U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10 - QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-11184
NORTH EAST INSURANCE COMPANY
(Name of small business issuer as specified in its charter)
Maine 01-0278387
(State or other Jurisdiction of (I.R.S employer
incorporation or organization) identification number)
482 Payne Road, Scarborough, Maine 04074
(Address of principal executive offices)
(207) 883-2232
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
[X] No [ ]
As of November 4, 1998 there were 3,049,089 outstanding shares of Common
Stock, $1.00 par value, the only authorized class of equity security.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
NORTH EAST INSURANCE COMPANY
AND SUBSIDIARIES
INDEX
-----
Part I. - Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheet
As of September 30, 1998
Consolidated Statements of Operations and
Comprehensive Income for the
Nine Months Ended September 30,1998 and 1997
Consolidated Statements of Operations and
Comprehensive Income for the
Three Months Ended September 30,1998 and 1997
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30,1998 and 1997
Notes to Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of
the Financial Condition and Results of Operations
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
Exhibit Index
North East Insurance Company and Subsidiaries
Part I: FINANCIAL INFORMATION
- ------------------------------
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet
As of September 30, 1998
1998
----
ASSETS
Investments:
Fixed maturities available for sale, at
fair value (amortized cost $16,032,244) $16,622,382
Equity securities available for sale,
at fair value (cost $385,769) 297,429
Short-term investments 1,375,111
-----------
Total investments 18,294,922
Reinsurance (loss and loss adjustment expense
reserves and paid recoverables) 2,769,601
Premium balances receivable 6,811,635
Deferred policy acquisition costs 1,418,962
Cash 689,630
Prepaid reinsurance premiums (ceded unearned premium) 830,423
Investment income due and accrued 273,890
Property and equipment, net of accumulated depreciation 304,859
Deferred tax asset 1,747,467
Prepaid federal income tax 9,242
Other assets 134,398
-----------
Total Assets $33,285,029
===========
LIABILITIES
Losses and loss adjustment expenses $12,762,648
Unearned premiums 8,779,796
Ceded reinsurance balances payable 405,340
Reserve for unpaid expenses 898,175
Book overdraft 273,177
Other liabilities 57,907
-----------
Total Liabilities 23,177,043
SHAREHOLDERS' EQUITY
Common stock $1.00 par value,
authorized 12,000,000 shares, issued
and outstanding 3,049,089 shares 3,049,089
Additional paid-in capital 6,407,132
Unrealized appreciation of investments 331,186
Accumulated retained earnings 320,579
-----------
Total Shareholders' Equity 10,107,986
-----------
Total Liabilities and Shareholders' Equity $33,285,029
===========
The accompanying notes are an integral part of the consolidated financial
statements.
North East Insurance Company and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income (Loss)
for the Nine Months ended September 30,
Consolidated Statements of Operations
-------------------------------------
1998 1997
---- ----
Revenues:
Premiums earned $9,934,435 $ 8,688,774
Premiums ceded 1,214,470 2,099,809
--------------------------
Net premiums earned 8,719,965 6,588,965
Net investment income 666,211 569,086
Realized capital gains 33,247 26,051
--------------------------
Total revenues 9,419,423 7,184,102
Expenses:
Losses and loss adjustment expenses 5,844,775 5,824,082
Reinsurance expense (recoveries) 304,182 (1,501,979)
--------------------------
Net losses and loss adjustment
expenses 6,148,957 4,322,103
Underwriting expenses incurred 3,369,601 3,052,900
--------------------------
Total expenses 9,518,558 7,375,003
--------------------------
Income (loss) before provision for
income taxes (99,135) (190,901)
Provision (credit) for income taxes (45,010) (70,531)
--------------------------
Net income (loss) $ (54,125) $ (120,370)
==========================
Net income (loss) per common share:
Basic $ (0.02) $ (0.04)
==========================
Diluted $ (0.02) $ (0.04)
==========================
Consolidated Statements of Comprehensive Income (Loss)
1998 1997
---- ----
Net income (loss) $ (54,125) $ (120,370)
Other comprehensive income (loss):
Change in unrealized appreciation (depreciation)
of securities (provision for income taxes
1998 - $87,936; 1997 -$0) 170,699 170,193
--------------------------
Comprehensive income (loss) $ 116,574 $ 49,823
==========================
The accompanying notes are an integral part of the consolidated financial
statements.
