Exhibit 13

1997 Goran Capital, Inc. Annual Report

             GORAN LOGO
             1997 Annual Report


             [Large Goran logo with three photos]

<PAGE>

[small Goran logo]

Corporate Profile

Goran Capital Inc. owns subsidiaries engaged in a number of business activities.
The most  important of these is the property  and  casualty  insurance  business
conducted  in 38  U.S.  states,  Canada  and  Barbados,  on  both a  direct  and
reinsurance basis through a number of subsidiaries  collectively  referred to in
this report as Goran. Goran owns 67% of Symons International Group, Inc. ("SIG")
which began trading on the NASDAQ on November 5, 1996 under the symbol SIGC. SIG
owns IGF Insurance Company of Des Moines,  Iowa which is the fourth largest crop
insurer in the United States. SIG also owns Superior Insurance Company of Tampa,
Florida and Pafco General  Insurance  Company of  Indianapolis,  Indiana.  These
insurers  provide  nonstandard  automobile  insurance and combined are the tenth
largest writers of such insurance in the United States. The other  subsidiaries,
Granite Reinsurance Company Ltd. and Symons  International Group, Inc. - Florida
underwrite finite (limited risk)  reinsurance in Bermuda,  the United States and
Canada and offer commercial insurance coverage,  respectively. The operations of
Symons  International  Group, Inc. Florida were discontinued in 1997 with a sale
of this operation expected in early 1998.

The investment  portfolios of the insurance  subsidiaries include primarily debt
and  government  instruments.  The  majority of holdings of the  portfolios  are
publicly  traded and most of the holdings of the debt portfolio have  investment
grade  ratings.  Goran is a public  company listed on The Toronto Stock Exchange
under the symbol GNC and NASDAQ under the symbol GNCNF.

All dollar amounts shown in this report are in U.S.  currency  unless  otherwise
indicated.  The  conversion  rates  for 1997 and as of  December  31,  1997 were
$1.3846 and $1.4295, respectively.


Table of Contents

Financial Highlights                                                        1

Chairman's Report                                                           2

Management's Discussion and Analysis                                        5

Consolidated Financial Statements                                           15

Notes to Consolidated Financial Statements                                  19

Auditors' Report                                                            34

Corporate Directory                                                         36

Subsidiaries and Branch Offices                                             IBC

Shareholder Information                                                     IBC



GRAPH        1993      1994       1995       1996       1997
           $88,936   $103,134   $124,634   $305,499   $460,600

           Gross Premiums Written By Year



<PAGE>

                                                              [small Goran logo]

Financial Highlights
(dollars in thousands, except per share amounts)
For The Years Ended December 31,

<TABLE>
<CAPTION>


                              1997       1996       1995       1994      1993

<S>                         <C>        <C>        <C>        <C>        <C>            
Gross premium revenue       $448,982   $299,376   $146,303   $126,978   $114,135

Earnings from continuing
operations                   $15,983    $14,127     $7,157   $3,940       $1,397

Earnings per share from
continuing operations          $2.86      $2.67      $1.43   $0.81         $0.29

Shareholders' Equity         $60,332    $47,258    $12,622   $5,067       $1,088

Book Value per share          $10.53      $8.74      $2.49   $1.03         $0.22

Market Value per share        $29.41     $20.08      $8.57   $5.20         $3.55

</TABLE>


                      CORPORATE STRUCTURE

                      Goran Capital, Inc.
                      Toronto, Ontario
                  ("Goran" or the "Company")
                            |
----------------------------------------------------------------------
|                           |                       |                |
67% Owned               100% Owned              100% Owned       100% Owned
Symons International    Granite Reinsurance     Granite          Symons
Group, Inc.,            Company, Ltd.           Insurance        International
Indianapolis, Indiana   Barbados                Company          Group, Inc.
("SIG")                 ("Granite Re")          ("Granite")      Florida
|------------------------------------------|
IGF Holdings, Inc.               GGS Management, Inc.
("IGFH")                          ("GGS Management")
|                                          |
IGF Insurance
Company
("IGF")           -----------------------------------
                  |                                 |
                  Pafco General             Superior Insurance
                  Insurance Company               Company
                  ("Pafco")                     ("Superior")
                                                     |
                                            -------------------------
                                            |                        |
                                    Superior Guaranty         Superior American
                                    Insurance Company         Insurance Company


                                      -1-
                                                              
<PAGE>

[small Goran logo]

Chairman's Report to Shareholders:  GORAN MILESTONES 

Greetings:

As has been my  practice  in the past,  I have used  "milestones"  to  provide a
comparison  of our  development.  I have taken a broader  approach this year and
carried the results into an appraisal of our efforts as I see it.

I am much encouraged with the future and I feel certain you will be too when you
digest the information assembled below.

