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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|/x/ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
|--- | -------------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2000
OR

|/ / | Transition Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
|--- | --------------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number 0-22922

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AMERICAN COUNTRY HOLDINGS INC.

(Exact Name of Registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

06-0995978(I.R.S. Employer
Identification No.)North LaSalle Street,
Chicago, Illinois(Address of principal executive offices)

60601-1105(zip code)


Registrant's
telephone number, including area code:
(312) 456-2000

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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 / /

The
aggregate number of shares of the Registrant's Common Stock, $.01 par value, outstanding August 8, 2000 was 8,059,738.

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## 

AMERICAN COUNTRY HOLDINGS INC.         INDEX

|                             |         |                                                                                                                |                                                                                       | Page
|---------------------------- | ------- | -------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----
|PART IFINANCIAL INFORMATION |         |                                                                                                               
|                             | Item 1. |                                                                                                                | Consolidated Financial Statements                                                     |     
|                             |         | Consolidated Balance Sheets at June 30, 2000 (Unaudited) and December 31, 1999                                 |                                                                                       | 3   
|                             |         | Consolidated Statements of Income (Unaudited) for the Six Months and Three Months Ended June 30, 2000 and 1999 |                                                                                       | 4   
|                             |         | Consolidated Statements of Comprehensive Income (Unaudited) at June 30, 2000 and 1999                          |                                                                                       | 5   
|                             |         | Consolidated Condensed Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2000 and 1999    |                                                                                       | 6   
|                             |         | Notes to the Consolidated Financial Statements (Unaudited)                                                     |                                                                                       | 7   
|                             | Item 2. |                                                                                                                | Management's Discussion and Analysis of Financial Condition and Results of Operations |     
|PART IIOTHER INFORMATION    |         |                                                                                                               
|                             | Item 1. |                                                                                                                | Legal Proceedings                                                                     |     
|                             | Item 2. |                                                                                                                | Changes in Securities                                                                 |     
|                             | Item 3. |                                                                                                                | Defaults upon Senior Securities                                                       |     
|                             | Item 4. |                                                                                                                | Submission of Matters to a Vote of Security Holders                                   |     
|                             | Item 5. |                                                                                                                | Other Information                                                                     |     
|                             | Item 6. |                                                                                                                | Exhibits and Reports on Form 8-K                                                      |     
|Signature                    |         | 19                                                                                                            

2

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## 

AMERICAN COUNTRY HOLDINGS INC.              CONSOLIDATED BALANCE SHEETS              (IN THOUSANDS, EXCEPT SHARE AMOUNTS)              (Unaudited)

|                                                                    |                                                                               | June 30,
2000                                                                              |         | December 31,
1999 |   
|------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------- | ----------------- | --
|ASSETS                                                              |                                                                              
|Investments:                                                        |                                                                               |                                                                                            |         |                   |   
|Available-for-sale                                                  |                                                                               |                                                                                            |         |                   |   
|                                                                    | Fixed maturitiesAt fair value (amortized cost: 2000$133,009; 1999$129,526) |                                                                                            | $       | 130,301           |   
|                                                                    | Equity securitiesAt fair value (cost: 2000$1,636; 1999$353)                |                                                                                            |         | 1,639             |   
|Collateral loans (at amortized cost, which approximates fair value) |                                                                               |                                                                                            | 1,987   |                   |   
|                                                                    |                                                                               |                                                                                            |         |                   |   
|Total investments                                                   |                                                                               |                                                                                            | 133,927 |                   |   
|Cash and cash equivalents                                           |                                                                               |                                                                                            | 4,272   |                   |   
|Premiums receivable (net of allowance: 2000$382; 1999$348)        |                                                                               |                                                                                            | 31,043  |                   |   
|Reinsurance recoverable                                             |                                                                               |                                                                                            | 14,198  |                   |   
|Deferred income taxes                                               |                                                                               |                                                                                            | 6,362   |                   |   
|Deferred policy acquisition cost                                    |                                                                               |                                                                                            | 6,553   |                   |   
|Accrued investment income                                           |                                                                               |                                                                                            | 1,795   |                   |   
|Property and equipment                                              |                                                                               |                                                                                            | 767     |                   |   
|Income taxes recoverable                                            |                                                                               |                                                                                            | 465     |                   |   
|Other assets                                                        |                                                                               |                                                                                            | 864     |                   |   
|                                                                    |                                                                               |                                                                                            |         |                   |   
|Total assets                                                        |                                                                               | $                                                                                          | 200,246 |                   | $ 
|                                                                    |                                                                               |                                                                                            |         |                   |   
|LIABILITIES AND STOCKHOLDERS' EQUITY                                |                                                                              
|Liabilities:                                                        |                                                                               |                                                                                            |         |                   |   
|                                                                    | Unpaid losses and loss adjustment expense                                     |                                                                                            | $       | 104,854           |   
|                                                                    | Unearned premiums                                                             |                                                                                            |         | 41,254            |   
|                                                                    | Note payable                                                                  |                                                                                            |         | 10,750            |   
|                                                                    | Accrued expenses                                                              |                                                                                            |         | 3,029             |   
|                                                                    | Payable for securities                                                        |                                                                                            |         | 781               |   
|                                                                    | Drafts outstanding                                                            |                                                                                            |         | 1,553             |   
|                                                                    |                                                                               |                                                                                            |         |                   |   
|Total liabilities                                                   |                                                                               |                                                                                            | 162,221 |                   |   
|                                                                    |                                                                               |                                                                                            |         |                   |   
|Commitments and contingent liabilities                              |                                                                               |                                                                                            |         |                   |   
|Stockholders' equity:                                               |                                                                               |                                                                                            |         |                   |   
|                                                                    | Common stock$.01 par value:                                                  |                                                                                            |         |                   |   
|                                                                    |                                                                               | Authorized60,000,000 shares Issued and outstandingshares: 20008,056,168; 19998,011,303 |         |                   | 81
|                                                                    | Preferred stock:                                                              |                                                                                            |         |                   |   
|                                                                    |                                                                               | Authorized2,000,000 shares; issued and outstanding0 shares                               |         |                   |  
|                                                                    | Additional paid-in capital                                                    |                                                                                            |         | 37,276            |   
|                                                                    | Accumulated other comprehensive income                                        |                                                                                            |         | (1,448            | ) 
|                                                                    | Retained earnings                                                             |                                                                                            |         | 2,116             |   
|                                                                    |                                                                               |                                                                                            |         |                   |   
|Total stockholders' equity                                          |                                                                               |                                                                                            | 38,025  |                   |   
|                                                                    |                                                                               |                                                                                            |         |                   |   
|                                                                    |                                                                               | $                                                                                          | 200,246 |                   | $ 
|                                                                    |                                                                               |                                                                                            |         |                   |   

