SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q



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



                  For Quarterly Period Ended September 30, 1997



                          Commission File Number 1-8538



                            WESTBRIDGE CAPITAL CORP.
             (Exact name of Registrant as specified in its Charter)



        DELAWARE                                      73-1165000
(State of Incorporation)              (I.R.S. Employer Identification No.)



 777 Main Street, Fort Worth, Texas                          76102
(Address of Principal Executive Offices)                   (Zip Code)



                                  817-878-3300
              (Registrant's Telephone Number, including Area Code)



                                 Not Applicable
   (Former Name, Address and Former Fiscal Year, if changed since Last Report)


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_____


Common Stock - Par Value $.10  6,224,044 Shares Outstanding at November 11, 1997


<PAGE>



                                        4

                                                                       Form 10-Q



Company or group of companies for which report is filed:


                            WESTBRIDGE CAPITAL CORP.


This quarterly  report,  filed pursuant to Rule 13a-13 and 15d-13 of the General
Rules and Regulations under the Securities Exchange Act of 1934, consists of the
following information as specified in Form 10-Q:


                                                                         Page(s)


PART I - FINANCIAL INFORMATION

      Item 1 - Financial Statements

           1.   Consolidated  Balance  Sheets at  September  30,  1997,
                         December 31, 1996 and September 30, 1996.           3-4

           2.            Consolidated Statements of Operations for the Three and
                         Nine Months Ended September 30, 1997 and 1996. 5

           3.   Consolidated Statements of Cash Flows for the Three and
                         Nine Months Ended September 30, 1997 and 1996.      6-7

           4.   Notes to Consolidated Financial Statements.                 8-10

      Item 2 -  Management's  Discussion and Analysis of Financial
                Condition and Results of Operations                        11-21


PART II - OTHER INFORMATION

      Item 1 - Legal Proceedings                                              22

      Item 3 - Defaults Upon Senior Securities                                22

      Item 6 - Exhibits and Reports on Form 8-K                               22


<PAGE>


                            WESTBRIDGE CAPITAL CORP.
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

                                     ASSETS



<TABLE>
<CAPTION>
                                                     September 30,  December 31, September 30,
                                                         1997           1996         1996
                                                     ------------   ------------ ------------
                                                      (unaudited)    (audited)  (unaudited)
                                                     ------------   ------------ ------------
<S>                                                 <C>            <C>          <C>
Investments:
   Fixed Maturities:
     Available-for-sale, at market value
       (amortized cost $130,407, $90,370
       and $90,541)                                  $    133,998   $     91,947 $     91,022
   Equity securities, at market                             5,573          1,596        1,594
   Mortgage loans on real estate                              398            658          671
   Investment real estate                                     816              -            -
   Policy loans                                               277            282          271
   Short-term investments                                   2,853          7,722        9,070
                                                     ------------   ------------ ------------
       Total Investments                                  143,915        102,205      102,628

Cash                                                        6,060          1,013        7,499
Accrued investment income                                   2,588          1,889        1,589
Receivables from agents, net of allowance
   for doubtful accounts                                   20,915         18,311       18,434
Deferred policy acquisition costs                          84,771         83,871       78,701
Leasehold improvements and equipment, at
   cost, net of accumulated depreciation and
   amortization                                             1,327          1,311        1,403
Due from reinsurers                                         2,877          1,456        2,235
Commissions receivable                                      3,477          3,406        1,951
Deferred debt costs, net of accumulated
   amortization                                             4,438          2,816        2,140
Deferred income taxes, net                                  1,617              -            -
Other assets                                                5,139          4,438        8,022
                                                     ------------   ------------ ------------
       Total Assets                                  $    277,124   $    220,716 $    224,602
                                                     ============   ============ ============

</TABLE>

The accompanying notes are an integral part of these financial statements.


<PAGE>


                            WESTBRIDGE CAPITAL CORP.
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

        LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                          September 30,   December 31, September 30,
                                                               1997           1996          1996
                                                          ------------    ------------ ------------
                                                           (unaudited)      (audited)   (unaudited)
                                                          ------------    ------------ ------------

<S>                                                      <C>             <C>          <C>
Liabilities:
   Policy liabilities and accruals:
     Future policy benefits                               $     55,985    $     54,204 $     56,039
     Claims                                                     53,090          39,186       39,935
                                                          ------------    ------------ ------------
                                                               109,075          93,390       95,974

Accounts payable and accruals                                    6,181           2,496        2,832
Commission advances payable                                      6,306           4,368        1,789
Other liabilities                                                8,908           1,700        6,002
Deferred income taxes, net                                           -          10,299        7,732
Notes payable                                                   13,110          21,210       25,817
Senior subordinated notes, net of unamortized
   discount, due 2002                                           19,422          19,350       19,328
Convertible subordinated notes, due 2004                        70,000               -            -
                                                          ------------    ------------ ------------

       Total Liabilities                                       233,002         152,813      159,474
                                                          ------------    ------------ ------------

Redeemable Preferred Stock                                      19,000          20,000       20,000
                                                          ------------    ------------ ------------

Stockholders' Equity:
   Common stock ($.10 par value, 30,000,000
     shares authorized; 6,224,039, 6,039,994
     and 6,020,729 shares issued)                                  622             604          602
   Capital in excess of par value                               31,098          29,226       29,184
   Unrealized appreciation of investments
     carried at market value, net of tax                         2,972           1,057          334
   Retained (deficit) earnings                                  (9,400)         17,186       15,178
                                                          ------------    ------------ ------------
                                                                25,292          48,073       45,298
Less - Aggregate of shares held in treasury and
   investment by affiliate in Westbridge Capital Corp.
   common stock (28,600 at September 30, 1997,
December 31, 1996, and September 30, 1996), at cost               (170)           (170)        (170)
                                                          ------------    ------------ ------------

     Total Stockholders' Equity                                 25,122          47,903       45,128
                                                          ------------    ------------ ------------

       Total Liabilities, Redeemable Preferred
         Stock and Stockholders' Equity                   $    277,124    $    220,716 $    224,602
                                                          ============    ============ ============
</TABLE>



The accompanying notes are an integral part of these financial statements.


<PAGE>


                                        5

                            WESTBRIDGE CAPITAL CORP.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                      (in thousands, except per share data)
                                   (unaudited)



<TABLE>
<CAPTION>
                                                Three Months Ended         Nine Months Ended
                                                   September 30,              September 30,
                                              -----------------------     -----------------------
                                                1997          1996          1997          1996
                                              ---------     ---------     ---------     ---------
<S>                                          <C>           <C>           <C>           <C>
Revenues:
   Premiums:
     First-year                               $   8,618     $  16,059     $  30,447     $  46,939
     Renewal                                     31,832        24,629        91,845        68,199
                                              ---------     ---------     ---------     ---------
                                                 40,450        40,688       122,292       115,138
   Net investment income                          3,207         2,283         7,963         6,590
   Fee and service income                         4,525         2,440        12,133         6,234
   Net realized gain (loss) on investments          223           (28)          355           173
                                              ---------     ---------     ---------     ---------
                                                 48,405        45,383       142,743       128,135
                                              ---------     ---------     ---------     ---------
Benefits, claims and expenses:
   Benefits and claims                           52,544        24,244       109,026        68,790
   Amortization of deferred policy
     acquisition costs                            9,292         6,221        22,622        16,576
   Commissions                                    4,993         2,506        11,960         6,252
   General and administrative expenses            8,667         6,235        27,035        19,934
   Taxes, licenses and fees                       1,533         1,431         4,615         4,495
   Interest expense                               2,096         1,253         5,022         3,217
                                              ---------     ---------     ---------     ---------
                                                 79,125        41,890       180,280       119,264
                                              ---------     ---------     ---------     ---------
(Loss) income before income taxes, equity
   in earnings of Freedom Holding
   Company and extraordinary item               (30,720)        3,493       (37,537)        8,871
(Benefit from) provision for income taxes       (10,752)        1,223       (13,138)        3,105
Equity in Freedom Holding Company                     -             -             -            74
                                              ---------     ---------     ---------     ---------
(Loss) income before extraordinary item         (19,968)        2,270       (24,399)        5,840
Extraordinary loss from early
   extinguishment of debt, net of tax                 -             -        (1,007)            -
                                              =========     =========     =========     =========
       Net (loss) income                      $ (19,968)    $   2,270     $ (25,406)    $   5,840
                                              =========     =========     =========     =========

Preferred stock dividends                           392           412         1,180         1,237
                                              ---------     ---------     ---------     ---------
       (Loss) income applicable to
           common stockholders                $ (20,360)    $   1,858     $ (26,586)    $   4,603
                                              =========     =========     =========     =========

Earnings per common share:
   Primary:
     (Loss)income before extraordinary item   $   (3.29)    $     .30     $   (4.19)    $     .75
     Extraordinary item                               -             -          (.16)            -
                                              =========     =========     =========     =========
       Net (loss) income                      $   (3.29)    $     .30     $   (4.35)    $     .75
                                              =========     =========     =========     =========
   Fully diluted:
     (Loss)income before extraordinary item   $   (3.29)    $     .27     $   (4.19)    $     .69
     Extraordinary item                               -             -          (.16)            -
                                              =========     =========     =========     =========
       Net (loss) income                      $   (3.29)    $     .27     $   (4.35)    $     .69
                                              =========     =========     =========     =========

Weighted average shares outstanding:
   Primary                                        6,189         6,138         6,112         6,119
   Fully diluted                                  6,189         8,535         6,112         8,517
</TABLE>




The accompanying notes are an integral part of these financial statements.


