<PAGE>

================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                               ----------------

                                   FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the quarterly period ended September 30, 1999
    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: 001-12099

                               ----------------

                            The Centris Group, Inc.
            (Exact name of Registrant as specified in its charter)

<TABLE>
       <S>                                              <C>
                   DELAWARE                                   33-0097221
         (State or other jurisdiction                      (I.R.S. Employer
       of incorporation or organization)                Identification Number)
</TABLE>

            650 Town Center Drive, Suite 1600, Costa Mesa, CA 92626
              (Address of principal executive offices) (Zip code)

                                (714) 549-1600
             (Registrant's telephone number, including area code)

                                Not applicable
  (Former name, former address and former fiscal year, if changed since last
                                   report.)

                               ----------------

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.  YES [X] NO [_]

Number of shares outstanding of each class of the Registrant's Common Stock as
of November 11, 1999:

<TABLE>
     <S>                                                              <C>
     Common Stock, par value $.01 per share:......................... 11,536,076
     Common Stock Purchase Rights:................................... 11,536,076
</TABLE>

================================================================================
<PAGE>

                                     INDEX

Part I FINANCIAL INFORMATION
<TABLE>

<S>                                                                         <C>
  Item 1. FINANCIAL INFORMATION

      Unaudited Condensed Consolidated Financial Statements:

      Balance Sheets as of September 30, 1999 and December 31, 1998........   3

      Statements of Income and Comprehensive Income for the Quarters and
       Nine Months Ended September 30, 1999
       and 1998............................................................   4

      Statements of Cash Flows for the Nine Months Ended September 30, 1999
       and 1998............................................................   5

      Notes to Condensed Consolidated Financial Statements.................   6

  Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS............................................  11

  Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK........  19

Part II OTHER INFORMATION

  Item 6. EXHIBITS and REPORTS ON FORM 8-K.................................  20

SIGNATURES.................................................................  21
</TABLE>

                                       2
<PAGE>

                         PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL INFORMATION

    Unaudited Condensed Consolidated Financial Statements:

                            THE CENTRIS GROUP, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                     September 30, December 31,
                                                         1999          1998
                                                     ------------- ------------
<S>                                                  <C>           <C>
                       ASSETS
                       ------

Investments, at market (amortized cost $75,730 at
 September 30, 1999,
 $292,181 at December 31, 1998).....................   $ 73,947      $292,463
Cash and invested cash..............................     26,734         6,804
Restricted cash and short term investments..........     33,484        29,799
Accrued investment income...........................      1,320         3,119
Assets held for transfer under pending reinsurance
 agreement..........................................     96,405        99,369
Receivables:
  Reinsurance recoverable on losses and reserves....    119,809       101,644
  Premiums..........................................     70,292        57,558
Prepaid reinsurance premiums........................     13,153        14,507
Other assets........................................     40,275        32,197
                                                       --------      --------
    Total assets....................................   $475,419      $637,460
                                                       ========      ========

        LIABILITIES AND STOCKHOLDERS' EQUITY
        ------------------------------------

Liabilities
Insurance liabilities:
  Amounts due insurance companies...................   $101,241      $109,516
  Losses and loss adjustment expenses...............    141,734       200,908
  Unearned premiums.................................     15,582        32,274
Pending transferable reinsurance....................     96,405        99,369
Note payable to bank................................     25,000        72,550
Accounts payable and accrued expenses...............     14,609        31,809
                                                       --------      --------
    Total liabilities...............................    394,571       546,426
Stockholders' Equity................................     80,848        91,034
                                                       --------      --------
    Total liabilities and stockholders' equity......   $475,419      $637,460
                                                       ========      ========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                            THE CENTRIS GROUP, INC.

      CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                 (Dollars in Thousands, except per share data)

<TABLE>
<CAPTION>
                                           Quarter Ended    Nine Months Ended
                                           September 30,      September 30,
                                          ----------------  ------------------
                                           1999     1998      1999      1998
                                          -------  -------  --------  --------
<S>                                       <C>      <C>      <C>       <C>
Revenues:
  Premiums earned.......................  $14,657  $28,448  $ 58,468  $ 84,796
  Managed and withdrawal lines..........    9,495      --     39,167       --
  Commissions and fees..................   10,043    8,792    28,197    26,312
  Net investment income.................    1,336    1,363     5,393     4,069
  Realized investment gains.............      156    3,909       226     6,505
                                          -------  -------  --------  --------
    Total revenues......................   35,687   42,512   131,451   121,682
                                          -------  -------  --------  --------
Operating Expenses:
  Losses and loss adjustment expenses
   incurred.............................   19,882   22,746    57,708    63,966
  Managed and withdrawal lines..........    9,495      --     39,167       --
  Policy acquisition expenses...........    3,732    9,451    17,941    28,151
  General and administrative expenses...    7,787    4,440    15,929    13,113
  Interest..............................      407      524     2,583     1,626
                                          -------  -------  --------  --------
    Total operating expenses............   41,303   37,161   133,328   106,856
                                          -------  -------  --------  --------
(Loss) income from continuing operations
 before income taxes....................   (5,616)   5,351    (1,877)   14,826
  Income tax expense....................      110    1,981     1,439     5,676
                                          -------  -------  --------  --------
(Loss) income from continuing
 operations.............................   (5,726)   3,370    (3,316)    9,150
Loss from discontinued operations.......   (4,000)  (4,554)   (4,000)   (1,599)
                                          -------  -------  --------  --------
    Net (loss) income...................  $(9,726) $(1,184) $ (7,316) $  7,551
                                          =======  =======  ========  ========
Basic income per share:
  (Loss) income from continuing
   operations...........................  $ (0.49) $  0.28  $  (0.29) $   0.75
  Discontinued operations...............    (0.35)   (0.38)    (0.34)    (0.13)
                                          -------  -------  --------  --------
    Net (loss) income...................  $ (0.84) $ (0.10) $  (0.63) $   0.62
                                          =======  =======  ========  ========
Diluted income per share:
  (Loss) income from continuing
   operations...........................  $ (0.49) $  0.28  $  (0.28) $   0.74
  Discontinued operations...............    (0.34)   (0.38)    (0.34)    (0.13)
                                          -------  -------  --------  --------
    Net (loss) income...................  $ (0.83) $ (0.10) $  (0.62) $   0.61
                                          =======  =======  ========  ========
Comprehensive (loss) Income.............  $(6,373) $(1,653) $ (4,658) $  7,114
                                          =======  =======  ========  ========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

                            THE CENTRIS GROUP, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                             Nine Months Ended
                                                               September 30,
                                                             ------------------
                                                               1999      1998
                                                             --------  --------
<S>                                                          <C>       <C>
Cash (used in) provided by operating activities............. $(14,300) $ 10,567

