FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 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 August 10, 2001 there were 7,078,625 shares of Common Stock outstanding.


<PAGE>

                            ALLCITY INSURANCE COMPANY

                                      INDEX




PART I   FINANCIAL INFORMATION                                              PAGE
------   ---------------------                                              ----

ITEM 1.  Interim Consolidated Financial Statements (Unaudited)

Consolidated Balance Sheets - June 30, 2001
and December 31, 2000.....................................................     1

Consolidated Statements of Operations - Six months ended
June 30, 2001 and June 30, 2000...........................................     2

Consolidated Statements of Operations - Three months ended
June 30, 2001 and June 30, 2000...........................................     3

Consolidated Statements of Cash Flows - Six months
ended June 30, 2001 and June 30, 2000.....................................     4

Consolidated Statements of Changes in Shareholders' Equity -
Six months ended June 30, 2001 and June 30, 2000                               5

Notes to Interim Consolidated Financial Statements .......................   6-7

ITEM 2.  Management's Discussion and Analysis of Financial
         Condition and Interim Results of Operations......................  7-10

PART II  OTHER INFORMATION
-------  -----------------

ITEM 5.  Other Information ...............................................    11

ITEM 6.  Exhibits and Reports on Form 8 ..................................    11

Signature Page............................................................    12


                                       i
<PAGE>

                         PART 1 - FINANCIAL INFORMATION
                         ------   ---------------------

ITEM 1. FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS

ALLCITY INSURANCE COMPANY AND SUBSIDIARY
(In thousands, except share and per share amounts)

                                                                                     June 30,  December 31,
                                                                                      2001          2000
                                                                                -------------- -------------
<S>                                                                                  <C>         <C>
     ASSETS                                                                        (Unaudited)
      Investments:
       Fixed maturities
           Available for sale (amortized cost of
           $46,314 in 2001 and $118,833 in 2000)                                     $ 46,970    $119,029
           Held to maturity (fair value
           of $487 in 2001 and $483 in 2000)                                              478         486
         Equity securities available for sale                                             375         375
         Short-term                                                                    63,747       6,834
       Other invested assets                                                           39,060      37,149
                                                                                -------------- -------------
                                                        TOTAL INVESTMENTS             150,630     163,873

         Cash                                                                              77          77
         Agents' balances, less allowance for
          doubtful accounts ($1,196 in 2001 and
          $1,770 in 2000)                                                               2,666       5,773
         Accrued investment income                                                        998       2,329
         Reinsurance balances receivable                                              172,630     174,629
         Prepaid reinsurance premiums                                                  12,811      17,748
         Deferred policy acquisition costs                                                -         3,035
         Other assets                                                                   4,350       4,820
                                                                                -------------- -------------
                                                        TOTAL ASSETS                 $344,162    $372,284
                                                                                ============== =============
      LIABILITIES
         Unpaid losses                                                               $231,402    $239,051
         Unpaid loss adjustment expenses                                               31,907      29,455
         Unearned premiums                                                             22,647      32,622
         Due to affiliates                                                              1,535         649
         Reinsurance balances payable                                                   3,046       1,505
         Other liabilities                                                              7,639       8,725
         Surplus note                                                                  16,792      16,486
                                                                                -------------- -------------
                                                        TOTAL LIABILITIES             314,968     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                                         1,031         571
         Retained earnings                                                             11,753      26,810
                                                                                -------------- -------------
                          TOTAL SHAREHOLDERS' EQUITY                                   29,194      43,791
                                                                                -------------- -------------
           TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                $344,162    $372,284
                                                                                ============== =============
</TABLE>

See Notes to Interim Consolidated Financial Statements

                                      - 1 -
<PAGE>


<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

ALLCITY INSURANCE COMPANY AND SUBSIDIARY
(In thousands, except share and per share amounts)



                                                                                      SIX MONTHS ENDED
                                                                                          JUNE 30
                                                                                ----------------------------
                                                                                      2001         2000
                                                                                -------------- -------------
<S>                                                                                <C>          <C>
     REVENUES
        Premiums earned                                                            $11,887      $16,031
      Net investment income                                                          5,042        6,534
        Net realized securities gains/(losses)                                       1,016         (588)
        Other income                                                                    84          111
                                                                                -------------- -------------
                                                                                    18,029       22,088
                                                                                -------------- -------------
     LOSSES AND EXPENSES
        Losses                                                                      18,763       11,300
        Loss adjustment expenses                                                     6,075        3,722
        Other underwriting expenses less deferrals
         of $1,783 in 2001 and $4,173 in 2000                                        3,124        3,802
        Amortization of deferred policy
          acquisition costs                                                          4,818        3,937
        Interest on surplus note                                                       306          302
                                                                                -------------- -------------
                                                                                    33,086       23,063
                                                                                -------------- -------------