<PAGE>


                            WESTBRIDGE CAPITAL CORP.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                 Three Months Ended          Nine Months Ended
                                                                    September 30,               September 30,
                                                               -----------------------     -----------------------
                                                                  1997         1996          1997          1996
                                                               ---------     ---------     ---------     ---------

<S>                                                           <C>           <C>           <C>           <C>
Cash Flows From Operating Activities:
   (Loss) income applicable to common stockholders             $ (20,360)    $   1,858     $ (26,586)    $   4,603
   Adjustments  to reconcile  net (loss) income to net
     cash used for operating activities:
   Depreciation expense                                              119           117           356           378
   Amortization of deferred policy acquisition costs               9,292         6,221        22,622        16,576
   Equity in earnings of Freedom Holding Company                       -             -             -           (74)
   Decrease (increase) in receivables from agents                    718         1,694        (2,604)       (1,728)
   Addition to deferred policy acquisition costs                  (6,586)      (12,661)      (23,522)      (34,539)
   Decrease (increase) in due from reinsurers                      1,154         3,048        (1,421)        1,294
   Decrease (increase) in commissions receivable                   2,079        (1,538)          (71)       (1,951)
   Decrease (increase) in deferred debt costs                         70           176        (1,622)          109
   Decrease (increase) in other assets                             1,318        (1,263)         (701)       (1,301)
   Increase in policy liabilities and accruals                    22,080         2,040        15,685         5,439
   Increase in accounts payable and accruals                         147            16         3,685           605
   (Decrease) increase in commission advances payable             (2,911)          808         1,938         1,789
   (Decrease) increase in other liabilities                       (1,105)       (3,273)        7,208        (2,957)
   (Decrease) increase in deferred income taxes, net             (10,352)        1,305       (11,916)        1,376
   Other, net                                                     (1,401)          556          (503)          996
                                                               ---------     ---------     ---------     ---------
       Net Cash Used For Operating Activities                     (5,738)         (896)      (17,452)       (9,385)
                                                               ---------     ---------     ---------     ---------

Cash Flows From Investing Activities:
   Acquisition of Freedom Holding Company                              -             -             -        (3,970)
   Proceeds from investments sold:
     Fixed maturities, called or matured                           6,144         1,206         8,905         6,394
     Fixed maturities, sold                                        2,814         6,857        15,822        37,320
     Short-term investments, sold or matured                           -        74,056         9,740       130,055
     Other investments, sold or matured                               14           299           367           554
   Cost of investments acquired                                  (13,258)      (84,847)      (73,558)     (165,280)
   Additions to leasehold improvements and equipment,
     net of retirements                                             (175)          (17)         (372)         (191)
                                                               ---------     ---------     ---------     ---------
       Net Cash(Used For)Provided By Investing Activities         (4,461)       (2,446)      (39,096)        4,882
                                                               ---------     ---------     ---------     ---------
Cash Flows From Financing Activities:
   Issuance of convertible notes                                       -             -        70,000             -
   Issuance of notes payable                                       6,019        11,277        15,102        14,008
   Repayment of notes payable                                     (3,273)       (3,998)      (23,202)       (3,998)
   Issuance of common stock                                           51           102           140           104
   Repurchase and cancellation of common stock                      (299)         (125)         (445)         (125)
                                                               ---------     ---------     ---------     ---------
       Net Cash Provided By Financing Activities                   2,498         7,256        61,595         9,989
                                                               ---------     ---------     ---------     ---------
       (Decrease) increase In Cash During Period                  (7,701)        3,914         5,047         5,486
       Cash at Beginning Of Period                                13,761         3,585         1,013         2,013
                                                               ---------     ---------     ---------     ---------
       Cash at End Of Period                                   $   6,060     $   7,499     $   6,060     $   7,499
                                                               =========     =========     =========     =========

Supplemental Disclosures Of Cash Flow Information:
   Cash paid during the periods for:
     Interest                                                  $     880     $   1,019     $   3,001     $   2,636
     Income taxes                                              $      70     $       -     $     118     $      32

</TABLE>


The accompanying notes are an integral part of these financial statements.


<PAGE>



                            WESTBRIDGE CAPITAL CORP.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (unaudited)


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES


One  thousand   shares  of  the  Company's   Series  A  Convertible   Redeemable
Exchangeable  Preferred  Stock ("Series A Preferred  Stock") were converted into
shares of Westbridge's  common stock,  par value $.10 per share ("Common Stock")
during the nine months ended September 30, 1997. The converted  shares of Series
A Preferred Stock had an aggregate liquidation preference of $1,000,000 and were
converted into 118,905 shares of Common Stock.

The Company  purchased the outstanding  capital stock of Freedom Holding Company
("FHC") in the second quarter of 1996 for a cash purchase price of $6.3 million.
This purchase resulted in the Company receiving assets and assuming  liabilities
as follows:

                             Assets                 $13,542,000
                             Liabilities            $ 5,780,000

Adjustments to reconcile net income to cash used for operating activities in the
Company's Consolidated Statement of Cash Flows exclude increases relating to the
acquired assets and liabilities of FHC.  Accordingly,  these  adjustments do not
correspond   to  the  changes  in  the  related  line  items  on  the  Company's
Consolidated Balance Sheets.






The accompanying notes are an integral part of these financial statements.


<PAGE>



                            WESTBRIDGE CAPITAL CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



NOTE 1 - FINANCIAL STATEMENTS

The  accompanying  unaudited  consolidated  financial  statements for Westbridge
Capital Corp.  ("Westbridge"  and, together with its consolidated  subsidiaries,
the "Company")  have been prepared in accordance  with the  instructions to Form
10-Q and Rule 10-01 of Regulation S-X and do not include all of the  information
and footnotes required by generally accepted accounting  principles ("GAAP") for
complete  financial  statements.  In the opinion of management,  all adjustments
(consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
presentation  have been  included.  Operating  results for the nine months ended
September  30, 1997 are not  necessarily  indicative  of the results that may be
expected for the year ending December 31, 1997. Certain  reclassifications  have
been  made to 1996  amounts  in order to  conform  to 1997  financial  statement
presentation.  The financial  statements  should be read in conjunction with the
consolidated  financial  statements and notes thereto  included in the Company's
Annual  Report  on Form  10-K  for the  year  ended  December  31,  1996 and the
Company's  Quarterly  Reports on Form 10-Q for the three  months ended March 31,
1997 and June 30, 1997.

NOTE 2 - COMMITMENTS AND CONTINGENCIES

In the normal course of their  business  operations,  National  Foundation  Life
Insurance  Company  ("NFL"),  National  Financial  Insurance  Company  ("NFIC"),
American Insurance Company of Texas ("AICT"), and Freedom Life Insurance Company
of America ("FLICA"),  Westbridge's primary insurance  subsidiaries  ("Insurance
Subsidiaries"),  are  involved in various  claims  disputes  and other  business
related disputes. In the opinion of management, the disposition of these matters
will have no material  adverse  effect on the Company's  consolidated  financial
position.

