<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 SEPTEMBER 30, 1999

[ ]      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.)

   12603 S.W. FRWY, STE. 315, STAFFORD, TEXAS                 77477
   ------------------------------------------               ----------
    (Address of principal executive offices)                (Zip Code)

                                  281-565-8010
                         -------------------------------
                         (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 October 31, 1999, there were 8,554,966 shares of Common Stock, $.10 par
value per share outstanding.





                                       1
<PAGE>   2


                                                      COMMISSION FILE NO. 0-8162




                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                               SEPTEMBER 30, 1999

                                      INDEX




<TABLE>
<CAPTION>
                                                                                         Page
                                                                                         ----
<S>               <C>                                                                    <C>
PART I -- FINANCIAL INFORMATION
         Item 1.  Financial Statements


                  Unaudited Consolidated Balance Sheets
                      (September 30, 1999 and December 31, 1998)                        3 -  4

                  Unaudited Consolidated Statements of Operations (Three months
                      and nine months ended September 30, 1999 and 1998)                     5

                  Unaudited Consolidated Statements of Common Stockholders'
                      Equity (Nine months ended September 30, 1999 and year
                      ended December 31, 1998)                                               6

                  Unaudited Consolidated Statements of Cash Flows (Nine months
                      ended September 30, 1999 and 1998)                                     7

                  Notes to Unaudited Consolidated Financial Statements                  8 - 12

         Item 2.  Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                              13 - 15

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk           15 - 16

PART II -- OTHER INFORMATION

         Item 6.  Exhibits and Reports on Form 8-K                                          16
         Signature                                                                          16
</TABLE>


                                       2
<PAGE>   3
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                        September 30,   December 31,
                                                           1999            1998
                                                           ----            ----
                                                       (unaudited)
                                                          (Thousands of dollars)
<S>                                                       <C>             <C>
ASSETS

Investments:
   Investments available for sale, at fair value:
      Fixed maturities (cost: 1999--$25,469,000;
         1998--$29,953,000)                                $25,075        $30,343
      Short-term investments
         (cost: 1999--$1,226,000; 1998--$1,204,000)          1,226          1,204
   Other invested assets                                         0          4,747
                                                           -------        -------
                                                            26,301         36,294

Cash                                                         2,198          2,587

Receivables:
   Premiums in process of transmittal, less
      allowance (1999--$200,000; 1998--$200,000)             3,391          7,975
   Amounts due from reinsurers                              42,911         36,877
   Amounts due from former subsidiaries                         13             65
                                                           -------        -------
                                                            46,315         44,917

Accrued investment income                                      298            282
Prepaid reinsurance premiums                                 2,103          5,913
Deferred policy acquisition costs                            1,060          2,803
Equipment--at cost, less accumulated
   depreciation (1999--$1,005,000; 1998--$1,673,000)           378            474
Leasehold improvements, less accumulated amortization
   (1999--$21,000; 1998--$13,000)                               17             24
Receivable from sale of discontinued and disposed
   of operations                                                 0            703
Other assets                                                   188            621
                                                           -------        -------
                                                             4,044         10,820
                                                           -------        -------
Total assets                                               $78,858        $94,618
                                                           =======        =======
</TABLE>




                                       3





<PAGE>   4
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS--(CONTINUED)

<TABLE>
<CAPTION>
                                                          September 30,     December 31,
                                                              1999             1998
                                                              ----             ----
                                                          (unaudited)
                                                             (Thousands of dollars)
<S>                                                           <C>              <C>
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY

Policy Reserves and Liabilities:
   Unearned premium reserves                               $  5,826          $12,449
   Insurance claims                                          55,016           49,535
                                                           --------          -------
                                                             60,842           61,984

Other Liabilities:
   Amounts withheld for others                                1,654            2,118
   Deferred reinsurance commissions                             248            1,508
   Amounts due reinsurers                                       351            3,583
   Accounts payable and other liabilities                     2,974            2,165
   Accrued restructuring cost                                   752               --
   Current federal income taxes                                 172              159
                                                           --------          -------
                                                              6,151            9,533
                                                           --------          -------
                                                             66,993           71,517
                                                           --------          -------