     LOSS BEFORE FEDERAL INCOME TAXES                                              (15,057)        (975)

     FEDERAL INCOME TAXES
         Current tax expense                                                           -              2
         Deferred tax benefit                                                          -           (700)
                                                                                -------------- -------------
                                                                                       -           (698)
                                                                                -------------- -------------
                                                     NET LOSS                     $(15,057)     $  (277)
                                                                                ============== =============



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

           BASIC AND FULLY DILUTED LOSS PER SHARE                                   $(2.13)     $ (0.04)
                                                                                ============== =============
</TABLE>


See Notes to Interim Consolidated Financial Statements.

                                     - 2 -
<PAGE>


<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

ALLCITY INSURANCE COMPANY AND SUBSIDIARY
(In thousands, except share and per share amounts)



                                                                                     THREE MONTHS ENDED
                                                                                           JUNE 30,
                                                                                -------------- -------------
                                                                                      2001         2000
                                                                                -------------- -------------
<S>                                                                                 <C>          <C>
     REVENUES
        Premiums earned                                                             $5,322       $7,954
      Net investment income                                                          2,351        3,249
        Net realized securities gains/(losses)                                           4         (367)
        Other income                                                                    38           43
                                                                                -------------- -------------
                                                                                     7,715       10,879
                                                                                -------------- -------------
     LOSSES AND EXPENSES
        Losses                                                                       4,586        5,508
        Loss adjustment expenses                                                     1,468        2,000
        Other underwriting expenses less deferrals
         of $672 in 2001 and $1,787 in 2000                                          1,269        2,033
        Amortization of deferred policy
          acquisition costs                                                          1,032        2,047
        Interest on surplus note                                                       140          158
                                                                                -------------- -------------
                                                                                     8,495       11,746
                                                                                -------------- -------------

     LOSS BEFORE FEDERAL INCOME TAXES                                                 (780)        (867)

     FEDERAL INCOME TAXES
        Current tax expense                                                            -              2
      Deferred tax benefit                                                             -           (305)
                                                                                -------------- -------------
                                                                                       -           (303)
                                                                                -------------- -------------
                                                     NET LOSS                      $(780)        $( 564)
                                                                                ============== =============



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


           BASIC AND FULLY DILUTED LOSS PER SHARE                                 $(0.11)        $(0.08)
                                                                                ============== =============
</TABLE>


See Notes to Interim Consolidated Financial Statements.

                                     - 3 -
<PAGE>

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

ALLCITY INSURANCE COMPANY AND SUBSIDIARY
(In thousands)
                                                                                      SIX MONTHS ENDED
                                                                                          JUNE 30,
                                                                                -------------- -------------
                                                                                      2001        2000
                                                                                -------------- -------------
<S>                                                                               <C>          <C>
      NET CASH FLOWS FROM OPERATING ACTIVITIES

         Net loss                                                                 $(15,057)    $  (277)
           Adjustment to reconcile net loss to
             net cash used for operations:
             Deferred tax benefit                                                      -          (700)
             Amortization of deferred policy acquisition
               costs                                                                 4,818       3,937
             Provision for doubtful accounts                                          (574)         24
             Net realized securities (gains)/losses                                 (1,016)        588
             Policy acquisition costs incurred and deferred                         (1,783)     (4,173)
           Net changes in:
             Agents' balances                                                        3,681         327
             Reinsurance balances receivable                                         1,999      32,942
             Prepaid reinsurance premiums                                            4,937       2,788
             Unpaid losses and loss adjustment expenses                             (5,197)    (54,551)
             Unearned premiums                                                      (9,975)     (1,536)
             Due (from)/to affiliates                                                  886     (11,437)
             Reinsurance balances payable                                            1,541       1,084
             Other                                                                   1,209       1,107
                                                                                -------------- -------------
      NET CASH USED FOR OPERATING ACTIVITIES                                       (14,531)    (29,877)
                                                                                -------------- -------------

