<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 MARCH 31, 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 April 30, 1999, there were 8,554,966 shares of Common Stock, $.10 par
value per share outstanding.



<PAGE>   2
                                        


                                                      COMMISSION FILE NO. 0-8162


                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                                 MARCH 31, 1999

                                      INDEX



<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION

         Item 1.  Financial Statements                                                                       Page
                                                                                                             ----
<S>               <C>                                                                                        <C>
                  Unaudited Consolidated Balance Sheets
                      (March 31, 1999 and December 31, 1998)                                                 3 -  4

                  Unaudited Consolidated Statements of Operations (Three months
                      ended March 31, 1999 and 1998)                                                              5

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

                  Unaudited Consolidated Statements of Cash Flows (Three months
                      ended March 31, 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

                     UNAUDITED CONSOLIDATED BALANCE SHEETS

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

Investments:
     Investments available for sale, at fair value:
         Fixed maturities (cost: 1999--$27,564,000;
            1998--$29,953,000)                             $     27,673     $     30,343
         Short-term investments
            (cost: 1999--$1,912,000; 1998--$1,204,000)            1,912            1,204
     Other invested assets                                        4,725            4,747
                                                           ------------     ------------
                                                                 34,310           36,294

Cash                                                                822            2,587

Receivables:
     Premiums in process of transmittal, less
         allowance (1999--$200,000; 1998--$200,000)               7,069            7,975
     Amounts due from reinsurers                                 42,592           36,877
     Amounts due from former subsidiaries                            13               65
                                                           ------------     ------------
                                                                 49,674           44,917

Accrued investment income                                           259              282
Prepaid reinsurance premiums                                      3,627            5,913
Deferred policy acquisition costs                                 2,404            2,803
Equipment--at cost, less accumulated
     depreciation (1999--$1,737,000; 1998--$1,673,000)              443              474
Leasehold improvements, less accumulated amortization
     (1999--$16,000; 1998--$13,000)                                  22               24
Receivable from sale of discontinued and disposed
     of operations                                                  703              703
Other assets                                                        416              621
                                                           ------------     ------------
                                                                  7,874           10,820
                                                           ------------     ------------


Total assets                                               $     92,680     $     94,618
                                                           ============     ============
</TABLE>



                                       3
<PAGE>   4
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

               UNAUDITED CONSOLIDATED BALANCE SHEETS--(CONTINUED)


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

Policy Reserves and Liabilities:
    Unearned premium reserves                             $     10,062      $     12,449
    Insurance claims                                            49,767            49,535
                                                          ------------      ------------
                                                                59,829            61,984
Other Liabilities:
    Amounts withheld for others                                  2,182             2,118
    Deferred reinsurance commissions                               905             1,508
    Amounts due reinsurers                                       5,575             3,583
    Accounts payable and other liabilities                       2,456             2,162
    Payable to former subsidiaries                                --                   3
    Current federal income taxes                                   172               159
                                                          ------------      ------------
                                                                11,290             9,533
                                                          ------------      ------------
                                                                71,119            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)                     (5,155)           (3,800)
    Less treasury shares at cost (1999--913,230;                (6,962)           (6,962)
       1998--913,230)
    Accumulated other comprehensive income                          72               257
                                                          ------------      ------------
                      Net common stockholders' equity           21,561            23,101
                                                          ------------      ------------

    Total liabilities and common stockholders' equity     $     92,680      $     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 March 31,
                                                              1999             1998
                                                          -----------      -----------
                                                            (Thousands of dollars, 
                                                             except per share data)
<S>                                                       <C>              <C>        
REVENUE:
     Gross premiums written                               $     8,539      $    13,791
     Less reinsurance ceded                                     2,768            8,185
                                                          -----------      -----------
         Net premiums written                                   5,771            5,606
     (Increase) decrease in unearned premium reserves             102             (723)
                                                          -----------      -----------
         Premiums earned                                        5,873            4,883
     Net investment income:
         Interest and dividends                                   475              664
         Realized gains (losses)                                    1              (53)
     Equity in income of affiliated company                       (22)            --
     Other income                                                  18              125
                                                          -----------      -----------
                                                                6,345            5,619
                                                          -----------      -----------
BENEFITS AND EXPENSES:
     Loss and loss adjustment expenses                          4,325            3,869
     Commissions and selling expenses                           1,711            2,211
     Reinsurance expense recovery                                (772)          (1,528)
     General and administrative                                 1,549            1,290
     Taxes, licenses and fees                                     392              519
     (Increase) decrease in deferred policy
         acquisition costs                                        399             (234)
                                                          -----------      -----------
                                                                7,604            6,127
                                                          -----------      -----------
INCOME (LOSS) BEFORE FEDERAL INCOME
     TAXES                                                     (1,259)            (508)

