<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549
                                    FORM 10-Q

(Mark One)
[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934


                       FOR THE QUARTER ENDED JUNE 30, 2000

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

FOR THE TRANSITION PERIOD FROM _________________  TO


COMMISSION FILE NUMBER 0-8162

                          ACCEL INTERNATIONAL CORPORATION
              (Exact name of registrant as specified in its charter)

              DELAWARE                                         31-0788334
   (State or other jurisdiction of                         (I.R.S. Employer
    incorporation or organization)                         Identification No.)

     75 WEST STREET, SIMSBURY, CT                                06070
    (Address of principal executive offices)                 (Zip Code)

                                  860-843-7600
                         (Registrant's Telephone Number)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                               Title of each class
                          COMMON STOCK, $.10 PAR VALUE

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

As of July 31, 2000, there were 9,084,004 shares of Common Stock, $.10 par value
per share outstanding.
<PAGE>   2
                                                      COMMISSION FILE NO. 0-8162




                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                                  JUNE 30, 2000

                                      INDEX



PART I -- FINANCIAL INFORMATION

<TABLE>
<CAPTION>
      Item 1.  Financial Statements                                                      Page
                                                                                         ----
<S>                                                                                    <C>
               Consolidated Balance Sheets
                  June 30, 2000 (unaudited) and December 31, 1999                       3 -  4

               Consolidated Statements of Operations
                    Three months and six months ended June 30, 2000 (unaudited)
                     and 1999                                                                5

               Consolidated Statements of Common Stockholders' Equity Three
                     months and six months ended June 30, 2000 (unaudited)
                     and year ended December 31, 1999                                        6

               Consolidated Statements of Cash Flows
                     Three months and six months ended June 30, 2000 (unaudited)
                     and 1999                                                               7

               Notes to Unaudited Consolidated Financial Statements                     8 - 13

      Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                  14 - 17

      Item 3.  Quantitative and Qualitative Disclosures About Market Risk                   18

PART II -- OTHER INFORMATION

      Item 6.  Exhibits and Reports on Form 8-K                                             19
               Signature                                                                    20

               Exhibit 27.0                                                                 21
</TABLE>


                                       2
<PAGE>   3
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              June 30,        December 31,
                                                                2000              1999
                                                            (Unaudited)
ASSETS                                                          (Thousands of dollars)
<S>                                                         <C>               <C>
Investments
    Investments available for sale, at fair value:
       Fixed maturities (cost: 2000--$12,615,000;
          1999--$21,592,000)                                  $12,241            $21,012
       Short-term investments, at cost
          (which approximates market value)                     1,048              1,358
                                                              -------            -------
                                                               13,289             22,370

Cash                                                               --                 --

Receivables:
    Premiums in process of transmittal, less
       allowance (2000--$0; 1999--$359,000)                        --              1,637
    Amounts due from reinsurers                                34,591             45,671
    Other accounts receivable                                   1,113                 --
                                                              -------            -------
                                                               35,704             47,308

Accrued investment income                                         172                234
Prepaid reinsurance premiums                                    2,309              1,918
Deferred policy acquisition costs                                  --                280
Equipment--at cost, less accumulated
    depreciation (2000--$632,000; 1999--$436,000)                 708                444
Other assets                                                      983                481
Intangible assets                                               6,126                 --
                                                              -------            -------
                                                               10,298              3,357
                                                              -------            -------




Total assets                                                  $59,290            $73,035
                                                              =======            =======
</TABLE>

                                                                     (Continued)


See notes to unaudited consolidated financial statements


                                       3
<PAGE>   4
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                   CONSOLIDATED BALANCE SHEETS -- (CONTINUED)


<TABLE>
<CAPTION>
                                                                        June 30,           December 31,
                                                                          2000                1999
                                                                      (Unaudited)
    LIABILITIES AND STOCKHOLDERS' EQUITY                          (Thousands of dollars, except share data)
<S>                                                                   <C>                  <C>
    Policy Reserves and Liabilities:
       Unearned premium reserves                                        $  2,324             $  3,125
       Insurance claim reserves                                           44,816               59,421
                                                                        --------             --------
                                                                          47,141               62,546
    Other Liabilities:
       Notes payable                                                       5,512                   --
       Bank overdrafts                                                       382                3,714
       Amounts withheld for others                                           747                  122
       Unearned commissions                                                  289                   --
       Deferred reinsurance commissions                                       --                  114
       Amounts due reinsurers                                                777                  828
       Accounts payable and other liabilities                                956                  653
       Consideration payable related to acquisitions                         769                   --
       Current federal income taxes                                                               172
                                                                        --------             --------
                                                                           9,433                5,603
                                                                        --------             --------
                                                                          56,573               68,149
                                                                        --------             --------


    Commitments and Contingencies

    Redeemable Preferred Stock:
       Authorized shares--1,000,000;
          no issued or outstanding shares                                     --                   --

    Common stockholders' equity:
       Common stock, $.10 par value
          Authorized shares (2000 and 1999--15,000,000)
          Issued shares (2000--9,997,234; 1999--9,468,196)                 1,000                  947
       Additional paid-in capital                                         33,538               32,659
       Accumulated deficit                                               (24,484)             (21,178)
       Less treasury shares at cost (2000 and 1999--913,230)              (6,962)              (6,962)
       Accumulated other comprehensive loss                                 (374)                (580)
                                                                        --------             --------
                      Net stockholders' equity                             2,718                4,886
                                                                        --------             --------


       Total liabilities & stockholders' equity                         $ 59,290             $ 73,035
                                                                        ========             ========
</TABLE>



See notes to unaudited consolidated financial statements.


                                       4
<PAGE>   5
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                 Three Months Ended June 30,        Six Months Ended June 30,
                                                    2000             1999             2000             1999
                                                 -----------      -----------      -----------      -----------
                                                         (Thousands of dollars, except per share data)
<S>                                              <C>              <C>              <C>              <C>
REVENUE:
    Gross premiums written                       $     1,284      $     6,689      $     1,616      $    15,228
    Less reinsurance ceded                             1,652              403            1,754            3,171
                                                 -----------      -----------      -----------      -----------
       Net premiums written                             (368)           6,286             (138)          12,057
    Decrease in unearned premium reserves                327              183            1,192              285
                                                 -----------      -----------      -----------      -----------
       Net premiums earned                               (41)           6,469            1,054           12,342
    Net investment income:
       Interest and dividends                            302              466              592              941
       Net realized capital (losses) gains               (68)              --             (307)               1
    Equity in loss of affiliated company                  --              (43)              --              (65)
    Service fee revenue                                  246               --              869               --
    Commission revenue                                 2,892               --            5,157               --
    Other income                                         108             (108)             154              (90)
                                                 -----------      -----------      -----------      -----------
                                                       3,440            6,784            7,519           13,129
                                                 -----------      -----------      -----------      -----------
BENEFITS AND EXPENSES:
    Loss and loss adjustment expenses                     97            7,144            1,009           11,469
    Commissions and other sales                        1,439            1,438            2,210            3,149
    Reinsurance expense recovery                          (3)            (701)            (114)          (1,473)
    General and administrative expenses                3,864            1,359            6,481            2,908
    Restructuring cost                                   252            1,676              414            1,676
    Taxes, licenses and fees                             152              298              278              690
    Amortization expense                                 134               --              250               --
    Interest expense                                     110               --              190               --
    Decrease in deferred policy
       acquisition costs                                  59              475              280              874
                                                 -----------      -----------      -----------      -----------
                                                       6,105           11,689           10,997           19,293
                                                 -----------      -----------      -----------      -----------

