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To: JRR4 who wrote (833)	4/23/1998 10:52:00 AM
From: Yo Yo	Read Replies (1) \| Respond to of 1121

U-Dog Likes NAAC ---------------------------------------- National Affiliated Corp. (NAAC, OTC BB) Recent Price: $1.10 Daily Average Volume: 81K 97 EPS: $0.09/share* 97 PE: 12.2 Industry average PE: 15 Estimated 1998 EPS:$0.60 Trailing PE1.8 Div/Shr: None Yield: None 52-week Range: 0.469- 5.375 Book value : $0.87/share Price/book1.26 Industry Average ratio of stock price to book: 4.0 Shares Outstanding: 14 M Float: 4.1 M Profit Margin: 25-35% 1997 revenue (first 9 months): $4 M Estimated 98 revenue$40 M Insider buying: Positive SEC filing:Yes * estimated. 10-K for 97 will be released soon. **With several major acquisitions, the revenues will be as high as 100 million in 1998 with EPS $1.50/share. NAAC is extremely bullish. Tendencies for prices to continue advancing are extreme at 95-100% with a short term (1-3 months) upside potential of $3 and a long term (12-24 months) upside potential of $10. BUSINESS SUMMARY AND CORPORATION BACKGROUND: NAAC, through its subsidiaries, markets and sells life and health insurance in 17 states and the District of Columbia. NAAC is a newly invigorated life and health insurance holding company licensed to conduct business in 17 states and the District of Columbia. Recapitalized last year by Maryland-based The Southern Group, the Company intends to emulate the remarkable success of Conseco with an aggressive program of acquiring underperforming life insurance companies. The Company's new management has thoroughly revamped its book of business, reducing unprofitable product lines and applying to regulatory agencies for rate increases of up to 33%. The Company's business plans will focus on growth through the acquisition and consolidation of other small life insurance companies. The Company plans to seek to acquire undervalued life insurance companies in the $2 million to $50 million equity range. The acquisitions are expected to be made through a joint venture with The Southern Group. This acquisition strategy will require acquisition candidates, evaluation, acquisition finance, and regulatory approvals. The Southern Group has implemented a program of identifying potential acquisition candidates and the Company intends to review acquisition opportunities presented by The Southern Group. Maryland Southern Life Insurance Company and Southern Mortgage, Inc. are under agreement to be added to the joint venture in the third quarter. RECENT DEVELOPMENTS: They have settled three lawsuits recently. They almost closed the deal for Conestoga (Conestoga's gross premiums were $49 million and net premiums were $32 million last year. The addition of these premiums would increase NAAC's gross revenues by 2,500 percent. Conestoga's total assets are $29 million and would increase NAAC's assets by 400 percent. American Sentinel's premiums were $1 million and its assets totaled $5 million). The acquisition will add the book value of NAAC $2.80/share and 98 EPS 0.50/share. However, the acquisition is delayed, because US Department of Justice wants to dispose Conestoga after its owner was convicted of many federal crimes last December. Positive side is that NAAC may acquire at a cheaper price, instead of $5 M cash they need to pay now, because the federal government just wants to get whatever they can get. An insider told us it may cost about $3 M to acquire Conestoga. NAAC has raised all the funding it need for acquiring Conestoga and got $20 M credit line from an investment bank for acquiring two more companies that NAAC is working on. It is expected to finish these three acquisitions in 1998. NAAC has signed an agreement with Paradigm Insurance Group to provide Plan Administration Services for ERISA self-funded trusts that Paradigm will market to more than 8,000 hotels and their 700,000 employees nationwide. Edward J. Birrane, Jr., architect of the MSLIC plan, and former Maryland Insurance Commissioner, estimated that the annual fees consolidated into NAAC will reach $2.4 million in 1998. He projects pre-tax income of $1,770,000, or about $0.17 per share. The contract calls for approximately $48 in revenue annually per employee. Paradigm management expects 50,000 employees to be under contract in 1998. Technical analysis indicates that NAACs shares temporarily peaked at $3.00 last September after breaking away its round bottom. Since then, its trading is best described as quietly slipping and basing. Since last week, the daily trading volumes have been gradually increased (from a daily average of 75 K to 250 K) with the upmoving price, signaling an impending breakout. Its On Balance Volume indicates its shares are under extremely heavy accumulation. Its trading logs show that ratio of buy to sell has been astonishingly extreme at 15:1 in the pas two weeks. There is an important technical support in the area of $0.75. Besides Conestoga and Stockholm acquisitions, NAAC is also working another major acquisition of an insurance company in Colorado with annual $100 M premium and $40 M assets. When they finish these three acquisitions, NAAC will become one of major life insurance companies in the nation. It is expected to finish these three acquisitions in 1998. We advise our readers to accumulate the shares before the news breaks out. Contact: National Affiliated Corp. Address: 7228 England Drive, Suite 24 Alexandria, LA 71315 1-888-984-0800 (Jane Davis or Brent) PR firm: 1-888-984-0801 (Wayne) Company homepage: southerngroup.com ---------------------------------------------------------------------- STATEMENT OF DISCLAIMER: The information presented in the Undervalued Dog is not an offer to buy or sell securities referred to herein. By no means is the above company information complete. One should obtain financial statements and a full due diligence package, including chronological news releases, from this company prior to reaching any investment decision. One should also use the full battery of available technical analysis (including stock charts, moving averages, etc. and consult a licensed financial advisor for an independent opinion. The Undervalued Dog is not in the financial advisory business. The Undervalued Dog is not responsible for the outcome of anyone's investment decision.