See
Notes to the Consolidated Financial Statements.

3

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## 

AMERICAN COUNTRY HOLDINGS INC.              CONSOLIDATED STATEMENTS OF INCOME              (UNAUDITED)

|                                      |                                                   | Six Months
Ended June 30, |     | Three Months
Ended June 30, |  
|------------------------------------- | ------------------------------------------------- | ------------------------- | --- | --------------------------- | -
|
|
|REVENUES:                             |                                                   |                           |     |                             |  
|                                      | Premiums earned                                   |                           | $   | 38,050                      |  
|                                      | Net investment income                             |                           |     | 4,099                       |  
|                                      | Net realized gains (losses) on investments        |                           |     | (240                        | )
|                                      | Other income                                      |                           |     | 808                         |  
|                                      |                                                   |                           |     |                             |  
|                                      | Total revenues                                    |                           |     | 42,717                      |  
|                                      |                                                   |                           |     |                             |  
|LOSSES AND EXPENSES:                  |                                                   |                           |     |                             |  
|                                      | Losses and loss adjustment expenses               |                           |     | 33,468                      |  
|                                      | Amortization of deferred policy acquisition costs |                           |     | 6,020                       |  
|                                      | Administrative and general expenses               |                           |     | 1,832                       |  
|                                      |                                                   |                           |     |                             |  
|                                      | Total losses and expenses                         |                           |     | 41,320                      |  
|                                      |                                                   |                           |     |                             |  
|                                      | Operating income                                  |                           |     | 1,397                       |  
|                                      | Interest expense                                  |                           |     | 410                         |  
|                                      |                                                   |                           |     |                             |  
|                                      | Income before income taxes                        |                           |     | 987                         |  
|                                      | Provision for income tax                          |                           |     | 178                         |  
|                                      |                                                   |                           |     |                             |  
|Net income                            |                                                   | $                         | 809 |                             | $
|                                      |                                                   |                           |     |                             |  
|Basic and dilutive earnings per share |                                                   | $                         | .10 |                             | $
|                                      |                                                   |                           |     |                             |  

See
Notes to the Consolidated Financial Statements

4

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## 

AMERICAN COUNTRY HOLDINGS INC.              CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME              (UNAUDITED)              (IN THOUSANDS)

|                            |                                                                                          | Six Months Ended
June 30, |       | Three Months Ended
June 30, |  
|--------------------------- | ---------------------------------------------------------------------------------------- | ------------------------- | ----- | --------------------------- | -
|
|Net income                  |                                                                                          | $                         | 809   |                             | $
|Other comprehensive income: |                                                                                          |                           |       |                             |  
|                            | Unrealized gain(loss) on investments  net of reclassification adjustments               |                           |       | 510                         |  
|                            | Deferred income tax benefit (expense) on change in unrealized gain (loss) on investments |                           |       | (173                        | )
|                            |                                                                                          |                           |       |                             |  
|Other comprehensive income  |                                                                                          |                           | 336   |                             |  
|                            |                                                                                          |                           |       |                             |  
|Comprehensive income        |                                                                                          | $                         | 1,145 |                             | $
|                            |                                                                                          |                           |       |                             |  