Commitments and Contingencies--Note E

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

Common stockholders' equity:
   Common stock, $.10 par value
      Authorized shares (1999--15,000,000;
         1998--15,000,000)
      Issued shares (1999--9,468,196;
         1998--9,468,196)                                       947              947
   Additional paid-in capital                                32,659           32,659
   Retained earnings (accumulated deficit)                  (14,519)          (3,800)
   Less treasury shares at cost (1999--913,230;
         1998--913,230)                                      (6,962)          (6,962)
   Accumulated other comprehensive income (loss)               (260)             257
                                                           --------          -------
                    Net common stockholders' equity          11,865           23,101
                                                           --------          -------
   Total liabilities and common stockholders' equity       $ 78,858          $94,618
                                                           ========          =======
</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        Nine Months Ended
                                                     September 30,             September 30
                                                    1999        1998         1999         1998
                                                 ----------   ---------   ----------   ----------
                                                  (Thousands of dollars, except per share data)
<S>                                              <C>          <C>         <C>          <C>
REVENUE:
     Gross premiums written                      $    3,918   $   8,772   $   19,146   $   33,704
     Less reinsurance ceded                           1,297       5,441        4,468       20,284
                                                 ----------   ---------   ----------   ----------
          Net premiums written                        2,621       3,331       14,678       13,420
     (Increase) decrease in unearned premium
       reserves                                       2,529         415        2,814          622
                                                 ----------   ---------   ----------   ----------
          Premiums earned                             5,150       3,746       17,492       14,042
     Net investment income:
          Interest and dividends                        726         531        1,667        1,796
          Realized gains (losses)                       207          10          208          (43)
     Equity in income of affiliated company              65         (86)          --          (86)
     Other income                                       111          56           21          268
                                                 ----------   ---------   ----------   ----------
                                                      6,259       4,257       19,388       15,977
                                                 ----------   ---------   ----------   ----------
BENEFITS AND EXPENSES:
     Loss and loss adjustment expenses                5,408       3,570       16,877       11,807
     Commissions and selling expenses                   616       1,377        3,765        5,304
     Reinsurance expense recovery                      (503)     (1,663)      (1,976)      (4,416)
     General and administrative                       3,988       1,302        6,896        3,896
     Restructuring cost                                 168          --        1,844           --
     Taxes, licenses and fees                             1         311          691        1,285
     (Increase) decrease in deferred policy
       acquisition costs                                869         132        1,743          232
                                                 ----------   ---------   ----------   ----------
                                                     10,547       5,029       29,840       18,108
                                                 ----------   ---------   ----------   ----------

INCOME (LOSS) BEFORE FEDERAL INCOME TAXES            (4,288)       (772)     (10,452)      (2,131)
     Federal income taxes:
          Current expense                                --        (125)          --         (125)
          Deferred expense                               --          --           --           --
                                                 ----------   ---------   ----------   ----------
                                                         --        (125)          --         (125)
                                                 ----------   ---------   ----------   ----------
NET INCOME (LOSS)                                $   (4,288)  $    (647)  $  (10,452)  $   (2,006)
                                                 ==========   =========   ==========   ==========
Earnings (loss) per common
  share--basic/assuming dilution:
     Net income (loss)                           $    (0.50)  $   (0.08)  $    (1.22)  $    (0.23)
                                                 ==========   =========   ==========   ==========
Weighted average number of common shares
  outstanding                                     8,554,966   8,570,956    8,554,966    8,579,400
                                                 ==========   =========   ==========   ==========
</TABLE>

See notes to unaudited consolidated financial statements.


