SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the transition period from ____ to ____

                          Commission File Number 1-7411

                            ALLCITY INSURANCE COMPANY
             (Exact name of registrant as specified in its charter)

           New York                                         13-2530665
-------------------------------                         -------------------
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                          Identification No.)

335 Adams Street, Brooklyn, N.Y                            11201-3731
----------------------------------------                   ----------
(Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code: (718)422-4000


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[ ]

On November 9, 2001 there were 7,078,625 shares of Common Stock outstanding.


<PAGE>
                         PART 1 - FINANCIAL INFORMATION
                         ------   ---------------------

ITEM 1. FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
ALLCITY INSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED  BALANCE SHEETS
September 30, 2001 and December 31, 2000
(Dollars in thousands, except par value)


                                                                                September 30,   December 31,
                                                                                    2001             2000
                                                                               -------------   -------------
ASSETS                                                                         (Unaudited)
<S>                                                                            <C>             <C>
    Investments:
    Fixed Maturities
      Available for sale (amortized cost of
      $73,698 in 2001 and $118,833 in 2000)                                    $     74,469    $    119,029
      Held to maturity (fair value
      of $491 in 2001 and $483 in 2000)                                                 482             486
    Equity securities available for sale                                                375             375
    Short-term                                                                       46,903           6,834
  Other invested assets                                                              24,779          37,149
                                                                               -------------   -------------
                                 TOTAL INVESTMENTS                                  147,008         163,873
                                                                               -------------   -------------

    Cash                                                                                  9              77
    Agents' balances, less allowance for
     doubtful accounts ($1,140 in 2001 and
     $1,770 in 2000)                                                                  1,796           5,773
    Accrued investment income                                                           476           2,329
    Reinsurance balances receivable                                                 178,589         174,629
    Prepaid reinsurance premiums                                                      7,776          17,748
    Deferred policy acquisition costs                                                  --             3,035
    Due from brokers                                                                  5,000            --
    Other assets                                                                      4,172           4,820
                                                                               -------------   -------------
                                    TOTAL ASSETS                               $    344,826    $    372,284
                                                                               =============   =============

LIABILITIES
    Unpaid losses                                                              $    237,292    $    239,051
    Unpaid loss adjustment expenses                                                  30,396          29,455
    Unearned premiums                                                                13,946          32,622
    Due to affiliates                                                                 8,539             649
    Reinsurance balances payable                                                      5,171           1,505
    Other liabilities                                                                 7,119           8,725
    Surplus note                                                                     16,910          16,486
                                                                               -------------   -------------
                               TOTAL LIABILITIES                                    319,373         328,493
                                                                               -------------   -------------

SHAREHOLDERS' EQUITY
    Common stock, $1 par value: 7,368,420
      shares authorized; 7,078,625 shares issued
      and outstanding in 2001 and 2000                                                7,079           7,079
    Additional paid-in capital                                                        9,331           9,331
    Accumulated other comprehensive income                                            1,146             571
    Retained earnings                                                                 7,897          26,810
                      TOTAL SHAREHOLDERS' EQUITY                                     25,453          43,791
                                                                               -------------   -------------
       TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                              $    344,826    $    372,284
                                                                               =============   =============
</TABLE>

See Notes to Interim Consolidated Financial Statements

                                     - 1 -
<PAGE>
<TABLE>
<CAPTION>
ALLCITY INSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED  STATEMENTS OF OPERATIONS (UNAUDITED)
For the nine months ended September 30, 2001 and 2000
(In thousands, except share and per share amounts)




                                                                                                    2001            2000
                                                                                               -------------   -------------
<S>                                                                                            <C>             <C>
  REVENUES
     Premiums earned                                                                           $     14,949    $     23,650
   Net investment income                                                                              7,135           9,598
     Net realized securities gains/(losses)                                                           1,463            (298)
     Other income                                                                                       107             162
                                                                                               -------------   -------------
                                                                                                     23,654          33,112
                                                                                               -------------   -------------
  LOSSES AND EXPENSES
     Losses                                                                                          25,017          18,523
     Loss adjustment expenses                                                                         7,928           8,362
     Other underwriting expenses less deferrals
       of $1,783 in 2001 and $5,750 in 2000                                                           4,380           5,707
     Amortization of deferred policy acquisition costs                                                4,818           5,826
     Interest on surplus note                                                                           424             468
                                                                                               -------------   -------------
                                                                                                     42,567          38,886
                                                                                               -------------   -------------