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of fixed maturity investments...................   (7,031)  (58,920)
  Purchases of equity securities............................   (5,432)  (14,226)
  Net proceeds from divestiture.............................   65,355       --
  Proceeds from sales of investment securities..............   30,135    64,428
  Net purchases of short term investments...................    1,514    (1,847)
  Purchases of property and equipment.......................   (1,232)   (1,214)
                                                             --------  --------
    Cash provided by (used in) by investing activities......   83,309   (11,779)
                                                             --------  --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payment on note payable...................................  (47,550)   (2,650)
  Dividends paid............................................   (1,035)   (1,105)
  Repurchase of shares and exercise of stock options........     (494)   (3,936)
                                                             --------  --------
    Cash (used in) financing activities.....................  (49,079)   (7,691)
                                                             --------  --------
Net increase (decrease) in cash and invested cash...........   19,930    (8,903)
Cash and invested cash at beginning of period...............    6,804    11,122
                                                             --------  --------
Cash and invested cash at end of period..................... $ 26,734  $  2,219
                                                             ========  ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Interest paid............................................. $  2,573  $  1,602
                                                             ========  ========
  Income taxes paid, net.................................... $  1,221  $  6,674
                                                             ========  ========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

                            THE CENTRIS GROUP, INC.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General

  The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles and
the instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management all
adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. For further information,
refer to the consolidated financial statements and footnotes thereto for the
year ended December 31, 1998 included in the 1998 Annual Report to
Stockholders of The Centris Group, Inc. (the "Company").

2. Pending Merger

  On October 12, 1999, the Company announced that it had entered into a
definitive agreement pursuant to which the Company will be acquired by a
wholly owned subsidiary of HCC Insurance Holdings, Inc. (HCC). The transaction
will take the form of a cash tender offer by the subsidiary of HCC for all
outstanding shares of the Company at $12.50 per share. Following completion of
a successful tender offer, HCC plans to merge the Company with the HCC
subsidiary, and pay $12.50 per share for any remaining untendered shares,
subject to applicable appraisal rights. In addition, options to purchase the
Company's stock will be converted into the right to receive $12.50 per share,
less the applicable option exercise price.

  Completion of the tender offer and subsequent merger requires certain
regulatory approvals from the insurance departments of three states. If the
acquisition is terminated, HCC has the right, under certain circumstances,
either to receive a $6 million breakup fee (plus expenses up to $1 million) or
to exercise an option to acquire up to 19.9% of the Company's common stock.
HCC also obtained an option to acquire, under certain circumstances, up to
approximately 13% of the Company's outstanding common stock, which is
beneficially owned by certain senior officers and directors of the Company,
including the right to vote such stock in favor of the merger.

  The tender offer is subject to customary terms and conditions, including
tender of at least a majority of the Company's shares of Common Stock. The
tender offer is expected to be completed by Year end, 1999. The Boards of
Directors of the Company and HCC have both unanimously approved the
transaction.

3. Changes in Capital Structure

  On February 3, 1998, the Company announced that its Board of Directors had
authorized a two-for-one split of its common stock in the form of a 100% stock
dividend to stockholders of record as of February 18, 1998. Certificates
reflecting the stock split were issued February 27, 1998. All references in
the financial statements to number of shares, per share amounts and market
prices of the Company's common stock have been adjusted retroactively for all
periods presented to reflect this change in capital structure.

  On August 16, 1999, the Company announced that it was reactivating the stock
buyback program authorized by its Board of Directors in October 1998, and
under this re-actived program the Company acquired 106,700 shares prior to
entering into the merger agreement with HCC. No further activity under this
program is expected.

4. Reinsurance Agreement

  In connection with the December 31, 1998 acquisition from Eureko, B.V. of
the Netherlands ("the Seller") of Seaboard Life Insurance Company (USA) (now
known as Centris Life Insurance Company ("CLIC")), part of the acquisition of
The VASA Group companies, the Seller separately negotiated a reinsurance
agreement with

                                       6
<PAGE>

                            THE CENTRIS GROUP, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Life Reassurance Corporation of America ("Life Re") covering CLIC's Individual
Life and Annuity business, which business was to be retroactively reinsured on
a 100% indemnity basis effective as of July 1, 1998. The Company has
classified the liabilities relating to this agreement as "pending transferable
reinsurance" and has classified the related assets as "assets held for
transfer". Any income earned or loss incurred from the Individual Life and
Annuity business line is credited to or charged to such reinsurer. For the
third quarter and nine-month periods of 1999, losses of $(534,000) and income
of $2,304,000, respectively, were credited to the reinsurer and are excluded
from the Company's results of operations.

  On October 22,1999, CLIC and Life Re closed the reinsurance transaction.
Terms of the closing include a requirement for a final accounting to be
prepared prior to March 31, 2000. Pertinent financial aspects of this
transaction will be reflected in the records of CLIC during the fourth quarter
of 1999 upon receipt of all required financial information by CLIC. The
closure of the reinsurance transaction will not have an effect on the
consolidated balance sheets of the Company.

5. Discontinued Operations

  The Company announced discontinuance of its property/casualty reinsurance
segment as of December 31, 1998 and recorded a $19,621,000 provision for
anticipated future costs associated with such discontinuance
(the "Provision"). On June 29, 1999, the Company completed the sale to
Folksamerica Holding Company, Inc. ("Folksamerica") of its property/casualty
reinsurance subsidiary, USF RE INSURANCE COMPANY ("USF RE"), for $92,500,000.
Terms of the sale include a cash payment of $71,750,000 and a $20,750,000
5-year note that bears interest at 6.4% annually. The note is subject to
downward adjustment based on future adverse loss development and is included
in other assets net of an allowance of $10,900,000.

  Through September 30, 1999, transaction fees, the excess of subsidiary
equity on the date of sale, unrealized investment portfolio losses, investment
banking fees, severance costs, legal fees, asset retirements and net losses
from discontinued operations totaling $15,779,000 reduced the Provision.

  In the third quarter of 1999, the Company increased the Provision by
$5,700,000 due to additional loss experience occurring in the medical lines
segment related to policy year 1998. This income statement charge is reflected
in loss and loss adjustment expenses in the medical lines segment. Also in the
third quarter the Company increased the Provision by $4,000,000 through an
additional income statement charge from discontinued operations to provide for
certain matters that may be in excess of the note receivable from Folksamerica
previously described. Included in this amount is the write-off of reinsurance
recoverables related to the insolvency of New Cap Re, an unrelated reinsurer.