See
Notes to the Consolidated Financial Statements

5

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## 

AMERICAN COUNTRY HOLDINGS INC.              CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS              (UNAUDITED)

|                                                 |                                    | Six Months Ended
June 30, |       
|------------------------------------------------ | ---------------------------------- | ------------------------- | ------
|
|
|Net cash provided by operating activities        |                                    | $                         | 4,101 
|                                                 |                                    |                           |       
|INVESTING ACTIVITIES                             |                                    |                           |       
|Fixed maturitiesavailable-for-sale:             |                                    |                           |       
|                                                 | Purchases                          |                           |       
|                                                 | Sales                              |                           |       
|                                                 | Maturities, calls, and prepayments |                           |       
|Equity securitiesavailable-for-sale:            |                                    |                           |       
|                                                 | Purchases                          |                           |       
|Sale or maturity of other investments            |                                    |                           | 734   
|Purchase of property, equipment and other        |                                    |                           | (98   
|                                                 |                                    |                           |       
|Net cash used by investing activities            |                                    |                           | (4,413
|                                                 |                                    |                           |       
|FINANCING ACTIVITIES                             |                                    |                           |       
|Proceeds from note payable                       |                                    |                           |      
|Payment on note payable                          |                                    |                           | (400  
|Issuance of common stock                         |                                    |                           | 11    
|                                                 |                                    |                           |       
|Net cash provided (used) by financing activities |                                    |                           | (389  
|                                                 |                                    |                           |       
|Net decrease in cash and cash equivalents        |                                    |                           | (701  
|Cash and cash equivalents at beginning of period |                                    | $                         | 4,973 
|                                                 |                                    |                           |       
|Cash and cash equivalents at end of period       |                                    | $                         | 4,272 
|                                                 |                                    |                           |       

See
Notes to the Consolidated Financial Statements.

6

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## 

AMERICAN COUNTRY HOLDINGS INC.       PART I  FINANCIAL INFORMATION       (See Financial Statements and Exhibits Attached)  Notes to the
Consolidated Financial Statements  (Unaudited)

A.  NATURE OF OPERATIONS

American Country Holdings Inc. (the "Company") is an insurance holding company which operates through its direct subsidiaries American Country Insurance
Company ("American Country"), American Country Financial Services Corp. ("Financial Services")and American Country Professional Services Corp. ("Professional Services"). American Country is an
Illinois domestic property and casualty insurance company that specializes in the underwriting and marketing of commercial property and casualty insurance for a focused book of business. American
Country concentrates on types of insurance in which it has expertise: transportation, hospitality and other commercial lines. American Country also wrote a nominal amount of personal lines, automobile
and homeowners insurance prior to exiting this market in 1999. Financial Services operates principally as a premium finance company. Professional Services operates principally as a finance company
which provides secured loans for certain of American Country's insurance customers.

B.  ACCOUNTING PRINCIPLES

The accompanying financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X and, accordingly, do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In
management's opinion, all adjustments necessary for a fair presentation are reflected in the interim periods presented. Those adjustments are of a normal, recurring nature. The accompanying financial
statements should be read in conjunction with the consolidated financial statements of the Company included in the Company's Annual Report on Form 10-K filed on March 30,
2000.

Operating
results for the six-month period ended June 30, 2000, are not necessarily indicative of the results that may be expected for the year ending
December 31, 2000.

Earnings
per share information is presented on the basis of weighted average shares outstanding for the period, restated for a one-for-four reverse stock split
effective at the close of business on May 8, 2000.

C.  CAPITAL STOCK

No dividends have been declared or paid by the Company during the periods presented in the accompanying financial statements. On May 8, 2000, the
Company effected a one-for-four reverse stock split. No fractional shares were issued as a result of the reverse stock split. Issued and outstanding common stock after the
reverse stock split represents approximately 13.37% of the total authorized number of shares. The number of common shares issued and outstanding have been restated for all periods presented. At
June 30, 2000, the Company had 2,019,424 warrants outstanding. The warrants allow the warrant holder to purchase .5475 shares of Common Stock at a price of $7.32 per share through
August 31, 2000.

D.  STOCK OPTION PLAN

The Company has established a Stock Option Plan (the "Plan"), as amended, under which options to purchase up to a total of 750,000 shares of common stock may
be granted to officers and other key employees. Stock options granted under this Plan, which may be either incentive stock options or

7

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nonqualified stock options for federal income tax purposes, expire up to ten years after date of grant and become exercisable over a three year period. Employees who have left the Company have
90 days to exercise their options. In April 2000, additional stock options were granted to employees of the Company. These additional options have a seven-year term and vest
at 331/3% per year and become fully exercisable three years after the date of grant. At June 30, 2000, the Company had 427,973 options outstanding with exercise prices ranging
from $2.40 per share to $15.00 per share.