<TABLE>
<CAPTION>

    YEAR:   No. of Employees   Gross Revenue   Pre-Tax Earnings    Net Earnings

    <S>         <C>               <C>              <C>              <C>   
    1994        253               $133,596         $4,614            $3,941

    1995        325               $152,443         $9,654            $7,157

    1996        672               $317,770         $24,984          $14,127

    1997        786               $491,461         $37,904          $15,983

(1) 1998        800               $730,000           N/A              N/A
</TABLE>

(1)  1998 information is an estimate based on stated corporate goals.
     Amounts are for continuing operations.
     Revenue is gross premiums, interest and fee income.
     All dollar amounts are in thousands of U.S. dollars.

While I don't always agree with analysts, generally they do a good job. But as a
person who has been in the  business of insurance  for more than fifty years,  I
have an advantage in assessing  the true value of an insurance  enterprise  over
those that do not have my  experience.  I have a better  tuned  antenna and feel
many  analysts  miss some  important  aspects of the true worth of an  insurance
company.

Over the years I have been the instigator and closer in the sale and purchase of
many insurance  entities.  The true value of those  businesses was somewhat more
than a mere multiplication of the Earnings Per Share, (EPS).

We believe that our  companies  are grossly  undervalued  in the market place in
that it does not  appreciate  the cost  and  value  added  for  growth  in gross
revenue.  To help you  understand  what I mean,  let's  look at  values  paid by
knowing  buyers for recent  acquisitions  in fields of insurance  similar to our
companies.

Note  that  the  price  paid  for  these  entities  doesn't  follow  a  straight
multiplication of EPS, in fact the most constant number that parallels the price
is the Gross Written Premium.


                                       -2-

<PAGE>

                                                              [small Goran logo]
                                                               Chairman's Report
<TABLE>
<CAPTION>

                                                                      Premium
                              Mean      Purchase      Trailing      to Purchase
                             Premiums    Price       EPS Multiple   Price Ratio

<S>                          <C>         <C>              <C>            <C> 
Omni Insurance               $140M       $185M            30             132%
(sold to Hartford)
10/16/97

Guaranty National            $510M       $469M            16             91%
(sold to Orion Capital)
9/18/97

Titan                        $172M       $240M            17             140%
(sold to U.S.F.&G.)
8/8/97

Integon                      $783M       $519M            N/A            62%
(sold to G.M.A.C.)           -----       -----            ---            ---
6/3/97

Average                                                   21             88%
                                                          ==             ===

</TABLE>

In today's  world,  the value of an insurer is more closely  linked to its gross
written premiums. Depending on the class of business, this value multiple should
be between 75% and 100% of the insurers premium volume. We have outperformed all
the above companies in every worthwhile category. Yet, I ponder why no value has
been attributed to our $150M of premium growth in 1997.

In the past several  years we have acquired  businesses in the industry  sectors
that we felt had the most  potential  for growth:  Crop  insurance  (the fastest
growing  segment  of  the  Commercial   insurance   industry)  and  Non-Standard
automobile  insurance  (the growth leader in the Personal line  component).  You
will note that our growth  parallels this pattern and that we have  consistently
demonstrated our ability to grow faster than our industry peer group.

Let me  recall  for you our two most  recent  acquisitions,  Superior  Insurance
Group,  and CNA Crop Book.  When we bought  Superior  Insurance  Group on May 1,
1996,  it was coming off a year in which it had produced  $95M of Gross  Written
Premiums and earned about $5M of pre-tax income. For 1997,  Superior wrote $250M
of premiums  and earned a pre-tax  profit of $20M.  This growth came through the
repositioning  of Superior in its markets and changing the way it did  business.
This rate of growth is continuing in 1998.

On March 2, 1998 we took over  CNA's  book of MPCI and Crop Hail  insurance.  In
return,  CNA gets a share of our crop reinsurance  business that would otherwise
be placed with other reinsurers.  We feel we can use our marketing expertise and
varied products to grow this approximately  $110M of business in the same way we
have grown our previous  acquisitions in the past, outpacing other crop insurers
in the process.

Over the last 5 years, we have seen our performance as follows:

         annual gross revenue average compound growth:   45%
         annual net income average compound growth:   92%
         annual ROE average compound growth:   64%

This growth and  performance is the result of attracting a competent work force,
excelling in niche markets and making  acquisitions  that others look at and say
are insightful  purchases (oddly,  only after we have turned these  acquisitions
into great producers). We are continuing to look at growth and acquisitions with
enthusiasm.


                                       -3-

<PAGE>

[small Goran logo]
Chairman's Report

During the second half of 1997, we retained Donaldson, Lufkin & Jenrette ("DLJ")
to lead a $135M,  thirty-year  issue of Trust Preferred  Securities.  As part of
this successful issue, we did a road show to tell the story of our company.  DLJ
prepared  the  presentations  for that  road  show and  commented,  among  other
positive statements,  that we have "a proven management team." This team has the
ability,  experience and the tools to continue our growth and  performance  into
the future.