  Results of operations for the discontinued property/casualty reinsurance
operations (in thousands of dollars) are as follows:

<TABLE>
<CAPTION>

                                            Quarter Ended        Nine Months
                                            September 30,    Ended September 30,
                                           ----------------  -------------------
                                            1999     1998      1999       1998
                                           -------  -------  --------  ---------
   <S>                                     <C>      <C>      <C>       <C>
   Revenues............................... $   --   $17,876  $ 27,837   $50,817
                                           =======  =======  ========   =======
   Loss before income taxes............... $(4,000) $(7,483) $(11,384)  $(4,083)
   Benefit for income taxes...............     --    (2,929)   (2,332)   (2,484)
                                           -------  -------  --------   -------
   Net Loss............................... $(4,000) $(4,554) $ (9,052)  $(1,599)
                                           =======  =======  ========   =======
</TABLE>

                                       7
<PAGE>

                            THE CENTRIS GROUP, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


6. Managed and Withdrawal Lines

  In connection with the December 31, 1998 acquisition of the VASA Group
companies, the Company agreed to run off the remaining VASA Group medical
stop-loss, group term life insurance and other medical lines business in
exchange for a fee that was included within the purchase price. The seller is
providing loss protection for the run-off of this business so that the Company
will have neither an underwriting gain nor incur an underwriting loss on such
business. Such items are reported as "Managed and withdrawal lines" revenues
and expenses in the Company's income statement. During the nine-month period
ended September 30, 1999, receivables due from the seller of $7,929,000
related to this loss protection were recorded.

7. Note Payable

  An aggregate amount of $47,550,000 of the sale proceeds received by the
Company from the sale of USF RE was used to reduce the principal amount of
Centris' outstanding note payable to Fleet National Bank from $72,550,000 to
$25,000,000. As a result, Centris entered into a Sixth Amendment to its
December 1994 Credit Agreement with Fleet National Bank ("Fleet Bank"),
pursuant to which Amendment certain terms and conditions of the Credit
Agreement were modified. Such modifications include changes in the Company's
capital requirements and interest rates applicable to the outstanding balance
of the note. Amounts outstanding bear interest at LIBOR plus a margin,
currently 1.25%. The Company's Credit Agreement contains certain covenants,
restrictions and dividend payment limitations and call provisions in the event
of non-compliance. The Company has notified Fleet Bank that the sale of USF RE
(See Note 5, herein) and the charge of $19,621,000 taken by the Company in
connection with discontinuing the property/casualty reinsurance segment in the
fourth quarter of 1998 combined with additional charges taken in the third
quarter of 1999 and discussed elsewhere in this Form 10-Q has caused non-
compliance with the minimum fixed charge coverage ratio, minimum debt service
coverage ratio and minimum interest coverage ratio covenants. Fleet Bank
retains the option to call the note as prescribed in the Credit Agreement.
However, the Company has received no indication that Fleet Bank intends to
call the debt.

                                       8
<PAGE>

                            THE CENTRIS GROUP, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


8. Income Per Share

  Reconciliation of income and outstanding shares and related per share
amounts adjusted to reflect the February 27, 1998 two-for-one stock split, is
presented below (in thousands of dollars, except per share data):

<TABLE>
<CAPTION>
                                                               Nine Months
                                            Quarter Ended         Ended
                                            September 30,     September 30,
                                           ----------------  ----------------
                                            1999     1998     1999     1998
                                           -------  -------  -------  -------
   <S>                                     <C>      <C>      <C>      <C>
   Income (Numerator)
    (Loss) income applicable to common
     stock for Basic and Diluted income
     per share:
      (Loss) income from continuing
       operations ........................ $(5,726) $ 3,370  $(3,316) $ 9,150
      Discontinued operations.............  (4,000)  (4,554)  (4,000)  (1,599)
                                           -------  -------  -------  -------
      Net (Loss) income................... $(9,726) $(1,184) $(7,316) $ 7,551
                                           =======  =======  =======  =======
   Weighted Average Shares (Denominator)
     Basic Shares.........................  11,560   12,111   11,603   12,165
   Effect of dilutive securities
     Common stock equivalents.............     101      --       153      281
                                           -------  -------  -------  -------
   Diluted Shares.........................  11,661   12,111   11,756   12,446
                                           =======  =======  =======  =======
   Basic Income Per Share
     (Loss) income from continuing
      operations.......................... $ (0.49) $  0.28  $ (0.29) $  0.75
     Discontinued operations..............   (0.35)   (0.38)   (0.34)   (0.13)
                                           -------  -------  -------  -------
     Net (Loss) income.................... $ (0.84) $ (0.10) $ (0.63) $  0.62
                                           =======  =======  =======  =======
   Diluted Income Per Share
     (Loss) income from continuing
      operations.......................... $ (0.49) $  0.28  $ (0.28) $  0.74
     Discontinued operations..............   (0.34)   (0.38)   (0.34)   (0.13)
                                           -------  -------  -------  -------
     Net (Loss) income.................... $ (0.83) $ (0.10) $ (0.62) $  0.61
                                           =======  =======  =======  =======
</TABLE>

9. Comprehensive Income

  SFAS No. 130, "Reporting Comprehensive Income" was adopted by the Company
effective January 1, 1998. Comprehensive income represents a measure of all
changes in equity of an enterprise that result from recognized transactions
and other economic events of the period other than transactions with owners in
their capacity as owners. The Company's comprehensive (loss) income is
comprised of net (loss) income for the period plus the tax effected increase
or decrease in unrealized investment gains occurring during the period.

10. Loss and Loss Adjustment expenses

  Insurance and reinsurance companies establish reserves for losses incurred,
but not yet paid or reported, in order to match such losses with the related
premiums earned. The process of establishing loss reserves is subject to
uncertainties that are a normal, recurring aspect of the insurance business
that requires the use of informed judgments and estimates. Loss and loss
adjustment expense ("LAE") reserve development is reviewed on a regular basis,
incorporating analysis of current trends, market changes in the Company's
business segments and historical experience to analyze the Company's actuarial
assumptions. The results of the third quarter 1999

                                       9
<PAGE>

                            THE CENTRIS GROUP, INC.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

actuarial study resulted in increases of $5,700,000 and $3,100,000 for medical
stop loss policy years 1998 and 1999, respectively. Such amounts are reflected
in the continuing operations of the Company for the periods ended September
30, 1999.

11. Agreement between The Company and Eureko B.V.

  As more fully described in the Company's 1998 Annual report on Form 10-K the
Company purchased 100% of the outstanding shares of common stock of the VASA
companies from Eureko, B.V. of the Netherlands ("the Seller") for
approximately $43 million in cash on December 31,1998. The transaction was
accounted for as a purchase.

  On November 1,1999 the Seller and the Company entered into a memorandum of
understanding to resolve and settle all pending matters related to the
purchase. The resolution includes the payment of commissions received by CLIC
under the reinsurance agreement with Life Re described in Note 4 to the Seller
and payment of $2,900,000 to the Company by the Seller. Presently, the Company
expects that the settlement of these matters will result in approximately
$3,000,000 of goodwill from this purchase. During the fourth quarter, upon
receipt of applicable financial information necessary to clear the reinsurance
transaction described in Note 4, the Company will revise its purchase
accounting to reflect the settlement.

12. Certain Reclassifications

  The 1998 Consolidated Balance Sheet presentation has been revised to conform
to the 1999 presentation.