NOTE 3 - ISSUANCE OF CONVERTIBLE SUBORDINATED NOTES, DUE 2004

On April 29,  1997,  the Company  completed  the sale of $65  million  aggregate
principal  amount of its  7-1/2%  Convertible  Subordinated  Notes Due 2004 (the
"Convertible  Notes") in an underwritten  public offering.  On May 16, 1997, the
Company  completed the sale of an additional $5 million of its Convertible Notes
in connection with the underwriters'  over-allotment option. The net proceeds of
the  transaction   approximated   $68  million  after   deducting   underwriting
commissions  and other  expenses  incurred in  connection  with the sales.  Each
$1,000  principal  amount of the  Convertible  Notes is convertible  into 91.575
shares of  Westbridge  Common Stock  (6,410,250  shares in the  aggregate) at an
initial conversion price of $10.92 per share,  subject to certain  anti-dilution
adjustments. Interest on the Convertible Notes is payable semi-annually on May 1
and November 1 of each year,  commencing November 1, 1997. See NOTE 7 SUBSEQUENT
EVENTS.  Also,  at the initial  closing for the sale of the  Convertible  Notes,
Westbridge  sold to the  underwriters,  for nominal  consideration,  warrants to
purchase 297,619 shares of Common Stock in the aggregate at an exercise price of
$10.92 per share, subject to certain anti-dilution provisions.  The warrants are
exercisable for a period of four years commencing on April 29, 1998.

On May 1,  1997,  Westbridge  contributed  approximately  $7  million of the net
proceeds  from  the  sale of the  Convertible  Notes  to  recapture  a block  of
insurance   policies  that  had   previously   been   reinsured   consisting  of
approximately $9 million in total recapture costs less  approximately $2 million
in unearned  premium  reserves due to NFL and FLICA.  See NOTE 4 - EXTRAORDINARY
ITEM. As of September 30, 1997,  Westbridge had  contributed  approximately  $33
million  of  additional  proceeds  to  the  Insurance  Subsidiaries  to  enhance
statutory capital and surplus.  The Company has used approximately $6 million in
net  proceeds  to  settle  certain  intercompany  balances  with  its  Insurance
Subsidiaries and for other general corporate purposes.


NOTE 4 - EXTRAORDINARY ITEM

For the nine  months  ended  September  30,  1997,  the  Company  recognized  an
aggregate of $1,007,000 in extraordinary  losses,  net of taxes. Of this amount,
(i)  $574,000  resulted  from the  recognition  of  unamortized  financing  fees
associated with the prepayment and refinancing of the Company's revolving credit
facility  with  Fleet  National  Bank;  and  (ii)  $433,000  resulted  from  the
termination and recapture of the block of reinsured  insurance policies referred
to in Note 3 above.

NOTE 5 - NEW ACCOUNTING PRONOUNCEMENT

In February  1997,  the FASB issued SFAS No.  128,  "Earnings  Per Share,"  (the
"Statement")  that  revises  the  standards  for  computing  earnings  per share
previously  found in APB Opinion  No. 15,  "Earnings  Per Share." The  Statement
established  two measures of earnings per share:  "basic earnings per share" and
"diluted  earnings per share." Basic  earnings per share is computed by dividing
income available to common shareholders by the weighted average number of common
shares  outstanding  during the period.  Diluted earnings per share reflects the
potential  dilution that could occur if  securities or other  contracts to issue
common  stock  were  converted  or  exercised.   The  Statement   requires  dual
presentation  of basic and diluted  earnings per share on the face of the income
statement for all entities with potential dilutive securities outstanding.

The Statement also requires a reconciliation of the numerator and denominator of
the basic earnings per share computation to the numerator and denominator of the
diluted earnings per share  computation.  The Statement is effective for interim
and annual periods ending after  December 15, 1997.  Earlier  application is not
permitted.  However, an entity may disclose pro forma earnings per share amounts
that would have  resulted if the entity had applied the  Statement in an earlier
period.  The  Company  intends to adopt  SFAS No.  128 in its  annual  financial
statements for the year ended December 31, 1997.

The pro forma  unaudited  earnings per share  amounts  that would have  resulted
assuming the Company had computed its earnings per share in accordance  with the
provisions established by SFAS No. 128 for the quarters ended September 30, 1997
and 1996 are as follows:

<TABLE>
<CAPTION>
                                        Three Months         Nine Months         Three Months          Nine Months
                                           Ended                Ended                Ended                Ended
                                      -----------------     ---------------    ------------------    ----------------
                                          09/30/97             09/30/97            09/30/96             09/30/96
                                      -----------------     ---------------    ------------------    ----------------

<S>                                     <C>                   <C>                  <C>                 <C>
Basic (loss) earnings per share         $    (3.29)           $   (4.34)           $   0.31            $    0.77
Diluted (loss) earnings per share       $    (3.29)           $   (4.34)           $   0.27            $    0.69
</TABLE>

Diluted  weighted  average  shares  exclude  all  dilutive  securities  for loss
periods.

NOTE 6- EARNINGS PER SHARE

Primary.  Primary  (loss)  earnings  per common  share  amounts are  computed by
dividing net (loss)  income,  less  preferred  stock  dividends,  by the primary
weighted  average  number of shares  outstanding.  Primary loss per common share
amounts  related to the  extraordinary  item were computed by dividing the total
extraordinary item, net of tax, by the primary weighted average number of shares
outstanding.

The  primary   weighted   average  shares  consist  of  common  shares  and,  as
appropriate,  dilutive common stock equivalents outstanding for the period. As a
result, primary weighted average shares do not assume conversion of the Series A
Preferred  Stock or the  Convertible  Notes to common  stock.  Primary  weighted
average shares exclude all common stock equivalents for loss periods.

Fully diluted.  Fully diluted per common share amounts assume  conversion of the
Series A Preferred  Stock and the  Convertible  Notes,  the  elimination  of the
related  preferred stock dividend and the after-tax  interest  expense,  and the
issuance  of  common  stock  for  all  other  potentially  dilutive  securities,
including stock options, warrants and restricted stock.

Fully  diluted  (loss)  earnings  per common  share are computed by dividing net
(loss) income plus after-tax  interest expense related to the Convertible  Notes
by the fully  diluted  weighted  average  number of  shares  outstanding.  Fully
diluted loss per common share  amounts  related to the  extraordinary  item were
computed  by dividing  the total  extraordinary  item,  net of tax, by the fully
diluted weighted average number of shares outstanding.

The fully diluted weighted average shares consist of common shares and all other
dilutive securities  outstanding for the period.  Fully diluted weighted average
shares exclude all dilutive securities for loss periods.

See also NOTE 5 - NEW ACCOUNTING PRONOUNCEMENT.

NOTE 7- SUBSEQUENT EVENTS

On November 3, 1997,  Westbridge did not make the scheduled interest payments of
$183,333 and  $2,654,167 on the Senior  Subordinated  Notes and the  Convertible
Notes,  respectively.  The  failure  to make  the  scheduled  interest  payments
constituted  payment  defaults under the  Indentures  relating to such Notes and
will become events of default thereunder on November 17, 1997. In addition,  the
failure to make such  interest  payments  also  resulted  in an event of default
under the Credit Agreement (as defined below).  Other covenant defaults are also
existing  under the Credit  Agreement and the  Indenture  relating to the Senior
Subordinated Notes. As a result of the foregoing events of defaults, the holders
of such  indebtedness  may declare the  outstanding  principal  amount  thereof,
together  with  accrued  and  unpaid  interest  thereon,  to be due and  payable
immediately.  If such indebtedness were to be accelerated,  the Company does not
have the ability to repay the  indebtedness  under the  outstanding  Convertible
Notes, the Senior Subordinated Notes and the Credit Agreement.

The Company did not make the  October 31, 1997  dividend  payment of $391,875 on
its Series A  Preferred  Stock.  The  failure to declare  and pay the  scheduled
dividend on the Series A Preferred Stock  constituted an event of non-compliance
under the terms of the Series A Preferred  Stock  Agreement  and  resulted in an
immediate  increase to 9.25% from 8.25% in the rate at which dividends accrue on
the Series A Preferred  Stock.  This  increase  will remain in effect until such
time as no event of non-compliance exists.


<PAGE>



                            WESTBRIDGE CAPITAL CORP.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



RECENT DEVELOPMENTS

As is described  below,  the Company  incurred a significant net loss during the
third quarter of 1997. As a result of this loss and operating losses expected in
the  fourth  quarter,   the  Company's   Insurance   Subsidiaries  will  require
significant  additional capital contributions prior to December 31, 1997 to meet
regulatory requirements.  Additional capital contributions will also be required
in 1998 to the extent that losses continue.

