<PAGE>
<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities  Exchange
    Act of 1934

                  For the quarterly period ended March 31, 1997

                                       OR

[ ] 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 0-15022

                         FRONTIER INSURANCE GROUP, INC.
             (Exact name of Registrant as specified in its charter)

           DELAWARE                                              14-1681606
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

195 LAKE LOUISE MARIE ROAD, ROCK HILL, NEW YORK                   12775-8000
   (Address of principal executive offices)                       (Zip Code)

       Registrant's telephone number, including area code: (914) 796-2100

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

The aggregate number of shares of the Registrant's Common Stock, $.01 par value,
outstanding on May 13, 1997 was 14,721,175.


                               Page 1 of 16 pages




<PAGE>
<PAGE>




                         FRONTIER INSURANCE GROUP, INC.

<TABLE>
<CAPTION>
                                          INDEX                                                                   PAGE
                                          -----                                                                   ----
<S>                                                                                                               <C>
PART I-   FINANCIAL INFORMATION

     Item 1.       Consolidated Financial Statements

                   Consolidated Balance Sheets at
                   March 31, 1997 (Unaudited) and December 31, 1996.......................................        3-4

                   Consolidated Statements of Income (Unaudited) for
                   the Three Months Ended March 31, 1997 and 1996.........................................          5

                   Consolidated Statements of Cash Flows (Unaudited)
                   for the Three Months Ended March 31, 1997 and 1996.....................................          6

                   Notes to Consolidated Financial Statements (Unaudited).................................        7-9

     Item 2.       Management's Discussion and Analysis of
                   Financial Condition and Results of Operations..........................................      10-14

PART II-  OTHER INFORMATION

     Item 1.       Legal Proceedings......................................................................         15

     Item 2.       Changes in Securities..................................................................         15

     Item 3.       Defaults upon Senior Securities........................................................         15

     Item 4.       Submission of Matters to a Vote of Security Holders....................................         15

     Item 5.       Other Information......................................................................         15

     Item 6.       Exhibits and Reports on Form 8-K.......................................................         15

     Signature     .......................................................................................         16
</TABLE>


                                       -2-



<PAGE>
<PAGE>




PART I - FINANCIAL INFORMATION

Item 1.    Consolidated Financial Statements

                 FRONTIER INSURANCE GROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
                          (dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                                                            March 31,         December 31,
                                                                                              1997                1996
                                                                                          -----------         -------------
                                                                                          (Unaudited)
<S>                                                                                        <C>                 <C>       
Investments:
Securities, available for sale--at fair value:
     Fixed maturities (amortized cost:  1997--$712,465; 1996--$680,281)                    $  707,199          $  685,277
     Equity securities (cost:  1997--$19,505; 1996--$13,871)                                   20,351              16,271
Short-term investments                                                                        102,547             133,835
Investment in limited liability corporation                                                     3,018               2,937
                                                                                           ----------          ----------
         TOTAL INVESTMENTS                                                                    833,115             838,320

Cash                                                                                           15,688               8,332
Agents' balances due, less allowances for doubtful accounts
     (1997--$2,226; 1996--$2,225)                                                              50,794              50,558
Premiums receivable from insureds, less allowances for doubtful accounts
     (1997--$55; 1996--$60)                                                                    27,489              26,225
Net reinsurance recoverables less allowances for possible uncollectible amounts
     (1997--$561; 1996--$517)                                                                 209,569             192,569
Accrued investment income                                                                       9,778               9,364
Federal income taxes recoverable                                                                1,165               3,987
Deferred policy acquisition costs                                                              36,834              32,871
Deferred federal income tax asset                                                              29,540              27,620
Home office building, property and equipment--at cost, less accumulated
     depreciation and amortization (1997--$12,158;  1996--$11,184)                             40,130              37,167
Intangible assets, less accumulated amortization (1997--$4,235; 1996--$3,808)                  11,311              11,738
Other assets                                                                                   10,507               7,656
                                                                                           ----------          ----------
         TOTAL ASSETS                                                                      $1,275,920          $1,246,407
                                                                                           ==========          ==========
</TABLE>

See notes to consolidated financial statements (unaudited).