                                      10
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

Business Operations

 General

  During the nine month period ended September 30, 1999, the Company completed
the sale of its USF RE INSURANCE COMPANY ("USF RE") subsidiary, reduced its
outstanding debt by $47,550,000 to $25,000,000, increased its free cash flow
position, maintained its risk retention level at 25% (down from 50% in prior
years) for its medical lines business, and continued the assimilation of the
VASA Group companies, acquired December 31, 1998. These major transactions,
which are more fully described in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 (1998 Form 10-K), are reflected in the 1999
periods and result in reduced premiums in the medical lines segment and
significant changes in the Company's balance sheet. The sale of USF RE also
terminated the inter-company pooling agreement between USF RE and its
subsidiary, USFIC, which affected the specialty lines segment. Subsequent to
the close of the third quarter of 1999, the Company entered into a merger
agreement under which the Company could be acquired, and completed a sequence
of significant transactions which are described below.

Current Period Events

 Pending Merger

  On October 12, 1999, the Company announced that it had entered into a
definitive agreement whereby the Company will be acquired by an entity wholly
owned by HCC Insurance Holdings, Inc. ("HCC").

  The transaction will take the form of a cash tender offer by a subsidiary of
HCC for all outstanding shares of the Company at $12.50 per share. Following
completion of a successful tender offer, HCC will merge the Company with the
HCC subsidiary and pay $12.50 per share for the remaining untendered shares,
if any, subject to applicable appraisal rights. In addition, options to
purchase the Company's stock will be converted into the right to receive
$12.50 per share less the applicable option exercise price.

  The tender offer is subject to customary terms and conditions, including
tender of at least a majority of the Company's shares of common stock. The
tender offer is expected to be completed by year end, 1999. The Boards of
Directors of the Company and HCC have both unanimously approved the
transaction.

  Completion of the tender offer and subsequent merger requires certain
regulatory approvals. If the acquisition is terminated, HCC has the right,
under certain circumstances, either to receive a $6 million breakup fee (plus
expenses up to $1 million) or to exercise an option to acquire up to 19.9% of
the Company's common stock. HCC also obtained an option to acquire, in certain
circumstances, up to approximately 13% of the Company's outstanding common
stock which is beneficially owned by certain senior officers and directors of
the Company, including the right to vote such stock in favor of the merger.

 Agreement between The Company and Eureko B.V.

  As more fully described in the Company's 1998 Annual report on Form 10-K the
Company purchased 100% of the outstanding shares of common stock of the VASA
companies from Eureko, B.V. of the Netherlands ("the Seller") for
approximately $43,000,000 in cash on December 31, 1998. The transaction was
accounted for as a purchase.

  On November 1, 1999 Eureko, B.V. and the Company entered into a memorandum
of understanding to resolve and settle all pending matters related to the
purchase. The resolution includes the payment of commissions received by CLIC
under the reinsurance agreement with Life Re described elsewhere in this
Form 10-Q to the Seller and payment of $2,900,000 to the Company by the
Seller. Presently, the Company

                                      11
<PAGE>

expects that the settlement of these matters will result in approximately
$3,000,000 of goodwill from this purchase. During the fourth quarter, upon
receipt of applicable financial information necessary to clear the reinsurance
transaction described above, the Company will revise its purchase accounting
to reflect the settlement.

 Discontinued Operations

  The Company announced discontinuance of its property/casualty reinsurance
segment as of December 31, 1998 and recorded a $19,600,000 provision for
anticipated future costs associated with such discontinuance (the
"Provision"). On June 29, 1999, the Company completed the sale to Folksamerica
Holding Company, Inc. ("Folksamerica") of its property/casualty reinsurance
subsidiary, USF RE INSURANCE COMPANY ("USF RE"), for $92,500,000. Terms of the
sale include a cash payment of $71,750,000 and a $20,750,000 5-year note that
bears interest at 6.4% annually. The note is subject to downward adjustment
based on future adverse loss development.

  Through September 30, 1999, transaction fees, the excess of subsidiary
equity on the date of sale, unrealized investment portfolio losses, investment
banking fees, severance costs, legal fees, asset retirements and net losses
from discontinued operations totaling $15,729,000 reduced the Provision.

  In the third quarter of the 1999, the Company increased the Provision by
$5,700,000 due to additional loss experience occurring in the medical lines
segment related to policy year 1998. This income statement charge is reflected
in loss and loss adjustment expenses in the medical lines segment. Also in the
third quarter the Company increased the Provision by $4,000,000 through an
additional income statement charge from discontinued operations to provide for
certain matters which may be in excess of the note receivable from
Folksamerica previously described. Included in this amount is the write-off of
reinsurance recoverable related to the insolvency of New Cap Re, an unrelated
reinsurer. The Company is maintaining the balance of the Provision for
discontinued operations as the buyer retains control over loss development on
discontinued business lines for the next five years.

 Reinsurance Agreement

  In connection with the December 31, 1998 acquisition of Seaboard Life
Insurance Company (USA) (now known as Centris Life Insurance Company
("CLIC")), part of the acquisition of The VASA Group Companies, the Seller
separately negotiated a reinsurance agreement with Life Reassurance
Corporation of America ("Life Re") covering CLIC's Individual Life and Annuity
business, which business was to be retroactively reinsured on a 100% indemnity
basis effective as of July 1, 1998. The Company has classified the liabilities
relating to this agreement as "pending transferable reinsurance" and has
classified the related assets as "assets held for transfer". Any income earned
or loss incurred from the Individual Life and Annuity business line is
credited to or charged to such reinsurer. For the third quarter and nine-month
periods of 1999, losses of $(534,000) and income of $2,304,000, respectively,
were credited to the reinsurer and are excluded from the Company's results.

  On October 22, 1999, CLIC and Life Re closed the reinsurance transaction.
Terms of the closure include a requirement for a final accounting to be
prepared prior to March 31, 2000. Pertinent financial aspects of this
transaction will be reflected in the records of CLIC during the fourth quarter
of 1999 upon receipt of all required financial information by CLIC. The
closure of the reinsurance transaction will not have an effect on the
consolidated balance sheets of the Company.

 Managed And Withdrawal Lines

  For the quarterly and year-to-date periods ended September 30, 1999, the
Company reported $9,495,000 and $39,167,000, respectively, in both revenue and
expenses from managed and withdrawal lines. These lines of business were
acquired as part of the VASA Group transaction, and pursuant to the terms of
the purchase agreement, the Company can neither profit from nor suffer loss
from running off this business due to loss protections provided by the Seller.
For further discussion of the terms and conditions of the purchase of the VASA
Group companies see the Company's 1998 Form 10-K.

                                      12
<PAGE>

 Results Of Operations

  Effective January 1, 1999, the Company's risk retention level on medical
stop loss and provider excess business produced by its subsidiary, USBenefits,
was reduced to 25% from the 50% level it had in prior years. This action
substantially reduced the Company's exposure to underwriting risk. The
decrease in the risk retention level produced the declines in premiums earned
in the 1999 periods as compared to the 1998 periods. Accordingly, consolidated
revenues, excluding managed and withdrawal lines, decreased 38.4% to
$26,192,000 for the third quarter ended September 30, 1999 from $42,512,000 in
the 1998 third quarter, and decreased 24.2% to $92,284,000 for the first nine
months of 1999 from $121,682,000 for the 1998 nine month period. Commissions
and fees increased in the 1999 periods as a result of higher production levels
that include rate increases of between 12% and 15%. The Company's acquisition
and divestiture activities yield a decrease in invested assets from
$292,463,000 at December 31, 1998 to $73,947,000 at September 30, 1999 which
produces lower levels of investment income after June 30, 1999.