The  commendations  on the quality of our  personnel  by the firm of  Donaldson,
Lufkin & Jenrette is self evident and  anything I might add on the  professional
standing of our managers and  employees  would be  redundant.  I would be remiss
however if I didn't thank them all for their efforts and  professional  interest
in the company's welfare and success.

It has been  said  that a  business  is,  at its  inception,  "Desperate,"  then
"Honest"   and   finally   "Respectable."   We  have   worked   hard  to   reach
"respectability"  and it is this that motivates us. We have made profits for our
shareholders  and have  greatly  enhanced  the  company's  corporate  governance
function.  Our growth in the business of insurance,  measured by premium income,
profits and professionalism has been outstanding.  This has come about primarily
through the efforts and  dedication of our personnel and I extend to all of them
the thanks of the Board of Directors.

We have two public companies,  Goran Capital Inc. and Symons International Group
Inc.,  and as a public  organization  we must  maintain  larger and more diverse
Boards.  As Chairman,  I rely on these gentlemen for their help and advice.  Our
meetings  are often  lengthy  and diverse  and we wrestle  with many  additional
factors  because the company is growth  oriented.  I wish to thank each of these
gentlemen for their  contribution  over the past year and assure them that their
efforts are greatly appreciated.

Thanks Board, thanks employees.


                                                   [large Goran logo]



                                      -4-

<PAGE>

                                                              [small Goran logo]
                                            MANAGEMENT'S DISCUSSION AND ANALYSIS

              [photographs of wheat down left margin]

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

         Goran Capital Inc. (the "Company" or "Goran")  underwrites  and markets
nonstandard  private  passenger  automobile  insurance and crop  insurance.  The
Company also writes third party property and casualty coverage and also provides
finite risk, stop loss and quota share reinsurance.

Acquisitions and Public Offerings

              On April 30 ,1996 the Company purchased the operations of Superior
Insurance Company for $66.6 million in cash (the  "Acquisition").  Funds for the
Acquisition  were provided from funds  affiliated  with Goldman Sachs and a bank
term loan of $48 million.  Both Goldman  Sachs and the bank term loan were taken
out in November 1997.

         On November 5, 1996, SIG issued  3,450,000  shares in an initial public
offering of 33% of its stock at $12.50 per share.

         On  November  12,  1997,  SIG issued  $135  million of Trust  Preferred
Securities at 9.50%.  The proceeds of this offering were used to buyout  Goldman
Sachs' minority interest share of the nonstandard automobile  operations,  repay
the term loan used to acquire  Superior and provide  capital to the  nonstandard
automobile division for future growth. The Preferred  Securities carry a 30 year
term  with  a  noncallable  period  of  10  years.   Distributions  are  payable
semi-annually  at a rate of 9.5% per annum with all principal  paid at maturity.
SIG also has the  ability  to forego  distributions  for  periods  of up to five
years,  although it has no intention to do so, and the Preferred Securities have
limited  covenants.  SIG  believed  the time was proper to obtain the benefit of
100% of the nonstandard automobile operations,  provide longer term financing at
favorable terms and provide additional capital for future growth.

Nonstandard Automobile Insurance Operations

         The Company,  through Pafco and Superior,  is engaged in the writing of
automobile  insurance for "nonstandard  risks".  Nonstandard  insureds are those
individuals who are unable to obtain insurance  through standard market carriers
due to factors such as poor premium payment history, driving experience,  record
of prior  accidents  or driving  violations,  particular  occupation  or type of
vehicle. Premium rates for nonstandard risks are higher than for standard risks.
Nonstandard  policies  have  relatively  short policy  periods and low limits of
liability.  Due to the low limits of  coverage,  the period of time that elapses
between the occurrence and  settlement of losses under  nonstandard  policies is
shorter than many other types of insurance. The nonstandard automobile market is
the fastest growing sector of the personal lines market.
              
