for whom nonstandard automobile insurance is only one of a variety of
products offered by the agent. Management believes such independent agents
represent the fastest growing segment of the nonstandard automobile insurance
market. Because independent insurance agents have significant influence over
which insurance company will write insurance policies for their customers,
management regards independent insurance agents as the Company's primary
customers. The Company believes its relationships with its independent agents
are excellent.

The Company continually monitors the loss ratio of each of the Company's
independent agents. This information provides the Company with an important
means of quality control and allows the Company to communicate with its agents
regarding results.

The Company employs thirteen salaried marketing representatives, each of whom
is responsible for a specific marketing region. Marketing representatives are
responsible for maintaining relationships with existing agents, recruiting new
agents and generally responding to the Company's needs within the territories
in which they serve. The marketing representatives provide support for agents
with respect to products, rating and administration. Each marketing
representative is equipped with a portable computer used for demonstration
purposes, communicating with Company headquarters and for agents' training.

The Company compensates agents based on a fixed percentage (ordinarily 15%) of
premiums written. The Company bills insureds directly for premium payments and
issues Company checks directly to independent agents for the payment of
commissions. As a consequence, agents' balances payable to the Company are not
a significant factor in the Company's operations. Management of the Company
believes this method of collecting premiums and paying agents' commissions is
efficient and enables the Company to avoid risks associated with collecting
balances due from agents.

The Company has developed and provides each of its agents with proprietary
computer software designed for rating prospective risks. Automated
policyholder account status information is provided to agents by means of an
on-line voice response unit or through personal computer interface. Through
this interface, agents are able to perform a variety of functions, including
electronic transfers of installments and renewal down payments. Policyholders
may call the Company directly or access a voice response unit by means of a
touch tone telephone to secure current information concerning the status of
their accounts. The Company seeks to improve service to agents and insureds by
directing all telephone calls to either the customer service or claims
department. In either case, the caller is connected to an employee of the
Company who is trained to handle each inquiry without being referred to another
department.

COMPUTER SYSTEM AND AUTOMATION

The Company's computer operating system ("System") has been designed by the
Company to enhance service to policyholders and agents, to achieve cost
efficiencies and to manage data for pricing and rating. The System is
comprised of IBM AS/400 hardware, personal computers and a local area network.

Upon the Company's receipt of an application for insurance, pertinent
information is entered into the System and is thereafter available for use by
all departments within the Company. Only certain employees may change data
based on controlled data entry codes. Data is entered only once. Information
is accessible on line and the System operates from a common database. The
System is regularly improved by Company employees who have extensive
computer-related experience. Some of the System's significant features are
described below:

- New applications can be entered on personal computers and uploaded to
the System or can be entered directly into the System, permitting
off-site entry and continuing access to the System.

- The System allows collection and analysis of a broad range of variables
for pricing the Company's product.

- The System provides for an array of payment options which may vary as to
frequency of payments, down payments and commissions, thereby providing
flexibility to the agent and customer in selecting a plan which fits the
customer's needs.

- Computer generated documents are stored in an electronic file which can
be accessed by all personnel, permitting responses to customer inquiries
without retrieving paper files. The Company's use of a transaction date
filing system which logs and files transactions into the System by date
permits operations to function without file room personnel.

- The System allows the Company's agents to rate policies with a limited
amount of data entry. Certain agents have the capability of entering
and transmitting application data to the Company by means of a modem.
When submitted applications meet pre-set driving record criteria,
policies can be issued without intervention by Company personnel,
thereby reducing the amount of handling and time required to issue
policies. These efficiencies reduce the Company's costs and enhance the
Company's image for service and responsiveness.

- The System automatically orders driving record information upon entry of
applications, updates driving records and re-rates policies using any
additional information contained in motor vehicle reports. Updated
policies which continue to meet the Company's underwriting criteria may
then be automatically issued.

- The System's voice response unit provides insureds with current
automated account status information by means of a touch tone telephone.
Similar information is available in display format through a personal
computer interface which allows agents with a modem to log onto the
Company's computer. This feature of the System provides extended hours
of service to policyholders and reduces the number of Company personnel
required to provide account status information.

- The System provides a comprehensive reporting program which provides
information necessary to meet the Company's statutory reporting
requirements. Statistical information is downloaded to a personal
computer network to assist in providing the actuarial department with
premium and loss development data.

REINSURANCE

From October 1, 1991, to January 1, 1994, Omni Insurance maintained a 35% quota
share reinsurance treaty with a third-party reinsurer. Effective January 1,
1994, Omni Insurance cancelled this treaty and recaptured the reserves ceded
for accident years 1992 and 1991. The reserves for accident year 1993 were
recaptured effective January 1, 1995. On December 31, 1994, Omni Insurance
entered into a new reinsurance agreement with a third-party reinsurer to limit
its potential losses on insurance contracts. Under this agreement, Omni
Insurance ceded 10% of its unearned premiums on December 31, 1994. Losses
incurred on business in effect on that date were covered by the reinsurer up
to their cession amount of 10%. Effective December 31, 1995, this treaty
expired and all outstanding reserves were recaptured.

The Company also maintains excess of loss reinsurance for amounts in excess of
statutory limits with a reinsurer rated A++ by A.M. Best. This treaty has been
in effect since 1988. The Company intends to maintain this type of reinsurance
coverage.

The Company has not historically maintained catastrophe reinsurance. During
1995, the Company entered Texas, increasing its exposure to catastrophe in the
form of hail. Effective January 1, 1996, Omni entered into a reinsurance
treaty with a reinsurer rated A+ by A.M. Best. This treaty reinsures 80% of
all comprehensive premiums and provides coverage in the event of large
weather-related losses.