                                       -3-



<PAGE>
<PAGE>




                 FRONTIER INSURANCE GROUP, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS--Continued

                      LIABILITIES AND SHAREHOLDERS' EQUITY
              (dollar amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                    March 31,           December 31,
                                                                                      1997                  1996
                                                                                  -----------           ------------
                                                                                  (Unaudited)
<S>                                                                                <C>                   <C>        
LIABILITIES
   Policy liabilities:
     Unpaid losses                                                                 $   452,669           $   429,506
     Unpaid loss adjustment expenses                                                   116,478               109,567
     Unearned premiums                                                                 180,891               185,728
                                                                                    ----------            ----------
           TOTAL POLICY LIABILITIES                                                    750,038               724,801
   Funds withheld under reinsurance contracts                                           72,112                64,065
   Cash dividend payable to shareholders                                                 1,905                 1,904
   Other liabilities                                                                    13,688                20,110
                                                                                    ----------            ----------
     TOTAL LIABILITIES                                                                 837,743               810,880

COMMITMENTS AND CONTINGENCIES

GUARANTEED PREFERRED BENEFICIAL INTEREST
IN COMPANY'S CONVERTIBLE  SUBORDINATED
DEBENTURES                                                                             166,979               166,953

SHAREHOLDERS' EQUITY--
   Preferred Stock, par value $.01 per share; authorized and unissued--
     1,000,000 shares
   Common Stock, par value $.01 per share (shares authorized:
     50,000,000, shares  issued:  1997--14,703,968;
     1996--14,689,552)                                                                     147                   147
   Additional paid-in capital                                                          222,289               221,984
   Net unrealized (losses) gains                                                        (2,873)                4,807
   Retained earnings                                                                    52,423                42,424
                                                                                    ----------            ----------
     SUBTOTAL                                                                          271,986               269,362
   Less treasury stock--at cost (45,540 shares)                                            788                   788
                                                                                    ----------            ----------
                    TOTAL SHAREHOLDERS' EQUITY                                         271,198               268,574
                                                                                    ----------            ----------
                    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                      $1,275,920            $1,246,407
                                                                                    ==========            ==========

Book value per share                                                                    $18.44                $18.28
                                                                                        ======                ======
</TABLE>




See notes to consolidated financial statements (unaudited).

                                       -4-



<PAGE>
<PAGE>





                 FRONTIER INSURANCE GROUP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
              (dollar amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                       Three Months
                                                                                      Ended March 31,
                                                                                 ---------------------------
                                                                                   1997              1996
                                                                                 -------            --------
<S>                                                                              <C>                 <C>    
REVENUES
   Premiums written                                                              $105,812            $74,860
   Premiums ceded                                                                 (26,499)           (13,131)
                                                                                 --------            -------
           NET PREMIUMS WRITTEN                                                    79,313             61,729
   Increase in net unearned premiums                                               (1,506)            (3,435)
                                                                                 --------            -------
           NET PREMIUMS EARNED                                                     77,807             58,294
   Net investment income                                                           11,893              7,786
   Realized capital gains                                                             721                691
                                                                                 --------            -------
           TOTAL NET INVESTMENT INCOME                                             12,614              8,477
   Gross claims adjusting income                                                       15                 25
                                                                                 --------            -------
           TOTAL REVENUES                                                          90,436             66,796

EXPENSES
   Losses                                                                          31,116             26,512
   Loss adjustment expenses                                                        14,558              8,931
   Amortization of policy acquisition costs                                        15,951             12,381
   Underwriting and other expenses                                                  9,231              5,791
   Minority interest in income of consolidated subsidiary trust                     2,732
   Interest expense                                                                                      441
                                                                                 --------            -------
TOTAL EXPENSES                                                                     73,588             54,056
                                                                                 --------            -------
INCOME BEFORE INCOME TAXES                                                         16,848             12,740

INCOME TAXES
   State                                                                              103                115
   Federal                                                                          4,841              3,361
                                                                                 --------            -------
           TOTAL  INCOME TAXES                                                      4,944              3,476
                                                                                 --------            -------
           NET INCOME                                                            $ 11,904            $ 9,264
                                                                                 ========            =======
PER SHARE DATA:
   Primary earnings per common share                                                 $.81               $.65
                                                                                     ====               ====
   Fully diluted earnings per common share                                           $.76               $.65
                                                                                     ====               ====
WEIGHTED AVERAGE COMMON  SHARES
OUTSTANDING (in thousands):
   Primary                                                                         14,695             14,352
   Fully diluted                                                                   18,379             14,352
</TABLE>



See notes to consolidated financial statements (unaudited).