                                       5

<PAGE>   6
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        UNAUDITED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

                             (Thousands of dollars)

<TABLE>
<CAPTION>
                                                                    Retained
                                                    Additional      earnings        Common         Accumulated other
                                         Common      paid-in      (accumulated    stock held in     comprehensive
                                         stock       capital         deficit)       treasury           income               Net
                                         ------     ----------    ------------    -------------    -----------------    -----------
<S>                                      <C>        <C>           <C>             <C>              <C>                  <C>
Balances at December 31, 1997            $  944     $   32,610    $      6,518    $      (6,599)   $             116    $    33,589
Comprehensive income (loss):
   Net loss                                  --             --         (10,451)              --                   --        (10,451)
   Other comprehensive
      income (loss), net:
   Change in unrealized appreciation
      on investment securities               --             --              --               --                  141            141
                                         ------     ----------    ------------    -------------    -----------------    -----------
   Other comprehensive
      income                                 --             --              --               --                  141            141
                                         ------     ----------    ------------    -------------     ----------------    -----------
   Comprehensive income (loss)               --             --         (10,451)              --                  141        (10,310)
   Change in valuation allowance
      for unrealized appreciation
      on investment securities               --             --             133               --                   --            133
   Purchase of 115,810 shares as
      treasury stock                         --             --              --             (363)                  --           (363)
   Issuance of 3,900 shares of
      Common Stock under
      Common Stock Option Plan                3             49              --               --                   --             52
                                         ------     ----------    ------------    -------------     ----------------    -----------
      Balances at December 31, 1998         947         32,659          (3,800)          (6,962)                 257         23,101
Comprehensive loss:
      Net loss                               --             --         (10,452)              --                   --        (10,452)
      Other comprehensive loss, net:
      Change in unrealized appreciation
         on investment securities            --             --              --               --                 (517)          (517)
                                         ------     ----------    ------------    -------------     ----------------    -----------
      Other comprehensive
         loss                                --             --              --               --                 (517)          (517)
                                         ------     ----------    ------------    -------------     ----------------    -----------
      Comprehensive loss                     --             --         (10,452)              --                 (517)       (10,969)
      Change in valuation allowance
         for unrealized appreciation
         for investment securities           --             --            (267)              --                   --           (267)
                                         ------     ----------    ------------    -------------     ----------------    -----------
      Balances at September 30, 1999
         (unaudited)                     $  947     $   32,659    $    (14,519)   $      (6,962)    $           (260)   $    11,865
                                         ======     ==========    ============    =============     ================    ===========
</TABLE>


See notes to unaudited financial statements.

                                       6






























<PAGE>   7
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                               Nine Months Ended September 30,
                                                  1999               1998
                                                ---------          ---------
                                                   (Thousands of dollars)
<S>                                             <C>                <C>
OPERATING ACTIVITIES:
  Net income (loss)                             $(10,452)          $ (2,006)
  Adjustments to reconcile net loss
    to net cash (used in) provided by
    operating activities:
      Equity method investment, net                  --                 --
      Provision for depreciation and
        amortization                                 125                196
      Net realized (gains) losses on
        investments                                 (208)                43
      Accrual of discount on bonds                   (27)               (38)
      Amortization of premium on bonds                83                 60
      Change in premiums receivable                4,584              4,801
      Change in accrued investment income            (16)               (42)
      Change in prepaid reinsurance premiums       3,810               (559)
      Change in amounts withheld for others         (464)              (327)
      Change in unearned premium reserves         (6,623)           (13,930)
      Change in insurance claim reserves           5,481              8,861
      Change in amounts due to and from
        reinsurers                                (9,266)           (12,472)
      Change in other assets, other
        liabilities and accrued income
        taxes                                      2,059             (5,933)
      Change in deferred policy acquisition
        costs                                      1,743                232
      Change in deferred reinsurance
        commissions                               (1,260)                89
                                                ---------          ---------
  Net cash used in continuing operations         (10,015)           (21,025)
  Net cash provided by discontinued
    operations                                       --              40,122
                                                ---------          ---------
NET CASH (USED IN) PROVIDED BY OPERATING
  ACTIVITIES                                     (10,015)           (19,097)
                                                ---------          ---------
INVESTING ACTIVITIES:
  Sale of investments available for sale          17,976             13,433
  Purchase of investments available for sale      (8,328)           (16,018)
  Other, net                                         (22)              (311)
                                                ---------          ---------
NET CASH (USED IN) PROVIDED BY INVESTING
  ACTIVITIES                                       9,626             (2,896)
                                                ---------          ---------
FINANCING ACTIVITIES:
  Repayment of notes payable                         --             (15,000)
  Issuance of common stock under stock
    option plan                                      --                  30
  Repurchase of treasury shares                      --                (306)
                                                ---------          ---------
NET CASH USED IN BY FINANCING ACTIVITIES             --             (15,276)
                                                ---------          ---------
NET INCREASE (DECREASE) IN CASH                     (389)               925
Cash at beginning of period                        2,587              1,589
                                                ---------          ---------
CASH AT END OF PERIOD                           $  2,198           $  2,514
                                                =========          ========
</TABLE>