LOSS BEFORE FEDERAL INCOME TAXES                      (2,665)          (4,905)          (3,478)          (6,164)

    Federal income taxes:
       Current (benefit)                                  --               --             (172)              --
       Deferred expense                                   --               --               --               --
                                                 -----------      -----------      -----------      -----------
                                                          --               --             (172)              --
                                                 -----------      -----------      -----------      -----------

NET LOSS                                         $    (2,665)     $    (4,905)     $    (3,306)     $    (6,164)
                                                 ===========      ===========      ===========      ===========

Net loss per common share--basic                 $     (0.29)     $     (0.57)     $     (0.37)     $     (0.72)

Net loss per common share--assuming dilution     $     (0.29)     $     (0.57)     $     (0.37)     $     (0.72)
                                                 ===========      ===========      ===========      ===========

Weighted average number of common
    shares outstanding                             9,084,004        8,554,966        9,043,531        8,554,966
                                                 ===========      ===========      ===========      ===========
</TABLE>


See notes to unaudited consolidated financial statements.


                                        5
<PAGE>   6
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

                             (Thousands of dollars)

<TABLE>
<CAPTION>
                                                                                                        Accumulated
                                                         Additional                    Common            other
                                                Common     paid-in    Accumulated   stock held in      comprehensive
                                                stock      capital      deficit        treasury            loss            Net
                                                ------     -------     --------         -------            -----         --------
<S>                                             <C>      <C>          <C>           <C>                <C>               <C>
Balances at December 31, 1998                   $  947     $32,659     $ (3,933)        $(6,962)           $ 390         $ 23,101
    Comprehensive loss:
         Net loss                                   --          --      (17,245)             --               --          (17,245)
         Other comprehensive loss-
           change in net unrealized losses
           on investment securities                 --          --           --              --             (970)            (970)
                                                ------     -------     --------         -------            -----         --------
         Comprehensive loss                         --          --      (17,245)             --             (970)         (18,215)
                                                ------     -------     --------         -------            -----         --------
Balances at December 31, 1999                   $  947     $32,659     $(21,178)        $(6,962)           $(580)        $  4,886

    Comprehensive loss:
         Net loss                                   --          --       (3,306)             --               --           (3,306)
         Other comprehensive income-
           change in net unrealized losses
           on investment securities                 --          --           --              --              206              206
                                                ------     -------     --------         -------            -----         --------
         Comprehensive loss                         --          --       (3,306)             --              206           (3,100)
    Issuance of 529,040 shares of
         Common Stock for Allegiance
         Insurance Managers purchase                53         530           --              --               --              583
    Issuance of 858,200 warrants for
         Common Stock in conjunction with
         Notes Payable to Accel Finance Co.         --         349           --              --               --              349
                                                ------     -------     --------         -------            -----         --------
Balances at June 30, 2000 (Unaudited)           $1,000     $33,538     $(24,484)        $(6,962)           $(374)        $  2,718
                                                ======     =======     ========         =======            =====         ========
</TABLE>


See notes to unaudited consolidated financial statements.


                                        6
<PAGE>   7
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               Six Months Ended June 30,
                                                                                 2000             1999
                                                                               --------         -------
                                                                                (Thousands of dollars)
<S>                                                                            <C>              <C>
OPERATING ACTIVITIES:
      Loss from continuing operations                                          $ (3,306)        $(6,164)
      Adjustments to reconcile income (loss) from continuing operations
          to net cash used in by operating activities:
              Equity method investment, net                                          --              65
              Change in premiums receivable                                       1,637           3,334
              Change in accrued investment income                                    62              20
              Change in prepaid reinsurance premiums                               (391)          3,749
              Change in premium deposits held                                        --            (526)
              Change in unearned premium reserves                                  (801)         (4,034)
              Change in insurance claim reserves                                (14,605)         (1,420)
              Change in amounts due to and from reinsurers                       11,029          (1,154)
              Change in other assets, other liabilities
                   and accrued income taxes                                        (831)          1,828
              Accrual of discount on fixed maturity securities                       --             (21)
              Amortization of premium on fixed maturity securities                   40              35
              Amortization of deferred policy acquisition costs                     280             875
              Policy acquisition costs deferred                                      --              --
              Reinsurance commissions earned                                       (114)           (887)
              Reinsurance commissions received                                       --              --
              Provision for depreciation and amortization                           410             130
              Net realized losses on investments                                    307               1
                                                                               --------         -------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                              (6,283)         (4,169)

INVESTING ACTIVITIES:
      Sale of investments available for sale                                      8,945           6,468
      Purchase of investments available for sale                                     --          (5,516)
      Purchase and sale of Short-Term Investments, net                              440             630
      Change in intangible assets                                                (6,126)             --
                                                                               --------         -------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                               3,259           1,582
                                                                               --------         -------

FINANCING ACTIVITIES:
      Change in bank overdrafts                                                  (3,332)             --
      Issuance of notes payable                                                   5,512              --
      Change in accrual of payable related to acquisitions                          769
      Warrants issued                                                               349              --
      Repayment of notes payable                                                   (274)             --
                                                                               --------         -------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                               3,024              --
                                                                               --------         -------

NET INCREASE (DECREASE) IN CASH                                                      --          (2,587)
Cash at beginning of year                                                            --           2,587
                                                                               --------         -------
CASH AT END OF PERIOD                                                          $     --         $    --
                                                                               ========         =======
</TABLE>


See notes to unaudited consolidated financial statements.


                                        7
<PAGE>   8
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2000


NOTE A--SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION: The accompanying unaudited consolidated financial
statements of ACCEL International Corporation ("ACCEL") and subsidiaries
(collectively referred to herein as the "Company") have been prepared in
accordance with generally accepted accounting principles ("GAAP") for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X which, as to the insurance company subsidiary, differ in some
respects from statutory accounting practices prescribed or permitted by state
insurance departments. Accordingly, they do not include all of the information
and footnotes required by GAAP for complete financial statements. In the opinion
of management, all adjustments considered necessary for a fair presentation have
been included. Operating results for all periods presented are not necessarily
indicative of the results that may be expected for the full year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.

PRINCIPLES OF CONSOLIDATION: The accompanying unaudited consolidated financial
statements include the accounts of ACCEL and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in the
unaudited consolidated financial statements.