E.  EMPLOYEE STOCK PURCHASE PLAN

The Company has established an Employee Stock Purchase Plan (the "Stock Purchase Plan"), under which active employees working more than 20 hours per
week may contribute, on an after-tax basis, between 2%-15% of their eligible compensation to the Stock Purchase Plan. The purchase price for each share of common stock
purchased under the Stock Purchase Plan is the lesser of (1) the offering price, which is defined as 85% of the fair market value of the common stock on the first day of each purchase period or
(2) 85% of the fair market value of the common stock on the last day of each purchase period, each adjusted to the nearest cent. Fair market value of a share is defined as the average closing
price of the common stock on the 20 business days preceding the purchase date.

F.  REINSURANCE

American Country reinsures a portion of its exposure by ceding to reinsurers a portion of the premiums received on the policies that are reinsured. Insurance
is ceded primarily to reduce the net liability on individual risks and to protect against catastrophic losses. Although reinsurance does not legally discharge an insurer from its primary liability for
the full amount of coverage, it does make the assuming reinsurer liable to the insurer to the extent of the losses reinsured. American Country seeks to maintain its risk exposure at appropriate levels
by setting maximum coverage limits by class and type of business. These agreements also provide American Country with increased capacity to write larger risk and to maintain it exposure to loss within
its capital resources. The Company remains contingently obligated for amounts reinsured in the event that reinsurers to not meet their obligations.

Effective
January 1, 2000, American Country amended its excess of loss treaty to include a ceding commission. The ceding commission is meant to offset some of American
Country's underwriting expenses associated with the premium covered under the treaty.

Effective
April 1, 2000, American Country entered into a quota share reinsurance agreement with General Reinsurance Company. Under the terms of the agreement, American Country
cedes approximately 30% of its non-transportation premium in exchange for the reinsurer paying 30% of the losses, excluding loss adjustment expenses, incurred on the policies reinsured. American
Country also receives a ceding commission under this contract, which is calculated based on the pure loss ratio for the business subject to the agreement.

The
components of the net reinsurance recoverable balances in the accompanying balance sheets were as follows:

June 30, 2000

December 31, 1999(In thousands)Ceded paid losses recoverable

$
2,063

$
1,106Ceded unpaid losses and loss adjustment expenses ("LAE")


9,722


13,141Ceded unearned premiums


2,413


986Total

$
14,198

$
15,233


8

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The components of the reinsurance ceded relating to the accompanying statements of income were as follows:

Six months ended June 30,2000

1999(In thousands)Ceded premiums earned

$
4,319

$
2,063Ceded incurred losses


2,115


5,966Ceded incurred LAE


405


483


The
effect of reinsurance on premiums written and earned for the six months ended June 30, 2000, and 1999 was as follows:

|        |  | Six months ended June 30, |        | Three months ended June 30, |  
|------- |  | ------------------------- | ------ | --------------------------- | -
|
|
|
|
|Direct  |  | $                         | 64,228 |                             | $
|Assumed |  |                           | 666    |                             |  
|Ceded   |  |                           | (5,747 | )                           |  
|        |  |                           |        |                             |  
|Net     |  | $                         | 59,147 |                             | $
|        |  |                           |        |                             |  

G.  BUSINESS SEGMENTS

The Company through American Country is engaged primarily as a property and casualty insurance carrier, providing commercial lines coverage including
commercial auto, commercial multiple peril and workers' compensation to three key niche markets: transportation, hospitality and artisan contractors. In addition, the Company through its other
subsidiaries provides premium and other financing services through secured loans to certain larger customers. All revenues are derived from markets in the United States.

Segment
revenues for the six months ended June 30, 2000 and 1999 were (in thousands):

|                                                         |                        | 2000 |        | 1999  
|-------------------------------------------------------- | ---------------------- | ---- | ------ | ------
|SEGMENT REVENUES                                         |                        |      |        |       
|Transportation                                           |                        | $    | 28,364 |       
|Hospitality                                              |                        |      | 4,823  |       
|Other Commercial                                         |                        |      | 8,461  |       
|Personal Lines                                           |                        |      | 6      |       
|Other                                                    |                        |      | 660    |       
|                                                         |                        |      |        |       
|                                                         | Total Segment Revenues |      |        | 42,313
|Other reconciling items:                                 |                        |      |        |       
|Investment and other income not attributable to segments |                        |      | 404    |       
|                                                         |                        |      |        |       
|Total revenues                                           |                        |      | 42,717 |       
|                                                         |                        |      |        |       