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. The Company evaluates the financial condition of its
reinsurers and monitors concentration of credit risk to minimize its exposure
to significant losses from reinsurer insolvencies.

UNDERWRITING

The Company seeks to classify and price risks into narrowly defined segments by
utilizing actuarial data and a broad range of variables. The pricing of the
Company's policies is accomplished by its actuarial staff based on its
proprietary database containing statistical experience by age, class of driver,
type of automobile, zip code, prior driving history and other rating
characteristics. The Company's database is continually monitored and updated
to enhance the Company's ability to develop more precise rates based on a
larger number of defined segments and variables.

The Company monitors its database and loss experience with a view toward
seeking regular and moderate rate adjustments, whenever it believes necessary.
These procedures generally enable the Company to avoid large rate increases,
which may cause policyholders not to renew their policies. The rate approval
process varies from state to state. Most states permit the use of rates only
after approval by the insurance department, while a limited number of states
allow the use of rates after only an informational filing.

Integrated computer software automates the Company's underwriting and rating
processes. The System screens insureds by comparing data on policy
applications with criteria pre-established by the Company, rates and issues
policies and develops statistical information for use by management.

The Company's independent agents have the authority to bind insurance coverages
in accordance with procedures established by the Company. The Company promptly
reviews all coverages bound by agents and decides whether to continue such
coverages. Since all final underwriting decisions are made by the Company,
management considers the risk in granting agents binding authority to be
minimal.

CLAIMS

All claims adjustments and payments are made by Company employees. The Company
also utilizes independent appraisers to aid in estimating physical damage
claims. However, the number of staff appraisers employed full-time by the
Company is increasing, allowing the utilization of independent appraisers to
continue to decline. Management believes that utilizing Company trained
employees permits faster, more efficient service at a lower effective cost.

Claims settlement authority levels are established for each adjuster or manager
based on the employee's ability and level of experience. Upon receipt, each
claim is reviewed and assigned to an adjuster based on the type and severity of
the claim. All claims-related litigation is monitored by home office
supervisors. The claims policy of the Company emphasizes prompt and fair
settlement of meritorious claims, adequate reserving for claims and controlling
claims adjustment expenses.

LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

Loss reserves are estimates of claims which an insurer expects to pay. The
Company is required to maintain reserves for the payment of estimated losses
and loss adjustment expenses ("LAE") for both reported claims ("case reserves")
and losses estimated to have been incurred but which have not yet been reported
("IBNR"). The Company's ultimate actual liability may be more or less than
current reserve estimates. The Company engages an independent actuary to
review and certify loss reserve estimates.

With respect to reported losses, reserves are established on either a
case-by-case or formula basis depending on the type and circumstances of the
loss. Case-by-case reserve amounts relate to bodily injury claims and are
established based on the Company's reserving practices, taking into account the
circumstances surrounding each claim and policy provision relating to types of
losses. Formula reserve amounts relate to all other types of claims and are
based on factors including historical paid and incurred loss data for similar
claims with provision for trends.

As to incurred claims which have not yet been reported, loss and loss expense
reserves are estimated based on historical information, statistical
projections, inflation, legal developments, general trends in claim severity
and frequency and other factors which could affect the adequacy of loss
reserves. The Company establishes IBNR reserves based on projections of the
number of claims ultimately expected and the average costs by claim type.

Loss reserves are reviewed quarterly by the Company and annually by an
independent actuary, and as new data becomes available, estimates are updated
and corresponding adjustments are made to loss reserves. Adjustments to
reserves are reflected in the operating results of the period during which such
adjustments are made. As there is no precise method for determining the
ultimate liability, the Company uses many resources and methods to estimate
these liabilities. The Company does not discount loss reserves for financial
statement purposes.

Historically, there has been no difference between the Generally Accepted
Accounting Principles ("GAAP") and statutory accounting principles ("SAP")
reserves. As a result of the Company's adoption in 1993 of Statement of
Financial Accounting Standards No. 113, "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts," the 1996 and 1995
GAAP reserves exceed the SAP reserves by $1.5 million and $1.0 million,
respectively. The excess is due to the classification of the ceded unpaid
losses and LAE as an asset on the GAAP financial statements rather than a
reduction in reserves on the statutory financial statements.

The following table sets forth the development of the Company's reserves for
unpaid losses and loss adjustment expenses from 1987 through 1996, net of
reinsurance. "Net liability for losses and LAE estimated as of 12/31" sets
forth the liability at the balance sheet date for each of the indicated years.
This represents the estimated amount of losses and LAE arising in all prior
years which is unpaid at the balance sheet date, including IBNR reserves.

The portion of the table labeled "Net liability re-estimate as of" shows the
re-estimated amount of the previously recorded liability based on experience as
of the succeeding year. This estimate changes and becomes more precise as more
information becomes known about the frequency and severity of still unpaid
claims. During 1996, the Company had approximately $2.0 million of adverse
development on the reserves established at year-end 1995, an improvement over
the $3.4 million adverse development which occurred during 1995 on the
reserves established at year-end 1994. This $2.0 million in development is
primarily attributable to an increase in allocated loss adjustment expenses.

The portion of the table labeled "Cumulative redundancy (deficiency) as of
12/31/96" represents the aggregate change in the estimates over all prior
years. The portion of the table labeled "Paid (cumulative) as of" shows the
cumulative loss and LAE payments made in succeeding years for losses incurred
prior to the balance sheet date.