  Insurance and reinsurance companies establish reserves for losses incurred,
but not yet paid or reported, in order to match such losses with the related
premiums earned. The process of establishing loss reserves is subject to
uncertainties that are a normal, recurring aspect of the insurance business
that requires the use of informed judgments and estimates. Loss and loss
adjustment expense ("LAE") reserve development is reviewed on a regular basis,
incorporating analysis of current trends, market changes in the Company's
business segments and historical experience to analyze the Company's actuarial
assumptions. As additional experience and other data become available, the
Company's actuarial estimates may be revised. Such revisions may impact
earnings.

  Loss and loss adjustment expense decreased by 12.6%, to $19,882,000 for the
1999 third quarter compared to $22,746,000 for the 1998 quarter. This result
reflects changes in the net risk retention level in the medical lines segment
to 25% on policies effective January 1, 1999 and continuing loss development
on policy year 1998 and prior years for which the Company had a net retention
level of 50%. Following an actuarial review in the third quarter, the Company
increased its reserves by $3,100,000 for medical stop loss policy year 1999
and reflected additional loss and loss adjustment expenses of $5,700,000 for
policy year 1998 in the medical lines segment. During the second quarter of
1999, the Company purchased reinsurance coverage in connection with the sale
of USF RE that provides $5,000,000 of excess of loss protection on development
of policy year 1998 losses above a pre-specified retention. Unanticipated
development in the third quarter will exhaust the reinsurance protection.
Specialty lines experience primarily reflects changes since January 1, 1999 in
retrocessional arrangements and termination of the intercompany pooling
agreement with USF RE.

  Policy acquisition expenses decreased to $3,732,000, or by 60.5% in the 1999
period, from $9,451,000, due primarily to the reduction in the Company's
exposure to underwriting risk discussed above and changes in the cost
structures associated with 1999 medical lines policies.

  General and administrative expenses of continuing operations for the third
quarter of 1999 increased 75.3% as compared to the 1998 period and increased
21.5% on a year to date basis. Increased general and administrative costs in
the third quarter of 1999 are inclusive of higher health care expenses and
additional professional services pertaining to the Company's major
transactions described elsewhere in this Form 10-Q.

  Loss and loss adjustment expense decreased by 12.6%, to $19,882,000 for the
1999 third quarter compared to $22,746,000 for the 1998 quarter. This result
reflects changes in the net risk retention level in the medical lines segment
to 25% on policies effective January 1, 1999 and continuing loss development
on policy year 1998 and prior years for which the Company had a net retention
level of 50%. Following an actuarial review in the third quarter, the Company
increased its reserves by $3,100,000 for medical stop loss policy year 1999
and reflected additional loss and loss adjustment expenses of $5,700,000 for
policy year 1998 in the medical lines segment. During the second quarter of
1999, the Company purchased reinsurance coverage in connection with the sale
of USF RE that provides $5,000,000 of excess of loss protection on development
of policy year 1998 losses above a pre-specified retention. Unanticipated
development in the third quarter will exhaust the reinsurance protection.
Specialty lines experience primarily reflects changes since January 1, 1999 in
retrocessional arrangements and termination of the intercompany pooling
agreement with USF RE.

                                      13
<PAGE>

  Policy acquisition expenses decreased to $3,732,000, or by 60.5% in the 1999
period, from $9,451,000, due primarily to the reduction in the Company's
exposure to underwriting risk discussed above and changes in the cost
structures associated with 1999 medical lines policies.

  General and administrative expenses of continuing operations for the third
quarter of 1999 increased 75.3% as compared to the 1998 period and increased
21.5% on a year to date basis. Increased general and administrative costs in
the third quarter of 1999 are inclusive of higher health care expenses and
additional professional services pertaining to the Company's major
transactions described elsewhere in this Form 10-Q.

  Interest expense, on a year to date basis, rose to $2,583,000, from
$1,626,000, in the 1999 period as compared to the 1998 period, due to the
December 1998 increase in borrowing levels to finance the VASA acquisition. An
aggregate amount of $47,550,000 of the sale proceeds received by the Company
from the June 1999 sale of USF RE was used to reduce the principal amount of
Centris' outstanding note payable to $25,000,000 from $72,550,000.
Accordingly, interest expense declined to $407,000 for the third quarter of
1999 from $524,000 for the third quarter of 1998.

  Net losses from continuing operations were $5,726,000 and $3,316,000 for the
third quarter and nine month periods of 1999 compared to net income of
$3,370,000 in the third quarter of 1998 and $9,150,000 in the 1998 nine month
period. These outcomes reflect completion of the Company's major restructuring
transactions begun in 1998 as well as loss development on policy year 1999 and
prior years in the medical lines segment.

  Generally, income taxes as a percentage of pre-tax income fluctuate
depending on the proportion of tax exempt investment income to total pre-tax
income and the proportion of total income subject to state income taxes. In
the 1999 periods, amounts pertaining to increases in loss and loss adjustment
expenses for the 1998 policy year relate to the sale of USFRE previously
described and do not produce an income tax benefit as a result of the loss
disallowance rules promulgated in the Federal Tax Code. Accordingly, the
Company incurs income tax expense in periods of operating losses.

  The statutory combined ratio is the traditional indicator of the potential
underwriting profitability of an insurance company's business. The Company's
statutory combined ratios for continuing operations were 112.5 and 102.7 for
the nine-month periods ended September 30, 1999 and 1998, respectively.

 Business Segments

  The Company conducts business in two segments:

    MEDICAL LINES includes (i) medical stop-loss and provider excess coverage
  underwritten by USBenefits Insurance Services, Inc. ("USBenefits") on
  behalf of The Continental Insurance Company ("Continental"), one of the CNA
  Insurance Companies, (ii) catastrophic accident and health risks
  underwritten and managed nationally and internationally by INTERRA, Inc.
  ("INTERRA"), and (iii) reinsurance of 50% of such business by USF RE
  through December 31, 1998, at which time USF RE terminated its reinsurance
  of the medical lines business on a run-off basis. Effective January 1, 1999
  Centris Life Insurance Company ("CLIC") (formerly known as Seaboard Life
  Insurance Company (USA)) and Centris Insurance Company ("CIC") (formerly
  known as VASA North Atlantic Insurance Company) became reinsurers of the
  medical lines business with net retained liability under all medical stop-
  loss and provider excess contracts limited to 25%. CLIC and CIC are rated
  "A-" (Excellent) by A.M. Best Company although these ratings have been
  placed under review with developing implications pending the outcome of the
  merger with HCC. There can be no assurance that these companies will retain
  their current A.M. Best Company ratings following completion of the merger.
  Medical stop-loss coverage is a form of excess insurance that protects
  employers that self-fund their employee healthcare plans by limiting their
  exposure from the risk of loss. Provider excess coverage limits the
  financial risks healthcare providers face from medical plans that prepay
  the providers fixed sums per plan participant (capitated fees) or provide
  specified rates for services. Medical lines products are marketed through a
  network of unaffiliated third party administrators, insurance agents,
  brokers and consultants.