North East Insurance Company and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income (Loss)
for the Three Months ended September 30,
Consolidated Statements of Operations
-------------------------------------
1998 1997
---- ----
Revenues:
Premiums earned $3,660,219 $ 3,020,178
Premiums ceded 276,887 258,997
--------------------------
Net premiums earned 3,383,332 2,761,181
Net investment income 217,794 187,552
Realized capital gains (losses) (69) (53,261)
--------------------------
Total revenues 3,601,057 2,895,472
Expenses:
Losses and loss adjustment expenses 1,468,825 1,829,574
Reinsurance expense (recoveries) 627,332 (521,238)
--------------------------
Net losses and loss adjustment
expenses 2,096,157 1,308,336
Underwriting expenses incurred 1,180,246 1,869,979
--------------------------
Total expenses 3,276,403 3,178,315
--------------------------
Income (loss) before provision for
income taxes 324,654 (282,843)
Provision (credit) for income taxes 110,406 (84,799)
--------------------------
Net income (loss) $ 214,248 $ (198,044)
==========================
Net income (loss) per common share:
Basic $ 0.07 $ (0.07)
==========================
Diluted $ 0.07 $ (0.07)
==========================
Consolidated Statements of Comprehensive Income (Loss)
------------------------------------------------------
1998 1997
---- ----
Net income (loss) $ 214,248 $ (198,044)
Other comprehensive income:
Change in unrealized appreciation (depreciation)
of securities (provision for income taxes
1998-$83,732; 1997-$0) 162,539 231,733
--------------------------
Comprehensive income $ 376,787 $ 33,689
==========================
The accompanying notes are an integral part of the consolidated financial
statements.
North East Insurance Company And Subsidiaries
Consolidated Statements of Cash Flows
for the Nine Months ended September 30,
1998 1997
---- ----
Cash flow from operating activities:
Insurance premium received $10,192,473 $ 8,153,167
Loss and loss adjustment expenses paid (5,586,217) (5,777,905)
Operating expenses paid (3,247,710) (4,298,216)
Investment income received 602,225 621,547
---------------------------
Net cash provided by
(used in) operating activities 1,960,771 (1,301,407)
---------------------------
Cash flows from investing activities:
Fixed maturities available for sale, sold 2,865,829 3,817,112
Fixed maturities available for sale, purchased (6,097,234) (1,850,675)
Equity securities available for sale, purchased (293,506) 0
Sale of furniture, fixtures and equipment 17,523 17,269
Purchase of furniture, fixtures and
equipment (43,192) (152,376)
---------------------------
Net cash provided by (used in)
investing activities (3,550,580) 1,831,330
---------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 5,758 100,049
Increase (decrease) in book overdraft (123,946) 748,024
---------------------------
Net cash provided by
(used in) financing activities (118,188) 848,073
---------------------------
Net increase (decrease) in cash,
and short-term investments (1,707,997) 1,377,996
Cash and short-term
investments at beginning of year 3,772,738 2,868,875
---------------------------
Cash and short-term
investments at end of period $ 2,064,741 $ 4,246,871
===========================
The accompanying notes are an integral part of the consolidated financial
statements.