LOSS BEFORE FEDERAL INCOME TAXES                                                                    (18,913)         (5,774)

  FEDERAL INCOME TAXES
      Current tax expense                                                                                -                3
      Deferred tax benefit                                                                               -           (2,380)
                                                                                               -------------   -------------
                                                                                                         -           (2,377)
                                                                                               -------------   -------------
                                                  NET LOSS                                     $    (18,913)   $     (3,397)
                                                                                               =============   =============



  Per share data, based on 7,078,625  average shares  outstanding in 2001 and
    2000:

        BASIC AND FULLY DILUTED LOSS PER SHARE                                                 $      (2.67)   $      (0.48)
                                                                                               =============   =============
</TABLE>


See Notes to Interim Consolidated Financial Statements.

                                     - 2 -
<PAGE>
<TABLE>
<CAPTION>
ALLCITY INSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED  STATEMENTS OF OPERATIONS (UNAUDITED)
For the  three  months  ended  September  30,  2001  and  2000
(In thousands, except share and per share amounts)


                                                                                       2001            2000
                                                                               -------------   -------------
<S>                                                                            <C>             <C>
REVENUES
   Premiums earned                                                             $      3,062    $      7,619
 Net investment income                                                                2,093           3,064
   Net realized securities gains                                                        447             290
   Other income                                                                          23              51
                                                                               -------------   -------------
                                                                                      5,625          11,024
                                                                               -------------   -------------
LOSSES AND EXPENSES
   Losses                                                                             6,254           7,223
   Loss adjustment expenses                                                           1,853           4,640
   Other underwriting expenses less deferrals
     of $0 in 2001 and $1,577 in 2000                                                 1,256           1,905
    Amortization of deferred policy acquisition costs                                  --             1,889
   Interest on surplus note                                                             118             166
                                                                               -------------   -------------
                                                                                      9,481          15,823
                                                                               -------------   -------------

LOSS BEFORE FEDERAL INCOME TAXES                                                     (3,856)         (4,799)

FEDERAL INCOME TAXES
   Current tax expense                                                                    -               1
   Deferred tax benefit                                                                   -          (1,680)
                                                                                          -          (1,679)
                                                                               -------------   -------------
                                                NET LOSS                       $     (3,856)   $     (3,120)
                                                                               =============   =============



Per share data, based on 7,078,625  average shares  outstanding in 2001 and
  2000:


      BASIC AND FULLY DILUTED LOSS PER SHARE                                   $      (0.54)   $      (0.44)
                                                                               =============   =============
</TABLE>

See Notes to Interim Consolidated Financial Statements.

                                     - 3 -
<PAGE>
<TABLE>
<CAPTION>
ALLCITY INSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED  STATEMENTS OF CASH FLOWS (UNAUDITED)
For the nine months ended September 30, 2001 and 2000
(In thousands)

                                                                   2001            2000
                                                           -------------   -------------
NET CASH FLOWS FROM OPERATING ACTIVITIES

<S>                                                        <C>             <C>
   Net loss                                                $    (18,913)   $     (3,397)
     Adjustment to reconcile net loss to
       net cash used for operations:
       Deferred tax benefit                                        --            (2,380)
       Amortization of deferred policy acquisition
         costs                                                    4,818           5,826
       Provision for doubtful accounts                             (630)             29
       Net realized securities (gains)/losses                    (1,463)            298
       Policy acquisition costs incurred and deferred            (1,783)         (5,750)
     Net changes in:
       Agents' balances                                           4,607            (245)
       Reinsurance balances receivable                           (3,960)         43,538
       Prepaid reinsurance premiums                               9,972           3,893
       Unpaid losses and loss adjustment expenses                  (818)        (64,893)
       Unearned premiums                                        (18,676)         (4,159)
       Due (from)/to affiliates                                   7,890         (13,391)
       Reinsurance balances payable                               3,666           2,619
       Other                                                      1,478             558
                                                           -------------   -------------
NET CASH USED FOR OPERATING ACTIVITIES                          (13,812)        (37,454)
                                                           -------------   -------------

