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, 1997


[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from  ____________ to  ____________

Commission File Number     0-8162
                           ------
                         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.)


 475 METRO PLACE NORTH, SUITE 100, DUBLIN, OHIO                  43017
   (Address of principal executive offices)                   (Zip Code)

                                  614-764-7000
                         (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 if disclosure of delinquent  filers  pursuant to Item 405
of Regulations S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-Q or any amendment to this
Form 10-Q. _____

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, 1997,  there were  8,603,742  shares of Common  Stock,  $.10 par
value per Share outstanding.

<PAGE>

                                                      COMMISSION FILE NO. 0-8162

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                                 March 31, 1997

                                      INDEX



PART I   FINANCIAL INFORMATION

Item 1.  Financial Statements                                         Page

          Unaudited Consolidated Balance Sheets
            (March 31, 1997 and December 31, 1996)                    1 -  2

          Unaudited Consolidated Statements of Operations (Three months
            ended March 31, 1997 and 1996)                            3

          Unaudited Consolidated Statements of Common Stockholders'
            Equity (Three months ended March 31, 1997 and year
            ended December 31, 1996)                                  4

          Unaudited Consolidated Statements of Cash Flows (Three
            months ended March 31, 1997 and 1996)                     5

          Notes to Unaudited Consolidated Financial Statements        6 - 10

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                       11 - 14


PART II  OTHER INFORMATION

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

<PAGE>

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                      UNAUDITED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                      March 31,    December 31,
                                                          1997            1996
                                                       (Thousands of dollars)
<S>                                                 <C>             <C>
ASSETS

Investments:
  Investments available for sale, at fair value:
    Fixed maturities (cost: 1997--$61,387,000;
      1996--$58,889,000)                            $   59,760      $   58,281
    Equity securities (cost:  1997--$5,566,000;
      1996--$5,514,000;                                  5,550           5,511
    Short-term investments
      (cost:  1997--$9,120,000; 1996--$10,670,000)       9,127          10,703
  Other invested assets at cost
    (fair value:  19976--$338,000; 1996--$346,000)         338             346
                                                    -----------     -----------
                                                        74,775          74,841

Cash                                                       829           3,331

Receivables:
  Premiums in process of transmittal, less
    allowance (1997--$213,000; 1996--$223,000)           8,574           7,286
  Amounts due from reinsurers,
    less allowance (1997 and 1996--$125,000)            19,269          11,138
  Recoverable federal income taxes                           -           1,019
                                                    -----------     -----------
                                                        27,843          19,443

Accrued investment income                                  571             652
Prepaid reinsurance premiums                            15,133          15,036
Reinsurance premium deposits                            40,522          42,615
Deferred policy acquisition costs                       29,985          30,946
Equipment--at cost, less accumulated
  depreciation (1997--$155,000;  1996--$162,000)           301             231
Leasehold improvements, less accumulated amortization
  (1997--$34,000; 1996--$26,000)                           144             152
Other assets:
  Cost in excess of fair value of net assets of
    subsidiaries at dates of acquisition ($4,448,000)
    less accumulated amortization                          689             716
  Funds held under reinsurance agreements                2,072             406
  Other                                                    924             939
                                                    -----------     -----------
                                                         3,685           2,061
                                                    -----------     -----------
                                                    $  193,788      $  189,308
                                                    ===========     ===========
</TABLE>
                                                                     (Continued)
                                        1
<PAGE>

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

               UNAUDITED CONSOLIDATED BALANCE SHEETS--(CONTINUED)

<TABLE>
<CAPTION>
                                                      March 31,    December 31,
                                                          1997            1996
                                                       (Thousands of dollars)
<S>                                                 <C>             <C>
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY

Policy Reserves and Liabilities:
  Unearned premium reserves                         $   80,302      $   81,820
  Insurance claims                                      24,716          25,256
  Other                                                      7               7
                                                    -----------     -----------
                                                       105,025         107,083
Other Liabilities:
  Funds held under reinsurance agreements                7,861           2,920
  Deferred reinsurance commissions                      14,126          13,902
  Amounts due reinsurers                                 8,238           6,133
  Notes payable                                         15,000          15,000
  Commissions payable                                    5,167           5,163
  Accounts payable and other liabilities                 2,961           2,788
  Federal income taxes:
    Current                                                 65               -
    Deferred                                             4,505           4,678
                                                    -----------     -----------
                                                        57,923          50,584
                                                    -----------     -----------
                                                       162,948         157,667
                                                    -----------     -----------
Commitments and Contingencies