North East Insurance Company And Subsidiaries
Consolidated Reconciliation of Cash Used In
Operating Activities to Net Income (Loss)
for the Nine Months ended September 30,
1998 1997
---- ----
Net income (loss) $ (54,125) $ (120,370)
Decrease (increase) in net premium and ceded
reinsurance balances (578,054) (1,568,826)
Increase in unearned
premium reserve 2,050,562 2,843,798
Increase (decrease) in net loss and loss
adjustment expense reserve 562,740 (1,166,572)
Decrease (increase) in investment income
due and accrued (63,986) 52,461
Decrease (increase) in deferred tax asset (45,010) (70,531)
Increase in deferred policy
acquisition costs (389,474) (980,638)
Increase (decrease) in expense accruals 315,227 (467,119)
Amortization of bond premium, net 50,895 56,937
Depreciation and amortization expense 146,239 145,871
Gain on investment activities (34,243) (26,418)
---------------------------
Net cash provided by
(used in) operating activities $1,960,771 $(1,301,407)
===========================
The accompanying notes are an integral part of the consolidated financial
statements.
North East Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 1998
1. The condensed financial statements included herein have been prepared by
the Registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosure normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Registrant believes
that the disclosures which are made are adequate to make the information
presented not misleading, particularly when read in conjunction with the
financial statements and the notes thereto included in the Registrant's
latest annual report on Form 10-KSB. In Management's opinion, the attached
interim financial statements reflect all adjustments which are necessary for
a fair statement of the results for the periods presented.
2. In June 1997, the Financial Accounting Standards Board ("FASB") issued
FAS No. 130, "Reporting Comprehensive Income", which establishes standards
for reporting and display of comprehensive income and its components in a
financial statement with the same prominence as other financial statements.
Comprehensive income is defined as net income adjusted for changes in
shareholders' equity resulting from events other than net income or
transactions related to an entity's capital instruments. North East adopted
the provisions of FAS 130 effective January 1, 1998.
In June 1997, the FASB issued FAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information", which establishes standards for
reporting information about operating segments. Generally, FAS 131 requires
that financial information be reported on the basis that is used internally
for evaluating performance. The Company is required to adopt FAS 131
effective January 1, 1998 and comparative information for earlier years must
be restated. This statement does not need to be applied to interim financial
statements in the initial year of application. The Company is currently
considering what impact, if any, FAS 131 will have on its year end reporting
format.
In June 1998, the FASB issued FAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain
derivatives embedded in other contracts, and for hedging activities.
Generally, FAS 133 requires recognition of all derivatives, at fair value,
as either assets or liabilities in the statement of financial position. The
Company is required to adopt the provisions of FAS 133 effective January 1,
2000. Adoption of FAS 133 is not expected to have a material effect on the
Company's consolidated results of operations or financial position as the
Company presently does not hold any derivative instruments nor does it
participate in any hedging transactions.
3. North East Insurance Company owns 100% of American Colonial Insurance
Company and North Atlantic Underwriters, Inc. whose results are consolidated
herein.
4. Earnings per share are computed in accordance with the provisions of FAS
No. 128 "Earnings Per Share" which requires the dual presentation of basic
and diluted earnings per share. The weighted average number of shares
outstanding used to calculate basic earnings per share was 3,047,591 and
3,017,197 for the nine months ended September 30, 1998 and 1997,
respectively. The weighted average number of shares outstanding used to
calculate diluted earnings per share was 3,133,158 and 3,085,382 for the
nine months ended September 30, 1998 and 1997, respectively.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Months Ended September 30, 1998
- -------------------------------------
Operating results for the third quarter have been significantly affected by
a rapid increase in premiums from a new personal automobile insurance
program ("Auto"Matic). In late May 1998 the Company introduced AutoMatic to
replace both its existing non-standard and standard/preferred personal
automobile insurance programs. Policies issued under the previous non-
standard and standard/preferred programs are being renewed under the new
"Auto"Matic program. Key features of the new program include assignment of
drivers to specific vehicles and automatic mid-term premium credits at
predefined eligibility dates instead of at the policy renewal date.