NET CASH FLOWS FROM INVESTING ACTIVITIES

   Available for sale:
      Acquisition of fixed maturities                           (62,829)        (11,235)
      Proceeds from sale of fixed maturities                     88,338          52,873
      Proceeds from maturities of fixed maturities               20,934           2,761
   Net change in other invested assets                            7,370          (3,382)
   Net change in short-term investments                         (40,069)         (4,074)
                                                           -------------   -------------
NET CASH PROVIDED BY INVESTING ACTIVITIES                        13,744          36,943
                                                           -------------   -------------

    NET DECREASE IN CASH                                            (68)           (511)
     Cash, at beginning of period                                    77             644
                                                           -------------   -------------
       Cash, at the end of period                               $     9    $        133
                                                           =============   =============
</TABLE>

See Notes to Interim Consolidated Financial Statements

                                     - 4 -
<PAGE>
<TABLE>
<CAPTION>
ALLCITY INSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED  STATEMENTS OF CHANGES IN SHAREHOLDERS'  EQUITY (UNAUDITED)
For the nine months ended September 30, 2001 and 2000
(In thousands, except par value)


                                                               ACCUMULATED
                                       COMMON                      OTHER
                                        STOCK     ADDITIONAL   COMPREHENSIVE
                                       $1 PAR      PAID-IN       INCOME/          RETAINED
                                        VALUE      CAPITAL        (LOSS)          EARNINGS         TOTAL
                                  -------------  -------------  -------------  -------------  -------------
<S>                               <C>            <C>            <C>            <C>            <C>
Balance, January 1, 2000          $      7,079   $      9,331   $     (2,304)  $     57,610   $     71,716
Comprehensive income (loss):
  Net loss                                                                           (3,397)        (3,397)
  Other comprehensive income:
     Net change in unrealized
       loss on investments
       (net of deferred tax
        of $590)                                                       1,095                         1,095
     Less: reclassification of
       net securities losses
       included in net loss
      (net of deferred tax
        of $367)                                                         681                           681
                                                                -------------  -------------  -------------
  Comprehensive income (loss)                                          1,776         (3,397)        (1,621)
                                  -------------  -------------  -------------  -------------  -------------
Balance, September 30, 2000       $      7,079   $      9,331   $       (528)  $     54,213   $     70,095
                                  =============  =============  =============  =============  =============

Balance, January 1, 2001          $      7,079   $      9,331   $        571   $     26,810   $     43,791
Comprehensive loss:
  Net loss                                                                          (18,913)       (18,913)
  Other comprehensive loss:
     Net change in unrealized
       gain on investments
     Less: reclassification of                                         1,795                         1,795
       net securities gains
       included in net loss                                           (1,220)                       (1,220)
                                                                -------------  -------------  -------------
  Comprehensive loss                                                     575        (18,913        (18,338)
                                  -------------  -------------  -------------  -------------  -------------
Balance, September 30, 2001       $      7,079   $      9,331   $      1,146   $      7,897   $     25,453
                                  =============  =============  =============  =============  =============
</TABLE>

See Notes to Interim Consolidated Financial Statements

                                      - 5 -
<PAGE>
                    ALLCITY INSURANCE COMPANY AND SUBSIDIARY
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1.       The unaudited interim consolidated financial statements,  which reflect
         all  adjustments  (consisting  only of  normal  recurring  items)  that
         management  believes  necessary to fairly  present  interim  results of
         operations,   should  be  read  in   conjunction   with  the  Notes  to
         Consolidated Financial Statements (including the Summary of Significant
         Accounting  Policies)  included in the Company's  audited  consolidated
         financial  statements for the year ended  December 31, 2000,  which are
         included in the  Company's  Annual  Report  filed on Form 10-K for such
         year (the "2000 10-K").  Results of operations for interim  periods are
         not  necessarily  indicative  of  annual  results  of  operations.  The
         consolidated  balance sheet at December 31, 2000 was extracted from the
         audited   annual   financial   statements  and  does  not  include  all
         disclosures  required by generally accepted  accounting  principles for
         annual financial statements.