December 31,
------------

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
-----------------------------------------------------------------------------------
(In thousands)

Net liability for losses
and LAE estimated at 12/31 . . $1,609 $6,231 $11,559 $13,780 $17,409 $17,931 $19,751 $30,886 $32,053 $31,628

Net liability re-estimated
as of:
One year later . . . . . . . . 1,127 6,320 11,815 13,864 16,983 17,316 20,012 34,305 34,062

Two years later . . . . . . . 1,123 6,690 12,112 13,778 16,965 17,459 21,199 35,891

Three years later . . . . . . 1,213 6,923 12,073 13,849 16,879 17,501 22,235

Four years later . . . . . . . 1,215 6,883 12,152 13,828 16,775 17,976

Five years later . . . . . . . 1,220 6,905 12,177 13,706 16,897

Six years later . . . . . . . 1,216 6,897 12,145 13,771

Seven years later . . . . . . 1,211 6,881 12,159

Eight years later . . . . . . 1,197 6,451

Nine years later . . . . . . . 1,197

Cumulative redundancy
(deficiency) as of
12/31/96 . . . . . . . . . . . 412 (220) (600) 9 512 (45) (2,484) (5,005) (2,009)

Paid (cumulative) as of:
One year later . . . . . . . . 762 4,105 7,207 7,504 10,389 11,237 12,646 23,516 24,140

Two years later . . . . . . . 997 5,674 10,037 11,333 14,506 14,373 17,995 32,058

Three years later . . . . . . 1,178 6,460 11,399 12,865 15,957 16,769 21,229

Four years later . . . . . . . 1,187 6,770 11,914 13,455 16,644 17,717

Five years later . . . . . . . 1,188 6,860 12,086 13,660 16,883

Six years later . . . . . . . 1,198 6,884 12,125 13,749

Seven years later . . . . . . 1,200 6,880 12,147

Eight years later . . . . . . 1,197 6,452

Nine years later . . . . . . . 1,197

Prior year amounts have been reclassified to conform with the current year
presentation.

DECEMBER 31,
--------------------
1996 1995
-------- ---------
RECONCILIATION TO GAAP LIABILITY FOR LOSSES AND LAE (In thousands)

SAP liability for losses and LAE estimated at 12/31.................................. $31,628 $32,053

Ceded unpaid losses and LAE.......................................................... 1,549 1,019
------- -------

GAAP liability for losses and LAE.................................................... $33,177 $33,072
======= =======

INVESTMENTS

The Company pursues investment objectives designed to secure the highest total
rate of return on its invested assets, after income taxes, consistent with
safeguarding capital and surplus on a long-term basis and maintaining adequate
liquidity for insurance operations. The Company's investment policy provides
that at least 90% of the Company's portfolio must be in fixed maturity
securities and no more than ten percent can be invested in equity securities.
At December 31, 1996, 99.6% of the Company's total investment portfolio
consisted of investment grade fixed maturity securities and cash, 0.1%
consisted of non-investment grade or non-rated fixed maturity securities and
0.3% consisted of equity securities. Investments in securities of a single
issuer (except securities issued by the U.S. Government or its agencies) are
limited to five percent of admitted assets. The Company retains an outside
investment advisor to manage its portfolio.

The following table sets forth the ratings of the Company's investment
portfolio at December 31, 1996:

Types/Ratings of Investments (1) Carrying
Amount Percent
------ -------

U. S. Government and Agencies . . . . . . . . $17,108,199 20.2

Aaa . . . . . . . . . . . . . . . . . . . . . 32,912,889 39.0

Aa . . . . . . . . . . . . . . . . . . . . . . 14,292,796 16.9

A . . . . . . . . . . . . . . . . . . . . . . 14,538,923 17.2

Baa . . . . . . . . . . . . . . . . . . . . . 99,982 0.1
---------- -----

Total Baa or Better . . . . . . . . . . . . 78,952,789 93.4

Ba and Below . . . . . . . . . . . . . . . . . -- 0.0

Non-rated . . . . . . . . . . . . . . . . . . 90,000 0.1
---------- -----

Subtotal . . . . . . . . . . . . . . . . . . 79,042,789 93.5

Invested cash . . . . . . . . . . . . . . . . 5,264,275 6.2

Equity securities . . . . . . . . . . . . . . 212,063 0.3
---------- -----

Total Investments . . . . . . . . . . . . . $84,519,127 100.0
=========== =====

(1) The ratings set forth above are the ratings assigned by Moody's Investors
Service, Inc. ("Moody's") and, for securities not assigned a rating by
Moody's, comparable ratings by Standard & Poor's Corporation.

The following table summarizes the Company's investment results for the periods
indicated:

Years Ended December 31,
-------------------------
1996 1995 1994
---- ---- ----

Average invested assets (1) . . . . . $82,144,363 82,369,773 74,097,848

Investment income (2) . . . . . . . . 4,080,717 4,238,596 3,592,721

Average yield . . . . . . . . . . . . 5.0% 5.1% 4.8%

Net realized gains (losses) . . . . . 40,245 (564) 100,375

(1) Average of the aggregate invested amounts at the beginning and end of
each monthly period.
(2) Net of investment expenses, including investment management fees paid
by the Company to its investment advisor.

REGULATION

The Company and its subsidiaries are subject to the insurance laws and
regulations of Illinois, the domiciliary state of the subsidiaries, and the
insurance laws and regulations of the other states in which the subsidiaries
are licensed to do business. In prior years, Omni Insurance and Omni Indemnity
Company were domiciled in the state of Georgia. Effective December 31, 1994,
Omni Insurance redomiciled from the state of Georgia to the state of Illinois.
Effective June 10, 1996, Omni Indemnity Company also redomiciled to the state
of Illinois. The insurance laws and regulations, as well as the level of
supervisory authority that may be exercised by the various state insurance
departments, vary by jurisdiction, but generally grant broad powers to state
insurance regulators to examine and supervise insurance companies and insurance
holding companies with respect to most significant aspects of the conduct of
the insurance business.