      NET CASH FLOWS FROM INVESTING ACTIVITIES

         Available for sale:
            Acquisition of fixed maturities                                        (19,559)     (6,377)
            Proceeds from sale of fixed maturities                                  72,372      32,322
            Proceeds from maturities of fixed maturities                            20,542         804
         Net change in other invested assets                                        (1,911)     (2,203)
         Net change in short-term investments                                      (56,913)      4,795
                                                                                -------------- -------------
      NET CASH PROVIDED BY INVESTING ACTIVITIES                                     14,531      29,341
                                                                                -------------- -------------

          NET DECREASE IN CASH                                                         -          (536)
           Cash, at beginning of period                                                 77         644
                                                                                -------------- -------------
             Cash, at the end of period                                           $     77     $   108
                                                                                ============== =============
</TABLE>

See Notes to Interim Consolidated Financial Statements

                                     - 4 -
<PAGE>


<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

ALLCITY INSURANCE COMPANY AND SUBSIDIARY
(In thousands, except par value amounts)

                                                         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:
  Net loss                                                                    (277)        (277)
  Other comprehensive income:
     Net change in unrealized
       loss on investments
       (net of deferred tax
       expense of $283)                                         526                         526
     Less: reclassification of
       net securities losses
       included in net loss
      (net of deferred tax benefit
        of $76)                                                 141                         141
                                                           ----------     ----------   ----------
  Comprehensive income                                          667           (277)         390
                                 ---------  ---------      ----------     ----------   ----------
Balance, June 30, 2000            $7,079     $9,331         $(1,637)       $57,333      $72,106
                                 =========  =========      ==========     ==========   ==========

Balance, January 1, 2001          $7,079     $9,331         $   571        $26,810      $43,791
Comprehensive loss:
  Net loss                                                                 (15,057)     (15,057)
  Other comprehensive loss:
     Net change in unrealized
       gain on investments                                    1,444                       1,444
     Less: reclassification of
       net securities gains
       included in net loss                                    (984)                       (984)
                                                           ----------     ----------   ----------
  Comprehensive loss                                            460        (15,057)     (14,597)
                                 ---------  ---------      ----------     ----------   ----------
Balance, June 30, 2001            $7,079     $9,331        $  1,031        $11,753      $29,194
                                 =========  =========      ==========     ==========   ==========
</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 (its parent
         company) and Centurion  Insurance Company (an affiliate)  (collectively
         referred  to  as  the  "Empire  Group")   announced   that,   effective
         immediately,  it 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.

         The Company increased reserves for loss and loss adjustment expenses by
         $11.7 million and $1.8 million for the six month periods ended June 30,
         2001 and 2000,  respectively,  and $0.9  million  for the  three  month
         period  ended June 30, 2000.  The increase  during the six month period
         ended June 30, 2001 reflected 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 wrote-off
         approximately   $2.6  million  and  $0.4  million  of  deferred  policy
         acquisition costs during the six and three month periods ended June 30,
         2001,  respectively,  as their recoverability from premiums and related
         investment income was no longer anticipated.

                                     - 6 -
<PAGE>

         In July 2001, the Department informed the Company and its parent of its
         examination  findings  concerning the three-year  period ended December
         31, 1999. The report on examination  has not been filed and the Company
         and its parent are in the process of reviewing  these findings with the
         Department.  Among other matters,  the Department's  report indicated a
         loss reserve  deficiency for the Company and its parent,  of which $9.0
         million was attributed to the Company. Although this deficiency is less
         than the  combined  surplus of the Company and its parent,  after it is
         allocated between them in accordance with the pooling  agreement,  this
         deficiency  causes its parent's stand alone  statutory  surplus to fall
         below  minimum  required  levels.  In addition,  the current  structure
         causes its parent's surplus to be reduced by a statutory  limitation on
         the  amount  that  it  can  invest  in  its   insurance   subsidiaries.
         Accordingly, the Company and its parent are evaluating reorganizing the
         current   structure  to  reduce  and/or   eliminate   these   statutory
         limitations.  Additionally,  the Company and its parent are considering
         certain other  transactions to increase the parent's  surplus above the
         minimum required level on a stand alone basis.

         A meeting has been  scheduled with the Department for the end of August
         2001 to review the Company's  response to these findings.  In addition,
         the parent believes that the above  transactions  will serve as a basis
         for providing the  Department by the end of August 2001 with a plan for
         remedying its surplus deficiency.  Such a plan is subject to the review
         and approval of the  Department.  No assurance can be given that such a
         plan  will be  approved  by the  Department  or that  material  adverse
         regulatory action will not be taken.

4.       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.

5.       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.