2.       Certain  amounts for prior  periods have been  reclassified  to conform
         with the 2001 presentation.

3.       On March 1, 2001, the Company, Empire Insurance Company ("Empire",  its
         parent  company)  and  Centurion   Insurance   Company  (an  affiliate)
         (collectively  referred  to as  the  "Empire  Group")  announced  that,
         effective  immediately,  the Empire Group would no longer issue any new
         (as compared to renewal)  insurance policies and that it filed plans of
         orderly  withdrawal  with  the  New  York  Insurance   Department  (the
         "Department")  as required.  Commercial lines policies were non-renewed
         or canceled in  accordance  with New York  insurance law or replaced by
         Tower   Insurance   Company  of  New  York  or  Tower  Risk  Management
         (collectively,  "Tower")  under an agreement for the sale of the Empire
         Group's renewal rights. Starting in the second quarter, Tower purchased
         the  renewal  rights  for  substantially  all  of  the  Empire  Group's
         remaining lines of business, excluding private passenger automobile and
         commercial  automobile/garage,  for a fee based on the  direct  written
         premium  actually  renewed  by  Tower.  The  amount  of the  fee is not
         expected  to  be  material.  The  Empire  Group  will  continue  to  be
         responsible  for the  remaining  term of its existing  policies and all
         claims  incurred  prior  to  the  expiration  of  these  policies.  For
         commercial  lines,  the Empire  Group will  thereafter  have no renewal
         obligations  for those  policies.  Under New York  insurance  law,  the
         Empire  Group is obligated to offer  renewals of  homeowners,  dwelling
         fire,   personal   insurance  coverage  and  personal  umbrella  for  a
         three-year policy period;  however,  the Tower agreement  provides that
         Tower must offer replacements for these policies.

         As a result of the terrorist attacks on September 11, 2001 at the World
         Trade Center,  the Company recorded  estimated incurred losses and loss
         adjustment  expenses  of  $800,000,   primarily  relating  to  business
         interruption coverage. Due to the recency and nature of this event, the
         Company  is  just   beginning  to  receive  the  related   claims  and,
         accordingly, the loss estimate from this event is likely to be revised.

                                     - 6 -
<PAGE>
         The Company increased reserves for loss and loss adjustment expenses by
         $17,700,000  and $5,700,000 for the nine month periods ended  September
         30, 2001 and 2000, respectively,  and $4,400,000 and $3,900,000 for the
         three month  periods ended  September 30, 2001 and 2000,  respectively.
         The  increase  during the nine month period  ended  September  30, 2001
         reflects adverse  development in commercial  package lines of business,
         primarily  due to increases in severity of  liability  claims,  adverse
         development in workers'  compensation  and automobile lines of business
         and an increase in estimated loss adjustment expenses related to claims
         handled in house.  In addition,  the Company also increased its reserve
         for loss  adjustment  expenses as a result of the increases to its loss
         reserves.  The Company  also  expensed  $2,600,000  of deferred  policy
         acquisition  costs  during the nine month period  ended  September  30,
         2001,  as their  recoverability  from  premiums and related  investment
         income was no longer anticipated.

         During the third quarter of 2001, the  Department  informed the Company
         and Empire of its examination findings concerning the three-year period
         ended December 31, 1999. The triennial report was subsequently filed by
         the  Department  in November.  Among other  matters,  the  Department's
         report indicated a loss and loss adjustment  expense reserve deficiency
         for the Company and Empire.  In addition,  the Empire  Group's  current
         structure  causes  Empire's  surplus  to  be  reduced  by  a  statutory
         limitation   on  the  amount  that  it  can  invest  in  its  insurance
         subsidiaries. The effect of this limitation is to reduce Empire's stand
         alone statutory  surplus below the minimum required level. The combined
         statutory  surplus of the Empire Group is  $22,700,000  as of September
         30,  2001;  however,  the stand  alone  surplus of Empire  (the  parent
         company of the Empire  Group) is a deficit of  $5,100,000.  The Company
         and Empire have responded to the Department's  examination findings and
         concluded that based on subsequent adverse development the Department's
         reserve   estimates  were  within  a  reasonable   actuarial  range  of
         acceptable  estimates and that, as of September 30, 2001, the Company's
         and Empire's  reserve  levels for losses and loss  adjustment  expenses
         prior to  December  31,  1999  were  consistent  with the  Department's
         findings.  Empire  has  also  submitted  to the  Department  a plan for
         remedying its surplus  deficiency.  The plan includes  reorganizing the
         Empire  Group's  current  structure  to  reduce  and/or  eliminate  the
         aforementioned   statutory   limitations   as  well  as  certain  other
         transactions to increase  Empire's  surplus above the minimum  required
         level on a stand alone basis and which will also  increase  surplus for
         the Group.  As part of this plan,  Empire has filed a request  with the
         Department  to  approve  the  merger  of  Empire  with one of its other
         subsidiaries,  and has begun to initiate  certain  other  transactions,
         some  of  which  will  require  the  Department's  further  review  and
         approval.  No  assurance  can be  given  that  these  requests  will be
         approved by the Department or that material adverse  regulatory  action
         will not be taken.