Laws and regulations generally require insurance companies to maintain minimum
standards of solvency, meet certain financial tests, comply with specified
investment requirements and limitations, file rates for approval or prior to
use, file certain reports with regulatory authorities, including information
concerning their capital structure, ownership and financial condition and
require prior approval of certain changes in control of domestic insurance
companies and their direct and indirect parents and give notice and secure
approval of payment of extraordinary dividends and distributions. In addition,
these laws and regulations require approval for certain intercompany transfers
of assets and certain transactions between insurance companies and their direct
and indirect parents and affiliates and generally require that all such
transactions have terms no less favorable than would result from transactions
between parties negotiating at arm's length. Further, many states have enacted
laws which restrict an insurer's underwriting discretion, such as the ability
to terminate policies, terminate agents or reject insurance coverage
applications. These laws may adversely affect the ability of insurance
companies, including the Company, to earn a profit.

Increasing public interest in the availability and affordability of insurance
has prompted legislative, regulatory and judicial activity in several states.
This includes efforts to contain insurance prices, restrict underwriting
practices and risk classifications, mandate rate reductions and refunds,
eliminate or reduce exemptions from antitrust laws and generally expand
regulations. These regulatory and judicial activities could impact the
Company's premium volume.

The Company's subsidiaries file quarterly and annual statutory financial
statements in each jurisdiction in which they are licensed. The accounts and
operations are subject to periodic examination by the Illinois Commissioner of
Insurance and by other state insurance regulatory authorities. Effective with
the 1994 statutory annual statement which is filed with the state Departments
of Insurance, property/casualty insurers must disclose their risk-based capital
("RBC") position. RBC prescribes the level of capital and surplus which
regulators deem necessary in order for an insurance company to prudently
support its business and investment risks. For 1996 the Company's two
insurance subsidiaries each had total adjusted capital in excess of any current
requirement.

Illinois insurance laws and regulations impose certain restrictions on the
amount of dividends that a company domiciled in the state may pay without prior
regulatory approval. As a result, the maximum amount of dividends that Omni
Insurance may pay without prior regulatory approval is the greater of (i) ten
percent of the statutory policyholders' surplus as of the preceding December
31, or (ii) the statutory net income for the preceding calendar year, including
a portion of its capital gains for such year, provided that dividends may only
be paid to the extent of earned surplus. Omni Insurance has the ability to pay
approximately $3.7 million of dividends to the Company during 1997.

Illinois insurance laws and regulations provide that no person may acquire
control of the Company, and thus control of Omni Insurance, without obtaining
the prior approval of the Commissioner. Any person acquiring ten percent or
more of the voting stock of an insurance holding company is deemed to have
acquired control of that company and, consequently, is required to obtain the
approval of the Commissioner before consummating such acquisition.

All states in which Omni Insurance transacts business have guaranty fund laws
pursuant to which insurers doing business in such states are assessed by a
state insurance guaranty association in order to fund liabilities to
policyholders and claimants of insolvent insurance companies. Assessments are
based on an insurer's writings in the particular state in relation to the
writings of all guaranty fund participants in that state. Such assessments
have not been material to the Company.

The Florida legislature recently enacted legislation creating the Florida
Hurricane Catastrophe Fund. Florida later modified this legislation to allow
up to a 4% emergency assessment on all insurers applicable premiums if a state
of emergency occurs with respect to a hurricane. The possible impact of this
legislation, if any, on insurers such as Omni is not determinable.

The Company's profitability may be adversely affected by judicial decisions.
Its premium rates are established using actuarial methods intended to provide
an underwriting profit. Judicial decisions may change the assumptions used in
such analyses and thus alter the projected level of profitability.

RESIDUAL MARKETS

Each state in which the Company operates requires insurers writing private
passenger automobile insurance to participate in such state's residual market
plan. Although regulations vary by state, residual market plans are generally
designed to provide insurance coverage for consumers who are unable to obtain
insurance in the voluntary automobile insurance market. In some states,
companies participate in the administration and profit or loss associated with
those consumers' policies to the extent provided by state regulations. In
other states, assigned risk pools are utilized. Assigned risk pool insureds
are assigned on a rotating basis to automobile insurers based on the individual
insurer's share of the total automobile insurance market for that state.
Insurers then issue and service those individual insurance risks assigned to
them and accept the profit or loss for those policies. Residual markets have
not had a material effect on the business or results of operations of the
Company.

COMPETITION

The Company competes with both large national and smaller regional insurers for
agents and insureds in each state in which it operates. Many of these
competitors are larger, have greater financial and marketing resources and may
offer lower rates and higher commissions than the Company.

Management believes the principal competitive factors affecting the Company's
business are price, service to agents and policyholders, agents' commissions
and financial stability of the insurer. The nonstandard automobile insurance
business is price sensitive. Certain of the Company's competitors may from
time to time seek to acquire or increase their market share by pricing their
products at levels below those required for profitability, thereby creating
downward pressure with respect to pricing. Downward pressure on pricing can
also result from competitors establishing rates based upon insufficient or
faulty actuarial data. The Company believes it can compete successfully
notwithstanding such factors, but such occurrences may nevertheless adversely
affect the Company and cause fluctuations in the Company's results of
operations. Management believes that the Company's prices are generally
competitive.