Gross premiums written for the three months ended September 30, 1998
amounted to $5,061,168, representing a growth of 61.6% over the $3,131,117
recorded for the comparable three months in 1997. Gross premiums earned for
the three months ended September 30, 1998 amounted to $3,660,219,
representing a growth of 21.2% over the $3,020,178 recorded in the
comparable period in 1997. Net premiums written and net premiums earned
amounted to $4,661,958 and $3,383,332 for the three months ended September
30, 1998, respectively, versus $3,230,472 and $2,761,181 for the comparable
period in 1997. Management believes comparisons between 1998 and 1997 net
premium are not meaningful, due to substantial changes in reinsurance
arrangements, as further described below.
The recent dramatic growth in premium volume has resulted primarily from the
substantial increase in the number of auto policies written. In addition,
the average premium per policy written has increased, due to recent changes
in coverage requirements. Effective July 1, 1998, the State of Maine increased
by 150% the mandatory statutory liability limits for personal auto coverage.
Increased coverage limits can be expected to result in higher claims expense
in the future. The Company has attempted to adopt a rate structure for
"Auto"Matic that will compensate NEIC for the increased risks being assumed,
and yet that will remain competitive with auto policies from other insurers.
Although pleased by the sudden popularity of "Auto"Matic with agents and
customers, management believes that the dramatic 61.6% growth in premiums
written is partially attributable to nonrecurring factors. Management has
instead budgeted for 15%-20% increases per year in the volume of premiums
written. The auto insurance market is highly competitive, however, and there
is no assurance that revenue growth at that rate can be sustained over time.
Loss and loss adjustment expense represented 62.0% and 47.4% of net earned
premium for the three months ended September 30, 1998 and 1997,
respectively. Underwriting expenses incurred amounted to $1,180,246 and
$1,869,779 or 25.3% and 57.9% of net written premium for the three months
ended September 30, 1998 and 1997, respectively. The combined ratio for the
three months ended September 30, 1998 and 1997 was 87.3% and 105.3%.
The Company substantially altered its reinsurance treaties during 1997. The
35% quota share treaty in effect for 1996 and 1995 was canceled on a runoff
basis effective January 1, 1997 and was subsequently commuted on September
30, 1997. Additionally, during the third quarter of 1997 the Company
negotiated a modification to the quota share program, reducing the per
occurrence deductible from $1,000 to $100, and a significant rate reduction
to its first excess of loss treaty. Reinsurance treaties for 1998 remain
unchanged from those in effect at December 31, 1997. The current
arrangements include an endorsement to the first layer excess of loss
treaty, to provide an experience rated premium adjustment in the event
NEIC's direct loss and loss expense exceeds 57% for 1997 and 68% for 1998.
This endorsement gives rise to additional net premium cost which was not
present in 1997.
Investment income, including realized gains, amounted to $217,725 for the
three months ended September 30, 1998, compared with $134,291 for the three
months ended September 30, 1997.
Net income for the three months ended September 30, 1998 amounted to
$214,248 or $0.07 per share compared with a net loss of $198,044 or $0.07
per share for the three months ended September 30, 1997.
Shareholders' equity at September 30, 1998 amounted to $10,107,986 or $3.32
per share compared with $9,731,199 or $3.19 per share at June 30, 1998.
Nine Months Ended September 30, 1998
- ------------------------------------
Gross premiums written for the nine months ended September 30, 1998 amounted
to $12,442,100, representing a growth of 32.9% over the $9,360,632 recorded
for the comparable period in 1997. Gross premiums earned for the nine months
ended September 30, 1998 amounted to $9,934,435, representing a growth of
14.3% over the $8,688,774 recorded for the comparable period in 1997. The
significant increase in premium values is directly related to the
introduction of "Auto"Matic in late May 1998 (see "Three Months Ended
September 30, 1998"). Net premiums written amounted to $10,770,527 for the
nine months ended September 30, 1998, compared with $9,432,763 for the
comparable period in 1997. Net premiums earned amounted to $8,719,965 for
the nine months ended September 30, 1998, compared with $6,588,965 for the
comparable period in 1997. As noted above, management believes comparisons
between 1998 and 1997 net premium are not meaningful, due to substantial
changes in reinsurance arrangements.