                                       -5-



<PAGE>
<PAGE>




                 FRONTIER INSURANCE GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                              Three Months
                                                                                             Ended March 31,
                                                                                         -------------------------
                                                                                           1997            1996
                                                                                         -------          --------
<S>                                                                                      <C>               <C>    
OPERATING ACTIVITIES
   Net income                                                                            $11,904           $ 9,264
   Adjustments to reconcile net income to net cash provided
      by operating activities:
         Increase in policy liabilities                                                   25,237            18,754
         Increase in reinsurance balances                                                 (8,953)           (8,217)
         Increase in agents' balances and premiums receivable                             (1,500)              (82)
         Increase in deferred policy acquisition costs                                    (3,963)           (2,358)
         (Increase) decrease in accrued investment income                                   (414)              634
         Deferred income tax expense                                                       2,220               278
         Depreciation and amortization                                                     1,551               938
         Realized capital gains                                                             (721)             (691)
         Other                                                                            (6,455)           (2,675)
                                                                                         -------           -------
             NET CASH PROVIDED BY OPERATING ACTIVITIES                                    18,906            15,845

INVESTING ACTIVITIES
   Proceeds from sales of fixed maturities available-for-sale                             14,116            17,217
   Proceeds from calls, paydowns and maturities of fixed maturities
      available-for-sale                                                                  22,918            21,825
   Proceeds from sales of equity securities                                                1,636             5,534
   Purchases of securities                                                               (75,891)          (59,512)
   Net sales (purchases) of short-term investments                                        31,288            (2,193)
   Additions and improvement to home office building                                      (1,682)             (160)
   Purchase of property and equipment                                                     (2,257)              (75)
   Proceeds from sales of property and equipment                                               2
   Investment in limited liability corporation                                               (81)
                                                                                         -------           -------
             NET CASH USED IN  INVESTING ACTIVITIES                                       (9,951)          (17,364)

FINANCING ACTIVITIES
   Cash dividends paid                                                                    (1,904)           (1,568)
   Issuance of common stock                                                                  305               504
                                                                                         -------           -------
             NET CASH USED IN FINANCING ACTIVITIES                                        (1,599)           (1,064)
                                                                                         -------           -------
             INCREASE (DECREASE) IN CASH                                                   7,356            (2,583)
             CASH AT BEGINNING OF YEAR                                                     8,332             5,115
                                                                                         -------           -------
             CASH AT END OF YEAR                                                         $15,688           $ 2,532
                                                                                         =======           =======
</TABLE>

See notes to consolidated financial statements (unaudited).

                                       -6-



<PAGE>
<PAGE>




                 FRONTIER INSURANCE GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)

1.   The  accompanying  unaudited  consolidated  financial  statements have been
     prepared in accordance with the instructions to Form 10-Q and Article 10 of
     Regulation S-X and, accordingly,  do not include all of the information and
     footnotes required by generally accepted accounting principles for complete
     financial   statements  and  should  be  read  in   conjunction   with  the
     consolidated  financial  statements  and  notes  thereto  included  in  the
     Company's  Annual Report on Form 10-K for the year ended December 31, 1996.
     In the opinion of management,  all adjustments  (consisting of only normal,
     recurring accruals)  considered necessary for a fair presentation have been
     included.  Certain  amounts  in the 1996  financial  statements  have  been
     reclassified to conform to the 1997  presentation.  All share and per share
     information  presented in the accompanying  financial  statements and these
     notes  thereto  have been  adjusted to give effect to stock  dividends  and
     stock splits.  Operating results for the three-month period ended March 31,
     1997 are not necessarily indicative of the results that may be expected for
     the year ending December 31, 1997.

2.   Earnings  per share  information  is  presented  on the  basis of  weighted
     average shares outstanding for the period.

3.   Dividends  have been  declared  by the Board of  Directors  and paid by the
     Company  during  the  periods  presented  in  the  accompanying   financial
     statements, as follows:

<TABLE>
<CAPTION>
     Declaration         Record        Payment                Type of                   Cash              Number of
        Date              Date           Date                 Dividend                  Paid            Shares Issued
     ----------          ------        -------                --------                  ----            -------------
                                                                                   (in thousands)
<S>                     <C>            <C>                <C>                          <C>               <C>    
     11/16/95           12/29/95       01/18/96           $.12 per share cash          $1,562                N/A
     03/28/96           04/08/96       04/30/96           $.12 per share cash          $1,568                N/A
     05/23/96           06/28/96       07/19/96           10% stock                    $   11(1)          1,311,178
     05/23/96           06/28/96       07/19/96           $.13 per share cash          $1,870                N/A
     08/15/96           09/30/96       10/18/96           $.13 per share cash          $1,903                N/A
     11/21/96           12/27/96       01/14/97           $.13 per share cash          $1,904                N/A
     02/27/97           03/24/97       04/18/97           $.13 per share cash          $1,905                N/A
</TABLE>


(1)  Cash in lieu of fractional shares.