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

Common stockholders' equity:
  Common stock, $.10 par value
    Authorized shares (1997 and 1996--15,000,000)
    Issued shares (1997 and 1996--9,401,162)               940             940
    Additional paid-in capital                          32,507          32,507
    Retained earnings                                    5,628           5,403
    Less 797,420 treasury shares at cost                (6,599)         (6,599)
    ESOP loan                                                -             (32)
    Net unrealized depreciation on investment
      securities                                        (1,636)           (578)
                                                    -----------     -----------
                                                        30,840          31,641
                                                    -----------     -----------
                                                    $  193,788      $  189,308
                                                    ===========     ===========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>

                                       2
<PAGE>

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                    Three Months Ended March 31,
                                                          1997            1996
                                                   (Thousands of dollars, except
                                                            per share data)
<S>                                                 <C>             <C>
REVENUE:
  Gross premiums written                            $   13,399      $   16,697
     Less reinsurance ceded                              3,434           9,070
                                                    -----------     -----------
       Net premiums written                              9,965           7,627
     Decrease (increase) in unearned premium reserves      586          (4,114)
                                                    -----------     -----------
       Premiums earned                                  10,551           3,513
     Net investment income:
        Interest and dividends                           1,155           1,002
        Realized gains                                      74             288
     Service fees on extended service
        contracts                                          545             585
     Other income                                           62             236
                                                    -----------     -----------
                                                        12,387           5,624
                                                    -----------     -----------
BENEFITS AND EXPENSES:
     Policy benefits                                     6,014           2,336
     Commissions and selling expenses                    4,774           5,209
     Reinsurance expense recovery                       (2,217)         (4,471)
     General and administrative                          1,866           1,704
     Taxes, licenses and fees                              398             513
     Interest                                              356             540
     Decrease (increase) in deferred policy
       acquisition costs                                   961            (245)
                                                    -----------     -----------
                                                        12,152           5,586
                                                    -----------     -----------
       INCOME (LOSS) BEFORE FEDERAL INCOME
         TAXES                                             235              38

Federal income taxes:
  Current expense                                          183             120
  Deferred expense (benefit)                              (173)           (128)
                                                    -----------     -----------
                                                            10              (8)

       NET INCOME (LOSS)                            $      225      $       46
                                                    ===========     ===========
Per Common Share:
  Net income (loss)                                 $     0.03      $     0.01
                                                    ===========     ===========
Weighted average number of common
  shares outstanding                                 8,603,742       4,453,932
                                                    ===========     ===========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>

                                       3




<PAGE>

<TABLE>
                                         ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                                 UNAUDITED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY 


<CAPTION>
                                                                                              Net
                                                                                       unrealized
                                                                                     appreciation
                                                                     Common             (depreci- 
                                          Additional                  stock             ation) on 
                                   Common    paid-in   Retained     held in      ESOP  investment
                                    stock    capital   earnings    treasury      loan  securities       Net 
                                  -------- ---------- --------- ------------  --------- --------- -----------
                                                                 (Thousands of dollars)

<S>                               <C>      <C>        <C>       <C>           <C>       <C>       <C>
Balances at December 31, 1995     $  524   $ 23,702   $ 3,299   $   (6,599)   $  (161)  $  (205)  $  20,560
    Payments on ESOP loan              -          -         -            -        129         -         129
    Change in net unrealized
       depreciation on
       investment securities           -          -         -            -          -      (373)       (373)
    Issuance of 110,000 shares of
       Common Stock under
       Common Stock Option Plan       11        223         -            -          -         -         234
    Issuance of 4,047,310 shares
       of Common Stock in
       conjunction with the Rights
       Offering and the
       Supplemental Offering         405      8,582         -            -          -         -       8,987
    Net Income                         -          -     2,104            -          -         -       2,104
                                  -------- ---------- -------   ------------  --------- --------- -----------
Balances at December 31, 1996        940     32,507     5,403       (6,599)       (32)     (578)     31,641
    Payments on ESOP loan              -          -         -            -         32         -          32
    Change in net unrealized
       depreciation on
       investment securities           -          -         -            -          -    (1,058)     (1,058)
    Net income                         -          -       225            -          -         -         225
                                  -------- ---------- -------   ------------  --------- --------- -----------
Balances at March 31, 1997           940     32,507     5,628       (6,599)         -    (1,636)     30,840
                                  ======== ========== =======   ============  ========= ========= ===========

