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Fortune Financial Inc. Announces Results

15 November 2000

Fortune Financial Inc. Announces Results

    JACKSONVILLE, Fla.--Nov. 15, 2000--Fortune Financial, Inc. announced a net loss of $1,434,380 ($0.19 per share) for the three months ended September 30, 2000, compared to a net loss of $2,296,982 ($0.32 per share) for the three months ended September 30, 1999. The loss for the nine months ended September 30, 2000 was $6,348,063 compared to a loss of $5,799,322 for the first nine months of 1999. Fortune Financial's primary product is non-standard automobile insurance written through independent insurance agents in the state of Florida.
    The third quarter's loss narrowed as the company began to see the positive impact of the rate increases it implemented on March 1 and June 1 of this year. While rates have gone up, claim frequency and severity have remained stable. During the third quarter, reserve strengthening on prior quarters totaled $0.4 million, down from $3.7 million of prior quarter strengthening in the first half of the year. Before the cost of reinsurance, the company's third quarter loss was less than $0.4 million.
    On a year-to-date basis, the company's loss has been driven primarily by reserve strengthening ($4.1 million), settlement of a 1997 reinsurance dispute ($1.9 million) and the ongoing cost of reinsurance ($2.3 million), in total representing approximately 80% of the company's 2000 pretax loss.
    The company expects the positive impact on financial results from rate increases to continue, as it implemented a further rate increase on November 1. The movement to rate adequacy is a key component of the operational turnaround which began in the fall of 1999. The company indicated that the operational turnaround is almost complete. Policyholder and claim levels of service continue to be received very positively in its markets, its primary product is approaching rate adequacy, and loss cost levels remain stable. During the third quarter the company developed a strategic plan for its next five years, and has begun implementation of that plan.

Forward-Looking Statements
    Statements made in this informational release relating to the impact of rate increases are forward-looking within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements describe strategies, goals and expectations of future results involving risks and uncertainties, which may cause actual results to differ materially from those, set forth. Among other things, estimates of the impact of rate increases on the company's profitability are based upon its assessment of the impact of such increases on the company's business volume, geographical distribution and coverage mix, and regulatory approval of possible future rate increases. Investors and prospective investors are referred to the Company's Form 10-Q for the quarter ended September 30, 2000 and its most recent Form 10-K for the year ended December 31, 1999 for a more detailed discussion of the factors that could cause actual results to differ. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.

               Fortune Financial, Inc. and Subsidiaries
            Unaudited Consolidated Statements of Operations
             Quarters Ended September 30, 2000 and 1999,
             Nine Months Ended September 30, 2000 and 1999

                            Quarters Ended       Nine Months Ended
                             September 30           September 30
                           2000       1999        2000       1999
Revenues:
 Insurance premiums earned 
  net of Premiums ceded of 
  $4,857,567, $8,096,408,
  $14,964,836 and 
  $28,789,575           $5,340,628 $7,035,914 $16,638,227 $23,033,849
 Service fees earned       572,366    729,638   2,223,026   4,040,039
 Investment income         333,678    820,034   1,250,248   2,740,692
 Other                       8,428      8,669     126,848      23,598
 Net realized gains 
 (losses) on investments    34,084     90,227    (233,745)    147,533
      Total revenues     6,289,184  8,684,482  20,004,604  29,985,711

Expenses:
 Losses and loss 
  adjustment expenses, 
  net of Reinsurance 
  recoveries of 
  $2,012,840, $8,184,229,
  $10,942,880 and 
  $29,663,651            4,706,202  5,853,756  15,911,658  22,360,102
 Policy acquisition 
  costs                    327,443  2,131,792   2,885,391   5,518,173
 Salaries and wages      1,560,546  1,667,747   4,839,511   5,018,313
 General and 
  administrative
  expenses               1,888,913  2,667,650   6,263,522   6,330,270
 Interest expense           83,607    157,214     340,985     499,597
      Total expenses     8,566,711 12,478,159  30,241,067  39,726,455

Loss before provision 
 for income taxes       (2,277,527)(3,793,677)(10,236,463) (9,740,744)

Provision and (benefit) 
 for income taxes:
   Current                       0 (1,528,944)          0  (3,460,855)
   Deferred               (843,147)    32,249  (3,888,400)   (480,567)

       Total provision 
        (benefit) for 
        income taxes      (843,147)(1,496,695) (3,888,400) (3,941,422)

Net loss              ($1,434,380)($2,296,982)($6,348,063)($5,799,322)

Basic and diluted loss 
 per share:
   Net loss                 ($0.19)    ($0.32)     ($0.85)     ($0.81)

   Dividends per share       $0.00      $0.00       $0.00       $0.11

See notes to consolidated financial statements.