See notes to unaudited consolidated financial statements.

                                       7






































<PAGE>   8


                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1999


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, 1998.

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. The Company's investment in an
affiliate owned more than 20 percent, but not in excess of 50 percent, is
reported using the equity method.

DESCRIPTION OF BUSINESS: ACCEL is an insurance holding company incorporated in
Delaware. The Company is engaged in the underwriting and sale of
property/casualty insurance products. The Company announced on July 2, 1999 its
intent of exiting its current lines of commercial property and casualty
business due to its loss experience from 1998 and the current year. The Company
ceased writing new policies of insurance and is non-renewing its in-force
policies. The net unearned premium reserve at September 30, 1999 is $5.5
million, a reduction of $6.6 million from December 31, 1998. Management is
pursuing efforts to restructure the Company so that it can re-enter other areas
of the insurance market. Management of the Company's claims is contracted to
Allegiance Insurance Managers, LTD.

The Company is also subject to competition from other insurers throughout the
states in which is writes business. The Company is also subject to regulation by
the insurance departments of states in which it is licensed, and undergoes
periodic examinations by those departments.

BUSINESS RESTRUCTURING: The Company announced on October 7, 1999 that it reached
an agreement in principle to acquire 100% of the stock of Allegiance Insurance
Managers, LTD (AIM) for 1,526,076 shares of ACCEL's common stock. Under the
proposed terms, ACCEL will 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 purchase. If the business does not
achieve certain cumulative earnings by December 31, 2002, the former AIM
shareholders will return 763,038 shares to ACCEL. Consummation of the purchase
is subject to negotiation and execution of a definitive stock purchase
agreement, clearance by the Ohio Department of Insurance and satisfaction of
customary closing conditions.

ACCEL further announced the election of Gerald H. Pastor, FCAS, president and
CEO of AIM, as president and CEO of its subsidiary, Acceleration National
Insurance Company (ANIC). Pastor replaces Douglas J. Coats who will remain on
the board of ANIC and serve as its chairman. Pastor will continue his
responsibilities as president and CEO of AIM. Upon completion of the
acquisition, Pastor will also be elected president and CEO of ACCEL.

AIM, headquartered in Simsbury, CT, 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 is presently running off all of its underperforming products. Going
forward, after ACCEL's purchase of AIM, the primary focus of ACCEL and ANIC will
be the non-standard automobile line of business, a business in which AIM and
Pastor have expertise. It is expected that ANIC will consolidate its
administrative offices with AIM in Simsbury, CT.

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 deferred policy
acquisition costs and the liability for insurance claims. 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.


                                       8
<PAGE>   9

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


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

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

The Company sold its 25% interest in USA Insurance Group, Inc., the parent
company of Transportation Insurance Specialists, the Company's general agent, on
August 10, 1999 for $5.0 million, producing a capital gain of $252,000.

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.

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.

LEASEHOLD IMPROVEMENTS:  Leasehold improvements are carried at cost less
accumulated amortization. Amortization is provided using the straight-line
method over the term of the five year lease.

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

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.


                                       9
<PAGE>   10
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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

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.

RECLASSIFICATIONS:  Certain amounts in the 1998 unaudited consolidated financial
statements have been reclassified to conform with the 1999 presentation.