Crop Insurance Operations

General

Crop  insurance  consists  of three  main  products.  Hail  insurance,  which is
controlled  by the private  insurance  industry,  receives  no subsidy  from the
government.  Multi-Peril  Crop  Insurance  ("MPCI"),  is a government  sponsored
product,  administered through the Federal Crop Insurance  Corporation ("FCIC").
Named perils  insurance  covers  farmers for risks  specific to specific  crops.
Farmers  who  purchase  insurance  receive  subsidies  to reduce  their cost and
provide  protection for major  catastrophic  loss. When a farmer wants to borrow

                                      -5-

<PAGE>

[small Goran logo]
MANAGEMENT'S DISCUSSION AND ANALYSIS


money to buy his seed, the bank wants insurance on the harvest so the bank knows
the loan can be repaid  either  through  normal  harvest or through an insurance
policy  covering the yield on the crop.  There are many types of  coverages  and
percentages that farmers can purchase. The Company works with independent agents
to meet the insurable  needs of the farmer which  includes the best coverage and
premium for the farm. The government supports this effort through commissions it
pays the Company to do this work and through  premium  subsidy for the  farmer's
insurance  costs. The government also provides back-up risk protection to the 18
or so crop insurance  providers in the event of major loss. Based on the results
for any given  year,  the  Company  and the  government  share in the results of
profit and loss.  In order to protect  IGF from the loss part of this  equation,
IGF buys third party  reinsurance  to reduce the downside from a loss year which
includes participation by Granite Re.

Certain Accounting Policies for Crop Insurance Operations

         The majority of the Company's crop insurance business consists of MPCI.
MPCI is a  government-sponsored  program with accounting treatment which differs
in certain respects from more traditional property and casualty insurance lines.
Farmers  may  purchase  "CAT  Coverage"  (the  minimum  available  level of MPCI
coverage) upon payment of a fixed administrative fee of $50 per policy (the "CAT
Coverage  Fee")  instead of a premium.  This fee is  included  in other  income.
Commissions paid to agents to write CAT policies are partially offset by the CAT
Coverage Fee. For purposes of the profit-sharing  formula under the MPCI program
referred to below,  the Company is credited  with an imputed  premium (its "MPCI
Imputed  Premium")  for  all CAT  Coverage  policies  it  sells,  determined  in
accordance with the profit-sharing  formula  established by the FCIC. For income
statement  purposes under GAAP,  Gross Premiums Written consist of the aggregate
amount of  premiums  paid by farmers  for "Buy-up  Coverage"  (MPCI  coverage in
excess of CAT Coverage),  and any related federal premium subsidies,  but do not
include any MPCI Imputed  Premium  credited on CAT  Coverage.  By contrast,  Net
Premiums  Written and Net  Premiums  Earned do not include any MPCI  Premiums or
premium  subsidies,  all of which are  deemed to be ceded to the  United  States
Government as reinsurer.  The Company's profit or loss from its MPCI business is
determined after the crop season ends on the basis of a  profit-sharing  formula
established  by  federal  regulation  and the FCIC.  For GAAP  income  statement
purposes,  any such profit or loss  sharing  earned or payable by the Company is
treated  as an  adjustment  to  commission  expense  and is  included  in policy
acquisition and general and administrative expenses. Amounts receivable from the
FCIC are reflected on the Company's  consolidated  balance sheet as  reinsurance
recoverables.

         The Company also  receives  from the FCIC (i) an expense  reimbursement
payment equal to a percentage of Gross Premiums Written for each Buy-up Coverage
policy it writes  (the  "Buy-up  Expense  Reimbursement  Payment"),  (ii) an LAE
reimbursement  payment  equal  to 13.0% of MPCI  Imputed  Premiums  for each CAT
Coverage  policy it writes  (the "CAT LAE  Reimbursement  Payment")  and (iii) a
small excess LAE Reimbursement  Payment of two hundredths of one percent (0.02%)
of MPCI  Retention to the extent the  Company's  MPCI Loss Ratios on a per state
basis exceed certain levels (the "MPCI Excess LAE Reimbursement  Payment").  For
GAAP income  statement  purposes,  the Buy-up Expense  Reimbursement  Payment is
treated as a  contribution  to income and reflected as an offset  against policy
acquisition and general and administrative  expenses.  The CAT LAE Reimbursement
Payment and the MPCI Excess LAE Reimbursement  Payment are, for income statement
purposes,  recorded as an offset  against  LAE,  up to the actual  amount of LAE
incurred by the Company in respect of such  policies,  and the  remainder of the
payment, if any, is recorded as other income.

         In 1996, the Company  instituted a policy of recognizing (i) 35% of its
estimated MPCI Gross Premiums Written for each of the first and second quarters,
(ii) commission  expense on MPCI Gross Premiums Written at contractual rates and
(iii)  Buy-up  Expense  Reimbursement  at the  contractual  rate of  MPCI  Gross
Premiums  Written along with normal  operating  expenses  incurred in connection
with  premium  writings.  In  the  third  quarter,  if a  sufficient  volume  of
policyholder  acreage  reports have been  received and processed by the Company,
the Company's  policy is to recognize MPCI Gross Premiums  Written for the first
nine months based on a re-estimate.  If an insufficient  volume of policies have
been  processed,  the  Company's  policy  is to  recognize  20% of its full year
estimate of MPCI Gross  Premiums  Written in the third  quarter.  The  remaining
amount of MPCI Gross Premiums Written is recognized in the fourth quarter,  when
all amounts are reconciled.  In prior years,  recognition of MPCI Gross Premiums
Written  was 30%,  30%,  30% and 10%,  for the first,  second,  third and fourth
quarters, respectively.  Commencing with its June 30, 1995 financial statements,
the Company also began  recognizing  MPCI  underwriting  gain or loss during the
first, second and third quarters,  reflecting the Company's best estimate of the
amount of such gain or loss to be recognized for the full year,  based on, among
other things, historical results, plus a provision for adverse developments.  In
the fourth quarter,  a reconciliation  amount is recognized for the underwriting
gain or loss based on final premium and loss information.