                                      14
<PAGE>

    SPECIALTY LINES insurance underwriting is conducted by the Company's USF
  Insurance Company ("USFIC") subsidiary, which is presently rated "A"
  (Excellent) by A.M. Best Company, a rating that it shared with USF RE,
  under an Intercompany Pooling Agreement that has been terminated effective
  as of January 1, 1999. There can be no assurance that USFIC will continue
  to be rated by A.M. Best Company following the merger or that if USFIC
  continues to be rated, that it will retain its current rating of "A". USFIC
  writes both standard and surplus lines insurance on commercial and personal
  property/casualty risks which are marketed exclusively through managing
  general agents, general agents and program administrators.

  The tables set forth below present pre-tax operating information by business
segment and holding company operations (including realized gains) for the
quarters and nine month periods ended September 30, 1999 and 1998,
respectively.

                                 MEDICAL LINES
                            (Dollars in Thousands)

<TABLE>
<CAPTION>
                                  Quarter Ended           Nine Months Ended
                                  September 30,             September 30,
                              -----------------------  -----------------------
                                                 %                        %
                               1999     1998   Change   1999     1998   Change
                              -------  ------- ------  ------- -------- ------
<S>                           <C>      <C>     <C>     <C>     <C>      <C>
Revenues:
  Premiums earned............ $13,730  $26,855   (49)% $55,569 $ 79,973  (31)%
  Commissions and fees.......   9,907    8,792    13 %  27,973   26,312    6 %
  Investment income..........     828    1,033   (20)%   4,260    3,094   38 %
                              -------  -------         ------- --------
  Total revenues.............  24,465   36,680   (33)%  87,802  109,379  (20)%
                              -------  -------         ------- --------
Expenses:
  Losses and loss
   adjustment................  19,053   21,434   (11)%  55,169   60,428   (9)%
  Policy acquisition.........   4,680    9,046   (48)%  18,410   27,219  (32)%
  General and
   administrative............   5,320    3,523    51 %  11,755   10,202   15 %
                              -------  -------         ------- --------
  Total expenses.............  29,053   34,003   (15)%  85,334   97,849  (13)%
                              -------  -------         ------- --------
(Loss) income before income
 taxes....................... $(4,588) $ 2,677  (271)% $ 2,468 $ 11,530  (79)%
                              =======  =======         ======= ========
</TABLE>

  The decline in premiums earned in the 1999 periods as compared to 1998 is
the result of the Company reducing its exposure to underwriting risk by
limiting its risk retention level on business written by USBenefits to 25% on
policies effective January 1, 1999 from the 50% level used in prior periods.
Commission and fee income increased moderately in the 1999 period due to
expansion of INTERRA brokerage operations and higher production levels. Loss
and loss adjustment expenses declined as a result of changes in the net risk
retention level to 25% on the 1999 medical lines business combined with the
impact of the results of the third quarter 1999 actuarial study which resulted
in additional loss and loss adjustment expenses of $5,700,000 for policy year
1999 and $3,100,000 for policy year 1998. Fluctuations in general and
administrative expenses in the 1999 periods occur due to changes in overhead
allocations which occur as a result of the sale of USF RE described elsewhere
in this Form 10-Q.

                                      15
<PAGE>

                                SPECIALTY LINES
                            (Dollars in Thousands)

<TABLE>
<CAPTION>
                                       Quarter Ended         Nine Months Ended
                                       September 30,           September 30,
                                    ---------------------   --------------------
                                                     %                      %
                                     1999    1998  Change    1999   1998  Change
                                    ------  ------ ------   ------ ------ ------
<S>                                 <C>     <C>    <C>      <C>    <C>    <C>
Revenues:
  Premiums earned.................. $  927  $1,593   (42)%  $2,899 $4,823  (40)%
  Investment income................    241     305   (21)%     865    890   (3)%
                                    ------  ------          ------ ------
  Total revenues...................  1,168   1,898   (38)%   3,764  5,713  (34)%
                                    ------  ------          ------ ------
Expenses:
  Losses and loss adjustment.......    829   1,312   (37)%   2,539  3,538  (28)%
  Policy acquisition...............   (948)    405  (469)%     932
  General and administrative.......    296     137   116 %     390    625  (38)%
                                    ------  ------          ------ ------
  Total expenses...................    177   1,854   (90)%   2,460  5,095  (52)%
                                    ------  ------          ------ ------
Income before income taxes......... $  991  $   44 2,152 %  $1,304 $  618  111 %
                                    ======  ======          ====== ======
</TABLE>

  Specialty lines operating results reflect changes in reinsurance programs
and termination of the intercompany pooling agreement with the Company's USF
RE subsidiary effective January 1, 1999. These operating changes are the
principal factors impacting premiums earned, loss and loss adjustment expenses
and policy acquisition costs in the 1999 periods.

                                HOLDING COMPANY
                            (Dollars in Thousands)

<TABLE>
<CAPTION>
                                    Quarter Ended         Nine Months Ended
                                    September 30,           September 30,
                                ----------------------  ----------------------
                                                  %                       %
                                 1999     1998  Change   1999     1998  Change
                                -------  ------ ------  -------  ------ ------
<S>                             <C>      <C>    <C>     <C>      <C>    <C>
Revenues:
  Commissions & fees........... $   136  $  --          $   224  $  --
  Investment income............     267      25  968 %      268      85  215 %
  Realized gains...............     156   3,909  (96)%      226   6,505  (97)%
                                -------  ------  ---    -------  ------
  Total revenues...............     559   3,934  (86)%      718   6,590  (89)%
                                -------  ------         -------  ------
Expenses:
  General and administrative...   2,171     780  178 %    3,784   2,286   66 %
  Interest.....................     407     524  (22)%    2,583   1,626   59 %
                                -------  ------         -------  ------
  Total expenses...............   2,578   1,304   98 %    6,367   3,912   63 %
                                -------  ------         -------  ------
(Loss) income before income
 taxes......................... $(2,019) $2,630         $(5,649) $2,678
                                =======  ======         =======  ======
</TABLE>

  Changes in realized gains in the 1999 period as compared to the 1998 period
arise from the continuous evaluation of the investment portfolio in accordance
with the Company's investment guidelines. General and administrative expenses
in the 1999 periods fluctuate based upon the timing of purchased services and
the allocation of services provided to the operating subsidiaries. Increased
general and administrative costs in the third quarter of 1999 are inclusive of
higher health care expenses and additional professional services pertaining to
the Company's major transactions described elsewhere in this Form 10-Q.