     Federal income taxes:
         Current expense                                         --               --
         Deferred expense                                        --               --
                                                          -----------      -----------
                                                                 --               --  
                                                          -----------      -----------

NET INCOME (LOSS)                                         $    (1,259)     $      (508)
                                                          ===========      ===========

Earnings per common share--basic/assuming dilution:
     Net income (loss)                                    $     (0.15)     $     (0.06)
                                                          ===========      ===========

Weighted average number of common
     shares outstanding                                     8,554,966        8,607,908
                                                          ===========      ===========
</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                      Accumulated 
                                                          Additional      earnings        Common           other
                                             Common        paid-in      (accumulated     stock held    comprehensive    
                                             stock         capital        deficit)      in 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 income (loss):
    Net loss                                       --             --         (1,259)             --              --          (1,259)
    Other comprehensive
       income (loss), net:
    Change in unrealized appreciation
       on investment securities                    --             --             --              --            (185)           (185)
                                           ----------     ----------     ----------      ----------      ----------      ----------
    Other comprehensive
       income                                      --             --             --              --            (185)           (185)
                                           ----------     ----------     ----------      ----------      ----------      ----------
    Comprehensive income (loss)                    --             --         (1,259)             --            (185)         (1,444)
    Change in valuation allowance
       for unrealized appreciation
       on investment securities                    --             --            (96)             --              --             (96)
                                           ----------     ----------     ----------      ----------      ----------      ----------
    Balances at March 31, 1999             $      947     $   32,659     $   (5,155)     $   (6,962)     $       72      $   21,561
                                           ==========     ==========     ==========      ==========      ==========      ==========
</TABLE>

See notes to unaudited consolidated financial statements.


                                       6
<PAGE>   7

               ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
                                      
               UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     Three Months Ended March 31,
                                                                        1999             1998
                                                                     -----------      -----------
                                                                        (Thousands of dollars)
<S>                                                                  <C>              <C>         
OPERATING ACTIVITIES:
     Net income (loss)                                               $    (1,259)     $      (508)
     Adjustments to reconcile net income (loss)
         to net cash (used in) provided by operating activities:
             Equity method investment, net                                    22             --
             Change in premiums receivable                                   906              936
             Change in accrued investment income                              23              (77)
             Change in prepaid reinsurance premiums                        2,286            1,524
             Change in premium deposits held                                  64              (24)
             Change in unearned premium reserves                          (2,387)         (14,668)
             Change in insurance claim reserves                              232            2,834
             Change in amounts due to and from reinsurers                 (3,723)          (3,691)
             Change in other assets, other liabilities
                and accrued income taxes                                     561             (289)
             Accrual of discount on bonds                                     (4)              (7)
             Amortization of premium on bonds                                  8               17
             Amortization of deferred policy acquisition  costs            2,803            5,957
             Policy acquisition costs deferred                            (2,404)          (6,191)
             Reinsurance commissions earned                               (1,508)          (4,412)
             Reinsurance commissions received                                905            4,602
             Provision for depreciation and amortization                      65               56
             Net realized gains (losses) on investments                        1              (53)
                                                                     -----------      -----------
     Net cash used in continuing operations                               (3,409)         (13,994)
     Net cash provided by discontinued operations                           --             39,756
                                                                     -----------      -----------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                       (3,409)          25,762
                                                                     -----------      -----------

INVESTING ACTIVITIES:
     Sale of investments available for sale                                4,453            5,641
     Purchase of investments available for sale                           (2,777)         (13,832)
     Other, net                                                              (32)            (209)
                                                                     -----------      -----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                        1,644           (8,400)
                                                                     -----------      -----------