4.       As a result of the Empire Group's actions  outlined in Note 3 above and
         a consolidation of the Empire Group's internal management  organization
         in 2001,  the  Company's  prior  business  segments of Small  Business,
         Mid-Market and Personal Lines have been  eliminated.  Accordingly,  the
         disclosures for these prior business segments have been eliminated.


5.       In  November   2001,  the  Empire  Group   received   notification   of
         cancellation  of  its  multiple  line  reinsurance  contract  effective
         January 1, 2002. The cancellation  only affects personal lines policies
         renewed on or after January 1, 2002,  and would only impact the Company
         for losses on policies that provided coverage in excess of its retained
         reinsurance  limit  of  $300,000.   Currently,  the  Empire  Group  has
         approximately  300  policies  in  force  (which  may  include  multiple
         insureds and vehicles)  that provide such coverage up to a maximum loss
         of $500,000 per occurrence.  Under the pooling  agreement,  70% of such
         losses  would be  assumed by Empire  and 30% would be  retained  by the
         Company. The Empire Group is in the process of reviewing its options of
         finding comparable  reinsurance  coverage with another reinsurer or not
         replacing such coverage.

                                     - 7 -
<PAGE>
6.       On January 1, 2001, the Company adopted Financial  Accounting Standards
         No.  133,   "Accounting   for   Derivative   Instruments   and  Hedging
         Activities," as amended ("SFAS 133"). Under SFAS 133, the Company would
         reflect  derivative  instruments at fair value. The  implementation  of
         SFAS 133 did not have a  material  effect  on the  Company's  financial
         position or results of operations.

7.       In  August  2001,  the  Financial  Accounting  Standards  Board  issued
         Financial  Accounting Standards No. 144, "Accounting for the Impairment
         or Disposal of Long-Lived Assets" ("SFAS 144"), which will be effective
         for fiscal years  beginning  after  December  15, 2001.  The Company is
         evaluating the potential  impact, if any, the adoption of SFAS 144 will
         have on its financial position and results of operations.


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


      The  following  should  be  read  in  conjunction  with  the  Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
included in the 2000 10-K.

LIQUIDITY AND CAPITAL RESOURCES

      For the nine month periods ended September 30, 2001 and 2000, net cash was
used for operations  principally  as a result of a decrease in premiums  written
and the payment of claims.

      At September 30, 2001 and 2000,  the yield on the Company's bond portfolio
was 3.2% and 6.6%,  respectively,  with an average maturity of 0.6 years and 1.9
years,  respectively.  At  September  30,  2001,  a  substantial  portion of the
Company's  investment  portfolio is rated "investment grade" by established bond
rating agencies or issued or guaranteed by the U.S.  Treasury or by governmental
agencies.  A portion of the Company's invested assets represent an investment in
a limited partnership which invests principally in convertible preferred stocks,
convertible long-term debt securities,  limited partnerships,  and common stocks
sold, but not yet purchased.  The Company is in the process of liquidating  this
portfolio and reinvesting it in more liquid securities.

      The Company maintains cash,  short-term and readily marketable  securities
and anticipates that the cash flow from investment income and the maturities and
sales of  short-term  investments  and fixed  maturities  will be  sufficient to
satisfy its anticipated cash needs.  During each of the nine month periods ended
September  30,  2001 and 2000,  the  Company  sold  certain  securities  to meet
short-term  cash flow needs.  The Company does not presently  anticipate  paying
dividends in the near future.

      As a result of its  decision  to exit all lines of  business,  the Company
expects to report a net use of cash from operations resulting primarily from the
payment of claims and other  expenses  in excess of revenues  generated  for the
foreseeable  future.  During 2001, the Company replaced a significant portion of
its fixed maturities investment portfolio with shorter term investments in order
to shorten its duration to match its cash needs.