The  Company is  evaluating  its  strategic  alternatives  in light of the third
quarter loss and has engaged  Houlihan  Lokey Howard & Zukin,  Capital to act as
its  financial  advisor  to assist  the  Company in  formulating  and  analyzing
strategies  and in holding its  discussions  with  various  constituencies.  The
Company has held a number of discussions with insurance regulatory  authorities,
and  such  discussions  are  continuing.   In  addition,  the  Company  has  had
preliminary  discussions  with certain of its  creditors and intends to organize
meetings with all of its creditor  constituencies  as soon as  practicable.  The
Company is also engaging in preliminary  discussions  with potential  purchasers
concerning  a   transaction   involving   the  Company   and/or  its   Insurance
Subsidiaries.  There  can be no  assurance  that  any such  transaction  will be
effected  or that  sufficient  statutory  capital  for the  Company's  Insurance
Subsidiaries  can be  obtained.  Any  failure  to provide  sufficient  statutory
capital to the  Company's  Insurance  Subsidiaries  could  result in  regulatory
action.

In order to preserve  capital and maintain  flexibility  while it considers  its
strategic  alternatives,  the  Company has  elected to  withhold  its  scheduled
November 1997 debt service payments on its publicly-held debt securities and not
to declare the dividend payable on its outstanding preferred stock scheduled for
October 1997. The failure to make the scheduled  interest  payments  constituted
payment  defaults  under the  Indentures  relating to such Notes and will become
events of default  thereunder on November 17, 1997. In addition,  the failure to
make such  interest  payments  also  resulted  in an event of default  under the
Credit Agreement (as defined below).  Other covenant  defaults are also existing
under the Credit Agreement and the Indenture relating to the Senior Subordinated
Notes.  As a result of the  foregoing  events of  defaults,  the holders of such
indebtedness may declare the outstanding principal amount thereof, together with
accrued and unpaid interest thereon, to be due and payable immediately.  If such
indebtedness  were to be  accelerated,  the Company does not have the ability to
repay the  indebtedness  under the  outstanding  Convertible  Notes,  the Senior
Subordinated Notes and the Credit Agreement.


BUSINESS OVERVIEW

The Company markets medical expense and supplemental  health insurance  products
and managed  care health  plans to  individuals  in 38 states.  Since 1992,  the
Company has grown  through a combination  of  acquisitions  and, more  recently,
through  sales  of  its  underwritten   products.   Primarily  as  a  result  of
acquisitions, the Company's total premiums grew from approximately $56.7 million
in 1992 to  approximately  $98.7  million in 1994.  During the first  quarter of
1995,  the Company  implemented  a strategy of expanding the number of agents in
its  marketing  distribution  system  to  increase  sales  of  its  underwritten
products.  As a result of this initiative,  the Company's net annualized written
premiums  increased  from $19.9  million  in 1994 to $79.1  million in 1996 with
total premiums  increasing 59.0% to $156.8 million in 1996. During the middle of
1996,  the Company  reduced the  marketing of its  underwritten  products due to
statutory capital and surplus constraints caused by its rapid growth. During the
second quarter of 1997, the Company  completed the sale of $70 million aggregate
principal  amount of its  7-1/2%  Convertible  Subordinated  Notes due 2004 (the
"Convertible  Notes").  The Company intended to use a substantial portion of the
net proceeds from the sale of the Convertible Notes to increase the marketing of
its underwritten  products.  However, the significant  statutory losses incurred
during the three and nine

<PAGE>


months  ended  September  30,  1997 have  resulted  in  renewed  strains  on the
statutory  capital  and surplus of the  Company's  Insurance  Subsidiaries  that
adversely  affect  the  Company's  ability  to  increase  the  marketing  of its
underwritten products.

The Company has utilized its  marketing  distribution  system to market  certain
managed  care  health  plans  that  are   underwritten  by  Health   Maintenance
Organizations ("HMOs") and other non-affiliated managed care organizations. This
marketing effort generates sales commissions that are included as a component of
fee and  service  income and the related  expense is included as a component  of
commissions.  Fee and  service  income can be  generated  without  regard to the
statutory  capital  and  surplus   requirements  that  apply  to  the  Company's
underwritten products.

The Company  derives its revenue  primarily  from  premiums  from its  insurance
products and, to a  significantly  lesser extent,  from fee and service  income,
income earned on invested assets and gains on the sale or redemption of invested
assets. The Company's primary expenses include benefits and claims in connection
with  its  insurance  products,  deferred  policy  acquisition  costs  ("DPAC"),
commissions  paid  on  policy  renewals,  general  and  administrative  expenses
associated with policy and claims  administration,  taxes, licenses and fees and
interest on its indebtedness.  In addition to the foregoing expenses, Westbridge
is  obligated  to pay  dividends  on its Series A Preferred  Stock if, and when,
declared by the Board of Directors.

Fee and service income is generated from (i) commissions received by the Company
for sales of managed  care  products  underwritten  primarily  by HMOs and other
managed care  organizations,  (ii) telemarketing  services provided by Precision
Dialing  Services,  Inc.  ("PDS"),  and  (iii)  printing  services  provided  by
Westbridge Printing Services, Inc. ("WPS").

Benefits  and claims are  comprised  of (i) claims  paid,  (ii) changes in claim
reserves for claims  incurred  (whether or not  reported)  and (iii)  changes in
policy  benefit  reserves  based on  actuarial  assumptions  of  future  benefit
obligations not yet incurred on policies in force.

DPAC consists of  expenditures  associated  with the production of new business.
Such  expenditures  consist  principally  of  the  amount  by  which  first-year
commission  costs exceed  commission  costs paid in subsequent  policy years and
policy issue  costs.  Also  included in DPAC is the cost of insurance  purchased
relating to acquired  blocks of  business.  The  amortization  of these costs is
based on actuarially estimated future premium revenues. The amortization rate is
adjusted monthly to reflect actual experience.

Acquisitions.  Since 1992,  the Company has from time to time acquired  seasoned
blocks of business to supplement its revenue. These acquisitions included blocks
of: (i) Medicare Supplement products purchased from American Integrity Insurance
Company ("AII") in September 1992, (ii) Medicare  Supplement  products purchased
from Life and Health  Insurance  Company of America ("LHI") in March 1993, (iii)
Critical Care and Specified Disease products  purchased from Dixie National Life
Insurance  Company  ("DNL")  in  February  1994,  (iv)  policies  in  all of the
Company's  product lines  purchased in the acquisition of NFIC and AICT in April
1994,  and (v) Critical Care and  Specified  Disease  products  purchased in the
acquisition of the remaining 60% ownership  interest in Freedom Holding Company,
FLICA's parent, in May 1996.



<PAGE>






Premiums. The following table shows the premiums, in thousands,  received by the
Company   as  a   result   of   internal   sales   and   acquisitions.   Certain
reclassifications  have been made to 1996  amounts  in order to  conform to 1997
presentation.

<TABLE>
<CAPTION>
                                      Three Months Ended      Nine Months Ended
                                        September 30,            September 30,
                                     --------------------    --------------------
                                       1997        1996        1997        1996
                                     --------    --------    --------    --------
<S>                                  <C>         <C>         <C>         <C>
First-year premiums                  $  8,277    $ 15,900    $ 29,635    $ 45,330
Renewal premiums                       20,809      12,068      57,604      30,231
                                     --------    --------    --------    --------
    Total Company-issued policies      29,086      27,968      87,239      75,561
                                     --------    --------    --------    --------

Acquired Policies:
    AII                                 1,772       2,029       5,464       6,369
    LHI                                   377         446       1,171       1,388
    DNL                                   706         730       2,140       2,256
    NFIC and AICT                       5,160       6,002      16,002      20,249
    FLICA                               3,089       3,219       9,475       8,390
    Other                                 260         294         801         925
                                     --------    --------    --------    --------
    Total acquired policies            11,364      12,720      35,053      39,577
                                     --------    --------    --------    --------

        Total Premiums               $ 40,450    $ 40,688    $122,292    $115,138
                                     ========    ========    ========    ========
</TABLE>


Generally,  as a result of acquisitions of policies in force and the transfer of
assets and liabilities relating thereto, the Company receives higher revenues in
the form of premiums and net investment  income and experiences  higher expenses
in the form of  benefits  and  claims,  amortization  of DPAC,  commissions  and
general and  administrative  expenses.  The Company  expects that premiums,  net
investment  income,  net  realized  gains on  investments,  benefits and claims,
amortization  of DPAC,  commissions  and  general  and  administrative  expenses
attributable  to these  acquired  policies will continue to decline over time as
the acquired policies lapse.