Loss and loss adjustment expense represented 70.5% and 65.6% of net earned
premium for the nine months ended September 30, 1998 and 1997, respectively.
Both of these ratios show continued improvement from the 75.9% and 78.7%
reported for the six month periods ending June 30, 1998 and 1997,
respectively. The improvement primarily reflects the seasonality of the
business, in that loss frequency is higher during the winter months.
Underwriting expenses incurred represented 31.2% and 32.4% of net premiums
written for the nine months ended September 30, 1998 and 1997, respectively.
The lower expense ratio for 1998 was directly attributable to stable fixed
overhead expenses even though premium volume increased substantially.
Expenses incurred in the nine months ended September 30, 1998 included
certain one-time expenses associated with the rights offering scheduled to
take place in the fourth quarter of 1998.
Investment income, including realized gains, amounted to $699,458 for the
nine months ended September 30, 1998, compared with $595,137 for the
comparable period in 1997. The return on invested assets, based on amortized
cost, net of allocated expenses, was 5.4% for the nine months ended
September 30, 1998, compared with 4.9% for the comparable period in 1997.
Net loss for the nine months ended September 30, 1998 amounted to $54,125 or
$0.02 per share compared with a loss of $120,370 or $0.04 per share for the
comparable period in 1997.
Shareholders' equity at September 30, 1998 amounted to $10,107,986 or $3.32
per share, compared with $9,985,654 or $3.28 per share at December 31, 1997.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities amounted to $1,960,771 for the nine
months ended September 30, 1998, compared with cash used by operating
activities of $1,301,407 for the comparable period in 1997. Cash flow for
the nine months ended September 30, 1998 included receipt of approximately
$2.8 million due the Company under its reinsurance treaties. Cash used in
investing activities amounted to $3,550,580 for the nine months ended
September 30, 1998, compared with cash provided by investing activities of
$1,831,330 for the comparable period in 1997.
The fair value of the Company's fixed maturities available for sale was
$590,138 more than amortized cost at September 30, 1998, compared with
$243,162 more than amortized cost at December 31, 1997. During the nine
months ended September 30, 1998 the Company used $293,506 for the purchase
of equity securities. At September 30, 1998 the fair value of equity
securities available for sale was $88,340 less than original acquisition
cost.
The Company maintains short-term investments to provide a cash resource
should the demands from operations exceed incoming cash flow. Short-term
investments amounted to $1,375,111 at September 30, 1998, compared with
$3,397,581 at December 31, 1997. The Company believes that the level of
short-term investments is adequate to meet any shortfall resulting from its
immediate operating activities.
The Company plans to conduct a rights offering of up to 3,049,089 shares of
its Common Stock to existing shareholders. If successful, such offering
would raise between $3 million and $6.8 million of new capital. The rights
offering is the subject of a Registration Statement filed with the
Securities and Exchange Commission.
Year 2000 Issues
- ----------------
Year 2000 ("Y2K") issues arise from the inability of some computer-based
systems to properly recognize and handle dates after December 31, 1999. Like
other insurers, NEIC relies on time-sensitive calculations in the
determining sales revenues (premiums) and, in the case of a claim, verifying
coverage at the time of the claim. Other time-sensitive calculations
include, but are not limited to, installment billing, credit or debit
surcharges, reinsurance protection, authority of authorized agents and
agents' commissions.
Beginning in 1995, the Company replaced its accounting, billing,
underwriting, and claims processing software and hardware. This upgrade was
motivated by factors other than Y2K issues, but was conducted with a view
toward avoiding Y2K problems. Since June 1997, NEIC has been reviewing Y2K
issues as they pertain to the new system. Program code has been searched in
order to identify any commands that include a two-digit year reference, and
modifications to a four-digit year have been made or are scheduled to be
made no later than June 30, 1999. As modified, the software will reject
attempts to input year codes having fewer than four digits. All of the new
hardware has since been upgraded or checked for Y2K compliance.
Although NEIC believes it has identified its internal Y2K issues, no
assurance can be given that it has identified all such problems.