                                      16
<PAGE>

  Changes in realized gains in the 1999 period as compared to the 1998 period
arise from the continuous evaluation of the investment portfolio in accordance
with the Company's investment guidelines. General and administrative expenses
in the 1999 periods fluctuate based upon the timing of purchased services and
the allocation of services provided to the operating subsidiaries. Increased
general and administrative costs in the third quarter of 1999 are inclusive of
higher health care expenses and additional professional services pertaining to
the Company's major transactions described elsewhere in this Form 10-Q.

  Interest expense for 1999 year to date rose due to higher borrowing levels
to finance the VASA acquisition. Interest expense declined in third quarter of
1999 due to the reduction of outstanding debt by $47,550,000 to $25,000,000 as
a result of the proceeds received from completion of the sale of USF RE on
June 29, 1999.

LIQUIDITY AND CAPITAL RESOURCES

  The Company utilizes cash from operations and maturing investments to meet
its insurance obligations to policyholders and claimants, as well as to meet
operating costs. Primary sources of cash from operations include premium
collections, commissions and fees and investment income. The principal uses of
cash from operations are for premium payments to insurance companies, payments
of claims under reinsurance and insurance contracts, and operating expenses
such as salaries, commissions, taxes and general overhead. Cash available from
operations varies between periods primarily due to the timing of premium
collections and the payment of claims. In December 1998, the Company borrowed
an additional $42,700,000 under its existing Credit Agreement for the purchase
of the VASA companies. As previously noted, the Company received $71,750,000
in cash upon completion of the sale of USF RE on June 29, 1999 and utilized
$47,550,000 of such proceeds to pay down the loan balance on its Credit
Agreement to $25,000,000. This resulted in a reduction of the debt to total
capitalization ratio to 23.6%. This transaction also produced additional cash
of $24,000,000 available to fund the Company's business. In connection with
the sale of USF RE, the Company entered into a Sixth Amendment to its December
1994 Credit Agreement with Fleet National Bank ("Fleet Bank"), pursuant to
which Amendment certain terms and conditions of the Credit Agreement were
modified. Such modifications include changes in the Company's capital
requirements and interest rates applicable to the outstanding balance of the
bank debt. Amounts outstanding bear interest at LIBOR plus a margin, currently
1.25%. The Company's Credit Agreement contains certain covenants, restrictions
and dividend payment limitations and call provisions in the event of non-
compliance. The Company has notified Fleet Bank that the sale of USF RE (See
Note 5, herein) and the charge of $19,621,000 taken by the Company in
connection with discontinuing the property/casualty reinsurance segment in the
fourth quarter of 1998 combined with additional charges taken in the third
quarter of 1999 and discussed elsewhere in this Form 10-Q has caused non-
compliance with the minimum fixed charge coverage ratio, minimum debt service
coverage ratio and minimum interest coverage ratio covenants. Fleet Bank
retains the option to call the note as prescribed in the Credit Agreement.
However, the Company has received no indication that Fleet Bank intends to
call the debt.

  The investment portfolio reflects an allocation of approximately 88% in
fixed-income investments, primarily taxable, with an "AA" average fixed income
portfolio rating, and 12% in equities. The portfolio does not contain any real
estate investments, derivatives, high yield bonds, private placements or
mortgage loans.

Year 2000

  As the Year 2000 approaches, the Company recognizes the need to ensure that
its operations will not be adversely affected by Year 2000 computer software
and hardware issues. Such issues pertain to date sensitive software and
hardware which could incorrectly recognize a two digit date field. This could
result in a system miscalculation or failure and lead to a disruption of
operations, including, among other things, a temporary inability to process
transactions, send invoices, make claims or other payments or engage in
similar activities.

  The Company adopted and has implemented a formal plan to evaluate and
implement solutions to Year 2000 related problems which focuses on eight
separate compliance issues: (i) the ability of the Company's systems to handle
the transition to the Year 2000; (ii) the ability of the Company's customers
and business partners to handle

                                      17
<PAGE>

the transition to the Year 2000; (iii) the ability of the Company's vendors
and service providers to handle the transition to the Year 2000; (iv) the
Company's disclosure of its Year 2000 compliance efforts to investors and
regulators; (v) the Company's potential exposure to losses from Year 2000
claims under its reinsurance contracts and insurance policies; (vi) the
Company's ability to secure and maintain insurance coverages protecting the
Company against Year 2000 losses; (vii) budget and resource issues; and (viii)
development and implementation of a Year 2000 contingency plan.

  The evaluation phase of the plan was completed in December 1997. Commencing
in 1998 and continuing in 1999, the Company has implemented and tested Year
2000 compliant systems for its corporate financial reporting system and its
medical lines operations. The Company believes that all of its internal
systems have reached a state of Year 2000 readiness and expects to continue
testing its systems during the remainder of 1999.

  In addition, the Company has solicited its trading partners including agents
and brokers, suppliers, financial institutions and others who could directly
or indirectly affect the Company's operations as to their Year 2000 compliance
efforts. Presently, these trading partners are in various stages of completion
of their own Year 2000 remediation efforts. The third party vendors providing
the Company's significant operational and financial software systems have
represented to the Company that the software now in use is Year 2000
compliant. The Company will continue to monitor the Year 2000 readiness of its
own systems, as well as the readiness of its customers, business partners,
vendors and service providers on an ongoing basis. It is presently not
possible to quantify the aggregate cost to the Company with respect to
external Year 2000 issues, if any, although the Company does not expect such
matters to have a material adverse effect on its operations.

  The Company continues to monitor the status of external Year 2000 issues and
is developing contingency plans for issues that may arise. In support of this
objective, the Company has developed a worst case scenario relating to Year
2000 situations. This scenario indicates that Year 2000 risks relate to the
Company's relationships with its trading partners where concerns such as
telephone availability, fax services and telecommunications including internet
service usage could cause the Company to revise its business practices in the
event of the non availability of such common services. The Company is
presently developing alternative methods to conducting its business in the
event that a worst case scenario or element thereof was to occur. This
scenario considers it unlikely that all external trading relationships would
become useless simultaneously. Therefore, the Company's contingency plan is
based upon alternatives to the specific loss of up to two of the identified
worst case items described. The Company intends to continue testing elements
of its contingency plan throughout 1999.

  Strategies have been developed to include identification of and management
of resources which can be operated in reduced or minimal modes, appropriate
recovery processes and use of alternate methods to process data. For example,
insured name clearance can be accomplished using copies of data currently
being compiled and stored off-premises, quote issuance can be performed
manually, and policy issuance can also be performed manually, so long as the
Company has access to photocopy systems and can maintain a log, either via
spreadsheet or manual listing. If necessary, claims could be processed and
paid manually and the data could be input into its systems once any problems
are resolved. Premiums, commissions, and other financial data could be
processed on a spreadsheet and checks typed on a manual basis. Alternatively,
record keeping could be kept in spreadsheet format, and the Company may rely
on the systems of one or more of its affiliated companies to perform some of
the functions affected.