FINANCING ACTIVITIES:
     Repayment of notes payable                                             --            (15,000)
     Issuance of common stock under stock option plan                       --                  9
     Repurchase of treasury shares                                          --               (306)
                                                                     -----------      -----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                         --            (15,297)
                                                                     -----------      -----------
NET INCREASE (DECREASE) IN CASH                                           (1,765)           2,065
Cash at beginning of period                                                2,587            1,589
                                                                     -----------      -----------
CASH AT END OF PERIOD                                                $       822      $     3,654
                                                                     ===========      ===========
</TABLE>


See notes to unaudited consolidated financial statements.

                                       7
<PAGE>   8

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 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, concentrating on commercial lines of
business. The Company offers various policies covering long-haul trucking,
charter bus, and limousine fleets, as well as other specialized products
tailored to other groups such as crane operators and gun dealers. The Company
offers these products through general agents. The Company is subject to
competition from other insurers throughout the states in which it 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.

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.

The investment in USA Insurance Group, Inc., the parent company of
Transportation Insurance Specialists, the Company's general agent, in which the
Company has a 25% interest is accounted for utilizing the equity method where
the cost of the investment is adjusted for the Company's proportionate share of
the investee's undistributed earnings or losses as well as any dividends paid by
the investee. 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.

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.



                                       8
<PAGE>   9


                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


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

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.

EARNINGS 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.




                                       9
<PAGE>   10

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


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 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.

The agreements provided that within 125 days after the closing, the sales price
for the Target Corporations would be decreased or increased by the amount, if
any, by which the Target Corporations' combined GAAP stockholder's equity as of
December 31, 1997 was less than or greater than, respectively, $31.6 million. As
of December 31, 1997, the combined GAAP stockholder's equity of the Target
Corporations was $32.1 million which resulted in a net sales price of
approximately $41 million.

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. The Company has filed a legal
action seeking declaratory judgment relief relating to disagreement with Lyndon
concerning the exact amount of the net sales price. Accordingly, the receivable
from sale may be more or less than $.7 million. The Company believes the
resolution of the matter will not have a material adverse effect on the
financial condition or results of operations of the Company.

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.

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. Unearned premium reserves associated with these
agreements at March 31, 1999 and December 31, 1998 are $3.6 million and $5.9
million, respectively, and the liability for insurance claims is $33.9 million
and $33.4 million at March 31, 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>
                                       Three Months Ended March 31,
                                   1999                          1998
                          -----------------------      ------------------------
                          Written        Earned         Written         Earned
                         ---------      ---------      ---------      ---------
                                        (Thousands of dollars)
<S>                      <C>            <C>            <C>            <C>      
Direct                   $   6,848      $   9,032      $  12,696      $  10,892
Assumed                      1,691          1,894          1,095            926
Ceded                       (2,768)        (5,053)        (8,185)        (6,935)
                         ---------      ---------      ---------      ---------
Net                      $   5,771      $   5,873      $   5,606      $   4,883
                         =========      =========      =========      =========
</TABLE>

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

<TABLE>
<CAPTION>
                                                      Three Months Ended March 31,
                                                         1999            1998 
                                                      ---------       ---------
                                                        (Thousands of dollars)
<S>                                                   <C>             <C>      
Direct                                                $   8,923       $   8,472
Assumed                                                   1,004             571
Ceded                                                    (5,602)         (5,174)
                                                      ---------       ---------
Net loss and loss adjustment
  expenses                                            $   4,325       $   3,869
                                                      =========       =========
</TABLE>




                                       10
<PAGE>   11

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


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>
                                                     Three Months Ended March 31,
                                                        1999            1998 
                                                      ---------       ---------
                                                       (Thousands of dollars)
<S>                                                   <C>             <C>      
Revenue:
        Property/Casualty                             $   6,341       $   5,391
        Corporate                                             4             228
                                                      ---------       ---------
          Total                                       $   6,345       $   5,619
                                                      =========       =========


Income (loss) before income taxes:
        Property/Casualty                             $    (938)      $    (505)
        Corporate                                          (321)             (3)
                                                      ---------       ---------
          Total                                       $  (1,259)      $    (508)
                                                      =========       =========
</TABLE>

<TABLE>
<CAPTION>
                                                      March 31,      December 31,
                                                        1999             1998
                                                      ---------       ---------
                                                        (Thousands of dollars)
<S>                                                   <C>             <C>      
Identifiable assets:
        Property/Casualty                             $  86,228       $  87,934
        Corporate                                         6,452           6,684
                                                      ---------       ---------
          Total                                       $  92,680       $  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, except that recent
developments in the long-term care insurance litigation discussed below 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.