4.   At March 31, 1997,  options to purchase  321,441 shares of common stock, at
     per share exercise  prices ranging from $18.86 to $39.75 were  outstanding,
     compared  to options to purchase  274,696  shares of common  stock,  at per
     share exercise  prices  ranging from $7.15 to $27.57,  outstanding at March
     31, 1996 under the Company's  stock option plans (the "Plans").  Options to
     purchase  130,690 and 96,576  shares of common  stock were  exercisable  at
     March 31, 1997 and March 31, 1996, respectively, under the Plans.

     During 1993,  the Company  granted the President and Chairman of the Board,
     and a Vice  President,  separate  stock  options  outside  of the  Plans to
     purchase 412,500 and 74,250 shares,  respectively,  of the Company's common
     stock at $45.45 per share at any time  through  December  31,  1999,  which
     options were outstanding at March 31, 1997.

     The number of shares  subject to options  and the per share  option  prices
     have been  adjusted to reflect  stock  dividends.  Exercisable  options are
     nondilutive to earnings per share presented in the  accompanying  financial
     statements.

                                       -7-



<PAGE>
<PAGE>




Item 1.       Notes to Consolidated Financial Statements (Unaudited)--Continued

5.   Contingent reinsurance commissions are accounted for on an earned basis and
     are accrued,  in accordance  with the terms of the  applicable  reinsurance
     agreement,  based on the estimated level of profitability  relating to such
     reinsured business.  During the three months ended March 31, 1997 and 1996,
     such earned  commissions  accrued were $574,000 and $92,000,  respectively.
     The  estimated  profitability  of the  reinsured  business  is  continually
     reviewed  and  as  adjustments  become  necessary,   such  adjustments  are
     reflected in current operations.

6.   Claims  adjusting  income is  accounted  for on an  accrual  basis,  before
     deducting  the related  expenses.  During the three  months ended March 31,
     1997 and 1996,  claims adjusting  expenses  included with  underwriting and
     other expenses amounted to $15,000 and $25,000, respectively.

7.   The  components  of  the  net  reinsurance  recoverables  balances  in  the
     accompanying balance sheets were as follows:

<TABLE>
<CAPTION>
                                              March 31, 1997             December 31, 1996
                                              --------------             -----------------
                                                              (in thousands)
<S>                                               <C>                          <C>     
     Ceded paid losses recoverable                $  8,527                     $  7,519
     Ceded unpaid losses and LAE                   189,042                      165,467
     Ceded unearned premiums                        26,059                       32,403
     Ceded reinsurance payable                     (14,059)                     (12,820)
                                                  --------                     --------
          TOTAL                                   $209,569                     $192,569
                                                  ========                     ========
</TABLE>



     The  reinsurance   ceded   components  of  the  amounts   relating  to  the
     accompanying income statements were as follows:

<TABLE>
<CAPTION>
                                                      Three Months Ended March 31,
                                                   -------------------------------------
                                                    1997                         1996
                                                   -------                      --------
                                                              (in thousands)
<S>                                                <C>                          <C>    
     Ceded premiums earned                         $32,842                      $12,292
     Ceded incurred losses                          27,685                        9,647
     Ceded incurred LAE                              4,705                        3,218
</TABLE>



     The effect of reinsurance on premiums  written and earned at March 31, 1997
and 1996 was as follows:

<TABLE>
<CAPTION>
                                   Three Months Ended March 31,
                       ----------------------------------------------------
                                1997                         1996
                              Premiums                      Premiums
                       ----------------------         ---------------------
                        Written       Earned          Written       Earned
                       ---------     --------         -------       -------
                                           (in thousands)
<S>                    <C>           <C>              <C>           <C>    
     Direct            $104,244      $108,553         $73,395       $68,140
     Assumed              1,568         2,096           1,465         2,446
     Ceded              (26,499)      (32,842)        (13,131)      (12,292)
                       --------      --------         -------        ------
     Net               $ 79,313      $ 77,807         $61,729       $58,294
                       ========      ========         =======       =======
</TABLE>


                                       -8-



<PAGE>
<PAGE>




Item 1.       Notes to Consolidated Financial Statements (Unaudited)--Continued

8.   In the first  quarter of 1997,  the Company  adopted  Financial  Accounting
     Standards Board  Statement 125,  "Accounting for Transfers and Servicing of
     Financial Assets and  Extinguishments  of Liabilities"  ("FASB 125"), which
     provides accounting and reporting standards for sales, securitizations, and
     servicing of receivables and other financial assets,  secured borrowing and
     collateral  transactions,  and  the  extinguishments  of  liabilities.  The
     adoption  excluded  the  provisions  that  deal  with  securities  lending,
     repurchase  and  dollar  repurchase  agreements,  and  the  recognition  of
     collateral,  which  will  be  adopted  in  1998  pursuant  to the  proposed
     amendment.  The adoption of FASB 125 did not have a material  impact to the
     Company's financial position or results of operations.