<FN>
See notes to unaudited consolidated financial statements.
</FN>
</TABLE>

                                       4

<PAGE>

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                    Three Months Ended March 31,
                                                          1997            1996
                                                       (Thousands of dollars)
<S>                                                 <C>             <C>
OPERATING ACTIVITIES:
  Net income                                        $      225      $       46
  Adjustments to reconcile net income to net
    cash used in operating activities:
      Change in premiums receivable                     (1,278)         (4,181)
      Change in accrued investment income                   81             (68)
      Change in prepaid reinsurance premiums               (97)        (29,746)
      Change in funds held under reinsurance
        agreements                                       3,275          (4,091)
      Change in unearned premium reserves               (1,518)          1,989
      Change in insurance claim reserves                  (540)            359
      Change in amounts due reinsurers
        and amounts due from reinsurers                 (6,026)        (12,265)
      Change in other assets, other liabilities
        and accured income taxes                         1,097            (270)
      Interest paid in kind                                  -             151
      Accrual of discount on bonds                         (50)            (46)
      Amortization of premium on bonds                      26              22
      Amortization of deferred policy acquisition
        costs                                            5,026           4,758
      Policy acquisition costs deferred                 (4,065)         (5,003)
      Reinsurance commissions earned                    (7,374)            663
      Reinsurance commissions received                   7,598          (2,539)
      Provision for depreciation and amortization           63              98
      Net realized gains on investments                    (74)           (288)
                                                    -----------     -----------
NET CASH USED IN OPERATING ACTIVITIES                   (3,631)        (50,411)
INVESTING ACTIVITIES:
  Sale of investments available for sale                 5,192           3,415
  Purchase of investments available for sale            (6,090)        (10,113)
  Sale of property occupied by the Company                   -           3,298
  Other, net                                               (98)           (234)
                                                    -----------     -----------
NET CASH USED IN INVESTING ACTIVITIES                     (996)         (3,634)
FINANCING ACTIVITIES:
  Payment on ESOP loan                                      32              37
  Issuance of Common Stock under Stock Option Plan           -              21
  Change in reinsurance premium deposits                 2,093          49,498
                                                    -----------     -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                2,125          49,556
                                                    -----------     -----------
NET DECREASE IN CASH                                    (2,502)         (4,489)
Cash at beginning of year                                3,331           5,039
                                                    -----------     -----------
CASH AT END OF PERIOD                                      829             550
                                                    ===========     ===========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>

                                       5

<PAGE>


                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 1997


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 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  subsidiaries,  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 generally  accepted  accounting  principles  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, 1996.

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

Description of Business:  ACCEL is an insurance holding company  incorporated in
Delaware  in  June  1978  as the  successor  to an  Ohio  corporation,  formerly
Acceleration Corporation, organized in 1969. The Company has been engaged in the
sale and  underwriting of credit life and credit accident and health  insurance,
extended  service  contracts,  commercial  auto  and  other  specialty  casualty
products.  The credit insurance and extended service contract  products continue
to be offered to consumers,  principally through automobile  dealers,  financial
institutions and other business  entities.  The specialty  casualty products are
offered 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 unearned premium reserves and 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.

Other invested assets are carried at cost which approximates fair value.

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

                                       6

<PAGE>

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


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

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.
Substantially  all such deferred costs are amortized within a four-year  period.
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.

Goodwill  Amortization:   Cost  in  excess  of  fair  value  of  net  assets  of
subsidiaries  at  dates  of  acquisition  is being  amortized  primarily  over a
thirty-five  year period.  It is the Company's policy to account for goodwill at
the lower of  amortized  cost or fair  value.  On an ongoing  basis,  management
reviews the valuation and amortization of its goodwill.

Premium Income  Recognition  and Unearned  Premium  Reserves:  Unearned  premium
reserves on credit life and credit accident and health  insurance are calculated
primarily under the "Rule of 78's Method", which results in premium income being
recognized  in  decreasing  proportions  over the terms of the  policies,  which
approximates the pattern of policy benefits incurred.

Unearned  premium  reserves on the extended  service  contracts are based on the
historical  emergence pattern of claims.  The Company's primary liability on new
car contracts exists subsequent to the expiration of manufacturers'  warranties.
This method  results in premium  being  recognized  in direct  proportion to the
emergence of benefits on these contracts.

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 policy
benefits  incurred are deducted from the respective income and expense accounts.
Assets and  liabilities  related to  reinsurance  ceded are  reported on a gross
basis.  Amounts  related to  reinsurance  contracts,  where it is not reasonably
possible for the reinsurer to realize a significant  loss, are recorded based on
the deposit accounting method.

                                       7

<PAGE>

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


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

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.  Substantially  all such  commissions  and
ceding  fees are  amortized  within a  four-year  period.  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  the  Financial
Accounting   Standards   Board's  (FASB)  Statement  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, FASB 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 FASB No. 123 had been
applied.

Earnings Per Common  Share:  Net income per common  share is computed  using the
weighted  average  number of common shares  outstanding  during the period.  The
inclusion of common stock equivalents (options) would not be dilutive.

Reclassifications:  Certain amounts in the 1996 unaudited consolidated financial
statements have been reclassified to conform with the 1997 presentation.