DESCRIPTION OF BUSINESS: ACCEL is an insurance holding company incorporated in
Delaware. Through the Company's wholly-owned subsidiary, Acceleration National
Insurance Company (ANIC), ACCEL was engaged in the underwriting and sale of
property-casualty insurance products, primarily concentrating, up to mid-1999,
on commercial automobile business. Before ANIC announced, on July 2, 1999, its
full exit from its current lines of business, it offered various policies
covering long-haul trucking, charter bus, limousine and paratransit vehicle
fleets, as well as other specialized products tailored to other groups such as
crane operators and gun dealers. ANIC offered these products through general
agents. Management is pursuing efforts to either restructure and recapitalize
ANIC so that it can re-enter the insurance marketplace, or sell ANIC.

ANIC is subject to competition from other insurers in the property and casualty
business. ANIC is also subject to regulation by the insurance departments of
states in which it is licensed, and undergoes periodic examinations by those
departments. Beginning May 2, 2000, the Ohio Department of Insurance ("the
Department"), the domiciliary regulator of ANIC, began an examination of the
financial affairs of ANIC for the years 1998 and 1999. On May 4, 2000, ANIC
received an order of supervision from the Department ( see Note F). Because of
ANIC's Risk Based Capital position at December 31, 1999, the Department
requested the Company to file a "as-is" RBC Plan by April 18, 2000, and a RBC
Plan including an additional capital assumption by May 15, 2000. The Company
complied with both of the Department's requests by the due dates. As of the
filing date of this Form 10-Q, the Department has neither accepted nor denied
the Company's filings.

Through its January 2000 purchase of Allegiance Insurance Managers (AIM) and
Accelerated Agency Group (AAG), ACCEL also operates in the property and casualty
non-standard auto insurance agency business, and provides various property and
casualty insurance services including underwriting management, actuarial support
and claims administration.

PURCHASE TRANSACTIONS: On January 14, 2000, the Company acquired 100% of the
stock of Allegiance Insurance Managers. Gerald H. Pastor, FCAS, President, CEO
and principal shareholder of AIM was elected President & CEO of ACCEL's
subsidiary, ANIC in October, 1999 and of ACCEL in November, 1999. In
consideration for the acquisition, ACCEL assumed net liabilities of
approximately $300,000 and has issued 529,040 shares of its common stock to
shareholders of AIM, other than Pastor, and will issue an additional 997,036
shares to Pastor upon and subject to receipt of clearance by the Ohio Department
of Insurance. A liability has been established at June 30, 2000 for the value of
the consideration to be issued to Pastor in the amount of approximately
$770,000. Should the forgoing clearance not be received, ACCEL will issue to
Pastor such other consideration as may be mutually agreed upon by ACCEL and
Pastor, which may include a lesser number of shares of ACCEL common stock
(subject to the foregoing clearance) and/or other securities. Under the terms of
the transaction, ACCEL will also issue up to an additional 2,180,110 shares of
its common stock to the shareholders of AIM if the combined business meets
certain performance criteria over the six years after the acquisition. If the
business does not achieve certain cumulative earnings by December 31, 2002, the
former AIM shareholders will return 763,038 shares to ACCEL.

AIM operates as an underwriting manager, managing general agency, and claims
administrator for various programs, companies and clients. It will continue to
expand its operations in these areas. ANIC has placed all of its underperforming
products in run-off and is seeking either additional capital or a sale of the
company. Going forward, the primary focus of ACCEL and ANIC will be the
non-standard automobile line of business.


                                       8
<PAGE>   9
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE A--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

Also on January 14, 2000, ACCEL completed arrangements for a credit facility of
$5,000,000 from a related party. Terms of the facility are 10% interest payable
quarterly, plus 280,000 warrants per $1,000,000 borrowed, at a price of $2.00
per share. All monies owed under the facility will be due in full by December
31, 2003. Applicable warrants will expire on December 31, 2004. As of June 30,
2000, $3.1 million of the facility has been drawn down and used for either
agency purchases or working capital, resulting in the issuance of 858,200
warrants. A portion of the proceeds received on the credit facility has been
allocated to the warrants issued and has been recorded as additional paid-in
capital.

On January 19, 2000 ACCEL acquired the assets of Payless Insurance Agencies
("Payless"). Payless is comprised of two locations in the Fort
Lauderdale/Broward County area, specializing in non-standard automobile
insurance. On January 20, 2000 ACCEL acquired substantially all of the assets of
Unistar Florida Holdings, Inc. ("Unistar"), representing 49 agency locations
throughout the state of Florida, also specializing in non-standard automobile
insurance. On May 21, 2000, ACCEL acquired the assets of Capitol Insurance
Agency & Tax Service, Inc. ("Capitol"). Capitol is comprised of one location in
West Palm Beach, FL, also specializing in non-standard automobile insurance. For
all agencies acquired, ACCEL paid approximately $4,975,000 in cash and notes.
All agency asset acquisitions were accounted for utilizing purchase accounting
and resulted in the recording of intangible assets of approximately $4,692,000.

ACCOUNTING ESTIMATES: In preparing the unaudited consolidated financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the unaudited consolidated financial
statements and revenues and expenses for the reporting period. Actual results
could differ significantly from those estimates.

The most significant estimates include those used in determining the liability
for insurance claims and claims adjustment expense reserves. Although some
variability is inherent in these estimates, management believes the amounts
provided are adequate. The estimates are continually reviewed and adjusted as
necessary. Such adjustments are generally reflected in current operations.

INVESTMENTS: The Company classifies its fixed maturity and equity securities as
available for sale, therefore these securities are carried at fair value and the
unrealized appreciation or depreciation is reported as a separate component of
common stockholders' equity after giving effect to applicable income taxes.
Short-term investments, which include U.S. Treasury securities, commercial paper
and certificates of deposit are carried at fair value which approximates cost.

Realized gains and losses on the disposal of investments are determined by
specific identification and are included in the unaudited consolidated
statements of operations.

When an other than temporary decline in value is recognized, the specific
investment is carried at estimated realizable value and its original book value
is reduced to reflect such impairment of the investment. Such reductions in book
value are reflected in realized investment losses for the period in which they
were written down. For mortgage backed securities, when the present value of
estimated future cash flows discounted at a risk-free rate of return is less
than the cost basis of the investment, an impairment loss is recognized by
writing the investment down to its fair value.

The Company has been a net-seller of its fixed income portfolio during the first
six months of 2000. The net sale of securities reduced the Company's fixed
maturity available for sale portfolio by $8.8 million for the six months ended
June 30, 2000. At June 30, 2000, the available for sale fixed income portfolio
is $12.2 million. However, $4.9 million of this is on deposit with various state
regulators and is generally unavailable to fund the operations of ANIC.

DEFERRED POLICY ACQUISITION COSTS: The costs (principally commissions and
certain expenses of policy issuance) of acquiring or renewing insurance
business, all of which vary with and are directly related to the production of
business, have been deferred. These deferred policy acquisition costs are
amortized in a manner related to the recognition of premiums earned. Anticipated
investment income is considered in determining recoverability of deferred costs.

EQUIPMENT AND DEPRECIATION: Equipment is carried at cost less accumulated
depreciation. Depreciation is provided using the straight-line method over an
estimated useful asset life of five years.