The preceding  statement and certain other statements  contained in the Notes to
the Consolidated  Financial Statements and Management's  Discussion and Analysis
of Financial Condition and Results of Operations are forward-looking statements.
These forward-looking statements are based on current expectations that could be
affected  by the risks and  uncertainties  involved in the  Company's  business.
These  risks and  uncertainties  include,  but are not limited to, the effect of
economic  and market  conditions,  the extent of any  increase  in future  claim
submissions,  the availability of sufficient  statutory capital and surplus, the
ability to increase  premium  rates on in-force  policies to offset  higher than
anticipated  loss  ratios,  actions  that may be taken by  insurance  regulatory
authorities and the Company's  creditors  following recent operating losses, and
the risks described from time to time in the Company's reports to the Securities
and Exchange Commission,  which include the Company's Annual Report on Form 10-K
for the year ended  December 31, 1996, the Company's  Quarterly  Reports on Form
10-Q for the  quarter  ended  March 31, 1997 and June 30,  1997,  the  Company's
Registration  Statement on Form S-1 dated as of March 28, 1997, as amended,  and
the  Prospectus  dated April 24,  1997.  Subsequent  written or oral  statements
attributable  to the  Company  or persons  acting on its  behalf  are  expressly
qualified  in their  entirety by the  cautionary  statements  in this  Quarterly
Report and those in the Company's  reports  previously filed with the Securities
and Exchange  Commission.  Copies of these filings may be obtained by contacting
the Company or the SEC.





RESULTS OF OPERATIONS

Three Months and Nine Months Ended  September  30, 1997 Compared to Same Periods
Ended September 30, 1996

Premiums

Three months ended September 30, 1997. Premiums decreased $0.3 million, or 0.7%,
from $40.7 million to $40.4 million.  This decrease  resulted from a decrease in
first-year premiums from Company-issued  policies of $7.5 million, or 47.2%, and
from a decrease in renewal premiums from acquired  policies of $1.5 million,  or
12.0%,  and was offset by an increase in renewal  premiums  from  Company-issued
policies of $8.7 million, or 71.9%.

The  decrease  in   first-year   premiums  from   Company-issued   policies  was
attributable  to a  decrease  of $4.9  million,  or 44.1%,  in  Medical  Expense
premiums  and a decrease  of $2.6  million,  or 60.5%,  in  Medicare  Supplement
premiums.

The decrease in renewal  premiums from acquired  policies was  attributable to a
decrease of $1.1 million,  or 18.3%,  from the policies acquired in the NFIC and
AICT  acquisition,  a decrease  of $0.2  million,  or 10.0%,  from the  policies
acquired  from AII, and a decrease of $0.2 million,  or 6.5%,  from the policies
acquired in the FLICA acquisition.

The increase in renewal premiums from  Company-issued  policies was attributable
to an increase of $5.8 million,  or 73.1%,  in Medical  Expense  premiums and an
increase of $2.9 million, or 67.4%, in Medicare Supplement premiums.

Nine months ended September 30, 1997.  Premiums increased $7.2 million, or 6.3%,
from $115.1 million to $122.3 million.  This increase  resulted from an increase
in renewal  premiums from  Company-issued  policies of $27.4 million,  or 90.7%,
that was offset by a decrease in renewal premiums from acquired policies of $3.7
million,  or 9.7%, and decreases in first-year  premiums from Company-issued and
acquired  policies  of $15.6  million  and $0.9  million,  or 34.4%  and  56.3%,
respectively.

The increase in renewal premiums from  Company-issued  policies was attributable
to an increase of $16.5 million,  or 141.0%,  in Medical Expense premiums and an
increase of $11.1 million,  or 122.0%, in Medicare  Supplement  premiums and was
offset by a decrease of $0.2  million,  or 2.1%,  in Critical Care and Specified
Disease premiums.

The decrease in renewal  premiums from acquired  policies was  attributable to a
decrease of $4.3 million,  or 21.3%,  from the policies acquired in the NFIC and
AICT acquisition and to a decrease of $1.4 million,  or 12.7%, from the policies
acquired  from AII, LHI, and DNL, and was offset by an increase of $2.0 million,
or 29.4%, from the policies acquired in the FLICA acquisition.

The  decrease  in   first-year   premiums  from   Company-issued   policies  was
attributable  to a  decrease  of $9.3  million,  or 30.4%,  in  Medical  Expense
premiums  and a decrease  of $6.3  million,  or 45.3%,  in  Medicare  Supplement
premiums.

The decrease in first-year premiums from acquired policies was attributable to a
decrease of $0.9  million,  or 56.3%,  from the  policies  acquired in the FLICA
acquisition.

Net Investment Income.  Net investment income increased $0.9 million,  or 39.1%,
from $2.3 million to $3.2 million for the three months ended September 30, 1997.
Net investment  income  increased $1.4 million,  or 21.2%,  from $6.6 million to
$8.0 million for the nine months ended September 30, 1997.  These increases were
attributable to a higher average investment base resulting from the net proceeds
received  from the  Company's  sale of its  Convertible  Notes during the second
quarter.

Fee and Service Income

Three months ended  September 30, 1997.  Fee and service  income  increased $2.0
million,  or  80.0%,  from $2.5  million  to $4.5  million.  This  increase  was
primarily  attributable  to  commissions on managed care product sales that were
earned by the Company's controlled general agencies.

Nine months ended  September 30, 1997.  Fee and service  income  increased  $5.9
million,  or 95.2%,  from $6.2  million  to $12.1  million.  This  increase  was
attributable to an increase of $6.0 million, or 125.0%,  relating to commissions
on managed  care  product  sales that were  earned by the  Company's  controlled
general agencies and was offset by a decrease of $0.1 million, or 7.1%, in other
fees.

Benefits  and Claims.  During the three  months ended  September  30, 1997,  the
Company  experienced a continuation of the increase in claim  submissions on its
Medical Expense and Medicare Supplement products which, as previously  reported,
adversely  affected the Company's  second quarter  results of  operations.  This
increase  continued  to  significantly  exceed the  Company's  expectations.  In
addition,  the extent of an  existing  backlog of pending  submitted  claims was
quantified during the quarter.  The previous backlog of pending submitted claims
has now been eliminated.

The Company has the ability,  within the constraints of the loss ratios mandated
by the  regulatory  authorities  and subject to  regulatory  approval,  to raise
premium rates on its products in the event of adverse claims experience.  During
the first and second  quarters of 1997,  the Company  implemented  certain  rate
increases on its Medicare Supplement products.  In addition,  as of July 1, 1997
the Company  implemented certain rate increases and modified certain features on
some of its Medical Expense products. Independent reviews of the Company's claim
reserves as of September  30, 1997 were  recently  completed.  Additionally,  an
independent  benefit  analysis of claims paid was completed which indicated that
significant additional rate increases,  which are expected to take more than six
months to fully implement, and further benefit modifications will be required to
offset the current adverse claims  experience.  However,  until such time as the
necessary   additional   rate  increases  and  benefit   modifications   can  be
implemented,  the  Company  expects  that it will  continue  to incur  operating
losses.  There can be no  assurance  that the full extent of such rate  increase
requests will be approved.

Three months ended  September 30, 1997.  Benefits and claims  expense  increased
$28.3 million, or 116.9%, from $24.2 million to $52.5 million. This increase was
attributable  to an increase in benefits and claims expense from  Company-issued
and acquired  policies of $23.7 million and $4.6  million,  or 136.2% and 67.6%,
respectively.

The increase in benefits and claims  expense  from  Company-issued  policies was
primarily  attributable to an increase of $18.5 million, or 207.9%, from Medical
Expense  products,  an  increase  of  $3.7  million,  or  52.1%,  from  Medicare
Supplement products, and an increase $1.5 million, or 107.1%, from Critical Care
and Specified Disease products.