NOTE B--NOTES PAYABLE

In 1991,  ACCEL  issued  $5,848,000  of  subordinated  notes (the  "Subordinated
Notes").  The Subordinated  Notes had a nine-year term with no principal payable
until maturity, and bear interest at 10.125% per annum. Effective June 30, 1992,
ACCEL  amended  the notes to permit the  issuance  of  additional  notes for the
purpose of making interest payments,  provided,  however,  that ACCEL may at its
option pay cash in lieu of issuing  additional notes in any denomination of less
than $1,000.  As a result,  ACCEL issued  additional notes totaling $151,000 for
the three months ended March 31, 1996.

Of the Subordinated  Notes described  above, a significant  portion were held by
Chase Insurance Holdings Corporation  ("CIHC"), a company related through common
ownership by a stockholder and director of the Company.

On July 25, 1996, the Company commenced an offering of  non-transferable  rights
(the "Rights Offering") to stockholders of record as of June 18, 1996. Under the
provisions of the Rights Offering,  the Company permitted CIHC and its affiliate
to tender the principal amount of their  Subordinated  Notes for cancellation as
consideration  (in lieu of cash) for the  purchase  of  shares  of common  stock
pursuant to the Rights  Offering.  On August 23,  1996,  CIHC and its  affiliate
tendered  $5,619,046  principal  amount  of  their  Subordinated  Notes  plus an
additional  $83,759 of accrued  interest  thereon  under the terms of the Rights
Offering. At the conclusion of the offering,  CIHC and its affiliate had reduced
their holding of Subordinated Notes to $0.

In a separate  transaction,  the Company retired  $731,533  principal  amount of
Subordinated  Notes  held by an  unrelated  third  party  for  consideration  of
$600,000.  The Company  recognized an extraordinary  gain on this transaction of
$131,533  during the third quarter of 1996. No federal income tax was recognized
related to this gain due to the consolidated tax position of the Company.

The result of the two aforementioned  transactions was to retire all outstanding
Subordinated Notes.

                                       8

<PAGE>

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE B--NOTES PAYABLE  (CONTINUED)

On December  29, 1995,  the Company  issued  senior  notes (the "Senior  Notes")
totaling  $16,500,000  at 9.50%,  maturing on April 1, 2001.  The proceeds  from
these notes were used to retire the loan  outstanding  under an existing  credit
agreement and to liquidate an  intercompany  loan between ACCEL and an insurance
subsidiary.  In addition,  as of January 1, 1996,  Acceleration  Life  Insurance
Company  ("ALIC")  entered into a  reinsurance  agreement  with an  unaffiliated
company to reinsure  the majority of the in-force  credit  business.  The Senior
Notes  are  payable  to the same  unaffiliated  company  which is a party to the
reinsurance  agreement dated January 1, 1996. This agreement is structured such,
that as future profits emerge on this block of business,  these profits are held
by the  reinsurance  company,  and ultimately  applied to pay interest on and to
redeem the Senior Notes. This is accomplished by the following transactions. The
reinsurance company distributes profits to ALIC as periodically agreed to by the
reinsurance  company and ALIC. ALIC then, subject to the Department of Insurance
of the State of Ohio (Ohio Department) approval, dividends funds to ACCEL. ACCEL
then uses these funds to redeem a portion of the senior  notes and the  interest
thereon. Profits in excess of the amount required to retire the Senior Notes are
to be returned to ALIC from the reinsurer.  As of December 31, 1996,  $1,500,000
of the  profits on this block of business  were  released to ALIC in the form of
the  aforementioned   Senior  Notes  This  release  resulted  in  a  balance  of
$15,000,000  of Senior Notes  outstanding  as of March 31, 1997 and December 31,
1996.


NOTE  C--REINSURANCE

On  January  1,  1996 the  Company  terminated  its then  existing  quota  share
reinsurance  agreement and elected to recapture the  liabilities  subject to the
treaty.  The liabilities  recaptured  thereunder were then available for cession
under the treaty  described  below.  The  unearned  premium  reserves  and claim
liabilities recaptured were $29,753,000 and $8,424,000, respectively.

Concurrent  with  this  termination,  the  Company  entered  into a  reinsurance
agreement with a different  unaffiliated  reinsurer  (which is also the buyer of
the Senior Notes  discussed in Note B) to reinsure a substantial  portion of the
in-force credit life and accident and health insurance  business,  including the
amounts  recaptured.  This  agreement is structured in such a way that as future
profits emerge on this block of business, a substantial portion of the Company's
share of the  profits  will be used over the next four to five years to pay fees
and interest to the  reinsurer  and redeem the new Senior  Notes of  $16,500,000
(see Note B). In connection  with this agreement,  approximately  $40,000,000 of
assets were  transferred  to the reinsurer on December 29, 1995, as agreed to by
all parties.  The unearned  premium  reserves and liability for insurance claims
subject to cession under this treaty  approximated  $48,616,000  and $9,919,000,
respectively, as of January 1, 1996.