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



                                       11
<PAGE>   12

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


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

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. No decision
has yet been rendered on the 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.

In November 1997, suit 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 also tendered
the matter back to ALIC.

The allegations of fraud and misrepresentation at the time of sale of the
long-term care policies are based on alleged statements that premiums "would not
be raised too much" even though the policy on its face stated that the "Company
reserves the right to increase premiums at anytime." Moreover, premiums were
increased subsequent to the reinsurance of the business to Commonwealth by ALIC,
and the increases appear to have been approved by the proper regulatory
authority. Plaintiffs amended their complaint to set forth allegations that the
policies were intentionally underpriced and/or poorly underwritten, so as to
justify premium increases and induce policy lapses. The Company and Commonwealth
are cooperating to vigorously defend the matter. Joint motions to dismiss and to
strike the class action allegations were filed in the U.S. District Court,
District of North Dakota, Southeastern Division. The Court acted to deny all
pending motions without prejudice to refiling until development of the record
occurred. The parties have undertaken to conduct discovery to develop the record
as directed by the Court. Based thereon, the Company filed a motion for summary
judgment. On March 16, 1999, the Court issued a Memorandum and Order denying
Defendant's motion for summary judgment and granting Plaintiff's motion for
class certification. The Company petitioned for interlocutory appeals of both
rulings which were subsequently denied. These recent developments involve one or
more theories of damages which if decided against defendants, including the
Company, might ultimately prove material although management cannot currently
estimate a range of potential loss. At a recent status conference on the matter,
a definition of the class was established by the Court which reduced the
membership of the class by approximately 50 percent and the Court fixed October
4, 1999 as the trial date. In the event the plaintiffs prevail, the Company
believes that it has a basis on which to seek indemnification from Commonwealth.

On March 3, 1999, a complaint was filed in the Circuit Court of Pinellas County,
Florida to represent a class of all Florida purchasers of long-term care
insurance sold by ALIC. The allegations are similar to the allegations in the
North Dakota litigation above. No response to the complaint has yet been filed
by the Company. The Company intends to deny any liability therein and to
continue to defend its interests vigorously in these matters.




                                       12
<PAGE>   13

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS

      Operating Results for the Three Months Ended March 31, 1999 and 1998

OPERATING RESULTS

The loss before federal income taxes for the three months ended March 31, 1999
was $1.3 million compared to a loss of $508,000 for the same period in 1998.
Although the Company's dollar loss was greater in 1999 than in 1998, the loss
ratio improved as discussed further below. Because the earned premium for 1999
was greater, the loss ratio, even though lower than in 1998, when combined with
expenses produced a higher dollar net loss.

The Company's continuing product lines, including commercial auto and other
niche products, produced a positive underwriting margin in the first quarter of
1999 of approximately $.1 million while net investment income contributed
$475,000. These contributions were primarily offset by general and
administrative expenses of $1.5 million and taxes, licenses and fees other than
premium taxes of $.2 million. The Company's commercial auto program produced
$7.7 million of gross premiums in the first quarter of 1999 compared to $10.9
million in the first quarter of 1998. This decrease was attributable 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 Company is focusing its ongoing efforts in commercial auto on
insuring charter buses and small fleets which the Company defines as fleets of 1
to 25 vehicles.

The net loss and loss adjustment expense ratio was 73.6% for the first quarter
of 1999 as compared to 79.2% for the same period in 1998. This improvement in
the loss ratio reflects that the underwriting actions taken in the fourth
quarter of 1998 to discontinue writing large fleets, paratransit and business in
under-performing territories are beginning to have a favorable impact on the
Company's loss ratio.