INTANGIBLE ASSETS; Intangible assets includes goodwill and other intangible
assets associated with purchase transactions, and are amortized over their
respective lives, up to ten years.

PREMIUM INCOME RECOGNITION AND UNEARNED PREMIUM RESERVES: Unearned premium
reserves on property-casualty products are calculated on the pro rata method.


                                       9
<PAGE>   10
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

NOTE A--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

COMMISSION AND OTHER SALES INCOME RECOGNITION AND UNEARNED COMMISSIONS:
Commissions and other sales revenues are recorded as income on a cash basis.
Unearned commissions are estimated for that portion of the commission revenue
that is due to premium finance and other producer entities and recorded as a
liability and a reduction of commission and other sales income.

INSURANCE CLAIMS: The liabilities for insurance claims are determined using
statistical analyses and represent estimates of the ultimate net cost of all
reported and unreported claims that are unpaid at year end. Considerable
variability is inherent in such estimates and actual results will likely differ
from those estimates.


FEDERAL INCOME TAXES: ACCEL and its subsidiaries file a consolidated federal
income tax return. The provision for income taxes is based on income for
financial reporting purposes, after permanent differences. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under this
method, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the deferred tax
assets to the amounts expected to be realized.

REINSURANCE: Reinsurance premiums ceded and reinsurance recoveries on losses and
loss adjustment expenses incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance ceded are
reported on a gross basis.

DEFERRED REINSURANCE COMMISSIONS: Commissions and ceding fees received in
connection with premiums ceded are deferred and amortized in a manner related to
the recognition of premiums earned. Earned ceding fees, commissions and
experience refunds are reported as reinsurance expense recoveries in the
unaudited consolidated statements of operations.

STOCK OPTION PLANS: Prior to January 1, 1996, the Company accounted for its
stock option plans in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock exceeded
the exercise price. On January 1, 1996, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair value based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.

EARNINGS (LOSS) PER COMMON SHARE: Net income (loss) per common share is computed
using the weighted average number of common shares outstanding during the
period.


NOTE B -- REINSURANCE

The ceding of insurance through reinsurance agreements does not discharge the
primary liability of the original underwriter to the insured, but it is the
practice of insurers to treat risks that have been reinsured with other
companies, to the extent of the reinsurance, as though they were not risks for
which the original insurer is liable. Should the reinsurer not be able to meet
its obligations, those obligations are the ultimate responsibility of the
Company. Therefore, in financial statement presentation, premiums earned and
loss and loss adjustment expenses are presented net of that portion of risks
reinsured with other companies.

The Company has entered into reinsurance contracts associated with its property
- casualty business. Under these agreements, the Company transfers a percentage
of risk to the related reinsurer. The Company also has agreements that transfer
risks after a predetermined loss has been reached. Unearned premium reserves
associated with these agreements at June 30, 2000 and December 31, 1999 are $2.3
million and $1.9 million, respectively, and the liability for insurance claims
ceded under these agreements is $29.4 million and $40.0 million at June 30, 2000
and December 31, 1999, respectively.


                                       10
<PAGE>   11
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

NOTE B -- REINSURANCE - (CONTINUED)

The following data summarizes certain aspects of the Company's reinsurance
activity for 2000 and 1999:

Premiums written and earned in 2000 and 1999 are summarized as follows:

<TABLE>
<CAPTION>
                              WRITTEN                                                  EARNED
            -----------------------------------------------      -----------------------------------------------
                                                   Period Ended June 30,
              Six Months Ended          Three Months Ended         Six Months Ended          Three Months Ended
              2000         1999          2000         1999        2000          1999         2000          1999
            -------      --------      -------      -------      -------      --------      -------      -------
                                                  (Thousands of dollars)
<S>         <C>          <C>           <C>          <C>          <C>          <C>           <C>          <C>
Direct      $ 1,558      $ 11,823      $ 1,460      $ 4,975      $ 1,882      $ 18,353      $   785      $ 9,321
Assumed          58         3,405         (176)       1,714          559         3,723          326        1,829
Ceded        (1,754)       (3,171)      (1,652)        (403)      (1,387)       (9,734)      (1,152)      (4,681)
            -------      --------      -------      -------      -------      --------      -------      -------
Net         $  (138)     $ 12,057      $  (368)     $ 6,286      $ 1,054      $ 12,342      $   (41)     $ 6,469
            =======      ========      =======      =======      =======      ========      =======      =======
</TABLE>


Loss and loss adjustment expenses incurred in 2000 and 1999 are summarized as
follows:

<TABLE>
<CAPTION>
                              Six Months Ended        Three Months Ended
                                   June 30,                 June 30,
                               2000       1999          2000       1999
                               ----       ----          ----       ----
                                        (Thousands of dollars)
<S>                           <C>       <C>             <C>       <C>
Direct                        $4,199    $18,888         $1,979    $9,965
Assumed                          401      2,272            329     1,268
Ceded                         (3,591)    (9,691)        (2,211)   (4,089)
                              -------  ---------        -------   -------
Net                           $1,009    $11,469         $   97    $7,144
                              ======    =======         ======    =======
</TABLE>


NOTE D--SEGMENT INFORMATION

ACCEL operates in the property-casualty insurance industry within the United
States. Through its January 2000 purchases, the Company is also in the
property-casualty agency business and in the insurance services business
including underwriting management, actuarial consulting and claims
administration. Except for certain claims handling fees between ANIC and AIM,
there are no intersegment sales. The allocations of certain general expenses and
investment income within segments are based on a number of assumptions, and the
reported operating results would change if different methods were applied.
Depreciation and capital expenditures are not considered material. Information
relating to revenue, loss before income taxes and identifiable assets by segment
are summarized as follows:

<TABLE>
<CAPTION>
                                                     Six Months Ended               Three Months Ended
                                                         June 30,                        June 30,
                                                  2000             1999            2000            1999
                                                 -------         --------         -------         -------
                                                  (Thousands of dollars)          (Thousands of dollars)
<S>                                              <C>             <C>              <C>             <C>
Revenue:
        Property/Casualty Insurance              $ 1,497         $ 13,271         $   351         $ 6,930
        Insurance Agencies                         5,174               --           2,910
        Insurance Services                           841               --             172              --
        Corporate                                      7             (142)              7            (146)
                                                 -------         --------         -------         -------
            Total                                $ 7,519         $ 13,129         $ 3,440         $ 6,784
                                                 =======         ========         =======         =======

Income (loss) before federal income taxes
        Property/Casualty                        $(1,915)        $ (5,280)        $(1,196)        $(4,342)
        Insurance Agencies                          (732)              --            (588)             --
        Insurance Services                          (486)              --            (604)             --
        Corporate                                   (345)            (884)           (276)           (563)
                                                 -------         --------         -------         -------
            Total                                $(3,478)        $ (6,164)        $(2,664)        $(4,905)
                                                 =======         ========         =======         =======
</TABLE>


                                       11
<PAGE>   12
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE D--SEGMENT INFORMATION  - (CONTINUED)

<TABLE>
<CAPTION>
                                    June 30,         December 31,
                                      2000               1999
                                    --------         ------------
                                       (Thousands of dollars)
<S>                                 <C>                <C>
Identifiable assets:
      Property/Casualty             $51,480            $72,629
      Insurance Agencies              5,474                 --
      Insurance Services              2,061                 --
      Corporate                         275                406
                                    -------            -------
        Total                       $59,290            $73,035
                                    =======            =======
</TABLE>



Due to the nature of its operations, the Company is at all times subject to
pending and threatened legal actions that arise in the normal course of its
activities. In management's evaluation of certain pending matters, based on the
advice or information and analysis of outside counsel, the accompanying
consolidated financial statements would not be materially affected by the
outcome of any legal proceedings or contingent liabilities.