     In February 1997, the Financial Accounting Standards Board issued Statement
     128,  "Earnings per Share," which is required to be adopted on December 31,
     1997.  At that time,  the  Company  will be  required  to change the method
     currently  used to  compute  earnings  per share and to  restate  all prior
     periods.  Under the new requirements  for calculating  primary earnings per
     share, the dilutive effect of stock options will be excluded. The impact is
     expected to result in no change in primary earnings per share in either  of
     the quarters ended March 31, 1997 and 1996. The impact on the  calculations
     of  fully diluted earnings per share for these quarters is not expected  to
     be material.

                                       -9-



<PAGE>
<PAGE>




Item 2. Management's  Discussion and Analysis of Financial Condition and Results
       of Operations

The following  discussion and analysis  should be read in  conjunction  with the
consolidated  financial  statements and notes thereto included elsewhere in this
Report and with the  Company's  Annual  Report on Form 10-K for the fiscal  year
ended December 31, 1996.

Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996

The following table sets forth the net premiums earned by the principal lines of
insurance written by the Company for the periods indicated and the dollar amount
and percentage of change therein from period to period:

<TABLE>
<CAPTION>
                                                 Three Months                  Increase (Decrease)
                                                Ended March 31,                    1996 to 1997
                                            -------------------------           ------------------
                                             1997              1996             Amount          %
                                            --------         --------           ------         ---
                                                            (dollar amounts in thousands)
<S>                                          <C>              <C>                <C>           <C> 
Medical malpractice (including
   dental malpractice)                       $27,907          $24,098            $3,809        15.8
General liability                             28,076           16,910            11,166        66.0
Surety                                        12,720           11,648             1,072         9.2
Workers' compensation                            808            3,049            (2,241)      (73.5)
Commercial earthquake                          1,744              512             1,232       240.6
Other                                          6,552            2,077             4,475       215.5
                                             -------          -------           -------
                        Total                $77,807          $58,294           $19,513        33.5
                                             =======          =======           =======
</TABLE>


The following  table sets forth the  Company's  combined  ratio  calculated on a
statutory  basis  ("Statutory  Combined  Ratio")  and on the basis of  generally
accepted   accounting   principles  ("GAAP  Combined  Ratio")  for  the  periods
indicated:

<TABLE>
<CAPTION>
                                                        Statutory Combined Ratio               GAAP Combined Ratio
                                                       --------------------------           -------------------------
                                                              Three Months                        Three Months
                                                             Ended March 31,                     Ended March 31,
                                                       --------------------------           ------------------------
                                                         1997              1996               1997            1996
                                                       --------          --------           --------         ------
<S>                                                        <C>              <C>                <C>            <C>  
Losses                                                     40.0%            45.5%              40.0%          45.5%
Loss adjustment expenses (LAE)                             18.7             14.0               18.7           15.3
                                                           ----             ----               ----           ----
Losses and LAE                                             58.7             59.5               58.7           60.8
Acquisition, underwriting, interest, and
  other expenses                                           33.4             31.9               32.3           31.2
                                                           ----             ----               ----           ----
Total combined ratio                                       92.1%            91.4%              91.0%          92.0%
                                                           ====             ====               ====           ====
</TABLE>

A variety of factors accounted for the 33.5% growth in net premiums earned,  the
principal  factor being increases in the Company's core and new program business
and as a result of the  acquisitions  of United  Capitol and  Regency  Insurance
Company in the second and third quarter of 1996, respectively. This increase was
partially offset by a decrease in workers' compensation, particularly the cotton
gin program  that the Company  discontinued  during  1996,  a decrease in social
services  programs due to price  competition  and to an increase in  reinsurance
costs associated with the aggregate excess of loss reinsurance contract.

The  increase  in  medical   malpractice   net  premiums  earned  was  primarily
attributable to an increase in the number of physicians  insured in the programs
for psychiatrists and alternative risks,  geographical expansion in Ohio, Texas,
Michigan and Illinois,  growth in the dental program  endorsed by the Academy of
General  Dentistry,  partially  offset by the  reclassification  of net premiums
written  in the  social  services  programs  to the  general  liability  line of
business.

Net premiums earned for the general  liability line increased  primarily because
of increases in various

                                      -10-



<PAGE>
<PAGE>





Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations--Continued

programs,  including  continued  growth in the social services  programs, alarms
and guards,  demolition contractors,  excess employer's liability, and  asbestos
abatement as  a  result of the acquisition of United Capitol in May 1996.  These
increases  were  partially  offset  by  a decrease in net premiums earned in the
umbrella and crane operator liability programs.