The increase in benefits and claims expense from acquired policies was primarily
attributable  to an  increase  of $2.7  million,  or  75.0%,  from the  policies
acquired in the NFIC and AICT  acquisition  and an increase of $1.9 million,  or
380.0%, from the policies acquired in the FLICA acquisition.

Nine months ended  September  30, 1997.  Benefits and claims  expense  increased
$40.2 million, or 58.4%, from $68.8 million to $109.0 million. This increase was
attributable  to an increase in benefits and claims expense from  Company-issued
and  acquired  policies of $37.6  million and $2.6  million,  or 90.0% and 9.6%,
respectively.

The increase in benefits and claims  expense  from  Company-issued  policies was
primarily  attributable to an increase of $28.4 million, or 143.4%, from Medical
Expense  products,  an  increase  of  $7.6  million,  or  43.2%,  from  Medicare
Supplement  products and an increase of $1.6  million,  or 36.4%,  from Critical
Care and Specified Disease products.

The increase in benefits and claims expense from acquired policies was primarily
attributable to an increase of $0.7 million, or 4.3%, from the policies acquired
in the NFIC and AICT acquisition, to an increase of $2.2 million, or 73.3%, from
the policies acquired in the FLICA acquisition,  and was offset by a decrease of
$0.3 million, or 3.8% from the policies acquired from AII, LHI, and DNL.

Amortization of DPAC. A portion of the Company's quarterly loss resulted from an
increase in  amortization  of DPAC due to lower  persistency as a result of rate
increase activity on inforce business.  As management  requests  additional rate
increases  for Medical  Expense  and  Medicare  Supplement  products in order to
resolve premium pricing disparities and to reduce adverse claim loss ratios, the
Company's earnings may be negatively impacted by further unanticipated increases
in amortization of DPAC during 1997 and 1998.

Three months ended  September  30, 1997.  Amortization  of DPAC  increased  $3.0
million,  or  48.4%,  from $6.2  million  to $9.2  million.  This  increase  was
attributable to $2.5 and $2.2 million,  or 86.2% and 200.0%, from Company-issued
Medical Expense and Medicare Supplement  products,  respectively.  This increase
was offset by a decrease of $1.4 million, or 100.0% from acquired policies and a
decrease of $0.3 million from Company-issued Critical Care and Specified Disease
products.

Nine months  ended  September  30, 1997.  Amortization  of DPAC  increased  $6.0
million,  or 36.1%,  from $16.6  million to $22.6  million.  This  increase  was
attributable to $5.6 and $3.3 million,  or 75.7% and 117.9%, from Company-issued
Medical Expense and Medicare Supplement  products,  respectively.  This increase
was offset by a decrease of $2.3 million,  or 51.1% from acquired policies and a
decrease of $0.6 million from Company-issued Critical Care and Specified Disease
products.

Commissions

Three months ended September 30, 1997.  Commissions  increased $2.5 million,  or
100.0%, from $2.5 million to $5.0 million.  This increase was attributable to an
increase in commissions on sales of  non-affiliated  insurance  products of $3.5
million that was offset by a $0.7 million, or 53.8%,  decrease in commissions on
sales of Company-issued policies. This increase was further offset by a decrease
of $0.3 million, or 20.0%, in commissions on sales of acquired policies.

Nine months ended  September 30, 1997.  Commissions  increased $5.7 million,  or
90.5%, from $6.3 million to $12.0 million.  This increase was attributable to an
increase in commissions on sales of  non-affiliated  insurance  products of $7.9
million that was offset by a $1.5 million, or 37.5%,  decrease in commissions on
sales of Company-issued policies. This increase was further offset by a decrease
of $0.7 million, or 15.2%, in commissions on sales of acquired policies.

General and Administrative Expenses

Three  months ended  September  30, 1997.  General and  administrative  expenses
increased  $2.5  million,  or 40.3%,  from $6.2  million to $8.7  million.  This
increase was primarily  attributable  to increases in the allowance for doubtful
agent  receivables  as well as a  change  in  estimate  for the  recognition  of
deferred  compensation  expense.  In addition,  fewer policies were eligible for
deferral of  acquisition  costs as a result of the  reduction  in the  Company's
marketing  efforts for its  underwritten  insurance  products  beginning  in the
second quarter of 1996.

Nine months  ended  September  30,  1997.  General and  administrative  expenses
increased  $7.1 million,  or 35.7%,  from $19.9 million to $27.0  million.  This
increase was primarily  attributable  to nonrecurring  reorganization  expenses,
increases in the  allowance  for  doubtful  agent  receivables,  and a change in
estimate for the  recognition  of deferred  compensation  expense.  In addition,
fewer  policies were eligible for deferral of  acquisition  costs as a result of
the reduction in the Company's marketing efforts for its underwritten  insurance
products beginning in the second quarter of 1996.

Taxes,  Licenses and Fees. Taxes, licenses and fees were relatively unchanged as
increases  in premium  taxes were offset by  decreases  in state levied fees and
special  assessments  for both the three months and nine months ended  September
30, 1997.

Interest Expense.  Interest expense increased $0.8 million,  or 61.5%, from $1.3
million to $2.1 million for the three months ended September 30, 1997.  Interest
expense increased $1.8 million,  or 56.3%, from $3.2 million to $5.0 million for
the nine months ended  September 30, 1997.  This increase is attributable to the
accrued  interest  expense  related to the  issuance  of $70  million  aggregate
principal of the Company's 7-1/2% Convertible Notes.

(Benefit from) Provision for Income Taxes.  The Company  reported a net loss for
the  three and nine  months  ending  September  30,  1997.  The  (benefit  from)
provision for income taxes is  calculated by applying the 35% statutory  federal
tax rate to the  Company's  pre-tax  (loss)  income  for the  reporting  period.
Accordingly,  the decrease in the (benefit from)  provision for income taxes for
both the three and nine months ended September 30, 1997 is directly attributable
to the net loss recorded for the periods.

Extraordinary  Item. The Company  recognized an extraordinary  loss on the early
extinguishment of debt in the amount of $1.0 million, net of taxes, for the nine
months ended September 30, 1997. This  extraordinary  charge is comprised of (i)
$0.4 million,  net of taxes, related to the termination and recapture of a block
of reinsured insurance policies and (ii) $0.6 million,  net of taxes, related to
the recognition of unamortized  financing fees associated with the repayment and
refinancing of the Company's revolving credit facility with Fleet National Bank.

FINANCIAL CONDITION

Liquidity, Capital Resources and Statutory Capital and Surplus

Westbridge

Westbridge  is an  insurance  holding  company,  the  principal  assets of which
consist of the capital stock of its operating  subsidiaries and invested assets.
Accordingly,  Westbridge's  sources of funds are comprised of dividends from its
operating subsidiaries,  advances from non-insurance company subsidiaries, lease
payments on fixed  assets and tax  contributions  under a tax sharing  agreement
among Westbridge and its subsidiaries.  Westbridge's primary obligations include
principal  and  interest on its  indebtedness  and, if and when  declared by the
Board of Directors, dividends on its Series A Preferred Stock.

Dividends  paid by the Insurance  Subsidiaries  are determined by and subject to
the regulations of the insurance laws and practices of the insurance departments
of their respective state of domicile. NFL, a Delaware domestic company, may not
declare or pay dividends from any source other than earned  surplus  without the
Delaware Insurance  Commissioner's approval. The Delaware Insurance Code defines
earned surplus as the amount equal to the unassigned funds as set forth in NFL's
most recent statutory annual statement including surplus arising from unrealized
gains or revaluation of assets.  Delaware life insurance companies may generally
pay ordinary  dividends or make  distributions  of cash or other property within
any twelve  month  period  with a fair  market  value  equal to or less than the
greater of 10% of surplus as regards  policyholders as of the preceding December
31 or the net gain from  operations  for the twelve month  period  ending on the
preceding  December 31.  During 1997,  NFL is  precluded  from paying  dividends
without  the  prior  approval  of the  Delaware  Insurance  Commissioner  as the
company's  earned surplus is negative.  Further,  NFL has agreed to file for the
prior approval of any dividends declared or paid for the foreseeable future.