      In April 2001, the Group's A.M. Best Company rating was downgraded from B+
(Very Good) to C++  (Marginal).  As a result of the Group having filed a plan of
orderly  withdrawal  with the  Department,  its  decision  to cease  writing any
business and the  substantial  loss reported for the year 2000, the Company does
not expect that the downgrade will have a material impact on its operations.

                                     - 8 -
<PAGE>
INTERIM  RESULTS OF  OPERATIONS-NINE  AND THREE MONTHS ENDED  SEPTEMBER 30, 2001
COMPARED TO THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2000.

      Net  earned  premium   revenues  of  the  Company  were   $14,900,000  and
$23,700,000  for the nine  month  periods  ended  September  30,  2001 and 2000,
respectively,  and  $3,100,000  and $7,600,000 for the three month periods ended
September  30, 2001 and 2000,  respectively.  The declines are due, in part,  to
previously  announced  decisions  not to issue any new (as  compared to renewal)
insurance  policies  in any  lines  of  business  effective  March 1,  2001,  to
non-renew all statutory  automobile  policies (public livery vehicles) effective
March 1, 2001, and to not accept any new private passenger  automobile  policies
effective December 2000.  Commercial lines policies were non-renewed or canceled
in accordance with New York insurance law or replaced by Tower.  Starting in the
second quarter,  Tower purchased the renewal rights for substantially all of the
Empire  Group's  remaining  lines  of  business,   excluding  private  passenger
automobile  and  commercial  automobile/garage,  for a fee  based on the  direct
written premium actually renewed by Tower. The amount of the fee is not expected
to be  material.  The  Empire  Group will  continue  to be  responsible  for the
remaining  term of its existing  policies and all claims  incurred  prior to the
expiration  of these  policies.  For  commercial  lines,  the Empire  Group will
thereafter  have no  renewal  obligations  for  those  policies.  Under New York
insurance  law, the Empire Group is obligated to offer  renewals of  homeowners,
dwelling  fire,   personal  insurance  coverage  and  personal  umbrella  for  a
three-year policy period;  however, the Tower agreement provides that Tower must
offer replacements for these policies.

      Excluding the remaining  terms of existing  policies that the Empire Group
intends to either non-renew,  cancel or that will be transferred to Tower, as of
September  30,  2001,  the  Empire  Group's  in  force  premium  volume  totaled
$12,200,000 of which the Company's  portion is $2,400,000.  As indicated  above,
these policies are primarily  personal lines policies whose volume will continue
to decline as the Empire Group exercises its  non-renewal  rights under New York
insurance law.

      Pre-tax  losses for the Company were  $18,900,000  and  $5,800,000 for the
nine  month  periods  ended  September  30,  2001 and  2000,  respectively,  and
$3,900,000 and  $4,800,000 for the three month periods ended  September 30, 2001
and 2000, respectively.  The Company's pre-tax losses include increases for loss
and loss  adjustment  expenses  for  prior  accident  years of  $17,700,000  and
$5,700,000  for the nine  month  periods  ended  September  30,  2001 and  2000,
respectively,  and  $4,400,000  and $3,900,000 for the three month periods ended
September 30, 2001 and 2000,  respectively.  In addition,  during the nine month
period ended  September 30, 2001,  the Company  expensed  $2,600,000 of deferred
policy  acquisition  costs as their  recoverability  from  premiums  and related
investment income was no longer anticipated.

                                     - 9 -
<PAGE>
      During  2001,  the  Company   increased  its  reserve  estimates  for  its
commercial  package  policies  lines of business,  primarily due to increases in
severity of liability  claims for accident years 1998 and prior. The Company has
exposure  for third party  liability  claims in many of its lines of  insurance.
During 2001,  there were several  settlements and court decisions on third party
liability  cases  for  amounts  that  are  greater  than the  industry's  or the
Company's  historical  experience for similar claims, which had formed the basis
for the Company's  estimated  loss reserves.  While many of these  decisions are
being appealed, these results may signal a change in the judicial environment in
the  Company's  marketplace.  Accordingly,  the Company has  increased  its loss
reserve  estimate  for  the  nine  month  period  ended  September  30,  2001 by
$6,900,000  due to an  estimated  increase  in  severity  for  certain  of these
exposures.