Growth in surety  net  premiums  earned  continued  in 1997,  and was  primarily
attributable to expanded writings of license and permit bonds, small contractors
bonds and miscellaneous bonds.

Net premiums earned for the workers'  compensation line decreased primarily as a
result of decreases  in the  specialty  niche  programs for cotton gins and feed
lots,  decreases in social services programs due to price competition and lesser
required participation in the National Workers' Compensation  Reinsurance Pools.
The decrease was partially offset by increases in workers' compensation premiums
written in the alternative risk program which the Company initiated in 1996.

Net premiums earned for the commercial  earthquake  program increased  primarily
due to the growth in the number of policies written in 1996 which are earned pro
rata in 1997, partially offset by the planned decrease in this line of business.

Net premiums earned for the other lines of business  increased  primarily due to
increased volume in commercial  package policies in the social services program,
and in the mobile  homeowners  program and auto  physical  damage  business as a
result of the  acquisition of Regency  effective in June 1996.  These  increases
were partially offset by decreases in other miscellaneous small programs.

Net investment  income before realized  capital gains and losses increased 52.7%
due principally to increases in invested  assets  resulting from the proceeds of
the issuance of Convertible Trust Originated Preferred Securities  ("Convertible
TOPrS")  in  October  1996,  cash  inflow  from  regular  operations,   and  the
contribution to net investment  income by United Capitol and Regency,  partially
offset by the  interest  charge on funds held by the  Company for the benefit of
the reinsurer of the Company's  aggregate excess of loss  reinsurance  contract.
Total net investment income increased 48.8% due to the  aforementioned  increase
in net investment income and a significantly  lower increase in realized capital
gains of 4.3%. The average annual  pre-tax yield on  investments,  excluding the
charge for funds held under the aggregate  excess loss of  reinsurance  contract
and realized  capital gains and losses,  was 6.5%,  unchanged  from the previous
year. The average annual  after-tax yield on  investments,  excluding the charge
for funds held  under the  aggregate  excess of loss  reinsurance  contract  and
realized capital gains and losses, was 5.1%.

Gross  claims  adjusting  income  decreased  40.0%  primarily  as a result  of a
decrease in claim services provided to outside companies, partially offset by an
increase in the rates charged for certain services.

Total revenues increased 35.4% as a result of the above.

Total expenses increased by 36.1% compared to the 33.5% increase in net premiums
earned. Losses and loss adjustment expenses ("LAE") increased at a 28.9% rate as
a result of a 17.4% increase in losses and a 63.0% increase in LAE. The increase
in losses and LAE was disproportionate to that of net earned premiums due to the
aggregate excess of loss reinsurance contract which provides coverage for losses
and  LAE in  excess  of 64%  and  65% for the  1997  and  1996  accident  years,
respectively,  which  resulted in a loss and LAE  component of the GAAP Combined
Ratio 2.1 percentage points lower than in the comparable 1996 period.  The 63.0%
increase  in LAE  resulted  from a change in the line of  business  mix to those
having a higher percentage  relationship of LAE to losses. The 38.6% increase in
the amortization of policy  acquisition  costs,  underwriting and other expenses
was attributable primarily to an increase in direct commission expense resulting
from growth in programs with higher  commission rates,  increased  staffing  and
marketing  expenses related to expansion,

                                      -11-



<PAGE>
<PAGE>




Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations--Continued

salary  increases and the  contribution  of total expenses  associated  with the
acquisition  of United  Capitol and Regency in 1996.  The  $441,000  decrease in
interest  expense was primarily the result of the repayment and  termination  of
the line of credit in the fourth  quarter of 1996.  The  Company  also  incurred
approximately  $2,732,000 of expenses in 1996  associated  with the  Convertible
TOPrS. As the non-claim  related  component of the GAAP Combined Ratio increased
at a  greater  rate  than  premiums  earned,  the  non-claim  component  was 1.1
percentage  points  higher than in the  comparable  1996 period.  The total GAAP
Combined  Ratio  decreased  by 1.0  percentage  point to 91.0 as a result of the
above.

The foregoing  changes  resulted in income before taxes of  $16,848,000  for the
1997 quarter, a 32.2% increase from the comparable 1996 quarter.  Net income for
the period increased by $2,640,000 or 28.5%.

Liquidity and Capital Resources

The Company is a holding company,  receiving cash  principally  through sales of
equities, borrowings, and dividends from its subsidiaries,  certain of which are
subject to dividend  restrictions.  The  ability of  insurance  and  reinsurance
companies  to  underwrite  insurance  and  reinsurance  is based on  maintaining
liquidity  and capital  resources  sufficient to pay claims and expenses as they
become due. The primary sources of liquidity for the Company's  subsidiaries are
funds  generated from insurance and  reinsurance  premiums,  investment  income,
commission and fee income,  capital  contributions from the Company and proceeds
from sales and maturities of portfolio  investments.  The principal expenditures
are for  payment  of  losses  and  LAE,  operating  expenses,  commissions,  and
dividends to shareholders.