A.M. BEST RATING

In 1993, its first year of eligibility, Omni Insurance received a rating of "A-
Excellent" by Best, an independent nationally recognized insurance publishing
and rating service. The following year, Omni Indemnity Company received its
first rating. It also was an "A- Excellent." These ratings were affirmed in
1996. Best's ratings are industry ratings based on a comparative analysis of
the financial condition and operating performance of insurance companies as
determined by their publicly available reports. Best's ratings are based upon
factors of concern to insureds and are not directed toward the protection of
investors.

EMPLOYEES

As of March 15, 1997, the Company had 231 full-time and 4 part-time employees,
none of whom were covered by collective bargaining agreements. Management
believes Omni's relationship with its employees is excellent.

FORWARD LOOKING STATEMENTS

This report includes "forward looking" statements within the meaning of the
Securities Act of 1933 and the Securities Exchange Act of 1934 related to the
Company that involve risks and uncertainties including, but not limited to,
fluctuations in loss and loss adjustment expense reserves, regulation, the
nature of the property and casualty insurance industry and other risks. For
further information about these and other factors that could affect the
Company's future results, please see Exhibit 99.1 to this Form 10-K.
Investors are cautioned that any forward looking statements are not guarantees
of future performance and involve risks and uncertainties and that actual
results may differ materially from those contemplated by such forward looking
statements.

ITEM 2. PROPERTIES

The corporate headquarters are located in approximately 42,000 square feet of
leased office space in Atlanta, Georgia. Approximately 8,000 square feet of
this space is subleased to an unrelated third party. The Company also has a
small office in Dallas, Texas leased under a one-year term. The Company owns
no real properties and believes that its leased facilities are adequate for its
needs.

ITEM 3. LEGAL PROCEEDINGS

Note 10 on page 27 of the Registrant's 1996 Annual Report to Shareholders is
incorporated herein by reference.

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

No matter was submitted to a vote of security holders during the last quarter
of the period covered by this report.

PART II

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

"Stockholder Information" appearing on page 31 of the Registrant's 1996 Annual
Report to Shareholders is incorporated herein by reference.

ITEM 6. SELECTED FINANCIAL DATA

"Selected Financial Data" appearing on page 8 of the Registrant's 1996 Annual
Report to Shareholders is incorporated herein by reference.

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

"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing on pages 9 to 13 of the Registrant's 1996 Annual Report
to Shareholders is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements set forth on pages 14 to 29 of the Registrant's 1996
Annual Report to Shareholders are incorporated herein by reference.

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

Not Applicable

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding the Registrant's Directors appearing under the caption
"Nominees for Election as Director" of the Registrant's Proxy relating to the
annual meeting of shareholders to be held on May 13, 1997 is incorporated
herein by reference.

EXECUTIVE OFFICERS OF THE REGISTRANT

NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------

Dudley L. Moore, Jr. 60 Chairman of the Board, Chief Executive Officer and Director, officer since 1986

J. Paul Kennedy 48 President, Chief Operating Officer and Director, officer since 1986

Lawrence J. Korth 54 Senior Vice President - Sales and Marketing, officer since 1989

Carl J. Leo 48 Senior Vice President - Actuarial, officer since 1995

David S. Peters 52 Senior Vice President - Customer Service and Human Resources, officer since 1986

Susan H. Scalf 38 Senior Vice President - Finance, Legal and Regulatory Services and Treasurer, officer
since 1989

Lowell E. Sims 54 Senior Vice President - Data Processing and Administrative Services, officer since 1986

Mary E. Skeeles 39 Senior Vice President - Claims, officer since 1989

K. Renee Weese 41 Senior Vice President - Product Management and Secretary, officer since 1986

Executive officers serve at the pleasure of the Board of Directors.

ITEM 11. EXECUTIVE COMPENSATION

The information appearing under the captions "Executive Compensation" and
"Directors Compensation" of the Registrant's Proxy is incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information appearing under the caption "Security Ownership of Certain
Beneficial Owners and Management" of the Registrant's Proxy is incorporated
herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information appearing under the caption "Certain Transactions" of the
Registrant's Proxy is incorporated herein by reference.

PART IV

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

(a) The following documents are filed as part of this Annual Report on
Form 10-K:

1. Financial Statements incorporated by reference into Part II, Item 8 of
this report:
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Earnings - Years ended December 31, 1996,
1995 and 1994
Consolidated Statements of Stockholders' Equity - Years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows - Years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Report of Independent Auditors

2. Financial Statement Schedules

Independent Auditors' Report on Financial Statement
Schedules
Schedule I. Summary of Investments - Other Than Investments in
Related Parties - at December 31, 1996
Schedule II. Condensed Financial Information of Registrant - at
December 31, 1996 and 1995 and for the years ended
December 31, 1996, 1995 and 1994
Schedule IV. Reinsurance - for the years ended December 31, 1996,
1995 and 1994
Schedule V. Valuation and Qualifying Accounts - for the years
ended December 31, 1996, 1995 and 1994
Schedule VI. Supplemental Information Concerning Property-Casualty
Insurance Operations - for the years ended December
31, 1996, 1995 and 1994

All other schedules are omitted because they are not applicable, not
required or the information is included elsewhere in the Financial
Statements or Notes thereto.