9

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Segment operating profit for the six months ended June 30, 2000 and 1999 were (in thousands):

|                                                         |                                | 2000 |        | 1999  | 
|-------------------------------------------------------- | ------------------------------ | ---- | ------ | ----- | 
|SEGMENT OPERATING INCOME                                 |                                |      |        |       | 
|Transportation                                           |                                | $    | 5,023  |       | 
|Hospitality                                              |                                |      | (754   | )     | 
|Other Commercial                                         |                                |      | (3,313 | )     | 
|Personal Lines                                           |                                |      | (154   | )     | 
|Other                                                    |                                |      | 660    |       | 
|                                                         |                                |      |        |       | 
|                                                         | Total segment operating income |      |        | 1,462 | 
|                                                         |                                |      |        |       | 
|Other reconciling items:                                 |                                |      |        |       | 
|Investment and other income not attributable to segments |                                |      | 404    |       | 
|General corporate expenses                               |                                |      | (375   | )     | 
|Other expenses not attributable to segments              |                                |      | (94    | )     | 
|                                                         |                                |      |        |       | 
|Total adjustments                                        |                                |      | (65    | )     | 
|                                                         |                                |      |        |       | 
|                                                         | Total operating profit         |      | $      | 1,397 | 
|                                                         |                                |      |        |       | 

Segment revenues for the three months ended June 30, 2000 and 1999 were (in thousands):

|                                                         |                        | 2000 |        | 1999  
|-------------------------------------------------------- | ---------------------- | ---- | ------ | ------
|SEGMENT REVENUES                                         |                        |      |        |       
|Transportation                                           |                        | $    | 15,346 |       
|Hospitality                                              |                        |      | 2,849  |       
|Other Commercial                                         |                        |      | 4,239  |       
|Personal Lines                                           |                        |      | (23    | )     
|Other                                                    |                        |      | 526    |       
|                                                         |                        |      |        |       
|                                                         | Total Segment Revenues |      |        | 22,937
|Other reconciling items:                                 |                        |      |        |       
|Investment and other income not attributable to segments |                        |      | 15     |       
|                                                         |                        |      |        |       
|Total revenues                                           |                        |      | 22,952 |       
|                                                         |                        |      |        |       

Segment operating profit for the three months ended June 30, 2000 and 1999 were (in thousands):

|                                            |                                | 2000 |        | 1999 |  
|------------------------------------------- | ------------------------------ | ---- | ------ | ---- | -
|SEGMENT OPERATING INCOME                    |                                |      |        |      |  
|Transportation                              |                                | $    | 3,097  |      | $
|Hospitality                                 |                                |      | (241   | )    |  
|Other Commercial                            |                                |      | (2,368 | )    |  
|Personal Lines                              |                                |      | (130   | )    |  
|Other                                       |                                |      | 588    |      |  
|                                            |                                |      |        |      |  
|                                            | Total Segment operating income |      |        | 946  |  
|                                            |                                |      |        |      |  
|Other reconciling items:                    |                                |      |        |      |  
|Investment and other income not             |                                |      |        |      |  
|attributable to segments                    |                                |      | 15     |      |  
|General corporate expenses                  |                                |      | (173   | )    |  
|Other expenses not attributable to segments |                                |      | (50    | )    |  
|                                            |                                |      |        |      |  
|Total adjustments                           |                                |      | (208   | )    |  
|                                            |                                |      |        |      |  
|                                            | Total operating profit         |      | $      | 738  |  
|                                            |                                |      |        |      |  

10

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H.  LEGAL PROCEEDINGS

There are no pending material legal proceedings to which the Company or its subsidiaries is a party or of which any of the properties of the Company or its
subsidiaries is subject, except as noted below. The Company is subject to claims arising in the ordinary course of business. Most of these lawsuits involve claims under insurance policies issued by
American Country. These lawsuits are considered by American Country in estimating the reserves for losses and loss adjustment expenses.

On
May 20, 1999, Frontier Insurance Group, Inc. (which owns approximately 25% of the outstanding shares of the Company) filed a purported shareholder derivative action in
Delaware Chancery Court
against the Company's directors and the Company itself as a nominal defendant. The complaint seeks a declaration that certain amendments to the Company's Stock Option Plan, which were approved at the
Company's Annual Meeting on May 18, 1999 are void or, alternatively, should be rescinded. The complaint further challenges the grant of options to purchase 275,000 shares (approximately
3% of the Company's total shares outstanding) to certain of its officers and directors. The individual defendants have advised the Company that they believe that they have substantial defenses to the
claims asserted by Frontier Insurance Group, Inc.

In
the opinion of management, the ultimate resolution of such litigation will not have a material effect on the financial condition of the Company.

11

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## 

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

The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this
Report.

Overview

American Country Holdings Inc. (the "Company") is an insurance holding company which operates through its direct subsidiaries American Country Insurance
Company ("American Country"), American Country Financial Services Corp. ("Financial Services") and American Country Professional Services Corp. ("Professional Services").