The Company also has an agreement in place which covers a substantial portion of
its credit insurance business produced in 1996 and 1997. This agreement contains
an experience  adjustment  computation that results in the ultimate cost of this
agreement  being a stated  percentage  related  to the  business  covered by the
agreement.  The Company  ultimately  retains a substantial part of the insurance
risk, the underwriting income or loss and the investment income on net funds.

The Company  determined  that deposit  accounting is the  appropriate  method of
accounting  for this  agreement  since  it is not  reasonably  possible  for the
reinsurer to realize a  significant  loss from the  transaction.  The  unaudited
consolidated financial statements have been prepared on this basis.

                                       9

<PAGE>

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE C--REINSURANCE (CONTINUED)

The following  data  summarizes  certain  aspects of the  Company's  reinsurance
activity for the periods presented.

Premiums written and earned in 1997 and 1996 are summarized as follows:

                                     Three Months Ended March 31,
                                  1997                            1996
                          Written      Earned            Written       Earned
                                         (Thousands of dollars)
Direct                   $ 13,693      $ 13,694          $ 15,862     $ 13,620
Assumed                      (294)        1,200               835        1,088
Ceded                       3,434         4,343             9,070       11,195
                         --------      --------          --------     --------
Net premiums             $  9,965      $ 10,551          $  7,627     $  3,513
                         ========      ========          ========     ========

Policy benefits incurred in 1997 and 1996 are summarized as follows:

                                     Three Months Ended March 31,
                                       1997                   1996
                                          (Thousands of dollars)
Direct                              $  6,513              $  5,052
Assumed                                  873                   831
Ceded                                  1,372                 3,547
                                    --------              --------

Net policy benefits                 $  6,014              $  2,336
                                    ========              ========


NOTE D--COMMITMENTS AND CONTINGENCIES

In May 1996, the  Liquidation  Bureau of the New York  Department  ("Liquidation
Bureau"), acting on behalf of the New York Property/Casualty  Insurance Security
Funds (the  "Guaranty  Fund"),  during a meeting  with  Company  representatives
informally  advised the Company that on behalf of the Guaranty  Fund it intended
to seek  indemnification or reimbursement  from Acceleration  National Insurance
Company  ("ANIC")  for  claims  paid by the  Guaranty  Fund to Galaxy  Insurance
Company  ("Galaxy",  a subsidiary of the Company) insureds on policies which may
have been covered by certificates of suretyship  ("Certificates") which ANIC had
issued with respect to certain Galaxy insurance policies. The Liquidation Bureau
has  provided  some  information  in  response  to  the  Company's  request  for
accounting data and other  information with respect to the Liquidation  Bureau's
analysis of the Guaranty Fund's right to indemnification;  however,  the Company
is not yet able to quantify the  magnitude of the potential  claim,  if any, for
indemnification  or  reimbursement.  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.  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.

The  Company  intends  to fully  investigate  each claim  which the  Liquidation
Bureau,  acting on behalf of the Guaranty Fund,  formally asserts is entitled to
the benefits of a Certificate to determine whether such Certificate was properly
endorsed by ANIC and issued  with proper  authority  and if so,  whether  proper
agreements,  assignments  and evidences of subrogation  have been executed.  The
Company  intends  to  vigorously  defend  any  claims  for   indemnification  or
reimbursement  made by the Liquidation  Bureau,  on behalf of the Guaranty Fund,
with respect to the  Certificates.  Although the Company is not in a position to
estimate  the  magnitude  of  the  potential  claims  for   indemnification   or
reimbursement,  it does not believe that the ultimate  resolution of such claims
will have a material  adverse  effect on the  financial  condition or results of
operations of the Company.

                                       10

<PAGE>

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

                  Operating Results for the Three Months Ended
                             March 31, 1997 and 1996

Operating Results

The income before federal income taxes for 1997 was $235,000 compared to $38,000
in 1996. The Company's three primary  product lines;  credit,  extended  service
contracts and commercial auto all produced positive  underwriting margins in the
first quarter of 1997.  Loss ratios for these products were at or below targeted
levels.

The  Company's  new Property  and  Casualty  programs  continued  their  growth,
producing $5,000,000 of annualized premium in the first quarter of 1997 compared
to $4,600,000 in the first quarter of 1996. These programs, primarily Commercial
Auto,  have now matured to the point where they are generating a contribution to
the Company's financial results.