NOTE B--SALE OF AUTO AFTERMARKET GROUP

Effective December 31, 1997, ACCEL sold to Lyndon Insurance Group, Inc. and
Lyndon Life Insurance Company (collectively, "Lyndon") the outstanding capital
stock of Acceleration Life Insurance Company ("ALIC"), Acceleration National
Service Company ("ANSC") and Dublin (collectively, the "Target Corporations")
for $30.2 million in cash and to Lyndon Property Insurance Company ("Lyndon
Property") assets related to the vehicle extended service contract business of
ACCEL's wholly owned subsidiary, Acceleration National Insurance Company
("ANIC"), for $10.3 million in cash. In conjunction with the sale, on January
1, 1998, ANIC ceded via a quota share reinsurance agreement 100% of its
liability related to the vehicle extended service contract business to Lyndon
Property.

The "Receivable from sale of discontinued and disposed of operations"
("Receivable from sale") of approximately $.7 million represents the difference
between the net sales price of $41 million and the initial sales price of $40.5
million and approximately $.2 million related to the cession of vehicle
extended service contract reserves to Lyndon Property. This receivable has been
utilized by the Company as part of the preliminary settlement of the long-term
care policy litigation described in Note E of this statement.

NOTE C--REINSURANCE

The Company has entered into reinsurance contracts associated with its property
and casualty lines which transfer a percentage of risk to the related reinsurer.
The Company also has agreements which transfer risks after a predetermined loss
amount has been reached. In June of 1999 the Company terminated one such
agreement effective January 1, 1999 with Stockton Reinsurance for its 1999
underwriting year. A charge of $.7 million was included in the Company's
restructuring charge for termination of this agreement. Unearned premium
reserves associated with these agreements at September 30, 1999 and December 31,
1998 are $2.1 million and $5.9 million, respectively, and the liability for
insurance claims ceded under these agreements is $38.2 million and $33.4 million
at September 30, 1999 and December 31, 1998, respectively. The following data
summarizes certain aspects of the Company's reinsurance activity for 1999 and
1998.

Premiums written and earned in 1999 and 1998 are summarized as follows:

<TABLE>
<CAPTION>
                                      WRITTEN                                                       EARNED
                ----------------------------------------------------          ----------------------------------------------------
                                                            Period Ended September  30,
                Nine Months Ended            Three Months Ended               Nine Months Ended            Three Months Ended
                 1999         1998              1999         1998              1999         1998             1999          1998
                 ----         ----              ----         ----              ----         ----             ----          ----
                                                             (Thousands of dollars)
<S>            <C>           <C>               <C>          <C>              <C>          <C>                <C>          <C>
Direct         $15,251       $30,124           $3,428       $7,441           $24,413      $30,870            $6,060       $9,627
Assumed          3,895         3,580              490        1,331             4,911        3,307             1,188        1,067
Ceded           (4,468)      (20,284)          (1,297)      (5,441)          (11,832)     (20,135)           (2,098)      (6,948)
                -------      --------          -------      -------          --------     --------           -------      -------
Net            $14,678       $13,420           $2,621       $3,331           $17,492      $14,042            $5,150       $3,746
               =======       =======           ======       ======           =======      =======            ======       ======
</TABLE>



                                       10
<PAGE>   11

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE C--REINSURANCE--(CONTINUED)

Loss and loss adjustment expenses incurred in 1999 and 1998 are summarized as
follows:

<TABLE>
<CAPTION>
                                        Nine Months Ended            Three Months Ended
                                          September 30,                 September 30,
                                       1999         1998              1999         1998
                                       ----         ----              ----         ----
                                                     (Thousands of dollars)
<S>                                  <C>           <C>              <C>           <C>
Direct                               $29,789       $25,683          $10,901       $8,342
Assumed                                3,626         2,163            1,354          740
Ceded                                (16,538)      (16,039)          (6,847)      (5,512)
                                     -------       -------           ------       ------
Net
                                     $16,877       $11,807           $5,408       $3,570
                                     =======       =======           ======       ======
</TABLE>

NOTE D--SEGMENT INFORMATION

The Company operates primarily in the property/casualty insurance industry
within the United States. 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, income (loss) before income taxes and
identifiable assets by segment are summarized as follows:

<TABLE>
<CAPTION>
                                                     Nine  Months Ended                           Three Months Ended
                                                       September  30,                               September  30,
                                                    1999              1998                      1999              1998
                                                    ----              ----                      ----              ----
                                                    (Thousands of dollars)                      (Thousands of dollars)
<S>                                                 <C>               <C>                       <C>               <C>
Revenue:
         Property/Casualty                         $18,892          $15,688                   $ 5,621           $ 4,278
         Corporate                                    (496)             289                       638               (21)
                                                   -------          -------                   -------           -------
               Total                               $19,388          $15,977                   $ 6,259           $ 4,257
                                                   =======          =======                   =======           =======

Income (loss) before federal income taxes
         Property/Casualty                        $ (6,473)         $(1,728)                  $(1,193)          $  (522)
         Corporate                                  (3,979)            (403)                   (3,095)             (250)
                                                  --------          -------                   -------           -------
               Total                             $ (10,452)         $(2,131)                  $(4,288)          $  (772)
                                                 ==========         ========                  ========          ========
</TABLE>

<TABLE>
<CAPTION>
                                               September 30,      December 31,
                                                   1999               1998
                                                   ----               ----
                                                   (Thousands of dollars)
<S>                                                <C>                <C>
Identifiable assets:
         Property/Casualty                         $75,067          $87,934
         Corporate and Other                         3,791            6,684
                                                   -------          -------
               Total                               $78,858          $94,618
                                                   =======          =======
</TABLE>


NOTE E--COMMITMENTS AND CONTINGENCIES

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, unless the proposed
settlement in the long-term care insurance litigation discussed below is not
completed, recent development in that litigation involve one or more theories of
damages which if decided against defendants, including the Company, might
ultimately prove material.

In July 1991, the Company acquired 100% of RGL. Galaxy Insurance Company
("Galaxy"), a wholly owned subsidiary of RGL, wrote commercial property
insurance, property and casualty, 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.



                                       11
<PAGE>   12
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


NOTE E--COMMITMENTS AND CONTINGENCIES--(CONTINUED)

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 to reargue. On June 15,
1999 the Court denied the Superintendent's motion to renew. The Superintendent
also filed a Notice of Appeal of the Court's Decision and Order dismissing the
complaint. ANIC will continue to defend vigorously against the Superintendent's
lawsuit.

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 regarding an alleged promise not to raise premiums
"too much". Said long-term care insurance business was entirely reinsured to and
assumed by Commonwealth Life Insurance Company ("Commonwealth") of Louisville,
Kentucky, in 1991. The matter was tendered to Commonwealth to defend on behalf
of ALIC pursuant to the applicable provisions of the reinsurance agreement
between the parties, and Commonwealth tendered the matter back to ALIC.

Pursuant to the settlement agreement, the Company paid $3.0 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 and 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 agreed
reimbursement to Lyndon was therefore in excess of $3.0 million. The September
30, 1999 financials include a reserve for the settlement and related attorney's
fees. Lyndon maintains that ACCEL owes at least $.7 million additional which
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.




                                       12
<PAGE>   13
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS

             Operating Results for the Three and Nine Months Ended
                          September 30, 1999 and 1998

OPERATING RESULTS

The Company announced on July 2, 1999 it would cease writing or renewing its
current lines of commercial property and casualty business due to it's loss
experience from 1998 and the current year. Management is pursuing efforts to
restructure the Company so that it can re-enter other areas of the insurance
market. The Company's operating results in the nine-month period were impacted
by the recognition of a restructuring charge of $1.8 million. Subsequently, the
Company further announced, on October 7, 1999 that the primary focus of ANIC
will be in the non-standard automobile line of business, see "Note A -
Significant Accounting Policies, Business Restructuring".