American
Country is an Illinois domestic property and casualty insurance company that specializes in the underwriting and marketing of commercial property and casualty insurance for a
focused book of business. American Country concentrates on types of insurance in which it has expertise: transportation, hospitality and other commercial lines. American Country also wrote a nominal
amount of personal lines, automobile and homeowners insurance. Financial Services operates principally as a premium finance company. Professional Services operates principally as a finance company,
which provides secured loans for certain of American Country's insurance customers.



Overall premium revenues increased 14.4% in the second quarter of 2000 to $20.3 million from $17.8 million in the comparable period in 1999, due
to continued geographic expansion of the transportation lines.

The
following table sets forth the net premiums earned by the principal lines of insurance underwritten by American Country for the periods indicated and the dollar amount and
percentage of change therein from period to period:

Net Premiums Earned

Three Months Ended
June 30,

Increase (Decrease)
2000 from 19992000

1999

Amount

Percent(in thousands)Transportation lines

$
13,082

$
9,877

$
3,205

32.4
%Hospitality Lines


2,534


1,902


632

33.2
%Commercial lines


4,691


5,954


(1,263
)
(21.2
)%Personal lines


0


25


(25
)
(100.0
)%Totals

$
20,307

$
17,758

$
2,549

14.4
%


Premium
revenues for transportation lines, which consist of taxicab and limousine liability and physical damage programs, increased in the second quarter of 2000 by 32.4% to
$13.1 million, as compared to $9.9 million in 1999. The major contributor to this increase was the geographic expansion of American Country's taxicab product outside of the Chicago
metropolitan area into the state of New York. Premium revenue also increased for American Country's traditional market, the Chicago metropolitan area.

Premium
revenues for hospitality lines increased 33.2% to approximately $2.5 million, as compared to $1.9 million for 1999. This increase is attributable to double-digit
rate increases on existing business and growth in the number of policies written for multiple peril package, workers' compensation and other liability products. This increase is offset by a quota
share reinsurance agreement entered into on April 1, 2000 with General Reinsurance Company. Under the new treaty, 30% of the hospitality lines premium is ceded to General Reinsurance Company.

12

---

Premium revenues for commercial lines experienced a decrease of 21.2% to $4.7 million in the second quarter of 2000, as a result of strict re-underwriting of these
lines, which resulted in approximately 28% of expiring policies being non-renewed. This was partly offset by significant pricing increases on retained business. In addition, a portion of
this decrease is attributable to a quota share reinsurance agreement entered into on April 1, 2000 with General Reinsurance Company. Under the new treaty, 30% of the commercial lines premium is
ceded to General Reinsurance Company.

The
decrease of 100% in premiums earned from personal lines is due to American Country's exit from its personal lines insurance.

Net
investment income increased 12.6%, to $2.1 million in the second quarter of 2000, as compared to $1.8 million in the comparable period in 1999. Realized losses
amounted to $90,000 in the second quarter of 2000, compared to $171,000 in the comparable period in 1999.

Losses
and loss adjustment expenses (LAE) increased 14.7% or $2.2 million in the second quarter of 2000, to $17.5 million, from $15.3 million in the second
quarter of 1999, resulting in a loss ratio of 86.4% in the second quarter of 2000 compared to 86.1% in the comparable period in 1999. This increase is largely due to the May 18, 2000 storm in
the Chicago area, which resulted in more than $500,000 in losses incurred, and to other property losses.

Losses
and LAE for transportation lines increased $418,000 in the second quarter of 2000, or 5.3% over the comparable period in 1999. However, the loss ratio for this line decreased
to 63.1% as compared to 79.4% for the same period in 1999. This decline in the loss ratio was primarily due to a decrease in loss severity and frequency of claims as well as increased revenues due to
the geographic expansion of the transportation line.

The
loss ratio for hospitality lines decreased to 93.1% compared to 105.2% in the same period in 1999, as a result of pricing increases and a lower severity of claims in the second
quarter of 2000.

Commercial
lines experienced a 29.7% increase in losses and LAE that resulted in a loss ratio of 145.2% in the second quarter of 2000 as compared to 88.2% in the comparable period in
1999. The increase was due to storm and other property losses.

Amortization
of deferred policy acquisition costs increased approximately $594,000 in the second quarter of 2000 due to increased commissions primarily due to geographic expansion and
overall premium growth.

Administrative
and general expenses increased $421,000 or 48.1% in the second quarter of 2000, due to increased marketing expenses incurred as a result of geographic
expansion.



Overall premium revenues increased 17.7% in the six months ended June 30, 2000 to $38.1 million from $32.3 million in the comparable
period in 1999, due to the geographic expansion of American Country's transportation and hospitality lines.