                                     - 7 -
<PAGE>

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 six month periods  ended June 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 June 30, 2001 and 2000,  the yield on the Company's  bond  portfolio was
4.5% and 6.8%, respectively, with an average maturity of 1.0 year and 2.0 years,
respectively.  At  June  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 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 six month periods ended
June 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.

INTERIM RESULTS OF OPERATIONS-SIX  AND THREE MONTHS ENDED JUNE 30, 2001 COMPARED
TO THE SIX AND THREE MONTHS ENDED JUNE 30, 2000.

     Net earned  premium  revenues of the Company  were $11.9  million and $16.0
million for the six month  periods  ended June 30, 2001 and 2000,  respectively,
and $5.3  million and $8.0  million for the three month  periods  ended June 30,
2001 and 2000, respectively.  Earned and written premiums declined in almost all
lines of  business.  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

                                     - 8 -
<PAGE>

period; however, the Tower agreement provides that Tower must offer replacements
for these policies.

     Pre-tax  losses for the Company were $15.1 million and $1.0 million for the
six month periods ended June 30, 2001 and 2000,  respectively,  and $0.8 million
and $0.9  million  for the three  month  periods  ended June 30,  2001 and 2000,
respectively.  The pre-tax losses include increases for loss and loss adjustment
expenses for prior  accident years of $11.7 million and $1.8 million for the six
month periods ended June 30, 2001 and 2000,  respectively,  and $0.9 million for
the three month  period ended June 30,  2000.  In  addition,  during the six and
three month periods  ended June 30, 2001,  the Company  wrote-off  approximately
$2.6 million and $0.4  million,  respectively,  of deferred  policy  acquisition
costs as their recoverability from premiums and related investment income was no
longer anticipated.

     During 2001, the Company increased its reserve estimates for its commercial
package policies lines of business,  primarily due to an increase in severity of
liability claims for accident years 1998 and prior. The Empire Group, along with
other  carriers  that  write  similar  risks  in the New York  marketplace,  has
exposure  for third  party  liability  claims in many of its lines of  business.
During 2001,  there were several  settlements and court decisions on third party
liability  cases for amounts  that are greater  than the  industry'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 six month period ended June 30, 2001 by  approximately  $5.4 million due
to an estimated increase in severity for certain of these exposures.

     Reserve  strengthening  in the six month  period  ended June 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 business.  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 $2.7 million for the six month period ended
June 30, 2001. In addition, during the six month period ended June 30, 2001, the
Empire Group recalculated its estimate of loss adjustment expenses and increased
its reserve by $2.1 million,  primarily as a result of increased costs to settle
claims handled in house.

     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.

     In July 2001,  the  Department  informed  the Company and its parent of its
examination  findings  concerning the three-year period ended December 31, 1999.
The report on examination  has not been filed and the Company and its parent are
in the process of reviewing  these  findings  with the  Department.  Among other
matters,  the Department's  report  indicated a loss reserve  deficiency for the
Company and its parent,  of which $9.0  million was  attributed  to the Company.
Although this  deficiency  is less than the combined  surplus of the Company and
its parent,  after it is allocated  between them in accordance  with the pooling
agreement,  this deficiency causes its parent's stand alone statutory surplus to
fall below minimum required levels.  In addition,  the current  structure causes
its parent's surplus to be reduced by a statutory  limitation on the amount that
it can invest in its insurance  subsidiaries.  Accordingly,  the Company and its
parent are  evaluating  reorganizing  the  current  structure  to reduce  and/or

                                     - 9 -
<PAGE>

eliminate these statutory limitations.  Additionally, the Company and its parent
are  considering  certain other  transactions  to increase the parent's  surplus
above the minimum required level on a stand alone basis.

     A meeting has been scheduled with the Department for the end of August 2001
to review the  Company's  response to these  findings.  In addition,  the parent
believes  that the above  transactions  will serve as a basis for  providing the
Department  by the end of August  2001  with a plan for  remedying  its  surplus
deficiency. Such a plan is subject to the review and approval of the Department.
No assurance can be given that such a plan will be approved by the Department or
that material adverse regulatory action will not be taken.

     Income  taxes for the six months  ended June 30, 2000  reflect a benefit of
$0.4 million for a change in the Company's  estimated  prior year's  federal tax
liability.

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  plan  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.

                                     - 10 -
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                           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


                                     - 11 -
<PAGE>

                                    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.



                                                ALLCITY INSURANCE COMPANY
                                                       Registrant




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


                                     - 12 -
<PAGE>