Gross premiums for the first quarter of 1999 included $.1 million of vehicle
extended service contract business (which was fully ceded) compared to $2.5
million in the same period in 1998. Excluding the fully ceded vehicle extended
service contract business, commissions and selling expenses as a percent of
gross premiums were comparable between 1999 and 1998.

Reinsurance expense recoveries decreased $.8 million or 49.5% in 1999 as
compared to 1998 due to the fact that the Company negotiated a lower reinsurance
premium rate by removing the reinsurance ceding commission clause from its
reinsurance contracts. Therefore, the Company's deferred reinsurance commissions
and reinsurance expense recoveries decreased in 1999 as compared to 1998.

The Company's general and administrative expenses increased by $259,000 or 20.1%
in the first three months of 1999 compared to the same period in 1998. This
increase was largely due to fluctuations in several expense items, including an
increase in guaranty association expenses of $112,000, primarily consisting of
payments to one state and the inclusion in 1998 of a benefit totaling $79,000
related to reimbursement of operating costs from another insurer for shared
services which was non-recurring in 1999. The Company adopted the reporting
requirements of Statement of Position ("SOP") 97-3, Accounting by Insurance and
Other Enterprises for Insurance-Related Assessments, in the first quarter of
1999. The effect of adopting SOP 97-3 on net income was immaterial.

The change in deferred policy acquisition costs from an increase of $.2 million
in the first quarter of 1998 to a decrease of $.4 million for the same period in
1999 was consistent with the decrease in gross premium writings as amortization
of the asset exceeded new additions.

REVENUE

Gross premium writings for the first quarter of 1999 were $8.5 million compared
to $13.8 million for 1998. Premiums written decreased by $2.8 million for the
new property and casualty programs and decreased $2.4 million for the vehicle
extended service contract program (which is fully ceded to Lyndon Property).

Net premium earned was $5.9 million and $4.9 million for the first quarter 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. The first quarter of 1999 represented the first
quarter the additional premiums retained by the Company earned for the Company's
benefit as opposed to earning for the reinsurer's benefit. The increase in net
premium earned from 1998 to 1999 was also due to the completion of the earnings
cycle in the first quarter of 1999 for policies written in 1998 which have since
been non-renewed or cancelled as discussed previously.




                                       13
<PAGE>   14

STRATEGIC PARTNERSHIP

The Company's Board of Directors has engaged Advest, an investment banking firm,
to assist the Company in finding a strategic partner or purchaser for itself or
its insurance subsidiaries, with an eye to enhancing overall shareholder value.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash flows from operations have generally 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 March 31, 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 March
31, 1999, the Company did not have a significant amount of higher risk mortgage
or asset backed securities which 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.

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.




                                       14
<PAGE>   15
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.

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 first 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 other than completion of its general
ledger system implementation which is scheduled to be completed by the end of
the second quarter of 1999.

Since January 1996, the Company has incurred approximately $145,000 in costs
associated with the Year 2000 project. The Company expects to incur
approximately $20,000 in remaining costs prior to the project's anticipated
completion by the end of the second quarter of 1999. 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, which will
be activated to accelerate the delinquent task.

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.

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.



                                       15
<PAGE>   16

Significant interest rate risk sensitive instruments as of March 31, 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                $2.1      $3.9       $7.5      $7.9       $3.6       $2.3         $27.3         $27.7
Book Value                       2.1       3.9        7.6       7.9        3.7        2.4          27.6
Average Interest Rate            6.8%      6.9%       6.5%      6.6%       6.4%       6.7%          6.6%          6.2%

SHORT-TERM INVESTMENTS

Principal Amount                $1.9       --         --        --         --         --           $1.9          $1.9
Book Value                       1.9       --         --        --         --         --            1.9
Average Interest Rate            4.7%      --         --        --         --         --            4.7%          4.7%
</TABLE>

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 March 31, 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:   May 14, 1999          BY: /s/ Cindy Moore
      ------------------          ----------------------------
                                  Cynthia A. Moore
                                  Senior Vice President, Chief Financial Officer
                                  and Treasurer*


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



                                       16
<PAGE>   17

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
  NO.          DESCRIPTION
--------       -----------
<S>            <C>
  27           Financial Data Schedule
</TABLE>