3. The following exhibits are incorporated herein by reference:

FILED HEREWITH (*),
NONAPPLICABLE (NA), OR
INCORPORATED BY REFERENCE FROM
-------------------------------
OMGR
EXHIBIT REGISTRATION NO. EXHIBIT
NUMBER OR REPORT NUMBER
- ------- --------- ------

2.0 Plan of acquisition, reorganization, arrangement, liquidation or succession NA

3.1 Articles of Incorporation of the Company, as amended 33-64346 3.1

3.2 By-laws of the Company, as amended 33-64346 3.2

4.1 Specimen certificate of the Registrant's Common Stock 33-64346 4.1

9.0 Voting trust agreement NA

10.1 Charter of Omni Insurance Company 33-64346 10.1

10.2 By-laws of Omni Insurance Company 33-64346 10.2

10.3 Amended and Restated Loan Agreement between Omni Insurance
Group, Inc. and Dresdner Bank A.G., Grand Cayman Branch, dated
September 8, 1988 33-64346 10.3

10.4 Promissory Note in the original principal amount of $5,500,000 payable
by the Company, Dudley L. Moore, Jr. and Hannover Holdings, Inc. to
Dresdner Bank A.G., Grand Cayman Branch dated September 8, 1988 33-64346 10.4

10.5 Lease Agreement between Omni Insurance Group, Inc. and Boston
Parkwood Company dated August 21, 1991, as amended by letter
agreement dated January 30, 1992 33-64346 10.5

10.5A First Amendment to Lease between Omni Insurance Group, Inc. and
Boston Parkwood Company dated August 21, 1991, and amended by
letter agreement dated January 30, 1992 1994 Form 10-K 10.5A

10.5B Second Amendment to Lease between Omni Insurance Group, Inc. and
Boston Parkwood Company dated August 21, 1991, and amended by
letter agreement dated January 30, 1992 1994 Form 10-K 10.5B

10.5C Sublease between Omni Insurance Company and Suburban Lodges of September 30, 1996
America, Inc. Form 10-Q 10.5C

10.6 Employment Agreement between Omni Insurance Group, Inc. and
J. Paul Kennedy dated April 28, 1986 as amended 33-64346 10.6

10.7 Stock Purchase Agreement among the Company, Dudley L. Moore, Jr.
and Hannover Holdings, Inc. dated May 19, 1993 33-64346 10.7

10.8 Promissory Note of the Company payable to First Union National
Bank of North Carolina in the principal amount of $10,500,000
dated June 8, 1993 33-64346 10.8

10.9 Loan Agreement between Omni Insurance Group, Inc. and First
Union National Bank of North Carolina dated June 8, 1993 33-64346 10.9

10.10 Pledge Agreement between Dudley L. Moore, Jr. and First Union
National Bank of North Carolina dated June 8, 1993 33-64346 10.10

10.11 Pledge Agreement between J. Paul Kennedy and First Union
National Bank of North Carolina dated June 8, 1993 33-64346 10.11

10.12 Share Transfer Agreement effective March 31, 1993 among
Dudley L. Moore, Jr., J. Paul Kennedy and the Company 33-64346 10.12

10.13 Omni Insurance Group 401(k) Retirement Plan 33-64346 10.13

10.14 1993 Incentive Stock Option Plan of the Company 33-64346 10.14

10.15 1993 Nonqualified Stock Option Plan of the Company 33-64346 10.15

10.16 1993 Nonemployee Director Nonqualified Stock Option Plan of
the Company 33-64346 10.16

10.17 Executive Split-Dollar Insurance Plan of the Company 33-64346 10.17

10.18 Agreement of Reinsurance between General Reinsurance Corporation
and Omni Insurance Company 33-64346 10.18

10.18A Endorsements Nos. 4, 5 and 6 to the Agreement of Reinsurance between
General Reinsurance Corporation and Omni Insurance Company *

10.19 Private Passenger Automobile Quota Share Reinsurance Agreement
between Omni Insurance Company and Transatlantic Reinsurance
Company 33-64346 10.19

10.20 Cover Note No. CT 1297-95 regarding reinsurance agreements between
Omni Insurance Company and Reliance Insurance Company 1994 Form 10-K 10.20

10.20A Quota Share Reinsurance Agreement between Omni Insurance
Company and Reliance Insurance Company 1995 Form 10-K 10.20A

10.21 Not used

10.22 Agency Agreement between Omni General Agency, Inc. and September 30,1995
Gainsco County Mutual Insurance Company Form 10-Q 10.22

10.22A Amendment 1 to the Agency Agreement between Omni General June 30, 1996
Agency, Inc. and Gainsco County Mutual Insurance Company Form 10-Q 10.22A

10.23 Quota Share Reinsurance Agreement between Gainsco County September 30,1995
Mutual Insurance Company and Omni Insurance Company Form 10-Q 10.23

10.23A Amendment 2 to the Quota Share Reinsurance Agreement between
Gainsco County Mutual Insurance Company and Omni Insurance June 30, 1996
Company Form 10-Q 10.23A

10.24 Management and Service Agreement between Omni General Agency, September 30,1995
Inc. and Omni Insurance Company Form 10-Q 10.24

10.25 Trust Agreement between Gainsco County Mutual Insurance September 30,1995
Company, Omni Insurance Company and The Northern Trust Company Form 10-Q 10.25

10.26 Split-Dollar Insurance Agreement between Omni Insurance Company March 31,1996
and D. Jack Sawyer, Jr. as Trustee under The DLMB Family Trust Form 10-Q 10.26

10.27 Cover Note CT1350-96 regarding reinsurance agreement between Omni March 31, 1996
Insurance Company and Transatlantic Reinsurance Company Form 10-Q 10.27

10.27A Automobile Physical Damage Quota Share Reinsurance Agreement between
Omni Insurance Company, Omni Indemnity Company and Transatlantic June 30, 1996
Reinsurance Company Form 10-Q 10.27A