NFIC and AICT, Texas domestic companies, may make dividend payments from surplus
profits or earned surplus  arising from its business.  The Texas  Insurance Code
defines earned surplus as unassigned surplus not including any unrealized gains.
Texas life  insurance  companies may  generally  pay ordinary  dividends or make
distributions  of cash or other  property  within any twelve month period with a
fair market value equal to or less than the greater of 10% of surplus as regards
policyholders  as of the preceding  December 31 or the net gain from  operations
for the twelve month period  ending on the  preceding  December 31. Any dividend
exceeding  the  applicable  threshold is considered  extraordinary  and requires
prior approval of the Texas Insurance  Commissioner.  To date, no dividends have
been declared or paid by NFIC or AICT.

FLICA, a Mississippi  domestic company, may make dividend payments only from its
actual  net  surplus  computed  as  required  by  law in  its  statutory  annual
statement.  Mississippi  life  insurance  companies  may  generally pay ordinary
dividends  or make  distributions  of cash or other  property  within any twelve
month period with a fair market value not exceeding the lesser of 10% of surplus
as regards  policyholders  as of the preceding  December 31 or the net gain from
operations for the twelve month period ending on the preceding  December 31. Any
dividend  exceeding the applicable  threshold  amount requires prior approval of
the Mississippi Insurance Commissioner. To date, no dividends have been declared
or paid by FLICA.

Generally,  all states  require  insurance  companies  to  maintain  capital and
surplus  which is  reasonable  in relation  to their  existing  liabilities  and
adequate to their financial needs. Delaware, Texas and Mississippi also maintain
discretionary  powers relative to the declaration and payment of dividends based
upon an insurance  company's  financial  position.  In light of the  significant
statutory  losses  incurred during the three and nine months ended September 30,
1997,  Westbridge  does not expect to receive any  dividends  from its Insurance
Subsidiaries for the foreseeable future.

Westbridge  did not make the  November 3, 1997  interest  payments on the Senior
Subordinated  Notes or the  Convertible  Notes, or the October 31, 1997 dividend
payment on its Series A Cumulative Convertible Redeemable Exchangeable Preferred
Stock (the  "Series A  Preferred  Stock").  The  failure  to make the  scheduled
interest payments  constituted payment defaults under the Indentures relating to
such Notes and will become events of default thereunder on November 17, 1997. In
addition,  the failure to make such interest  payments also resulted in an event
of  default  under the Credit  Agreement  (as  defined  below).  Other  covenant
defaults are also existing under the Credit Agreement and the Indenture relating
to the  Senior  Subordinated  Notes.  As a result  of the  foregoing  events  of
defaults, the holders of such indebtedness may declare the outstanding principal
amount thereof, together with accrued and unpaid interest thereon, to be due and
payable  immediately.  If such indebtedness were to be accelerated,  the Company
does not have the  ability  to repay  the  indebtedness  under  the  outstanding
Convertible Notes, the Senior Subordinated Notes and the Credit Agreement.

The failure to declare and pay the scheduled  dividend on the Series A Preferred
Stock  constituted  an event of  non-compliance  under the terms of the Series A
Preferred  Stock  Agreement and resulted in an immediate  increase to 9.25% from
8.25% in the rate at which  dividends  accrue on the Series A  Preferred  Stock.
This   increase   will  remain  in  effect  until  such  time  as  no  event  of
non-compliance  exists. In addition, if the failure to declare and pay dividends
continues for six  consecutive  quarters,  the holders of the Series A Preferred
Stock  shall have the right to elect two  directors  to the  Company's  Board of
Directors.

As of October 31, 1997,  Westbridge  had  approximately  $22 million in cash and
invested  assets  remaining from the net proceeds of the sale of the Convertible
Notes. The Company has had preliminary discussions with certain of its creditors
and intends to organize meetings with all of its creditor constituencies as soon
as practicable.  In addition, the Company is engaging in preliminary discussions
with potential purchasers  concerning a transaction involving the Company and/or
its Insurance Subsidiaries.  There can be no assurance that any such transaction
will be effected.

The Convertible Notes may not be redeemed prior to May 1, 2000 and,  thereafter,
may be redeemed at the Company's option at a specified  declining  premium.  The
Convertible  Notes mature on May 1, 2004. The Senior  Subordinated  Notes may be
redeemed,  at the Company's option,  without premium,  on or after March 1, 1998
and mature in March 2002.  The Series A  Preferred  Stock may be redeemed at any
time at the Company's option and is subject to mandatory redemption on April 12,
2004.

Insurance Subsidiaries

The primary  sources of cash for the  Insurance  Subsidiaries  are  premiums and
income on invested assets.  Additional cash is periodically provided by advances
from  Westbridge  and from the sale of  short-term  investments  and  could,  if
necessary,  be provided through the sale of long-term  investments and blocks of
business.  The  Insurance  Subsidiaries'  primary uses for cash are benefits and
claims,  commissions,  general and administrative expenses,  taxes, licenses and
fees.

During the three months ended  September  30, 1997,  the Company  experienced  a
continuation  of the increase in claim  submissions  on its Medical  Expense and
Medicare Supplement products which, as previously  reported,  adversely affected
the Company's second quarter results of operations.  This increase  continued to
significantly exceed the Company's  expectations.  In addition, the extent of an
existing backlog of pending  submitted claims was quantified during the quarter.
The previous backlog of pending  submitted claims has now been eliminated.  As a
result of the increase in claims  submissions,  the Company expects that it will
continue  to incur  operating  losses  until  such  time as the  necessary  rate
increases can be implemented.

The Company has the ability,  within the constraints of the loss ratios mandated
by the  regulatory  authorities  and subject to  regulatory  approval,  to raise
premium rates on its products in the event of adverse claims experience.  During
the first and second  quarters of 1997,  the Company  implemented  certain  rate
increases on its Medicare Supplement products.  In addition,  as of July 1, 1997
the Company  implemented certain rate increases and modified certain features on
some of its Medical Expense products. Independent reviews of the Company's claim
reserves as of September  30, 1997 were  recently  completed.  Additionally,  an
independent  benefit  analysis of claims paid was completed which indicated that
significant additional rate increases,  which are expected to take more than six
months to fully implement, and further benefit modifications will be required to
offset the current adverse claims experience. There can be no assurance that the
full extent of such rate increase requests will be approved.

The Company has also determined that, due to the third quarter  operating losses
and operating  losses  expected in the fourth quarter,  the Company's  Insurance
Subsidiaries will require significant  additional capital contributions prior to
December 31, 1997 to meet regulatory requirements.  Furthermore,  the ability of
the Insurance  Subsidiaries to underwrite insurance products is limited by state
regulation  of  statutory  capital  and  surplus  requirements.  There can be no
assurance that sufficient  statutory  capital to satisfy the minimum  regulatory
requirements  and to  underwrite  new business  can be obtained.  Any failure to
provide  sufficient  statutory capital to the Company's  Insurance  Subsidiaries
could result in regulatory  action.  The Company's  discussions  with  insurance
regulatory authorities are continuing.

In the ordinary course of business, the Company advances commissions on policies
written by its general agencies and their agents.  The Company is reimbursed for
these advances from the commissions earned over the respective policy's life. In
the event  that  policies  lapse  prior to the time the  Company  has been fully
reimbursed, the general agency or the individual agents, as the case may be, are
responsible  for  reimbursing  the  Company for the  outstanding  balance of the
commission advance.  For the three and nine months ended September 30, 1997, the
Company has recorded a provision for uncollectible  commission advances totaling
$1.5  million  and $2.1  million,  respectively.  This  increase  relates to the
Company's  projections of future renewal  commissions  that indicate an expected
short-fall  in  amounts   necessary  to  satisfy  and  retire  the   outstanding
receivables  as a result of increases in lapse rates on policies  supporting the
receivables.  Future rate  increases may result in additional  lapses that would
lead to additional uncollectible receivables.

The  Company  finances  its  obligations  to make  commission  advances  through
Westbridge Funding Corporation ("WFC"), an indirect  wholly-owned  subsidiary of
Westbridge.  On June 6, 1997,  WFC entered into a Credit  Agreement  dated as of
such date  with  LaSalle  National  Bank (the  "Credit  Agreement").  See NOTE 3
"EXTRAORDINARY  ITEM." This Credit Agreement  provides WFC with a two-year,  $20
million revolving loan facility (the "Receivables  Financing"),  the proceeds of
which  are  used to  purchase  agent  advance  receivables  from  the  Insurance
Subsidiaries and certain affiliated marketing companies. WFC's obligations under
the  Credit  Agreement  are  secured by liens  upon  substantially  all of WFC's
assets. As of September 30, 1997, $13.1 million was outstanding under the Credit
Agreement.  The Credit  Agreement  terminates on June 6, 1999, at which time the
outstanding  principal  and  interest  thereunder  will be due and  payable.  As
referred  to above,  there is  currently  an event of default as well as certain
technical  defaults  existing  under the  Credit  Agreement.  The  Company is in
discussions with LaSalle National Bank concerning these defaults.