Accordingly, the Company continues to perform information systems tests to
further evaluate its posture relative to Y2K.
Failure of the policy issuance, premium collection or premium billing
systems as a result of any corrupt data or unclear program code, including
those issues associated with Y2K, for any significant length of time could
result in complete loss of revenue for the Company. Accordingly, the Company
has placed great emphasis on these systems to correct Y2K issues of which it
is aware. In the event any of these systems fail to perform, the Company
would depend upon its information system staff and outside consultants to
identify the source of the failure and rectify the problem.
In November 1998 the Company will begin issuing insurance policies having
terms that expire in the year 2000. Subsequent to November 1998 endorsement
processing may occur for policies with year 2000 expiration dates. In
November 1999 the Company will issue its first policy with a year 2000
effective date and a year 2001 expiration date. Each phase of this process
will be closely monitored.
Systems failure of the claims processing system would receive similar
attention, although manual intervention is an alternative. Should manual
intervention be necessary, the Company would utilize its existing staff on
an overtime basis and, if necessary, hire additional part-time staff.
The Company relies on the independent agents to market and sell its
insurance products. NEIC will be sending letters to agents who represent the
Company, to ascertain whether their systems will be Y2K compliant, whether
new business submissions will be affected by noncompliance with Y2K and what
steps are being taken to rectify areas known to be Y2K noncompliant.
NEIC uses outside vendors to verify information provided by its insureds and
to determine credits or surcharges in calculating the amount of insurance
premium charged for the risk assumed. This data is provided through
electronic media. The Company also uses outside vendors for various
electronic financial statement preparation processes. NEIC is in the process
of contacting these vendors to ascertain their status relative to Y2K
issues.
The Company is reviewing its non-financial software (security, mail
processing equipment, telephone, etc.) to assess the effect Y2K noncompliance
could have on the operations of the Company. Since the Company is in the
information gathering phase, it does not yet have a contingency plan for
Y2K-related disruptions in these systems.
The Company estimates that the cost of upgrading its information processing
systems (over and above normal systems maintenance costs) did not exceed
$1,000,000 from 1995 through the date of substantial completion of the
upgrade. As noted above, this upgrade was motivated primarily by factors
other than Y2K compliance. The Company estimates its additional expenditures
for Y2K compliance will not exceed $100,000.
No assurance can be given that the Company will be fully Y2K compliant by
the dates required. However, based on current information, the Company
believes that the effects of any noncompliance will not be material to the
overall operations of the Company.
Forward-Looking Information
- ---------------------------
From time to time, NEIC publishes information that includes forward-looking
statements, as defined in Section 21E of the Securities Exchange Act of
1934. This "Management's Discussion and Analysis" section of this Form 10-
QSB contains forward-looking statements, such as estimates of future revenue
growth and estimates of costs and implementation dates associated with Y2K
compliance efforts.
The Company cautions readers that numerous factors beyond NEIC's control
could cause projected revenue growth to differ materially from the levels
reflected in these forward-looking statements, including changes in the
changes in the pricing of competing policies, consolidation among insurance
agents, and changes in consumer preferences. Factors that could cause Y2K-
related costs to exceed expectations include the failure of agents and
outside vendors to cooperate with NEIC compliance efforts and unanticipated
problems with systems believed to be Y2K compliant.
North East Insurance Company and Subsidiaries
Part II: OTHER INFORMATION
- --------------------------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
27 Financial Data Schedules
b) Reports on Form 8-K
None
North East Insurance Company and Subsidiaries
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
North East Insurance Company
Date: November 12, 1998 By /S/ Robert G. Schatz
---------------------------
Robert G. Schatz
President and Chief Executive Officer
Date: November 12, 1998 By /S/ Graham S. Payne
---------------------------
Graham S. Payne
Treasurer and Chief Financial Officer
North East Insurance Company and Subsidiaries
Form 10-QSB
Exhibit Index
Exhibit
Number Description Page
- ------- ----------- ----
27 Financial Data Schedules 19