At March 31, 1997, $1.3 billion in total assets were comprised of the following:
66.5% cash and investments,  16.4% net reinsurance  recoverables,  6.1% premiums
receivable,  3.1% home office  building and  equipment,  5.2% deferred  expenses
(federal income taxes and policy acquisition costs), and 2.7% other assets.

The  Company's  subsidiaries  maintain  liquid  operating  positions  and follow
investment  guidelines that are intended to provide for an acceptable  return on
investment while preserving capital,  maintaining  sufficient  liquidity to meet
their obligations, and as to the Company's insurance subsidiaries, maintaining a
sufficient  margin of capital and surplus to ensure their unimpaired  ability to
write insurance and assume reinsurance.

                                      -12-



<PAGE>
<PAGE>




Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations--Continued

The  following  table  provides  a profile  of the  Company's  fixed  maturities
investment portfolio by rating at March 31, 1997:

<TABLE>
<CAPTION>
                                                                                Amount
                                       Market            Reflected on         Percent of
         S&P's/Moody's Rating           Value            Balance Sheet        Portfolio
         --------------------          ------            -------------        ----------
                                               (dollar amounts in thousands)
<S>                                    <C>                  <C>                  <C> 
AAA/Aaa (including U.S. Treasuries     $409,984             $409,984             58.0
             of $22,339)                111,734              111,734             15.8
AA/Aa                                   138,207              138,207             19.5
A/A                                      47,250               47,250              6.7
BBB/Baa                                      24                   24              0.0
                                       --------             --------            -----
All other                              $707,199             $707,199            100.0
                                       --------             --------            -----
                                       --------             --------            -----
             Total
</TABLE>

Cash flow generated from operations for the three-month  periods ended March 31,
1997 and 1996 was  $18.9  million,  and  $15.8  million,  respectively,  amounts
adequate to meet all obligations during the periods.

In April  1992,  the  Company  commenced  paying  quarterly  cash  dividends  to
shareholders. Cash  dividends  declared  during  the  three-month  periods ended
March 31, 1997 and 1996 were $1,905,000 and $1,568,000, respectively.

Reinsurance

Frontier  has  entered  into  a  stop  loss  reinsurance  contract  with  Centre
Reinsurance  Company of New York ("Centre Re") for 1995 and future years.  Under
the terms of the agreement,  Centre Re provides  reinsurance  protection  within
certain accident year and contract aggregate dollar limits for losses and LAE in
excess of a  predetermined  ratio of these expenses to net premiums earned for a
given accident year for all lines of business except bail, customs,  license and
permit,  and miscellaneous  surety bonds prior to 1997. During the first quarter
of 1997, the Company elected to include license and permit bonds, fidelity bonds
and certain other  miscellaneous  surety bonds in the net premiums  earned ceded
under the contract. The loss and LAE ratio above which the  reinsurance provides
coverage is 65% and 64% for accident years 1996 through 1997,  respectively. The
maximum  amount  recoverable  for  an  accident year is  175% of the reinsurance
premium paid  for  the  accident year, or  $162,500,000 in the aggregate for the
three years.  During the first  quarter  1997 and 1996 the  Company  ceded 13.0%
and  13.5%  of  the  earned  premiums  from  the  covered  lines  of business to
Centre Re, respectively.