      Reserve  strengthening  in the nine month period ended  September 30, 2001
also resulted from unfavorable  development  principally in its automobile lines
of business for the 1998  through 2000  accident  years,  primarily  relating to
personal injury  protection  coverage  ("PIP") and in its workers'  compensation
lines of insurance.  The Company  believes that the increased loss estimates for
PIP are consistent with recent trends in the industry, and has strengthened loss
reserves for all automobile  lines by $3,300,000 for the nine month period ended
September 30, 2001. In addition, the Company also increased its reserve for loss
adjustment  expenses  by  $5,500,000  as a result of the  increases  to its loss
reserves.

      As a result of the  terrorist  attacks on September  11, 2001 at the World
Trade Center, the Company recorded estimated incurred losses and loss adjustment
expenses of $800,000,  primarily relating to business interruption coverage. Due
to the  recency  and nature of this  event,  the  Company is just  beginning  to
receive the related claims and,  accordingly,  the loss estimate from this event
is likely to be revised.

      During the period between 1984 and 1995, the Company  entered into certain
retrospectively rated reinsurance contracts covering  substantially all lines of
business, except worker's compensation.  Under these contracts, the Company paid
the  reinsurer  provisional  premiums  that are subject to  adjustment  based on
subsequent loss development. Ceded premiums accrued under these contracts reduce
both net  written  and earned  premiums  during  the  period  the  retrospective
reinsurance  premiums are accrued.  If additional  unfavorable  loss development
emerges in future  periods,  the Company  may be  required to accrue  additional
retrospective  reinsurance premiums. Net earned premiums revenues of the Company
were reduced for retrospective reinsurance premiums by $2,400,000 and $1,400,000
for the nine and three month periods ended September 30, 2001, respectively, and
$500,000 and $200,000, respectively, for the comparable periods in 2000.

      In  management's  judgment,   information  currently  available  has  been
appropriately considered in estimating the Company's loss reserves. However, the
reserving  process  relies on the basic  assumption  that past  experience is an
appropriate  basis for predicting  future events.  As additional  experience and
other data become  available  and are  reviewed,  the  Company's  estimates  and
judgments may be revised.

                                     - 10 -
<PAGE>
      During the third quarter of 2001, the Department  informed the Company and
Empire of its  examination  findings  concerning  the  three-year  period  ended
December 31, 1999. The triennial report was subsequently filed by the Department
in November.  Among other matters,  the Department's report indicated a loss and
loss  adjustment  expense  reserve  deficiency  for the Company  and Empire.  In
addition,  the Empire Group's current  structure  causes Empire's  surplus to be
reduced  by a  statutory  limitation  on the  amount  that it can  invest in its
insurance  subsidiaries.  The effect of this  limitation  is to reduce  Empire's
stand alone statutory  surplus below the minimum  required  level.  The combined
statutory  surplus of the Empire Group is  $22,700,000 as of September 30, 2001;
however,  the stand alone  surplus of Empire  (the parent  company of the Empire
Group) is a deficit of $5,100,000.  The Company and Empire have responded to the
Department's examination findings and concluded that based on subsequent adverse
development  the  Department's   reserve  estimates  were  within  a  reasonable
actuarial range of acceptable  estimates and that, as of September 30, 2001, the
Company's and Empire's  reserve levels for losses and loss  adjustment  expenses
prior to  December  31, 1999 were  consistent  with the  Department's  findings.
Empire has also  submitted to the  Department a plan for  remedying  its surplus
deficiency.  The plan includes reorganizing the Empire Group's current structure
to reduce and/or eliminate the aforementioned  statutory  limitations as well as
certain  other  transactions  to  increase  Empire's  surplus  above the minimum
required  level on a stand alone basis and which will also increase  surplus for
the Group. As part of this plan,  Empire has filed a request with the Department
to approve  the  merger of Empire  with one of its other  subsidiaries,  and has
begun to initiate  certain  other  transactions,  some of which will require the
Department's  further review and approval.  No assurance can be given that these
requests will be approved by the Department or that material adverse  regulatory
action will not be taken.