The loss before federal income taxes for the nine months of 1999 was $10.5
million compared with a loss of $2.0 million for the same period in 1998. Prior
to the restructuring charge, the loss for 1999 was $8.6 million compared to the
loss of $2.0 million for 1998. Charges associated with the preliminary
settlement of the long-term care policies litigation as noted in Note E resulted
in a $3.3 million charge for the year. The termination of a reinsurance contract
effective January 1, 1999 with Stockton Reinsurance produced an additional
charge of $.8 million in 1999. The decline in gross written premium in 1999
produced deferred policy acquisition costs of $1.7 million as compared to $.2
million for 1998. Development of loss and loss adjustment expenses added an
additional charge of $2.2 million in 1999 as compared to 1998.

The loss before federal income taxes for the three months ended September 30,
1999 was $4.3 million compared to a loss of $.6 million for the same period in
1998. The preliminary settlement of the long-term care policy litigation as
noted in Note E of $3.3 million comprises a significant portion of the loss for
the quarter.

The Company's continuing product lines, including commercial auto and other
niche products, produced a negative underwriting margin in the first nine months
of 1999 of approximately $1.2 million while net investment income contributed
$1.4 million. This contribution was primarily offset by general and
administrative expenses of $4.2 million (including $1.8 million of restructuring
cost) and taxes, licenses and fees including premium taxes of $.7 million. The
decrease in the Company's gross premiums produced a $1.7 million charge for
deferred policy acquisition cost. This decrease was attributable in part to
certain types of commercial auto insurance, which the Company is no longer
writing, including large fleets, paratransit vehicles and business in
under-performing territories.

The results for the third quarter of 1999 produced a negative underwriting
margin of $.9 million. Investment income contributed $.7 million. General and
administrative expenses were $.8 for the period, including $.2 million in
restructuring cost. Taxes, licenses, fees and deferred policy acquisition cost
contributed an additional $.9 million loss for the period.

REVENUE

Gross premium writings for the nine months of 1999 were $19.1 million compared
to $33.7 million for 1998. Premiums written decreased by $9.1 million for new
property and casualty programs and decreased $5.5 million for the vehicle
extended service contract program (which is fully ceded to Lyndon Property).

Gross premium writings for the third quarter of 1999 were $3.9 million compared
to $8.8 million for 1998. Premiums written decreased by $4.4 million for new
property and casualty programs and decreased $.4 million for the vehicle
extended service contract program.

Net premium earned was $17.5 million and $14.0 million for the first nine months
of 1999 and 1998, respectively. The increase in 1999 compared to 1998 was
primarily due to the change in the Company's retention under its reinsurance
contracts. As of January 1, 1999, the Company increased its loss retention to
$250,000 from the previous level of $100,000 which had the effect of ceding less
premium to the reinsurers thereby increasing the Company's premiums earned over
the underlying policy periods.

In the third quarter of 1999 earned premiums increased $1.4 million as compared
to 1998. Earned premiums were $5.1 million and $3.7 million respectively. The
decrease in written premiums was offset by the Company's increased premium
retention, thus accounting for this increase.




                                       13
<PAGE>   14
LIQUIDITY AND CAPITAL RESOURCES

The Company's cash flows from operations have been adequate for its current
operating needs. The Company's long haul trucking and charter bus business
generally is written for a term of one year with the casualty claim-related
liabilities extending beyond that period. The Company's liability on vehicle
extended service contracts typically has extended for either one-year or
five-year periods. However as previously discussed, the Company's existing
vehicle extended service contract business was ceded to Lyndon Property
effective January 1, 1998.

The Company's "available for sale" fixed maturity securities at September 30,
1999 and December 31, 1998 included 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
September 30, 1999, 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
1999.

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.

Effective April 1, 1998, the Company purchased a 25% interest in the common
stock of USA Insurance Group, Inc., the parent company of Transportation
Insurance Specialists, the Company's general agent, for $5 million. This
investment is included in other invested assets and is accounted for using the
equity method. Amortization of the amount by which the investment in USAIG
exceeds the Company's share of the underlying net assets is being amortized on
the straight-line method over 10 years. On August 9, 1999 the Company sold its
investment in USAIG for $5.0 million plus interest of .3 million.

Although the cumulative effects of inflation on premium growth cannot be fully
determined, increases in the value of commercial property results in increased
premiums for property coverages. The combination of severity (which is affected
by inflation) and frequency of loss trends in commercial auto and general
liability are recognized in premium increases or decreases by the adoption of
filed premium rates.