The Company's general and  administrative  expenses  have  increased by $162,000
or 9.5% in 1997 compared to 1996.  These expenses are being incurred in order to
prepare  the Company  to add additional  product lines  and to  enhance  current
offerings.

Revenue

Premium writings for 1997 were $13.4 million compared to $16.7 million for 1996.
Premiums written in 1997 compared to 1996 increased by $490,000 for the extended
service  contract  program and by $400,000 for the new commercial  auto program.
These increases were offset by decreases in credit premium written of $2,600,000
and in  medical  premiums  of  $1,600,000.  The  decrease  in credit  premium is
attributable to the termination of a joint marketing  agreement  covering credit
business written in the state of Pennsylvania, the loss of a significant account
and the Company's withdrawl from the state of Michigan.

Liquidity and Capital Resources

The Company's  cash flows from  operations  have generally been adequate for its
current operating needs. The Company's credit insurance policy terms and related
liabilities  are  generally  limited  to a  four-year  period  during  which the
consumer makes payments on the loan. The Company's liability on extended service
contracts  typically  extends for either  one-year  or  five-year  periods.  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,  therefore,  maintains  liquidity in its  investment
portfolio  to  correspond  with  the  liabilities  outstanding  on its  lines of
business.  At March 31, 1997,  the  estimated  duration of the  Company's  fixed
income investment portfolio was 3.0 years while the estimated liability duration
was  approximately  3.5 years.  Currently,  an interest  rate change of 1% would
impact the fair value of the fixed maturity  portfolio and stockholders'  equity
by a decline of  approximately $2 million if interest rates rose and an increase
of approximately $2 million if interest rates declined.

The Company's  "available for sale" fixed  maturity  portfolio at March 31, 1997
and 1996 includes mortgage-backed securities, 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 are either 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, 1997, the
Company  did not have a  significant  amount of higher  risk  mortgage  or asset
backed securities.  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.

                                       11

<PAGE>

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.  Based on this  regulation,  ALIC could pay a dividend  of
$1,543,315  without  Ohio  Department  approval  to ACCEL in 1997 and ANIC would
require Ohio Department approval to pay any dividend to ACCEL during 1997.

The Company  will monitor its current and future debt  service  requirements  to
coincide  with cash flow  availability.  The  Company  has used a portion of the
proceeds from a Rights  Offering and the payment from a judgment  entered in its
favor in a legal  proceeding  (see Rights  Offering and  Discontinued  Realtor's
Errors and  Omissions  Program  under  Certain  Events) to repay  $4,296,000  in
advances received in 1992 and 1993 from ACCEL's subsidiaries.  These outstanding
advances were eliminated in consolidation.

On July 25, 1996, the Company commenced an offering of  non-transferable  rights
to stockholders of record as of June 18, 1996 (see Rights Offering under Certain
Events).  The  Rights  Offering  concluded  on  August  28,  1996 and  generated
$3,261,780 in cash proceeds.  A supplemental  offering to employees,  agents and
customers  concluded  on  September  30,  1996 and  generated  $141,862  in cash
proceeds of which  $113,355 had been  received by the Company as of December 31,
1996.  The  cash  proceeds  from  these   offerings  have  been  used  to  repay
intercompany  advances  ($2,647,000),  for the redemption of Subordinated  Notes
which were not tendered in the Rights  Offering  ($600,000) (see "Note B" in the
Notes to Unaudited Consolidated Financial Statements), and for general corporate
purposes.

Also, under the provisions of the Rights Offering,  the Company  permitted Chase
Insurance  Holdings  Corporation  ("CIHC")  and its  affiliates  to  tender  the
principal  amount  of their  Subordinated  Notes  (See  "Note B" in the Notes to
Unaudited  Consolidated  Financial Statements) for cancellation as consideration
(in lieu of cash) for the  purchase  of shares of common  stock  pursuant to the
Rights Offering. On August 23, 1996, CIHC and its affiliates tendered $5,619,046
principal  amount of their  Subordinated  Notes  plus an  additional  $83,759 of
accrued  interest  thereon  under  the  terms  of the  Rights  Offering.  At the
conclusion of the offering,  CIHC and its affiliate had reduced their holding of
Subordinated Notes to $0.

In  a  separate   transaction,   ACCEL  retired  $731,533  principal  amount  of
Subordinated  Notes  held by an  unrelated  third  party  for  consideration  of
$600,000. ACCEL recognized an extraordinary gain on this transaction of $131,533
during the third quarter of 1996. No federal income tax was  recognized  related
to this gain due to the current  consolidated  tax position of the Company.  The
result of the two  aforementioned  transactions  was to retire  all  outstanding
Subordinated Notes.