NOTE E--COMMITMENTS AND CONTINGENCIES

The "Galaxy" New York Liquidation Bureau Suit:

In July 1991, the Company acquired 100% of RGL. Galaxy Insurance Company
("Galaxy"), a wholly owned subsidiary of RGL, wrote commercial property and
casualty insurance, and assumed treaty reinsurance. Galaxy became statutorily
insolvent at June 30, 1994. Due to the insolvency of Galaxy, the Company wrote
its investment in RGL to zero and deconsolidated RGL as of April 1, 1994.

On October 7, 1994, the Liquidation Bureau took control of Galaxy pursuant to an
order of liquidation of the New York Supreme Court. Prior to the liquidation of
Galaxy, ANIC had issued certain certificates of suretyship ("Certificates") with
respect to certain Galaxy insurance policies each of which provided that ANIC
would assume the responsibilities of Galaxy under the specified policy if Galaxy
became insolvent or financially unable to meet its obligations on the underlying
policy, but only if certain conditions were met. In particular, the Certificates
provided that ANIC's assumption of liability was contingent upon the insured's
executing and delivering all agreements, assignments or evidences of subrogation
satisfactory to ANIC respecting payments made or liabilities assumed.

In May 1996, the Liquidation Bureau, acting on behalf of the New York
Property/Casualty Insurance Security Funds (the "Guaranty Fund"), informally
advised the Company that on behalf of the Guaranty Fund it intended to seek
indemnification or reimbursement from ANIC for claims paid by the Guaranty Fund
to Galaxy insureds on policies which may have been covered by the Certificates.
The company has taken the position that the Guaranty Fund has no right to seek
indemnification unless Galaxy insureds who hold properly issued Certificates
have executed assignments and evidences of subrogation to ANIC. Even if any
Galaxy insured properly made such a claim directly to ANIC, the Company has been
advised by counsel that if ANIC paid any such claim, it would have the right,
under assignment and subrogation agreements with its insureds, to assert all
rights that the insureds could have asserted to recover the loss amounts from
any other source, including the Guaranty Fund.

In early 1998, the Superintendent of Insurance of the State of New York, as
Liquidator of Galaxy and Administrator of the Guaranty Fund ("Superintendent"),
filed suit against ANIC in New York State Supreme Court. The complaint alleged,
among other things, breach of contract and demanded that ANIC specifically
perform its alleged obligations under the Certificates. The complaint asked for
an amount in excess of $6.5 million in damages.

As reflected above, the suit requested indemnification or reimbursement for the
claims paid or to be paid by the Guaranty Fund to Galaxy insureds on policies
which may have been covered by the Certificates. ANIC has maintained that the
Guaranty Fund does not have the right to seek indemnification unless the terms
and conditions of validly issued Certificates have been strictly complied with.
Accordingly, ANIC filed for dismissal of the suit which motion was granted by
the Court on October 6, 1998. Thereafter, the Superintendent moved to reargue
and renew his opposition to ANIC's motion to dismiss. By an Order dated February
23, 1999, the Court denied the Superintendent's motion. The Superintendent has
filed a Notice of Appeal of the Court's Decision and Order dismissing the
complaint, and has filed a brief in support of the appeal. On July 17, 2000, the
Company was notified that the Appellate Court ruled against the dismissal by the
New York State Supreme Court. Subsequently, the Company and the Superintendent
have agreed to suspend any motions in this matter for a period of 45 days. ANIC
will continue to defend vigorously against the Superintendent's lawsuit.


                                       12
<PAGE>   13
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE E--COMMITMENTS AND CONTINGENCIES -(CONTINUED)

The North Dakota-Lyndon Matter:

On October 1, 1999 settlement was reached regarding a November 1997 suit that
was filed against ALIC by three long-term care policyholders seeking to
represent a class of North Dakota policyholders alleging breach of contract,
fraud and misrepresentation. Pursuant to a settlement agreement, ALIC paid $4.0
million toward a global, nationwide settlement. ACCEL, which had conditionally
contracted with Lyndon Life (to whom ALIC was sold), agreed to pay $2.3 million
plus the proceeds from a suit against Lyndon Life that was expected to produce
in excess of $.7 million, previously carried as a receivable. The total
reimbursement to Lyndon was therefore in excess of $3.0 million. Lyndon
maintains that ACCEL owes at least $.7 million additional. ACCEL refuses to pay
on the grounds that it only authorized a total of $3.0 million in accordance
with the sale contract. ACCEL will vigorously oppose making any additional
payments.


NOTE F -- SUBSEQUENT EVENT

In May 2000, the State of Ohio Department of Insurance (the "Ohio DOI") issued
an Order of Supervision appointing a Supervisor of ANIC under Ohio Revised Code
Section 3903 (A) or (B). ANIC may not dispose of, convey, or encumber any of its
assets, withdraw from bank accounts or lend any of its funds without prior
approval of the Supervisor. There are further limitations on entering into new
contracts or transactions by ANIC without such prior approval. The term of the
Supervision is for 60 days and is automatically renewed until lifted by the Ohio
DOI. At the same time, the Ohio DOI began a financial examination of ANIC's
statutory books and records. The action was taken by the Ohio DOI pursuant to
the Authorized Control Level Risk Based Capital position of ANIC as of December
31, 1999. Management of the Company believes the Order of Supervision will not
have a material adverse impact on the Company's current operations since ANIC
has essentially written no new business since the summer of 1999. Furthermore,
the Company acknowledges the need for additional capital and is considering
various alternatives, including utilization of the remaining credit facility
described in note A, a possible sale of ANIC, or other investor sources of
capital. In addition to the actions taken by the Ohio DOI, the company has been
notified by seven other states in which it is licensed that it no longer can
write additional business in these states without prior written approval.

As a result of the preliminary financial examination by the Ohio DOI, the
Company has recorded $558,000 of additional expense in the June 30, 2000
financial statements.

On August 4, 2000, A.M. Best Company revised ANIC's "Best Rating" from B- (Fair)
to a rating of E (Under Regulatory Supervision). Management of the Company
believes the change in the A.M. Best rating will not have a material adverse
impact on the Company's current operations since ANIC has written no new
business since the summer of 1999, except for certain 100%-ceded aviation
policies.