                                      -6-

<PAGE>

                                                              [small Goran logo]

Selected Segment Data of the Company

The  following  table  presents   historical  segment  data  for  the  Company's
nonstandard automobile and crop insurance operations. This data does not reflect
results of operations  attributable  to corporate  overhead,  interest costs and
amortization of intangibles or commercial or reinsurance  insurance  operations,
nor does it include the results of operations of Superior prior to May 1, 1996.

<TABLE>
<CAPTION>

                                                                         Year Ended December 31,
Nonstandard - Automobile Insurance Operations                         1997        1996       1995
  
<S>                                                                 <C>         <C>         <C>    
Gross premiums written                                              $323,915    $187,176    $49,005
                                                                     =======     =======     ======
  Net premiums written                                              $256,745    $186,579    $37,302
                                                                     =======     =======     ======
  Net premiums earned                                               $251,020    $168,746    $34,460
  Fee income                                                          15,515       7,578      1,787
  Net investment income                                               10,969       6,489        624
  Net realized capital gain (loss)                                     9,462     (1,014)       (508)
                                                                     -------     ------      ------
Total Revenues                                                       286,966     181,799     36,363
                                                                     -------     -------     ------
  Losses and loss adjustment expenses                                195,900     124,385     25,423
  Policy acquisition and general and administrative expenses          72,463      46,796     12,929
                                                                     -------      ------     ------
Total Expenses                                                       268,363     171,181     38,352
                                                                     -------     -------     ------
  Earnings (loss) before income taxes                                $18,603     $10,618    $(1,989)
                                                                     =======      ======     ======
GAAP RATIOS (Nonstandard Automobile Only)
  Loss ratio                                                            70.2%       65.1%      65.8%
  LAE ratio                                                              7.8%        8.6%       8.0%
  Expense ratio, net of billing fees                                    22.7%       23.2%      32.3%
                                                                        ----        ----       ----
  Combined ratio                                                       100.7%       96.9%     106.1%
                                                                       =====        ====      =====
Crop Insurance Operations:
  Gross premiums written                                            $126,401    $110,059    $70,374
                                                                     =======     =======     ======
  Net premiums written                                               $20,796     $23,013    $11,608
                                                                      ======      ======     ======
  Net premiums earned                                                $20,794     $23,013    $11,608
  Fee income                                                           4,764       1,672        384
  Net investment income                                                  191         181        674
  Net realized capital gain (loss)                                       (18)         (1)       164
                                                                       -----          --        ---
Total Revenues                                                        25,731      24,865     12,830
                                                                      ------      ------     ------
  Losses and loss adjustment expenses                                 16,185      12,724      8,629
  Policy acquisition and general and administrative expenses(1)      (11,551)     (6,095)    (7,466)
  Interest and amortization of intangibles                               235         551        627
                                                                       -----       -----      -----
Total Expenses                                                         4,869       7,180      1,790
                                                                       -----       -----     ------
  Earnings before income taxes                                       $20,862     $17,685    $11,040
                                                                      ======      ======     ======
Statutory Capital and Surplus:
  Pafco                                                              $19,924     $18,112    $11,875
  IGF                                                                 42,809      29,412      9,219
  Superior                                                            65,146      57,121     49,277

</TABLE>

(1) Negative crop expenses are caused by inclusion of MPCI expense 
reimbursements and underwriting gain.