On December 29, 1995, the Company  issued new senior notes (the "Senior  Notes")
totaling  $16,500,000  at 9.50%,  maturing on April 1, 2001.  The proceeds  from
these notes were used to retire the loan  outstanding  under an existing  credit
agreement  (see  "Note  B" in the  Notes  to  Unaudited  Consolidated  Financial
Statements) and to liquidate an intercompany loan between ACCEL and an insurance
company  subsidiary.  In  addition,  as of January 1, 1996,  ALIC entered into a
reinsurance  agreement  with an  unaffiliated  company to reinsure  its in-force
credit business.  The Senior Notes are payable to the same unaffiliated  company
which is a party to the  reinsurance  agreement  dated  January  1,  1996.  This
agreement is structured  such,  that as future  profits  emerge on this block of
business,  these profits are held by the  reinsurance  company,  and  ultimately
applied to pay interest on and to redeem the Senior Notes.  This is accomplished
by the following  transactions.  The reinsurance  company distributes profits to
ALIC as periodically  agreed to by the reinsurance  company and ALIC. ALIC then,
subject to Ohio Department  approval,  dividends funds to ACCEL. ACCEL then uses
these funds to redeem a portion of the senior  notes and the  interest  thereon.
Profits in excess of the amount  required  to retire the Senior  Notes are to be
returned to ALIC from the reinsurer.  As of December 31, 1996, $1,500,000 of the
profits  on this  block of  business  were  released  to ALIC in the form of the
aforementioned  Senior Notes issued by ACCEL. This release resulted in a balance
of $15,000,000 of Senior Notes outstanding as of March 31, 1997 and December 31,
1996.

ACCEL's Board of Directors  approved an Employee  Stock  Ownership Plan ("ESOP")
during 1989. In 1990,  the ESOP entered into an agreement with ALIC to borrow up
to $1,000,000  for the purchase of ACCEL's common stock.  Company  contributions
into the ESOP have been used to pay down the loan from ALIC and  release  shares
into the participants' accounts as the Company's matching contribution. The ESOP
purchased  136,887 shares (adjusted for the 1990 5% common stock dividend) under
this loan agreement with ALIC at a cost of $1,000,000. In addition to the shares
purchased under the loan agreement, the ESOP purchased 90,088 common shares at a
cost of $603,000. The loan bears interest at 10%.

                                       12

<PAGE>

The  unpaid  balance of the loan has been  reflected  as a  reduction  in common
stockholders' equity in the accompanying  unaudited consolidated balance sheets.
During the first quarter of 1997,  ACCEL made the final payment and retired this
loan.

The Company  currently has three  material lines of business that are in run-off
status:  the REO line, the farmowner's  multi-peril and ancillary  inland marine
products and the auto dealers' commercial multi-peril line.

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.

In June 1996, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial  Accounting  Standards  No. 125 -  Accounting  for  Transfers  and
Servicing of Financial  Assets and  Extinguishments  of Liabilities  (SFAS 125).
SFAS 125 provides accounting and reporting standards for transfers and servicing
of financial  assets and  extinguishments  of  liabilities.  The  accounting and
disclosure requirements of SFAS 125 are effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after December 31,
1996 and is to be applied prospectively.  Earlier or retroactive  application is
not  permitted.  ACCEL  adopted SFAS 125 in 1997 and the impact on the unaudited
consolidated financial statements was not material.

In February 1997, the FASB issued  Statement of Financial  Accounting  Standards
No. 128 - Earnings  per Share (SFAS 128).  SFAS 128  establishes  standards  for
computing and presenting earnings per share (EPS). The accounting and disclosure
requirements  of SFAS 128 are  effective  for  financial  statements  issued for
periods ending after December 15, 1997,  including  interim  periods and earlier
adoption  is  not  permitted.   SFAS  128  also  requires   restatement  of  all
prior-period EPS data presented.  ACCEL will adopt SFAS 128 in December 1997 and
the impact on the unaudited consolidated financial statements is not expected to
be material.

Although the  cumulative  effects of inflation on premium growth cannot be fully
determined, increases in the retail price of automobiles have generally resulted
in increased  amounts  being  financed  which  constitute  the basis of premiums
charged for credit insurance.  Anticipated  increases in automobile repairs also
provide the primary basis for  increases in extended  service  contract  premium
rates.

Certain Events

Rights  Offering:  On July 25, 1996, the Company  commenced a Rights Offering to
stockholders  of record as of June 18, 1996. The  non-transferable  subscription
rights  entitled  stockholders  of record to receive one right for each share of
stock  held and each right  entitled  the holder  thereof  to  purchase  one and
one-half  shares of the common stock of the Company at a  subscription  price of
$2.25 per  share.  The  rights  expired on August 28,  1996.  No  commission  or
compensation  was paid in connection  with the Rights  Offering.  As part of the
Rights Offering,  the Company permitted the outstanding  Subordinated Notes held
by CIHC and its affiliates to be tendered for cancellation as consideration  (in
lieu of cash) for the purchase of shares of common stock  pursuant to the Rights
Offering.

