CERTAIN RELATIONSHIPS/RELATED TRANSACTIONS

     Simultaneously  with the acquisition of Superior Insurance Company,  Goran,
the Company, GGS Management Holdings, Inc. ("GGSH") and certain investment funds
affiliated  with Goldman  Sachs & Co. ("GS Funds")  entered into an agreement to
capitalize  GGSH and cause GGSH to issue its capital stock to the Company and to
the GS Funds. This transaction gave the Company a 52% ownership interest in GGSH
and the GS Funds a 48%  interest  in GGSH.  Pursuant  to this  transaction,  the
Company  contributed to GGSH all of the common stock of Pafco General  Insurance
Company ("Pafco"), the Company's right to acquire Superior Insurance Company and
certain  fixed  assets with an  approximately  value of  $350,000.  The GS Funds
contributed $21.2 Million in cash.

     Prior to the transfer of the stock of Pafco to GGSH, Pafco  transferred all
of the outstanding capital stock of IGF Insurance Company ("IGF") to the Company
in order to improve the risk-based capital rating of Pafco and to permit GGSH to
focus  exclusively  on the  nonstandard  auotmobile  insurance  business.  Pafco
accomplished this transfer by forming a wholly-owned  subsidiary,  IGF Holdings,
Inc., ("IGF Holdings") to which Pafco contributed all of the outstanding  shares
of capital stock of IGF. The stock of IGF Holdings was then  distributed  to the
Company.

     Prior to the transfer of the stock of IGF  Holdings to the  Company,  Pafco
received  a  dividend  from IGF  Holdings  in cash and a note from IGF having an
aggregate value of approximately $11 Million.

     Jerome B.  Gordon,  a nominee  to the Board of  Directors  of the  Company,
received fees in the amount of $177,994  (including  reimbursement  of expenses)
for his consulting service to the Company during 1996 as well as 4,000 shares of
Goran stock worth approximately $80,000 at the time of receipt.

     Two (2) of the  Company's  subsidiaries,  IGF and Pafco,  have entered into
reinsurance agreements with Granite Reinsurance Company Ltd., ("Granite Re"), an
affiliate of Goran.

     Granite Re reinsures all Pafco  insurance  policies  which were  previously
issued through Symons  International  Group, Inc. - Florida,  ("SIGF"), a former
subsidiary  of the Company and now a subsidiary of Goran.  This  agreement is in
respect of business  other than  nonstandard  automobile  insurance.  Granite Re
reinsures 100% of this SIGF business on a quota share basis.

     Also, IGF reinsures a portion of its crop insurance with Granite Re and for
1996,  Granite Re reinsured 15% of IGF's  multi-peril  crop  insurance stop loss
protection  ("MPCI")  underwriting losses to the extent that aggregate losses of
its  insureds  nationwide  exceed  100%  of  MPCI  Retention  up to 125% of MPCI
Retention and 95% of IGF's MPCI underwriting losses to the extent that aggregate
losses of its insureds  nationwide  exceed 125% of MPCI  Retention up to 150% of
MPCI Retention.  Further,  for 1996, Granite Re had a 5% participation in 95% of
IGF's  crop-hail  losses in  excess of an 80% pure loss  ratio up to a 100% pure
loss ratio and a 10%  participation  in 95% of IGF crop-hail losses in excess of
100% pure loss ratio up to a 120% pure loss ratio.

<PAGE>

AUDITOR'S REPORT


To the Shareholders of Goran Capital Inc.


We have  audited the  consolidated  balance  sheets of Goran  Capital Inc. as at
December 31, 1996 and 1995 and the consolidated statements of earnings, retained
earnings (deficit) and changes in cash resources for the years then ended. These
financial  statements are the  responsibility of the company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards  require that we plan and perform an audit to obtain
reasonable  assurance  whether  the  financial  statements  are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management, as well as evaluating the overall financial statement presentation.

In our opinion,  these consolidated  financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 1996
and 1995 and the  results of its  operations  and the  changes in its  financial
position  for the  years  then  ended  in  accordance  with  generally  accepted
accounting principles.



/s/ Schwartz Levitsky Feldman

Chartered Accountants
Toronto, Ontario
March 21, 1997