      Net investment income for the nine and three month periods ended September
30, 2001 was lower than for the  comparable  2000  periods due to a reduction in
investments  held in order to fund  operations  and a  reduction  in  investment
yields resulting from lower interest rates and the Company's decision to shorten
the duration of its investment portfolio.

      Income  taxes for the nine  months  ended  September  30,  2000  reflect a
benefit of $400,000 for a change in the Company's estimated prior year's federal
tax liability.

      In November 2001, the Empire Group received  notification  of cancellation
of its  multiple  line  reinsurance  contract  effective  January 1,  2002.  The
cancellation only affects personal lines policies renewed on or after January 1,
2002,  and would only impact the Company  for losses on policies  that  provided
coverage in excess of its retained reinsurance limit of $300,000. Currently, the
Empire Group has approximately 300 policies in force (which may include multiple
insureds  and  vehicles)  that  provide  such  coverage up to a maximum  loss of
$500,000 per occurrence.  Under the pooling agreement,  70% of such losses would
be assumed by Empire and 30% would be retained by the Company.  The Empire Group
is in the process of  reviewing  its options of finding  comparable  reinsurance
coverage with another reinsurer or not replacing such coverage.


                                     - 11 -
<PAGE>
CAUTIONARY STATEMENT FOR FORWARD-LOOKING INFORMATION

      Statements  included  in this  Management's  Discussion  and  Analysis  of
Financial   Condition   and   Results  of   Interim   Operations   may   contain
forward-looking statements pursuant to the safe-harbor provisions of the Private
Securities  Litigation Reform Act of 1995. Such  forward-looking  statements may
relate, but are not limited, to projections of revenues, income or loss, capital
expenditures,  fluctuations in insurance  reserves,  plans for growth and future
operations,  competition  and regulation as well as assumptions  relating to the
foregoing.  Forward-looking  statements  are  inherently  subject  to risks  and
uncertainties,  many of which cannot be predicted  or  quantified.  When used in
this Management's  Discussion and Analysis of Financial Condition and Results of
Interim Operations, the words "estimates", "expects", "anticipates", "believes",
"plans",  "intends"  and  variations of such words and similar  expressions  are
intended  to  identify   forward-looking   statements  that  involve  risks  and
uncertainties.  Future events and actual  results could differ  materially  from
those  set  forth  in,   contemplated  by  or  underlying  the   forward-looking
statements.  The factors  that could cause actual  results to differ  materially
from those  suggested by any such  statements  include,  but are not limited to,
those discussed or identified from time to time in the Company's public filings,
including  general  economic and market  conditions,  changes in domestic  laws,
regulations and taxes, changes in competition and pricing environments, regional
or general  changes in asset  valuation,  the occurrence of significant  natural
disasters, the inability to reinsure certain risks economically, the adequacy of
loss and loss  adjustment  expense  reserves,  prevailing  interest rate levels,
weather   related   conditions   that  may  affect  the  Company's   operations,
effectiveness  of the Tower  agreement,  the  ability to attract  and retain key
personnel,  adverse  selection  through renewals of the Empire Group's policies,
the Empire Group's ability to develop an alternative business model,  regulatory
approval of the Empire Group's  proposed  actions in response to the findings of
the Department,  adverse  regulatory action against the Empire Group and changes
in composition of the Company's assets and liabilities  through  acquisitions or
divestitures.  Undue  reliance  should  not be placed  on these  forward-looking
statements,  which  are  applicable  only as of the  date  hereof.  The  Company
undertakes no obligation to revise or update these forward-looking statements to
reflect events or circumstances  that arise after the date of this  Management's
Discussion and Analysis of Financial Condition and Results of Interim Operations
or to reflect the occurrence of unanticipated events.

                                     - 12 -
<PAGE>
                           PART II - OTHER INFORMATION
                           -------   -----------------


ITEM 5. OTHER INFORMATION

        None.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        a)    Exhibits

              None

        b)    Report on Form 8-K

              None


                                     - 13 -
<PAGE>
                                   SIGNATURES
                                   ----------

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



                                              ALLCITY INSURANCE COMPANY
                                                      Registrant




Date: November 14, 2001                        By: /s/Rocco J. Nittoli
      -----------------                            ----------------------------
                                                   Rocco J. Nittoli
                                                   Chief Operating Officer

                                     - 14 -
<PAGE>