13

---

The following table sets forth the net premiums earned by the principal lines of insurance underwritten by American Country for the periods indicated and the dollar amount and
percentage of change therein from period to period:

Net Premiums Earned

Six Months Ended
June 30,

Increase (Decrease)
2000 from 19992000

1999

Amount

Percent(in thousands)Transportation lines

$
24,117

$
18,515

$
5,602

30.3
%Hospitality lines


4,442


3,269


1,173

35.9
%Commercial lines


9,485


10,475


(990
)
(9.5
)%Personal lines


6


51


(45
)
(88.2
)%Totals

$
38,050

$
32,310

$
5,740

17.7
%


Premium
revenues for transportation lines, which consist of taxicab and limousine liability and physical damage programs, expanded in the six months ended June 30, 2000 by
30.3% to $24.1 million over the comparable period in 1999. Nearly all the transportation programs offered by American Country generated premium revenue increases, especially those products
representing American Country's expansion outside its traditional market, the Chicago metropolitan area. This geographical expansion was accomplished primarily by increasing writings in the state of
New York.

Premium
revenues for hospitality lines increased 35.9% to approximately $4.4 million as compared to $3.3 million for 1999. This increase is attributable to rate
increases and growth in the number of policies written for multiple peril package, workers' compensation and other liability products, partly offset by a quota share agreement entered into on
April 1, 2000. Under the new reinsurance agreement, 30% of the hospitality premiums are ceded to General Reinsurance Company.

Premium
revenues for commercial lines experienced a decrease of 9.5% to $9.5 million in the six months ended June 30, 2000, as compared to $10.5 million for the
same period in 1999, the result of stricter underwriting and a quota share agreement entered into on April 1, 2000. Under the new reinsurance agreement, 30% of the commercial lines premium is
ceded to General Reinsurance Company.

The
decrease of 88.2% in Personal lines is the result of American Country's exit from its personal insurance.

Net
investment income increased $432,000 or approximately 11.8%, to $4.1 million in the six months ended June 30, 2000, as compared to $3.7 million in the same
period in 1999. Realized losses amounted to $240,000 in the six months ended June 30, 2000 compared to a gain of $194,000 in the same period in 1999. This is the result of the continuing
decline in the market value of fixed income securities, as interest rates rose for the period.

Losses
and loss adjustment expenses (LAE) increased 16.7% or $4.8 million in the six months ended June 30, 2000, to $33.5 million from $28.7 million in the
comparable period in 1999, resulting in a loss ratio of 88.0% in the six months ended June 30, 2000 compared to 88.8% in the comparable period in 1999. The decrease in the loss ratio is
primarily due to a decrease in the transportation lines loss ratio, and also to significant rate increases for hospitality and commercial lines.

Losses
and LAE for Transportation lines increased $3.6 million or 27.9% in the six months ended June 30, 2000, over the comparable period in 1999, due to American
Country's geographic expansion. Although the dollar amount of losses increased, the loss ratio for this line decreased in the first six months of 2000. The loss ratio for this line in the six months
ended June 30, 2000 was 68.1% compared to 69.3% in

14

---

the comparable period in 1999. This decrease is attributable to both a lower frequency and severity of claims for this line.

The
loss ratio for hospitality lines increased to 102.6% compared to 83.7% in the same period in 1999, which is primarily the result of storm and other property losses.

Commercial
lines experienced a significant increase in the loss ratio in the six months ended June 30, 2000. The increase was most significant in the commercial multiple peril
products. The loss ratio was 130.0% in the six months ended June 30, 2000, compared to 119.6% in the comparable period in 1999. This increase is attributable to weather-related property losses
in the first half of 2000.

Amortization
of deferred policy acquisition costs increased $529,000 in the six months ended June 30, 2000. This is a direct result of American Country's geographic expansion
into new territories, which resulted in higher commission expense.

Administrative
and general expenses increased $804,000, in the six months ended June 30, 2000. The increase is primarily attributable to increased costs associated with
American Country's geographic expansion.

Liquidity and Capital Resources

The Company is a holding company, receiving cash principally through fees and dividends from its subsidiaries and borrowings. American Country, the principal
subsidiary of the Company, is the only subsidiary of the Company subject to restrictions and regulatory approval on fees and dividends. The ability of insurance and reinsurance companies to underwrite
insurance and reinsurance is based on maintaining liquidity and capital resources sufficient to pay claims and expenses as they become due. The primary sources of liquidity for the Company's insurance
subsidiary are funds generated from insurance premiums, investment income, commission and fee income, capital contributions from the Company and proceeds from sales and maturities of portfolio
investments. The principal expenditures are for payment of losses and LAE, operating expenses and commissions.

On
October 5, 1999, the Board of Directors approved a loan proposal from The Northern Trust Company, wherein its line of credit was converted to an $8.0 million four
year term loan and a $7.0 million
364 day revolving line of credit. Under the term loan, the first installment of $2.0 million is due April 30, 2001. The interest rate on the term loan may be based on LIBOR+1%,
the New York Federal Funds rate+1, or the prime rate minus one. The revolving credit agreement has a commitment fee of .25% per annum on the unused portion.