                                       13
<PAGE>   14
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS

   Operating Results for the Three and Six Months Ended June 30, 2000 and 1999

OVERVIEW

ACCEL International Corp. ("ACCEL" or "the Company") is a publicly traded
holding company headquartered in Simsbury, Connecticut. Its principal operating
subsidiaries underwrite property-casualty business, sell non-standard automobile
insurance, and provide certain services to the property-casualty insurance
company marketplace. ACCEL conducts its business through three principal
operating entities. Acceleration National Insurance Company ("ANIC") underwrites
U.S. property-casualty insurance, although ANIC is currently in run-off and is
under supervision of the Ohio Department of Insurance. On August 4, 2000, A.M.
Best Company revised ANIC's "Best Rating" from B- (Fair) to a rating of E (Under
Regulatory Supervision). Management of the Company believes the change in the
A.M. Best rating will not have a material adverse impact on the Company's
current operations since ANIC has written no new business since the summer of
1999, except for certain 100%-ceded aviation policies. Accelerated Agency Group
("AAG") produces non-standard automobile insurance under the Unistar trade name
in Florida. And Allegiance Insurance Managers ("AIM") provides underwriting,
actuarial and claims services to the property-casualty insurance company
marketplace.

ACQUISITIONS

On January 14, 2000, the Company acquired 100% of the stock of Allegiance
Insurance Managers. AIM operates as an underwriting manager, managing general
agency, and claims administrator for various programs, companies and clients. It
will continue to expand its operations in these areas. ANIC has placed all of
its underperforming products in run-off. Going forward, the primary focus of
ACCEL and ANIC will be the non-standard automobile line of business.

Also on January 14, 2000, ACCEL completed arrangements for a credit facility of
$5,000,000 from a related party. Terms of the facility are 10% interest payable
quarterly, plus 280,000 warrants per $1,000,000 borrowed, at a price of $2.00
per share. All monies owed under the facility will be due in full by December
31, 2003. Applicable warrants will expire on December 31, 2004. At June 30,
2000, $3.1 million has been drawn down from the facility and 858,200 warrants
have been issued.

On January 19, 2000 ACCEL acquired the assets of Payless Insurance Agencies
("Payless"). Payless is comprised of two locations in the Fort
Lauderdale/Broward County area, specializing in non-standard automobile
insurance. On January 20, 2000 ACCEL acquired substantially all of the assets of
Unistar Florida Holdings, Inc. ("Unistar"), representing 49 agency locations
throughout the state of Florida, also specializing in non-standard automobile
insurance. On May 21, 2000, ACCEL acquired the assets of Capitol Insurance
Agency & Tax Service, Inc. ("Capitol"). Capitol is comprised of one location in
West Palm Beach, FL also specializing in non-standard automobile insurance.
ACCEL paid approximately $4,975,000 in cash and notes for all agencies acquired.
All agency asset acquisitions were accounted for utilizing purchase accounting
and resulted in the recording of intangible assets of approximately $4,692,000.

CONSOLIDATED RESULTS OF OPERATIONS
QUARTER AND SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH QUARTER AND SIX MONTHS
ENDED JUNE 30, 1999

The Company announced on July 2, 1999 it would cease writing or renewing its
current lines of commercial property-casualty business due to its loss
experience from 1998 and 1999. Management is pursuing efforts to restructure or
sell the insurance company.

REVENUES

Total revenues for the six months ended June 30, 2000 decreased 41% to $7.7
million, compared to $13.1 million for the same period in 1999. For the quarter
ended June 30, 2000, total revenues decreased 47% to $3.6 million, compared to
$6.8 million for the same quarter in 1999. The Company ceased writing new
policies of insurance and is non-renewing its in-force policies. The net
unearned premium reserve at June 30, 2000 is $2.3 million, a reduction of $6.1
million from the June 30, 1999 unearned premium reserve of $8.4 million. The net
premiums written for the six months ending June 30, 2000 are $(138,000) compared
to the six months ending June 30, 1999 of $12.1 million. Included in ACCEL's
consolidated results of operations for 2000 are AAG's and AIM's operating
results.

NET PREMIUMS EARNED

Net premiums earned for the six months ended June 30, 2000 were $1.1 million,
compared to $12.3 million in 1999, a 90% decrease. For the quarter ended June
30, 2000, net premiums earned were $(41,000), compared to $6.5 million in 1999.
The Company's insurance operations are in run-off, except for a certain aviation
risks program, which is 100% ceded to three A.M. Best + Company "A" rated
reinsurers.. The decrease in 2000 compared to 1999 was due to the Company's
announcement and subsequent management of its run-off property-casualty
activity. ACCEL's new focus is on non-standard automobile insurance markets. The
Company will sell this line of business, including ancillary products, through
its owned agencies producing commission income and fees. The Company will also
provide to property and casualty non-standard automobile insurance companies,
other related services including actuarial, underwriting and claims management,
producing service fee revenue.


                                       14
<PAGE>   15
NET INVESTMENT INCOME

ACCEL's net investment income for the six months ended June 30, 2000 was
$592,000 compared to $941,000 for the same period in 1999. For the quarter ended
June 30, 2000, net investment income was $302,000 compared to $466,000 in 1999,
a 35% decrease. The overall decrease in net investment income in the first six
months of 2000 was due to run-off property-casualty loss and loss adjustment
expense payments that have decreased the invested asset base, and the fact that
ANIC is not currently writing any new or renewal property-casualty business.

NET REALIZED INVESTMENT (LOSSES) GAINS

ACCEL net realized capital losses for the six months ended June 30, 2000 were
$307,000 or $(.03) per basic and diluted share, compared to a net realized
capital gain of $1,000 for the same period in 1999. For the quarter ended June
30, 2000, net realized capital losses were $68,000 or $(.01) per basic and
diluted share, compared to no net realized capital gains or losses during the
same quarter in 1999. After-tax net realized capital losses resulted primarily
from the sale of securities in the first six months to fund loss and loss
adjustment expense payments. Due to the significant amount of available net
operating loss carryforwards, the tax benefits normally associated with these
losses can not be recorded.

SERVICE FEE, COMMISSION AND OTHER INCOME

Service fee, commission, and other income for the six months ended June 30, 2000
was $6.2 million, compared to a loss of $90,000 in the same period in 1999. For
the quarter ended June 30, 2000, service fee, commission, and other income was
$3.2 million, compared to a loss of $108,000 for the same quarter in 1999.
Service fee revenue was $900,000 in the first six months of 2000 and $246,000 in
the quarter ended June 30, 2000. This increase reflects the inclusion of AIM's
service fee business in 2000. Commission revenue from AAG's operations was $5.0
million in the first six months of 2000 and $2.9 million in the quarter ended
June 30, of 2000.

LOSS AND LOSS ADJUSTMENT EXPENSES INCURRED

ACCEL's loss and loss adjustment expenses incurred for the six months ended June
30, 2000 was $1.0 million, compared to $11.5 million in the same period in 1999.
For the quarter ended June 30, 2000, loss and loss adjustment expenses incurred
was $97,000, compared to $7.1 million for the same period in 1999. The decrease
is principally attributable to the decrease in premium volume because of the
Company's position in run-off property-casualty insurance business.