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. Implementation of the codified statutory
principles may affect the surplus level of ANIC on a statutory basis. Management
is unable at this time to determine what impact, if any this project will have
on the statutory surplus of ANIC.


                                       14
<PAGE>   15

YEAR 2000 CONSIDERATION

The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (Year 2000) approaches. The
Company's plan for assessment and renovation of these issues is grouped by
hardware, system and operating software, application system software, end-user
decision support software, telecommunications, office (non-information
technology) systems, service provider relationships and business partner
relationships. Within each grouping, components representing mission-critical
operations to the Company have been prioritized. Hardware, operating software,
application software, telecommunications, and key business partner relationships
necessary to conduct the basic business of the Company have progressed beyond
the renovation phase and are being validated or implemented. Success to date is
demonstrated in the fact that throughout the second and third quarter of 1999,
the Company has processed policies with expiration dates beyond the end of the
century. Additionally, the Company is performing final assessments of supportive
components within each group to verify that normal life cycles and third party
provider efforts have matured to compliance levels. The Company expects little
renovation will be required from this phase.

Since January 1996, the Company has incurred approximately $200,000 in costs
associated with the Year 2000 project. Continual contact and assessment of the
Company's key partners and vendors will continue throughout 1999 and early 2000
to insure readiness is maintained. Management is in constant appraisal of the
project status and is supportive and committed to successful completion. Based
on the Company's current state of readiness and project progress, management has
determined that the effect on the Company's financial condition and earnings is
not material. Should any of the Company's benchmarks be compromised from the
planned completion timetables, the Company has contingency plans in the form of
contractual resource relationships and new software components, which will
either be utilized or installed to achieve full compliance.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

The 1995 Private Securities Litigation Reform Act provides issuers the
opportunity to make cautionary statements regarding forward-looking statements.
Accordingly, any forward-looking statement contained herein or in any other oral
or written statement by the Company or any of its officers, directors or
employees is qualified by the fact that actual results of the Company may differ
materially from such statement due to the following important factors, among
other risks and uncertainties inherent in the Company's business: state
insurance regulations, rate competition, adverse changes in interest rates,
unforeseen losses with respect to loss and settlement expense reserves for
unreported and reported claims, and catastrophic events.

QUANTITATIVE 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 September 30, 1999
were:

<TABLE>
<CAPTION>
                                                                                                                 TOTAL
                                                                                                                 FAIR
                                1999      2000       2001      2002       2003    Thereafter       TOTAL         VALUE
                                ----      ----       ----      ----       ----    ----------       -----         -----
                                                          (Millions of dollars)
<S>                             <C>       <C>        <C>       <C>        <C>        <C>          <C>           <C>
INVESTMENTS IN FIXED MATURITY SECURITIES

Principal Amount                $1.80     $4.66      $8.23     $3.53      $1.87      $5.16        $25.24        $25.07
Book Value                       1.81      4.69       8.30      3.58       1.87       5.22         25.47
Average Interest Rate            6.65%     6.67%      6.31%     5.89%      6.18%      6.70%         6.41%         6.76%

SHORT-TERM INVESTMENTS

Principal Amount                $1.09      -          -         -          -          -           $ 1.09        $ 1.09
Book Value                       1.09      -          -         -          -          -             1.09
Average Interest Rate            4.83%     -          -         -          -          -             4.83%         4.83%
</TABLE>



                                       15
<PAGE>   16


PART II.  OTHER INFORMATION

ITEM 6.  Exhibits and Reports on Form 8-K

   (b) No reports on Form 8-K have been filed by the Registrant during the
quarter ended September 30, 1999.


                                   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





Dated:  November 15  , 1999            By:  /s/ Douglas Coats
                                          -------------------------------------
                                       Name Douglas Coats
                                       Title* President


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




                                       16



<PAGE>   17



                               INDEX TO EXHIBITS


         EXHIBIT
           NO.                    DESCRIPTION
         -------                  -----------
           27.1       -     Financial Data Schedule