10.28 Executive Incentive Common Stock Plan of Omni Insurance Group, Inc. June 30, 1996
Form 10-Q 10.28

11.0 Statement regarding computation of per share earnings NA

12.0 Statement regarding computation of ratios NA

13.1 The Registrant's 1996 Annual Report to Shareholders. *
Except as expressly incorporated by reference in this report on Form 10-K,
such annual report is furnished only for the information of the Securities
and Exchange Commission and is not to be deemed "filed" as part of this report.
The following portions of such annual report are incorporated by reference in
the indicated items of this report:

Items in
Portions of the Annual Report for the Year Ended December 31, 1996 this Report
------------------------------------------------------------------ -----------
Commitments and Contingencies 3
Stockholder Information 5
Selected Financial Data 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
Consolidated Financial Statements 8

16.0 Letter regarding change in certifying accountant NA

18.0 Letter regarding change in accounting principles NA

21.1A List of subsidiaries of the Registrant (as amended) 1995 Form 10-K21.1A

22.0 Published report regarding matters submitted to vote of security holders NA

23.0 Consents of accountants, experts and counsel NA

24.0 Power of attorney NA

27.1 Financial data schedule (electronic filers only) *

99.1 Forward Looking Statements *

(b) Reports on Form 8-K.

None

(d) Financial Statement Schedules

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Omni Insurance Group, Inc.:

Under date of February 14, 1997, we reported on the consolidated balance sheets
of Omni Insurance Group, Inc. and subsidiaries (the "Company") as of December
31, 1996 and 1995, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1996, as contained in the 1996 annual report to
stockholders. These consolidated financial statements and our report thereon
are incorporated by reference in the annual report on Form 10-K for the year
1996. In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial statement
schedules as listed in Item 14 (a) 2. The financial statement schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statement schedules based on our audits.

In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.

As discussed in note 1 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" as of
January 1, 1994.

KPMG PEAT MARWICK LLP

Atlanta, Georgia
February 14, 1997

SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES SCHEDULE I
OMNI INSURANCE GROUP INC.
AS OF DECEMBER 31, 1996

AMOUNT AT
ESTIMATED WHICH SHOWN
AMORTIZED FAIR IN THE
TYPE OF INVESTMENT COST VALUE BALANCE SHEET
-------------------------------------------------------------------------------------------------------------

Fixed maturities:

U. S. Treasury securities and obligations of U. S.
Government corporations and agencies $ 17,248,024 17,108,199 17,108,199

Obligations of state and political subdivisions 43,195,299 43,791,938 43,791,938

Public utilities 4,836,184 4,894,911 4,894,911

Corporate securities 12,936,415 13,047,741 13,047,741

Certificates of deposit 200,000 200,000 200,000
----------- ----------- -----------

Total fixed maturities 78,415,922 79,042,789 79,042,789

Equity securities 89,174 212,063 212,063

Invested cash 5,264,275 5,264,275 5,264,275
----------- ----------- -----------

Total investments $ 83,769,371 84,519,127 84,519,127
=========== =========== ===========

CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE II
OMNI INSURANCE GROUP, INC. (PARENT ONLY)
CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995

1996 1995
---- ----
ASSETS

Investments:

Investment in subsidiary $ 51,212,340 47,041,469

Invested cash 93,000 562,000
------------ ------------

Total investments 51,305,340 47,603,469

Federal income taxes receivable 64,942 --

Other assets 813,261 852,496
------------ ------------

Total assets $ 52,183,543 48,455,965
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Accounts payable and accrued expenses $ 2,431 176,299

Federal income taxes payable -- 280,878
------------ ------------

Total liabilities 2,431 457,177
------------ ------------

Stockholders' equity:

Common stock, par value $.01, authorized 15,000,000 shares;
issued and outstanding 5,700,150 shares 57,002 57,002

Additional paid-in capital 28,937,173 28,937,173

Net unrealized (depreciation) appreciation of securities (5,245) 674,182

Retained earnings 23,192,182 18,330,431
------------ ------------

Total stockholders' equity 52,181,112 47,998,788
------------ ------------

Total liabilities and stockholders' equity $ 52,183,543 48,455,965
============ ============

CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE II (CONTINUED)
OMNI INSURANCE GROUP, INC. (PARENT ONLY)
CONDENSED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

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

Revenues:

Net investment income $ 32,167 63,843 16,720
---------- ---------- ----------

Total revenues 32,167 63,843 16,720
---------- ---------- ----------

Expenses:

Administrative and other operating expenses 470,068 191,357 347,572
---------- ---------- ----------

Total expenses 470,068 191,357 347,572
---------- ---------- ----------

Loss before income taxes (437,901) (127,514) (330,852)

Income tax (expense) benefit 449,355 (457,664) 117,165
---------- ---------- ----------

Earnings (loss) before equity in earnings
of subsidiary 11,454 (585,178) (213,687)

Equity in net earnings of subsidiary 4,850,297 3,273,708 2,959,534
---------- ---------- ----------

Consolidated net earnings $4,861,751 2,688,530 2,745,847
========== ========== ==========

CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE II (CONTINUED)
OMNI INSURANCE GROUP, INC. (PARENT ONLY)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

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

Cash flows from operating activities:

Net earnings (loss) before equity in earnings
of subsidiary $ 11,454 (585,178) (213,687)

Adjustments to reconcile net earnings to net cash
(used in) provided from operating activities:

(Increase) decrease in federal income
taxes receivable (345,820) 393,878 684,000

(Decrease) increase in accounts payable and
accrued expenses (173,868) 165,383 10,917

Decrease (increase) in receivable from affiliates 30,901 (811,496) (11,512)

Other, net 8,333 4,125
--------- --------- ---------

Net cash (used in) provided by operating
activities (469,000) (833,288) 469,718
--------- --------- ---------
Cash flows from investing activities:

Decrease (increase) in invested cash 469,000 833,288 (471,818)
--------- --------- ---------
Net cash provided by (used in) investing
activities 469,000 833,288 (471,818)
--------- --------- ---------
Cash flows from financing activities:

Exercise of stock options -- -- 2,100
--------- --------- ---------
Net cash provided by financing activities -- -- 2,100
--------- --------- ---------
Change in cash
Cash at beginning of year -- -- --
--------- --------- ---------
Cash at end of year $ -- -- --
========= ========= =========

Supplemental disclosure of noncash financing activities:

Retirement of treasury stock $ -- 7,400,000 --
========= ========= =========

REINSURANCE SCHEDULE IV
OMNI INSURANCE GROUP, INC.
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

PROPERTY-
LIABILITY PERCENTAGE
INSURANCE ASSUMED FROM OF AMOUNT
PREMIUMS GROSS CEDED TO OTHER OTHER NET ASSUMED
EARNED: AMOUNT COMPANIES COMPANIES AMOUNT TO NET
- ------------------------------------------------------------------------------------------------------

1996 $ 85,689,271 9,394,285 14,585,350 90,880,336 16.0%
============ =========== ============ ============= ========

1995 $ 92,915,902 5,892,656 571,182 87,594,428 0.7%
============ =========== ============ ============= ========

1994 $ 85,772,653 2,068,821 -- 83,703,832 --
============ =========== ============ ============= ========

VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE V
OMNI INSURANCE GROUP, INC.
YEARS ENDED DECEMBER 31, 1996 AND 1995

ADDITIONS
---------------------------------

BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS OF YEAR
------------------------------------------------------------------------------------------

Allowance for doubtful accounts

1996 $ 2,938,626 1,726,279 -- 4,664,905
=========== ========== ======== =========

1995 $ 1,891,562 1,047,064 -- 2,938,626
=========== ========== ======== =========

1994 $ 1,126,370 812,110 -- 1,891,562
=========== ========== ======== =========

SUPPLEMENTARY INFORMATION CONCERNING SCHEDULE VI
PROPERTY - CASUALTY INSURANCE UNDERWRITERS
OMNI INSURANCE GROUP, INC.
AS OF DECEMBER 31, 1996, 1995 AND 1994

AFFILIATION DEFERRED POLICY RESERVES FOR UNPAID
WITH ACQUISITION CLAIMS AND CLAIMS DISCOUNT ON LOSS UNEARNED
BALANCE SHEET DATE REGISTRANT COSTS ADJUSTMENT EXPENSES RESERVES PREMIUMS
--------------------------------------------------------------------------------------------------------------

December 31, 1996 (a) $ 9,542,558 33,176,563 -- 49,722,892
=========== =========== ====== ==========

December 31, 1995 (a) $ 7,672,865 33,072,391 -- 34,606,009
=========== =========== ====== ==========

(a) Consolidated property/casualty entities

SUPPLEMENTARY INFORMATION CONCERNING SCHEDULE VI (CONTINUED)
PROPERTY - CASUALTY INSURANCE UNDERWRITERS
OMNI INSURANCE GROUP, INC.
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

CLAIMS AND CLAIM ADJUSTMENT
EXPENSES INCURRED
RELATED TO
-------------------------

AFFILIATION NET AMORTIZATION OF PAID CLAIMS AND NET
YEAR ENDED WITH NET EARNED INVESTMENT CURRENT PRIOR DEFERRED POLICY CLAIM ADJUSTMENT PREMIUMS
DECEMBER 31, REGISTRANT PREMIUMS INCOME YEAR (B) YEARS (B) ACQUISITION COSTS EXPENSES (B) WRITTEN
- ------------------------------------------------------------------------------------------------------------------

1996 (a) $90,880,336 4,080,717 65,234,919 2,010,384 18,914,549 67,670,551 101,954,184
=========== ========= ========== ========= ========== ========== ===========

1995 (a) $87,594,428 4,238,596 62,900,442 3,420,407 18,882,192 65,153,530 89,517,458
=========== ========= ========== ========= ========== ========== ==========

1994 (a) $83,703,832 3,592,721 63,360,120 261,171 18,860,929 52,487,005 98,810,667
=========== ========= ========== ========= ========== ========== ==========

(a) Consolidated property/casualty entities

(b) Prior year amounts have been reclassified to conform with the current
year presentation.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Atlanta,
State of Georgia, on March 26, 1997.

OMNI INSURANCE GROUP, INC.

By: /s/ Dudley L. Moore, Jr.
--------------------------------
Dudley L. Moore, Jr.
Chairman of the Board and
Chief Executive Officer

By: /s/ Susan H. Scalf
--------------------------------
Susan H. Scalf
Senior Vice President and
Principal Financial Officer

Pursuant to the requirements of the Securities Act of 1934, this report has
been signed by the following persons in the capacities and on the dates
indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ Dudley L. Moore, Jr. Chairman of the Board and March 26, 1997
- ------------------------------ Chief Executive Officer
Dudley L. Moore, Jr. (Principal Executive Officer)

/s/ J. Paul Kennedy President and Director March 26, 1997
- ------------------------------ (Chief Operating Officer)
J. Paul Kennedy

/s/ Randolph G. Brown Director March 26, 1997
- ------------------------------
Randolph G. Brown

/s/ John E. Cay, III Director March 26, 1997
- ------------------------------
John E. Cay, III

/s/ Don L. Chapman Director March 26, 1997
- ------------------------------
Don L. Chapman

/s/ John W. Rooker Director March 26, 1997
- ------------------------------
John W. Rooker

/s/ S. Stephen Selig, III Director March 26, 1997
- ------------------------------
S. Stephen Selig, III