                                      -7-

<PAGE>

[small Goran logo]
MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

Overview

1997 Compared To 1996

The Company recorded earnings from continuing operations of $15,983,000 or $2.86
per share, respectively in 1997. This is approximately a 13.1% and 7.1% increase
from 1996  comparable  amounts of $14,127,000 or $2.67 per share.  In the fourth
quarter of 1997, the Company discontinued the operations of SIGFL and expects to
sell these  operations  in 1998.  The intended  sale results from the  Company's
decision to focus on nonstandard  automobile,  crop and reinsurance  operations.
The Company recorded a loss from  discontinued  operations of $3,545,000 in 1997
compared  to  a  loss  of  $1,000,000  in  1996.  Such  increase  was  due  to a
deterioration in the loss ratio. The Company also recorded a gain of $18,169,000
in 1996 from the sale of SIG stock in its IPO. That gain is not included as part
of earnings from continuing  operations.  The nonstandard  automobile  insurance
segment demonstrated improved earnings due to continued premium growth, improved
expense ratios and higher realized gains from investment  sales.  Premium growth
in nonstandard  automobile  was generated  from increased  pressure on uninsured
motorists to obtain  insurance,  expansion into new states and increased  market
share penetration. During 1997, the Company increased reserves at Pafco for both
prior and current accident years. The total increase for prior accident years at
Pafco was approximately $7.5 million. The improvement in crop insurance earnings
relates to growth in market share and favorable underwriting results.  Growth in
market  share  occurred  in all  product  lines  for crop and is the  result  of
improved marketing and agent service efforts.  Record  underwriting  results are
due to favorable crop conditions and continued improvement in risk selection.

1996 Compared To 1995

Earnings and earnings per share from  continuing  operations  increased 97.4% to
$14,127,000  and  86.7% to  $2.67 in 1996  from  $7,157,000  and  $1.43 in 1995.
Improved earnings in 1996 were  attributable to both the nonstandard  automobile
and  crop  segments.   The  nonstandard   automobile   segment  benefitted  from
significant  premium  growth from the  acquisition  of Superior,  elimination of
quota share reinsurance and internal growth. The nonstandard  automobile segment
also  benefitted  from lower loss and  expense  ratios  due to  improved  claims
management,  introduction  of multi-tiered  products and operating  efficiencies
through   reengineering,   management   changes  and  gains  from  technological
advancements.  The crop  insurance  segment  also  benefitted  from  significant
premium growth in both crop hail and MPCI premiums. The crop insurance segment's
profitability  was  enhanced by a lower crop hail loss ratio and  improved  MPCI
underwriting gains.

Years Ended December 31, 1997 and 1996

Gross Premiums Written

         Consolidated  Gross  Premiums  Written  increased  50.0% in 1997 due to
growth in both the  nonstandard  automobile  and crop  segments.  Gross Premiums
Written for the nonstandard  automobile segment increased 73.1% in 1997. While a
portion of this increase relates to four additional months of premium in 1997 of
Superior,  additional  premium growth relates to internal growth due to improved
service, certain product improvements, tougher uninsured motorist laws in states
such as  California  and Florida and entrance into new states such as Nevada and
Oregon.  Such increase was  primarily due to volume rather than rate  increases,
although the Company adjusts rates on an ongoing basis.  Gross Premiums  Written
for the crop segment increased 14.5% in 1997. Such increase was due to continued
industry privatization and aggressive marketing efforts,  resulting in continued
increase in market share. Remaining gross written premiums represent reinsurance
business.

Net Premiums Written

         Net Premiums Written increased in 1997 as compared to 1996 due to the
growth in Gross Premiums Written offset by quota share reinsurance.

         In 1997,  the  Company  ceded  $62,412,000  of  nonstandard  automobile
premiums as part of a quota share  treaty  instituted  January 1, 1997.  For the
first three  quarters of 1997 the Company  ceded 20% of  nonstandard  automobile
premiums  and ceded 25% of such  premiums  in the  fourth  quarter.  In 1998 the
Company plans to cede 10% of nonstandard automobile premiums with adjustments as
needed for surplus leverage.  No such treaty was in effect during 1996. In 1997,
the Company ceded $15,640,000 of crop hail premiums as part of a 40% quota share
treaty  instituted  January 1, 1997. In 1996, crop hail premiums were ceded at a
rate of 10%. Granite Re participated in 10% of the nonstandard  automobile quota
share treaties but did not participate in the crop hail quota share treaties.

Net Premiums Earned

         Net  Premiums  Earned  increased in 1997 as compared to the prior year,
reflecting the strong growth in Gross Written  Premiums offset by the effects of
the  nonstandard  automobile  and crop hail quota share  treaties.  Net premiums
earned to net premiums written for the nonstandard  automobile segment was 97.8%
in 1997 as compared to 90.4% in 1996. The increase in the earned ratio is due to
higher premium growth earlier in 1997.

                                      -8-

<PAGE>

                                                              [small Goran logo]

Fee Income

         Fee  income  increased  $11,023,000  in 1997  compared  to  1996.  Such
increase was due to billing fee income on nonstandard  automobile  business from
an increase in in-force policy count.  There was also an increase in the receipt
of CAT Coverage Fees and CAT LAE  Reimbursement  Payments due to higher  premium
volume.

Net Investment Income

         Net investment  income  increased  $5,032,000 in 1997 compared to 1996.
Such increase was due primarily from additional months of investment income from
Superior but also due to greater  invested assets  resulting from premium growth
and higher profitability.