The
revolving credit agreement contains various debt covenants including conditions for prepayment and certain financial covenants, the most restrictive covenant being the ratio of
debt to equity. American Country was in compliance with all covenants as of June 30, 2000.

At
June 30, 2000, the Company's total assets of $200.2 million were comprised of the following: Cash and investments, 69.0%; premiums receivable, 15.5%; reinsurance
recoverables, 7.1%; deferred expenses (policy acquisition costs and deferred taxes) 6.5%; fixed assets, 0.3%; and other assets, 1.6%.

The
Company's subsidiaries seek to maintain liquid operating positions and follow investment guidelines and state regulations for investments that are intended to provide for an
acceptable return on investment while preserving capital, maintaining sufficient liquidity to meet its obligations and, as to the Company's insurance subsidiary, maintaining a sufficient margin of
capital and surplus to ensure its unimpaired ability to write insurance and assume reinsurance.

15

---

The following table provides a profile of the Company's fixed maturities investment portfolio by rating at June 30, 2000:

S&P/Moody's Ratings(1)

Fair
Value

Percent
of TotalAAA/Aaa (including US Treasuries of $6,718)

$
69,697

53.5
%AA/Aa


15,569

11.9
%A/A


28,563

21.9
%BBB/Ba


11,754

9.0
%All other


4,718

3.6
%Total

$
130,301

100.0
%


---

Cash
flow provided by operations for the quarter ended June 30, 2000 was $2.53 million, as compared to $1.5 million for the same period in 1999. Such amounts were
adequate to meet all obligations during the periods. The increase in cash flow provided for the quarter ended June 30, 2000, as compared to the same period in 1999 is attributable to increased
premium writings in the current period, as compared to the comparable period in 1999.

Forward-Looking Statements

The Company cautions readers regarding certain forward-looking statements contained in the foregoing and elsewhere and in any other statements made by, or on
behalf of, the Company, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical facts. In particular, statements
using verbs such as "expect," "intend," "plan," "anticipate," "believe" or similar words generally involve forward- looking statements. Forward-looking statements also include but may not be limited
to, statements relating to future plans, targets and objectives, financial results, cyclical industry conditions, government and regulatory policies, the uncertainties of the reserving process and the
competitive environment in which the Company operates.

Forward-looking
statements are based upon estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond the
Company's control and subject to change. These uncertainties can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements.
Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable events or developments, some of which may be national in scope,
such as general economic conditions and interest rates. Some of these events or developments may be related to the insurance industry generally, such as pricing competition, regulatory developments
and industry consolidation. Others may relate to the Company specifically, such as credit, volatility and other risks associated with the Company's investment portfolio, and other factors. Investors
are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the SEC, including Exhibit 99 to the Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended December 31, 1999. The Company disclaims any obligation to update forward-looking information.

16

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PART II  OTHER INFORMATION

Item 1.  Legal Proceedings

There are no pending material legal proceedings to which the Company or its subsidiaries is a party or of which any of the properties of the Company or its
subsidiaries is subject, except as noted below. The Company is subject to claims arising in the ordinary course of its business. Most of these proceedings involve claims under insurance policies
issued by American Country. These lawsuits are considered by American Country in estimating the reserves for losses and loss adjustment expenses. In the opinion of management, the ultimate resolution
of such litigation will not have a material effect on the financial condition of the Company.

On
May 20, 1999, Frontier Insurance Group, Inc. (which owns approximately 25% of the outstanding shares of the Company) filed a purported shareholder derivative action
in Delaware Chancery Court against the Company's directors and the Company itself as a nominal defendant. The complaint seeks a declaration that certain amendments to the Company's Stock Option Plan,
which were approved at the Company's Annual Meeting on May 18, 1999 are void or, alternatively, should be rescinded. The complaint further challenges the grant of options to purchase
275,000 shares (approximately 3% of the Company's total shares outstanding) to certain of its officers and directors. The defendants believe that they have substantial defenses to the claims
asserted by Frontier Insurance Group, Inc.

Item 2. Changes in Securities

On May 8, 2000, the Company effected a one-for-four reverse stock split. No fractional shares were issued as a result of the
reverse stock split. Issued and outstanding common stock after the reverse stock split represents approximately 13.37% of the total authorized number of shares. The par value of $0.01 per share
remains unchanged.

Item 3. Defaults upon Senior Securities

None.

Item 4. Submission of Matters to Vote of Security Holders



17

---



VOTES CAST

For

Against

Abstain

Broker
Nonvote7,483,767

118,107

2,250

0




VOTES CAST

For

Against

Abstain

Broker
Nonvote7,580,926

22,508

690

0


Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K





18

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## 

SIGNATURE

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

Date:
August 14, 2000

| |  | AMERICAN COUNTRY HOLDINGS INC.(Registrant)
| |  | ------------------------------------------
| |  | By:                                       

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