WFC's  obligations under the Credit Agreement have been guaranteed by Westbridge
under the Guaranty Agreement,  and the Company has pledged all of the issued and
outstanding  shares of the capital stock of WFC, NFL and NFIC as collateral  for
that guaranty.

Consolidated

The Company's  consolidated  net cash used for operations  totaled $17.5 million
and  $9.4  million  for the nine  months  ended  September  30,  1997 and  1996,
respectively.  The  increase in the amount of net cash used for  operations  was
primarily  the result of the increase in the number of claims  processed  during
the first nine months of 1997 coupled with the increase in certain medical costs
covered by the Company's Medical Expense and Medicare  Supplement  products as a
result of medical cost inflation.  Additional increases in consolidated net cash
used for  operations  related to amounts  remitted to  reinsurers  under certain
reinsurance arrangements.  These increases in the consolidated net cash used for
operations  were  offset,  in part,  by lower  levels of  additions to DPAC as a
result of the Company's  reduction of its marketing efforts for its underwritten
products beginning in the second quarter of 1996.

Net cash (used for) provided by investing  activities  for the nine months ended
September  30, 1997 and  September  30, 1996  totaled  $(39.1)  million and $4.9
million,   respectively.  The  increase  in  the  cash  outflow  represents  the
investment of the net proceeds from the issuance of the Convertible  Notes. Cash
inflows  for the nine months  ended  September  30,  1996 were  utilized to fund
operating cash requirements.

Net cash  provided  by  financing  activities  totaled  $61.6  million and $10.0
million for the nine months ended September 30, 1997 and 1996, respectively. For
the nine months ended September 30, 1997, cash inflows were provided by issuance
of $70.0 million  aggregate  principal of Convertible  Notes offset, in part, by
cash  payments  of $7.0  million  to  retire a note  payable  associated  with a
recaptured reinsurance  agreement,  $1.0 million to retire a note with a related
party and $0.1 million in net  borrowings  and  repayments  associated  with the
Receivables  Financing  program.  For the nine months ended  September 30, 1996,
cash was provided by borrowings  under the  receivables  financing  program with
Fleet National Bank.

The  Company  will  require  additional  capital to satisfy its  short-term  and
long-term  cash  requirements  and there  can be no  assurance  that  sufficient
additional  capital can be obtained.  The Company is  evaluating  its  strategic
alternatives  and has engaged  Houlihan Lokey Howard & Zukin,  Capital to act as
its  financial  advisor  to assist  the  Company in  formulating  and  analyzing
strategies and in holding its discussions with various constituencies.

The Company had no significant high-yield, unrated or less than investment grade
fixed maturity securities in its investment  portfolio as of September 30, 1997,
and it is the  Company's  policy not to exceed  more than 5% of total  assets in
such  securities.  Changes in interest  rates may affect the market value of the
Company's investment  portfolio.  The Company's principal objective with respect
to the management of its investment portfolio is to meet its future policyholder
benefit  obligations.   In  the  event  the  Company  was  forced  to  liquidate
investments  prior to  maturity,  investment  yields could be  compromised.  The
Company has adopted a policy not to invest in real  estate  mortgage  loans and,
accordingly,  the Company has not purchased any real estate mortgage loans since
1989.

Inflation will affect claim costs on the Company's Medicare  Supplement Products
and Medical  Expense  products.  Costs  associated  with a hospital stay and the
amounts  reimbursed by the Medicare program are each determined,  in part, based
on the  rate of  inflation.  If  hospital  and  other  medical  costs  that  are
reimbursed  by the  Medicare  program  increase,  claim  costs  on the  Medicare
Supplement products will increase.  Similarly, as the hospital and other medical
costs increase,  claim costs on the Medical Expense products will increase.  The
Company has  somewhat  mitigated  its  exposure to  inflation  by  incorporating
certain limitations on the maximum benefits which may be paid under its policies
and by filing for premium rate increases as necessary.

The National  Association  of  Insurance  Commissioners  ("NAIC") has  developed
certain  Risk-Based   Capital  ("RBC")  statutory   requirements  for  insurance
companies.  Under  these  requirements,  insurers  whose  statutory  capital and
surplus fall below the  specified  level are subject to remedial  action.  These
guidelines are not effective  unless they are adopted by the states.  The States
of  Delaware  and  Mississippi  have each  adopted  the NAIC's  RBC  calculation
guidelines.  The State of Texas has developed a RBC calculation that varies from
the  NAIC.  The RBC  statutory  requirements  are  only in  effect  based on the
Insurance  Subsidiaries  year-end  financial position and results of operations.
The RBC for each of the Insurance  Subsidiaries exceeded the proposed thresholds
for required  regulatory  intervention  as of December 31, 1996.  However,  as a
result of the statutory losses sustained for the nine months ended September 30,
1996 and the  expected  statutory  losses  for the fourth  quarter of 1997,  the
Company  expects the RBC for NFL and NFIC to fall below the proposed  thresholds
for required  regulatory  intervention unless additional capital can be obtained
for those entities prior to December 31, 1997.


<PAGE>





                                                                         PART II



Item 1 - Legal  Proceedings (See Part I - Note 2 to the  Consolidated  Financial
     Statements).

Item 3 - Defaults Upon Senior Securities

          (a)  Debt Securities

               On  November  3,  1997,  Westbridge  did not make  the  scheduled
               interest  payments  of  $183,333  and  $2,654,167  on the  Senior
               Subordinated Notes and the Convertible Notes,  respectively.  The
               failure  to make  the  scheduled  interest  payments  constituted
               payment defaults under the Indentures  relating to such Notes and
               will become events of default thereunder on November 17, 1997. In
               addition,  the  failure  to  make  such  interest  payments  also
               resulted in an event of default under the Credit Agreement.  As a
               result of the foregoing  events of defaults,  the holders of such
               indebtedness   may  declare  the  outstanding   principal  amount
               thereof, together with accrued and unpaid interest thereon, to be
               due and  payable  immediately.  If such  indebtedness  were to be
               accelerated,  the Company  does not have the ability to repay the
               indebtedness under the outstanding  Convertible Notes, the Senior
               Subordinated Notes and the Credit Agreement.

          (b)  Preferred Stock

               The Company did not make the October 31, 1997 dividend payment of
               $391,875 on its Series A Preferred Stock.

               The Company is  evaluating  its  strategic  alternatives  and has
               engaged  Houlihan  Lokey  Howard & Zukin,  Capital  to act as its
               financial  advisor to assist the Company in its discussions  with
               creditors,   potential   purchasers   and  insurance   regulatory
               authorities.  The Company has had  preliminary  discussions  with
               certain of its  creditors  and intends to organize  meetings with
               all of its creditor  constituencies  as soon as practicable.  The
               Company's  discussions with insurance regulatory  authorities are
               continuing.

Item 6 - Exhibits and Reports on Form 8-K

          (a)  Exhibits

               Exhibit 27  Financial  Data  Schedule,  (included  in  electronic
               filing only).

          (b)  Reports on Form 8-K

               No Form 8-K was required to be filed during the period.


<PAGE>




                                                                       Form 10-Q



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.


  
                                    WESTBRIDGE CAPITAL CORP.





                                   /s/Patrick J. Mitchell
                                   Patrick J. Mitchell
                                   President, Chief Operating Officer,
                                   Chief Financial Officer and Treasurer
                                   (On Behalf of the Registrant and as
                                   Principal Financial and Accounting Officer)










Dated at Fort Worth, Texas
November 13, 1997









<PAGE>


                                       23

                                                                       Form 10-Q



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.




                                   WESTBRIDGE CAPITAL CORP.


                                   /s/Patrick J. Mitchell
                                   Patrick J. Mitchell
                                   President, Chief Operating Officer,
                                   Chief Financial Officer and Treasurer
                                   (On Behalf of the Registrant and as
                                   Principal Financial and Accounting Officer)









Dated at Fort Worth, Texas
November 13, 1997