Net Realized Capital Gains (Loss)

         Realized  gains  of  $9,393,000  in 1997  were  due to the  significant
strength  of the equity  markets in 1997 and the  Company's  position to realize
gains as securities had reached targeted pricing levels.

Losses and LAE

         The Loss and LAE Ratio for the nonstandard automobile segment was 78.0%
for 1997 as  compared  to 73.7% for 1996.  The Crop Hail Loss  Ratio in 1997 was
77.8%  compared to 55.3% in 1996. The increase in the Loss and LAE Ratio for the
nonstandard  automobile  segment reflects the recent growth in premium volume in
an effort to increase  market share and improve  economies  of scale,  increased
physical damage  severity costs and certain pending rate increases.  The Company
increased  1996  and  prior  nonstandard  automobile  reserves  at Pafco by $6.0
million in the first two quarters and $1.5 million in the fourth  quarter  which
increased the Loss and LAE Ratio by 3.0% in 1997.  Deficient reserve development
at superior was  approximately  $2.5  million in 1997.  The increase in the crop
hail loss  ratio is the result of storm  damage in the third  quarter in certain
eastern  states on new  business  obtained  in 1997.  The Company  continues  to
aggressively  address ways to decrease the  nonstandard  automobile  loss ratios
including elimination of unprofitable agents, rate increases and improved claims
management and closure  rates.  The Company is also reviewing the pricing of the
crop hail business to improve future loss experience.

Policy Acquisition and General and Administrative Expenses

         Policy acquisition and general and  administrative  expenses have
increased  as a result of the  increased  volume  of  business  produced  by the
Company.  Policy  acquisition  and general and  administrative  expenses rose to
$66,197,000 or 23.9% of Net Premiums  Earned for 1997 compared to $48,647,000 or
23.3% of Net Premiums  Earned in 1996. The Expense  Ratio,  net of billing fees,
for the nonstandard automobile segment improved to 22.7% for 1997 as compared to
23.2% for 1996.

         Due to  the  accounting  for  the  crop  insurance  segment,  operating
expenses for 1997 includes a contribution to earnings of $11,551,000 as compared
to  $6,095,000  for  1996.  Such  increase  was due to  greater  Buy-up  Expense
Reimbursement  Payments  and MPCI  underwriting  gain due to  increased  premium
volumes and more favorable underwriting results.

         Amortization of intangibles  includes  goodwill from the acquisition of
Superior,  additional  goodwill from the  acquisition  of the minority  interest
position in GGSH, debt or preferred  security issuance costs and  organizational
costs.  The increase in 1997  reflects the effects of the  Preferred  Securities
Offering.

Interest Expense

         Interest expense primarily represents interest incurred since April 30,
1996 on the GGS Senior  Credit  Facility.  The GGS Senior  Credit  Facility  was
repaid with the proceeds from the Preferred Securities Offering.

Income Tax Expense

         Income  tax  expense  was  30.6%  of  pre-tax  income  from  continuing
operations for 1997 as compared to 32.2% in 1996.

Distributions on Preferred Securities

         Distributions on Preferred  Securities are calculated at a rate of 9.5%
net of federal income taxes from the offering date of August 12, 1997.

Years Ended December 31, 1996 and 1995

Gross Premiums Written

         Gross  Premiums   Written  in  1996  increased  to  $299,376,000   from
$146,603,000  in 1995  reflecting  a 282%  increase  in  nonstandard  automobile
insurance  and an increase  of 56.4% in crop  insurance.  Other  Gross  Premiums
Written  consist of finite  reinsurance  premiums.  The increase in  nonstandard
automobile Gross Premiums  Written was due to the  Acquisition,  which generated
Gross Premiums Written of $118,661,000 subsequent to the Acquisition, as well as
a 21%  increase  in policies  in-force  issued by Pafco.  The  increase in Pafco
policies  in-force   primarily   resulted  from  improved  service  and  product
improvements.  The  increase  in  crop  insurance  Gross  Premiums  Written  was
primarily due to (i) farmers electing higher  percentage of crop price levels to
be insured  under MPCI  Buy-up  Coverages,  (ii) an  increase  in MPCI  policies
in-force,  and (iii) increase in the number of acres  insured,  together with an
increase of  $10,990,000,  or 64.8%,  in crop hail  premiums in 1996 compared to
1995.