POLICY ACQUISITION COSTS

ACCEL's deferred policy acquisition costs for the six months ended June 30, 2000
were $280,000, compared to $874,000 in the same period in 1999. For the quarter
ended June 30, 2000, deferred policy acquisition costs were $59,000 compared to
$475,000 for the same period in 1999. The decrease in the expense of $594,000 in
the six month period ending June 30, 2000 compared to the same time period last
year, is principally attributable to the decrease in premium volume because of
the ANIC's run-off property and casualty insurance business. There are no
remaining policy acquisition costs deferred as of June 30, 2000.

UNDERWRITING EXPENSES

During the first six months of 2000, ANIC recorded underwriting expenses of $2.1
million, compared to $5.3 million in the same period in 1999. For the quarter
ended June 30, 2000, underwriting expenses were $1.4 million, compared to $2.4
million for the same period in 1999. Underwriting expenses consist of
commissions, general and administrative expense, and taxes licenses and fees,
offset by reinsurance expense recoveries. The decrease in the expense of $3.2
million during the first six months of 2000, and the decrease in the expense of
$1 million for the second quarter, compared to the same time periods in 1999,
are principally attributable to the decrease in premium volume because of the
ANIC's run-off property and casualty insurance business. The remainder of the
Company's general and administrative expense was attributable to AAG ($3.8
million in the first six months and $2.2 million in the second quarter) and to
AIM ($.7 million in the first six months and $.2 million in the second quarter)

RESTRUCTURING COST

Restructuring costs for the first six months of 2000, were $414,000, compared to
$1.7 million in the same period in 1999. For the quarter ended June 30, 2000,
restructuring costs were $252,000, compared to $1.7 million for the same period
in 1999. Restructuring costs consist of salary and other personnel termination
benefits and the costs associated with scaling back operations of the insurance
company while in a run-off mode. The decrease in the expense of $1.3 million
during the first six months of 2000, and the decrease in the expense of $1.4
million for the second quarter, compared to the same time periods in 1999, are
principally attributable to the decrease in insurance processing activity
because of the ANIC's run-off property and casualty insurance business.

INTANGIBLE AMORTIZATION

Intangible amortization, which includes amortization of goodwill and other
intangibles, for the first six months of 2000, was $250,000, and $134,000 for
the quarter ended June 30, 2000. This increase reflects the inclusion, through
purchase, of AAG's and AIM's businesses in 2000.

INTEREST EXPENSE

Interest expense for the first six months of 2000, was $190,000 and $110,000 for
the quarter ended June 30, 2000. This increase reflects the interest on notes
payable used to finance the purchase of AAG's and AIM's businesses in 2000.


                                       15
<PAGE>   16
INCOME TAX BENEFIT

Income tax benefit for the first six months of 2000 was $172,000, compared with
no income tax benefit for the same time period in 1999. There was no income tax
benefit recorded in the quarters ended June 30 for either year. For the first
six months of 2000, ACCEL recorded an income tax benefit of $172,000 for the
release of current taxes previously recorded and remaining on the December 31,
1999 balance sheet. There is no current federal income tax liability because of
NOL carryforwards available to the consolidated group. The Company has not
established a net deferred tax asset because its history of net operating losses
makes realization uncertain.

NET LOSS

For the first six months of 2000, ACCEL generated a net loss of $3.3 million,
compared to a net loss of $6.2 million for the same period in 1999. For the
quarter ended June 30, 2000, the net loss was $2.7 million compared with a net
loss of $4.9 million for the comparable period in 1999. The basic and diluted
net loss per share was a loss of $(.37) for the six months ended June 30, 2000
and $(.29) for the quarter ended, as compared to basic and diluted net loss per
share of $(.72) and $(.57) respectively, for the same periods in 1999.

LIQUIDITY AND CAPITAL RESOURCES

For the first six months of 2000, the Company has experienced negative operating
cash flow of $6.3 million. Since ANIC's insurance operations are in run-off,
the Company has had to be a net-seller of its fixed income portfolio during the
first six months of 2000, and the net cash provided by investing activities was
$10.0 million. These net sales of securities reduced the Company's fixed
maturity available for sale portfolio by $8.8 million for the six months ended
June 30, 2000, and by $1.6 million during the quarter ended June 30, 2000. At
June 30, 2000, the available for sale portfolio is $12.2 million; however $4.9
million of this is on deposit with various state regulators and is generally
unavailable to fund the operations of ANIC. Therefore, free available for sale
securities are $7.3 million. Also, the start-up operations of the agency
business of AAG, have consumed cash during the transition period to the
Company's new ownership. The Company has had to use $1.0 million from the credit
facility established in January 2000, to support current working capital needs.
Currently, management continues to see a net negative cash flow from all
operations for the third quarter 2000, which will require the Company to either
sell securities or borrow again from the credit facility during the third
quarter. The Company expects both AIM and AAG to produce positive cash flow in
the fourth quarter 2000.

The Company's "available for sale" fixed maturity securities at June 30, 2000
and December 31, 1999 include collateralized mortgage obligation securities and
asset-backed collateralized securities. The mortgage and asset-backed securities
are subject to risks associated with variable prepayments. As such, those
securities may have a different actual maturity and yield than planned at the
time of purchase. The degree to which a security is susceptible to either gains
or losses is influenced by the difference between its amortized cost and par
value, relative sensitivity of the underlying mortgages to prepayment risk in a
changing interest rate environment and relative priority of the securities in
the overall securitization.

The Company limits the extent of its risks on fixed maturity securities by
generally avoiding securities whose cost significantly exceeds par, by
purchasing securities which are backed by stable collateral, and by
concentrating on securities that have either a planned amortization or
sequential pay classes. The collateralized mortgage obligations and asset backed
securities owned have primarily short to intermediate average lives. At June 30,
2000 the Company did not have a significant amount of higher risk mortgage or
asset backed securities that had a significant risk of loss or principal. There
are negligible default risks on the mortgage and asset backed security
portfolios as a whole as the vast majority of the assets are either guaranteed
by U.S. government-sponsored entities or are supported in the securitization
structure by junior securities enabling the assets to achieve high investment
grade status. The Company's collateralized mortgage obligations and asset backed
securities are predominantly sequential pay with little or no exposure to
interest only obligations ("IOs") or inverse IOs.

Ohio domiciled insurance companies are subject to Ohio law which regulates the
ability of insurance companies to pay dividends. The regulation limits the
annual dividend or distribution of an insurer to the greater of (1) net income
of the previous year or (2) 10% of unassigned surplus as of the end of the
previous year. In addition, all dividends must come from earned surplus to
qualify as a non-extraordinary dividend. Amounts greater than this would be
considered extraordinary dividends and could not be paid without permission of
the Ohio Department of Insurance ("Ohio Department"). Based on this regulation,
ANIC would require Ohio Department approval to pay any dividend to ACCEL during
2000. AAG has not reached the point in its operations where it can pay any
dividends to ACCEL.