A total of 3,984,260 shares were subscribed for under the Rights Offering. Total
consideration of $8,964,585  consisted of $5,702,805  in Subordinated  Notes and
$3,261,780 in cash.

Subsequent to the Rights Offering, the Company commenced a Supplemental Offering
to employees, agents and customers which concluded on September 30, 1996. Shares
were offered  under this  Supplemental  Offering at $2.25 per share.  A total of
63,050 shares were  subscribed  for under this offering.  No soliciting  fees or
other  compensation  were paid in connection  with such  offering.  The net cash
proceeds  from these  offerings  have been used to repay  intercompany  advances
($2,647,000),  for the redemption of Subordinated  Notes which were not tendered
in the Rights Offering ($600,000) and for general corporate purposes.

                                       13

<PAGE>

Claims  Asserted by Liquidation  Bureau under  Certificates  of  Suretyship:  On
October  7,  1994,  the  Liquidation  Bureau  of the New  York  Department  (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.

During  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  Liquidation  Bureau  has  provided  some  information  in  response  to the
Company's  request for accounting data and other information with respect to the
Liquidation  Bureau's analysis of the Guaranty Fund's right to  indemnification;
however,  the Company has not been able to evaluate or quantify the magnitude of
the potential claim, if any, for  indemnification or reimbursement.  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.  Even if any Galaxy
insureds  properly  made such a claim  directly  to ANIC,  the  Company has been
advised by its legal 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  1997,  the
Liquidation Bureau requested of the Companys' counsel the basis for the position
taken by the Company.  A written analysis  supporting the Company's position was
subsequently issued to the Liquidation Bureau.

The  Company  intends to  vigorously  defend any claims for  indemnification  or
reimbursement  made by the Liquidation  Bureau,  on behalf of the Guaranty Fund,
with respect to the  Certificates.  Although the Company is not in a position to
estimate  the  magnitude  of  the  potential  claims  for   indemnification   or
reimbursement,  it does not believe that the ultimate  resolution of such claims
will have a material  adverse  effect on the  financial  condition or results of
operations of the Company.

Discontinued  Realtors' Errors and Omissions Program:  As a result of the losses
sustained in the REO  program,  and in  particular,  conduct  discovered  by the
Company after it assumed  responsibility for claims processing and handling, the
Company  filed  suit in  November  1991  against  the  non-affiliated  marketing
organization and broker involved in the program.

The  lawsuit  sought to recover  funds  improperly  withdrawn  from the  account
established  for the  payment of claims  under the  program;  for damages due to
business  expenses  improperly  charged  against  such funds;  and for  improper
administration  of the  program.  ACCEL  and ANIC  entered  into an  arrangement
whereby  ANIC's rights under the lawsuit were  transferred  to ACCEL in exchange
for a $4,000,000  collateral loan issued to ANIC which was recorded as a capital
contribution.  The transaction and related  agreements were approved by the Ohio
Department.  The loan  agreement  and  accompanying  promissory  note called for
interest at the 13 week Treasury Bill rate plus 100 basis points.  The principal
of $4,000,000 was paid in full on December 29, 1995.

In  late  1995,  ACCEL  was  awarded  $5,300,000  in  damages  related  to  this
litigation.  Pursuant to  settlements  reached  with all of the  parties,  ACCEL
received a total of $4,291,085 in 1996  ($140,000 in the first quarter of 1996).
With the approval of the Ohio Department,  the proceeds from the settlement were
shared  equally  between  ACCEL and ANIC.  The  Company  requested  the  sharing
agreement due to the continuing losses in the REO program realized by ANIC since
1991.   The  Company  has  recorded  the  recovery  as  "Other  income"  in  the
accompanying unaudited consolidated statement of operations for the three months
ended March 31, 1996.

                                       14

<PAGE>

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, 1997.


                                                          SIGNATURE


Pursuant  to  the  requirements  of  the  Securities  Exchange  Act of 1934, the
Registrant  has  duly  caused  this report  to be  signed  on its  behalf by the
undersigned  thereunto duly authorized.


                                                 ACCEL INTERNATIONAL CORPORATION

Dated:            May 13, 1997                   By:   /S/ Kurt L. Mueller
        --------------------------------               -------------------
                                                       Kurt L. Mueller
                                                       Vice President, Treasurer
                                                       and Controller*
-----
* Mr.  Mueller is Vice  President,  Treasurer and  Controller  and has been duly
authorized to execute the report on behalf of the Registrant.

                                       15