  In the event that the Company's systems do not function as expected and the
Company has to implement its contingency plan, the Company does not believe
there will be a material impact on the Company's operations. Critical
operational tasks which could be negatively impacted include: insured name
clearance, quote issuance, policy contract issuance, claims processing,
generation of management reports, accounting, and communications with clients.
Critical operational task data currently being produced is backed-up daily and
stored at an off-site facility and will be available for processing by either
an outside third party vendor or by the Company on a manual basis or on off-
the-shelf software which could be readily purchased.


                                      18
<PAGE>

  As mentioned, the Company is working to make certain that its business
partners are aware of the potential risks and that they are taking steps to
make certain their systems are Year 2000 compliant. In the event a vendor,
supplier or service provider cannot certify or establish Year 2000 compliance
status, the Company will contract with alternative sources for products and
services. Further, the failure of one of the Company's business partners to
achieve compliance, or a finding that its systems do not function as expected,
may have an impact on the Company. The Company has communicated with its
business partners to determine their extent of compliance and has learned that
a variety of operating systems are being used by them. The Company believes
that it is unlikely that the failure of one operating system to perform as
expected will affect a significant portion of its business partners at any one
time.

  The Company has also taken steps to ensure that it will have adequate
insurance coverages for any Year 2000 losses that it may incur by monitoring
its coverages to ensure that there are no Year 2000 restrictions or
limitations on its policies, renewing its D&O and E&O coverages early without
any limitations pertaining to Year 2000, and by obtaining multi-year contracts
that will extend beyond the Year 2000 to ensure that its coverages are not
restricted or canceled during 1999. In addition, it is the Company's intention
to renew all of its other principal coverages to ensure that such coverages
also do not contain Year 2000 restrictions.

 Forward Looking Statements

  Some of the statements included in this quarterly report, on Form 10-Q,
including but not limited to Management's Discussion and Analysis of Financial
Condition and Results of Operations, Condensed Consolidated Financial
Statements, and related notes thereto, that are not historical facts may be
considered to be forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Investors are cautioned that all such forward-looking statements are
subject to certain risks and uncertainties that could cause the actual results
to differ materially from those suggested by such statements. Such risks and
uncertainties include, but are not limited to, the following: catastrophic
losses or a material aggregation of such losses in the Company's insurance
lines; changes in federal or state law affecting an employer's ability to
self-insure or other adverse regulatory changes; the adequacy of the Company's
reinsurance programs; general economic conditions in this country or abroad;
adverse developments in the securities markets and their impact on the
Company's investment portfolio; the effects of competitive market pressures
within the medical lines or property/casualty marketplaces; the effect of
changes required by generally accepted accounting practices or statutory
accounting practices; failure of the Company's computer systems to perform in
an appropriate manner following year 2000 remediation efforts; failure of the
Company's trading partners, customers or key vendors to make their computer
systems year 2000 compliant in a timely manner; and other risks which are
described from time to time in the Company's filings with the Securities and
Exchange Commission. The words "believes", "anticipates", "expects" and
similar expressions are intended to identify forward-looking statements.
Although the Company believes that the assumptions underlying the forward-
looking statements contained herein are reasonable, any of the assumptions
could prove to be inaccurate and, therefore, there can be no assurance that
such forward-looking statements will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements, the
inclusion of such information should not be regarded as a representation by
the Company or by any other person that the objectives and plans of the
Company will be achieved.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

  The Company does not believe there have been any material changes in the
market risks since December 31, 1998, which would impact the fair value of
certain assets and liabilities included in the Condensed Consolidated Balance
Sheets.

                                      19
<PAGE>

                          PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

  (a) Following is a list of exhibits that are required to be filed as part of
this Form 10-Q by Item 601 of Regulation S-K:

<TABLE>
   <C>       <S>
   3.1, 4.1  The Company's Restated Certificate of Incorporation, as amended,
             as presently in effect. Filed as Exhibits 3.1 and 4.1 to the
             Company's Annual Report on Form 10-K for the year ended December
             31, 1997, and incorporated herein by this reference.

   3.2, 4.2  The Bylaws of the Company, as amended, as presently in effect.
             Filed as Exhibits 3.2 and 4.2 to the Company's Annual Report on
             Form 10-K for the year ended December 31, 1997, and incorporated
             herein by this reference.

        4.3  Stock Certificate of the Company. Filed as Exhibit 4.3 to the
             Company's Quarterly report on Form 10-Q for the quarter ended June
             30, 1997, and incorporated herein by this reference.

        4.4  Rights Agreement. Filed as Exhibit 2 to the Company's Current
             Report on Form 8-K dated May 24, 1990, and incorporated herein by
             this reference.

        4.5  First Amendment to Rights Agreement. Filed as Exhibit 1 to the
             Company's Current Report on Form 8-K dated January 16, 1992, and
             incorporated herein by this reference.

        4.6  Second Amendment to Rights Agreement. Filed as Exhibit 10.1 to the
             Company's Current Report on Form 8-K dated April 29, 1994, and
             incorporated herein by this reference.

        4.7  Third Amendment to Rights Agreement. Filed as Exhibit 4 to the
             Company's Current Report on Form 8-K dated September 28, 1995, and
             incorporated herein by this reference.

        4.8  Fourth Amendment to Rights Agreement. Filed as Exhibit 1 to the
             Company's Current Report on Form 8-K dated July 23, 1997, and
             incorporated herein by this reference.

        4.9  Fifth Amendment to Rights Agreement. Filed as Exhibit 1 to the
             Company's Current Report on Form 8-K dated January 28, 1998, and
             incorporated herein by this reference.

       15.*  Independent Auditors' letter regarding unaudited interim financial
             information.

       27.*  Financial Data Schedules
</TABLE>
--------
* Describes the exhibits filed with this Quarterly Report on Form 10-Q.

  (b) The following report on Form 8-K was filed by the Company with the
Securities and Exchange Commission during the third quarter ended September
30, 1999:

  A Current Report on Form 8-K filed on July 13, 1999, describing the
completion of the sale of 100% of the issued and outstanding stock of USF RE
INSURANCE COMPANY to Folksamerica Holding Company, Inc. and a concurrent
reduction in the principal amount in the Company's Credit Agreement with Fleet
National Bank (the Sixth Amendment to the Credit Agreement), together with
exhibits describing these transactions.

                                      20
<PAGE>

                                   SIGNATURES

  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.

The Centris Group, Inc.

Date: November 11, 1999

                                          By: /s/     David L. Cargile
                                             ----------------------------------
                                                      David L. Cargile
                                              Chairman of the Board, President
                                                and Chief Executive Officer

Date: November 11, 1999                   By: /s/   Charles M. Caporale
                                             ----------------------------------
                                                    Charles M. Caporale
                                                Senior Vice President, Chief
                                               Financial Officer and Treasurer
                                                  (Principal Financial and
                                                     Accounting Officer)

                                       21