The estimates for policy reserves are continually under review and adjusted as
necessary as experience develops or new information becomes known; such
adjustments are included in current operations. These liabilities are
necessarily subject to the impact of future changes in claim severity, frequency
and other factors. Although considerable variability is inherent in such
estimates, based on recent evaluations management believes that the current
level of policy reserves will be adequate to cover anticipated claim
liabilities. Accordingly, the ultimate amounts required for settlement of policy
benefits may vary significantly from the amounts included in the accompanying
unaudited consolidated financial statements.

Due to the nature of its operations, the Company is at all times subject to
pending and threatened legal actions that arise in the normal course of its
activities. For information regarding legal proceedings involving the Company
including developments relating to the insolvency of Galaxy Insurance Company (a
subsidiary of the Company) and a suit against ALIC by three long-term care
policyholders, see "Note E" in the Notes to Unaudited Consolidated Financial
Statements.


                                       16
<PAGE>   17
The National Association of Insurance Commissioners ("NAIC") has completed and
adopted a project to codify statutory accounting principles with a provision for
commissioner discretion in the determination of appropriate statutory accounting
for insurers. Although the NAIC has indicated that January 1, 2001 is the
expected date of implementation, the implementation is ultimately dependent upon
the insurer's state of domicile.

SAFE HARBOR DISCLOSURE

In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, ACCEL sets forth below cautionary statements
identifying important risks and uncertainties that could cause its actual
results to differ materially from those that might be projected, forecasted or
estimated in its "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, made by or on behalf of ACCEL in this Quarterly Report on Form 10-Q and in
press releases, written statements or documents filed with the Securities and
Exchange Commission, or in its communications and discussions with investors and
analysts in the normal course of business through meetings, phone calls and
conference calls. Such statements may include, but are not limited to,
projections of premium revenue, investment income, other revenue, losses,
expenses, earnings (including earnings per share), cash flows, plans for future
operations, common stockholders' equity (including book value per share),
investments, financing needs, capital plans, dividends, plans related to
products or services of ACCEL and estimates concerning the effects of litigation
or other disputes, as well as assumptions for any of the foregoing and generally
expressed with the words such as "believes," "estimates," "expects,"
"anticipates," "plans," "projects," "forecasts," "goals," "could have" "may
have," and similar expressions. ACCEL, as a matter of policy, does not make any
specific projections as to future earnings nor does it endorse any projections
regarding future performance that may be made by others.

Forward-looking statements involve known and unknown risks and uncertainties,
which may cause ACCEL's results to differ materially from such forward-looking
statements. These risks and uncertainties include, but are not limited to, the
following:

-   Changes in the level of competition in the domestic primary insurance market
    that effect the volume or profitability of ACCEL's property-casualty
    business. These changes include, but are not limited to, changes in the
    intensity of price competition, the entry of new competitors, existing
    competitors exiting the market and the development of new products by new
    and existing competitors;

-   Changes in the demand for reinsurance, including changes in ceding
    companies' risk retentions that effect the cost of ACCEL's reinsurance
    purchases;

-   The ability of ACCEL to execute its strategies in its property-casualty,
    agency and service operations;

-   Adverse development on property-casualty loss and loss adjustment expense
    liabilities related to business written in prior years, including, but not
    limited to, evolving case law, changing government regulations, newly
    reported claims, new theories of liability or new insurance and reinsurance
    contract interpretations;

-   Lower than expected reinsurance recoveries on unpaid losses, including, but
    not limited to, losses due to a decline in the creditworthiness of ACCEL's
    reinsurers;

-   Increases in interest rates, which may cause a reduction in the market value
    of ACCEL's fixed income portfolio, and its common stockholders' equity;

-   Decreases in interest rates which may cause a reduction of income earned on
    new cash flow from operations and the reinvestment of the proceeds from
    sales or maturities of existing investments;

-   Changes in the composition of ACCEL's investment portfolio;

-   Adverse results in litigation matters;

-   The impact of mergers and acquisitions; and

-   Changes in ACCEL's capital needs.

In addition to the factors outlined above that are directly related to ACCEL's
businesses, ACCEL is also subject to general business risks, including, but not
limited to, adverse state or federal legislation and regulation, adverse
publicity or news coverage, changes in general economic factors and the loss of
key employees.

The factors set forth above should be considered in connection with any
forward-looking statement contained in this Quarterly Report. The important
factors that could effect such forward-looking statements are subject to change,
and ACCEL does not intend to update any forward-looking statement or the
foregoing list of important factors. By this cautionary note ACCEL intends to
avail itself of the safe harbor from liability with respect of forward-looking
statements provided by Section 27A and Section 21E referred to above.


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<PAGE>   18
QUANITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK MANAGEMENT

The Company is exposed to market risk, including changes in interest rates. To
manage the volatility relating to this exposure, the Company manages the
duration of its invested assets to stay within a reasonable range of the
duration of its liabilities. The Company does not hold or issue derivative
instruments. The table below provides information about the Company's other
financial instruments that are sensitive to changes in interest rates. The
financial instruments are grouped by market risk exposure category. All
instruments are denominated in U.S. dollars.

Significant interest rate risk sensitive instruments as of June 30, 2000 were:

<TABLE>
<CAPTION>
                                                                                                                             TOTAL
                                                                                                                             FAIR
                                    2000         2001         2002         2003         2004     Thereafter     TOTAL        VALUE
                                                                    (Millions of dollars)
<S>                               <C>          <C>          <C>          <C>            <C>       <C>          <C>           <C>
INVESTMENTS IN FIXED MATURITY SECURITIES

Principal Amount                  $ 0.77       $ 5.13       $ 2.55       $ 0.40         0.50      $ 3.14       $12.25        $12.25
Book Value (amortized cost)         0.77         5.17         2.58         0.40         0.52        3.17        12.62
Average Interest Rate               5.95%        6.24%        5.69%        6.79%        6.27%       7.01%        6.32%         7.17%


SHORT-TERM INVESTMENTS

Principal Amount                  $  .93           --           --           --           --          --       $ 1.14        $ 1.14
Book Value                           .93           --           --           --           --          --         1.14
Average Interest Rate               6.26%          --           --           --           --          --         6.26%         6.26%
</TABLE>


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<PAGE>   19
PART II.  OTHER INFORMATION

ITEM 6.   Exhibits and Reports on Form 8-K

  (a)     Exhibits

          27.0 Financial Data Schedule

  (b)     Reports on Form 8-K filed during the quarter ended June 30, 2000:

          None.


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<PAGE>   20
                                   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.


                                                ACCEL INTERNATIONAL CORPORATION
                                                (Registrant)


DATED: August 21, 2000




BY: /s/ Gerald H. Pastor                        BY: /s/ Richard A. Lawrence
    --------------------------------------          ----------------------------
    Gerald H. Pastor                                Richard A. Lawrence
    *President and Chief Executive Officer         *Vice President, Chief
                                                    Financial Officer
                                                    and Treasurer


* Have been duly authorized to execute the report on behalf of the Registrant.


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