                                      -13-



<PAGE>
<PAGE>




Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations--Continued

Litigation with the State of New York

In  December  1990,  the New York State  Court of Claims  rendered a decision in
favor of the  Company  holding  that a State  University  of New  York  ("SUNY")
medical school faculty member engaged in the clinical  practice of medicine at a
SUNY medical facility,  corollary to such physician's  faculty  activities,  was
within  the  scope of such  physician's  employment  by SUNY  and was  protected
against malpractice claims arising out of such activity by the State of New York
and not under  the  Company's  medical  malpractice  policy.  The  decision  was
affirmed on appeal by the New York State Appellate Division in November 1991 and
not  appealed  by the  State.  In July  1992,  the  State  of New  York  enacted
legislation  eliminating  medical school faculty  members of SUNY engaged in the
clinical practice of medicine at a SUNY medical facility from indemnification by
the State with  respect to  malpractice  claims  arising  out of such  activity,
retroactive  to July 1, 1991. In an opinion filed on September 3, 1993 the Court
of  Claims  of the  State of New  York  held,  inter  alia,  that the July  1992
legislation  by the State of New York  eliminating  SUNY medical  school faculty
members  engaged  in the  clinical  practice  of  medicine,  as  part  of  their
employment  by  SUNY,  from   indemnification  by  the  State  with  respect  to
malpractice  claims  arising  out  of  such  activity  was  not  to  be  applied
retroactively.  This  decision  was  affirmed  by the New York  State  Appellate
Division in April 1994.  Subsequently,  in February 1995, the Appellate Division
granted  leave to  Frontier  and the  State of New  York to have the  issues  of
Frontier's  entitlement  to  recover  its  costs  of  defense  and its  costs of
settlement ruled on by the State's highest Court, the New York Court of Appeals.
In  December  1995,  the New York  Court of  Appeals  ruled  on this  issue  and
concluded  that  Frontier  was  entitled to  recoveries  from the State for such
medical malpractice  claims. As a result of this decision,  the Company believes
the  above-referenced  decisions  are  controlling  precedents  and that it will
benefit  economically  by not being  ultimately  responsible  for certain claims
against SUNY physicians for whom it presently  carries  reserves and be entitled
to reimbursements of certain claims previously paid; accordingly, effective June
30 , 1996 and December 31, 1995, Frontier recorded  subrogation  recoverables of
approximately $13,000,000 and $19,000,000, respectively, representing the amount
of claims already paid and the reserves currently held by Frontier on open cases
that management  believes are  reimbursable by the State of New York. In January
1997,  the New  York  Court of  Claims  rendered  a  decision  granting  summary
judgement  to the Company on three SUNY cases that were  previously  paid by the
Company. This decision has been appealed by the State of New York. To the extent
that the amount of the actual recovery varies,  such difference will be reported
in the period  recognized.  The Company is continuing to defend all SUNY faculty
members  against  malpractice  claims that have been asserted and is maintaining
reserves therefor adjusted for the anticipated recoveries.

Shareholder Litigation

The Company  has been  served with  several  purported  class  actions  alleging
violations  of federal  securities  laws by the Company  and, in some cases,  by
certain of its officers and directors; certain actions also allege violations of
the  common  law.  The  complaints  relate  to the  Company's  November  8, 1994
announcement of its third quarter  financial results and allege that the Company
previously had omitted and/or misrepresented  material facts with respect to its
earnings and profits.  The Company  believes the suits are without merit and has
retained  special legal counsel to contest them vigorously and believes that the
Company's  exposure to liability  under such lawsuits,  if any, would not have a
material adverse effect on the Company's financial condition.

                                      -14-



<PAGE>
<PAGE>





PART II - OTHER INFORMATION

Item 1.       Legal Proceedings

              Not applicable.

Item 2.       Changes in Securities

              Not applicable.

Item 3.       Defaults upon Senior Securities

              Not applicable.

Item 4.       Submission of Matters to a Vote of Security Holders

              Not applicable.

Item 5.       Other Information

On March 31, 1997, the Company announced that it executed a definitive agreement
to acquire 100% of the stock of Lyndon  Property  Insurance  Company and its six
subsidiaries,  Lyndon  Life  Insurance  Company,  Twin  Mercury  Life  Insurance
Company,  Gulfco Life Insurance  Company,  Lyndon  Southern  Insurance  Company,
Lyndon - DFS Warranty  Services,  Inc. and Lyndon General Agency of Texas, Inc.,
subject to certain  closing  conditions and regulatory  approval,  at a purchase
price of approximately $92,000,000.  The transaction is expected to close in May
1997.

On April 30, 1997, the Company  executed a commitment  letter with Deutsche Bank
AG, New York Branch  ("Deutsche"),  whereby Deutsche will provide a $100,000,000
Revolving  Credit  Facility  for  five  years,  subject  to the  execution  of a
definitive credit agreement.  The Company proposes to borrow $62 million to fund
the purchase of Lyndon Property Insurance Company and its six subsidiaries.  The
transaction is expected to close in May 1997.

Item 6.       Exhibits and Reports on Form 8-K

              a.   Exhibits.

                   None.

              b.   Reports on Form 8-K.

                   None.

                                      -15-



<PAGE>
<PAGE>



                                    SIGNATURE

Pursuant  to the  requirements  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.

DATE:  May 15, 1997                       Frontier Insurance Group, Inc.
                                          --------------------------------------
                                                      (Registrant)

                                      By: /s/ Mark H. Mishler
                                          --------------------------------------
                                          Mark H. Mishler

                                          Vice President - Finance and Treasurer
                                          (Principal Financial and
                                          Accounting Officer and Duly
                                          Authorized Officer)

                                      -16-

<PAGE>