Net Premiums Written

         The  Company's  Net  Premiums  Written  in  1996  increased  161.3%  to
$213,778,000  from $81,822,000 in 1995 due to the  Acquisition,  which generated

                                      -9-

<PAGE>

[small Goran logo]
MANAGEMENT'S DISCSUSSION AND ANALYSIS

Net Premiums Written for Superior of $118,298,000 subsequent to the Acquisition,
and the increase in Gross  Premiums  Written in Pafco's  nonstandard  automobile
insurance business.  In addition,  the increase in Net Premiums Written resulted
from the Company's  election not to renew,  as of January 1, 1996, its 25% quota
share  reinsurance  on its  nonstandard  automobile  business.  As a  result  of
increases over time in its statutory capital,  the Company determined that it no
longer  required the additional  capacity  provided by this coverage in order to
maintain  acceptable  premium to surplus  ratios.  Since all MPCI  premiums  are
reported  as 100%  ceded,  MPCI  Gross  Premiums  Written  have no effect on Net
Premiums Written.

Net Premiums Earned

         The Company's Net Premiums Earned in 1996 increased  188.1%  reflecting
the increase in Net Premiums  Written.  The ratio of Net Premiums  Earned to Net
Premiums  Written in 1996 increased to 97.7% from 88.7% in 1995 due to growth in
Net Premiums Written in 1996 exceeding growth in Net Premiums Written in 1995.

Fee Income

         The Company's fee income in 1996  increased  327.9% due  principally to
(i) billing fee revenue of $4,655,000 at Superior subsequent to the Acquisition,
(ii)  increased  billing  fee  revenue  at Pafco of  $998,000  from  nonstandard
automobile  insurance  policies,  resulting  from the  increase in the  in-force
policy count described above, and an increase in fees charged per installment in
late 1995,  and (iii)  increased  CAT  Coverage  Fees and CAT LAE  Reimbursement
Payments  resulting from the  introduction  of CAT Coverages in the Federal Crop
Insurance Reform Act of 1994 (the "1994 Reform Act").

Net Investment Income

         The Company's net  investment  income in 1996  increased  100.2%.  This
increase was due primarily to the investment  earnings of $4,996,000 at Superior
subsequent  to  the  Acquisition.  Also  contributing  to  the  increase  in net
investment  income is an increase in average  invested assets in the nonstandard
automobile  division  (not  including  Superior)  to  $30,911,000  in 1996  from
$22,653,000 in 1995.

Net Realized Capital Gain (Loss)

         The  Company  recorded  a net  realized  capital  loss from the sale of
investments of $637,000 in 1996 compared to a net realized capital loss from the
sale of investments  of $198,000 in 1995. The net realized  capital loss in 1996
was the  result  of sales of  securities  to  shorten  the  portfolio's  overall
maturity to provide a better duration match with claims payments.

Losses and LAE

         The Loss and LAE Ratio for the nonstandard  automobile  segment in 1996
was 73.7% as compared to 73.8% in 1995.  The reduction in the Loss and LAE Ratio
for 1996 was a function of rate  increases and improved  claim  closure  ratios.
Crop hail loss ratios  decreased in 1996 to 55.3% from 74.3% in 1995 due to more
favorable  weather  conditions  and a broader  geographic  expansion of premiums
which serves to reduce exposure.

Policy Acquisition and General and Administrative Expenses

         The  Expense  Ratio  for the  nonstandard  automobile  segment,  net of
billing fees  decreased to 23.2% in 1996 from 32.3% in 1995.  This  decrease was
due to several  factors  including:  (i) lower  commission  expense at  Superior
through  utilization  of  multi-tier  products,  (ii) lower staff  expenses as a
result  of  higher   utilization  and  work  flow   re-engineering,   and  (iii)
technological  advancements in the underwriting,  premium  processing and claims
areas.  As a result  of the  accounting  for the crop  insurance  segment,  such
segment experienced a contribution to income reflected in the policy acquisition
and general and administrative  expense line item of $6,095,000 in 1996 compared
to a contribution to income of $7,466,000 in 1995. This decrease in contribution
resulted from a combination of several  factors.  The primary  difference is the
decrease in ceding  commission  income of $2,036,000  which is due to only a 10%
quota  share  agreement  for crop hail in 1996 versus a 25% quota share in 1995.
Other items include a commission  expense  increase of $6,217,000  due to higher
premium writings and an increase in other operating expenses of $4,153,000. This
net increase in expense of $10,370,000  was reduced by an increase of $8,490,000
in Buy-up Expense Reimbursement and an increase in the MPCI underwriting gain of
$2,624,000.

Interest Expense

         The Company's  interest  expense in 1996  increased to $4,961,000  from
$1,761,000  in 1995 due  primarily to interest of  $2,774,000 on the $48 million
indebtedness  incurred by a subsidiary of GGSH to partially fund the Acquisition
(the "GGS Senior Credit Facility").

Income Tax Expense

         The effective tax rate in 1996 reflects a 32.2% provision compared to a
25.8%  provision in 1995. The increase in the effective tax rate is due to lower
tax-exempt interest income.


                                      -10-

<PAGE>

                                                              [small Goran logo]

Symons International Group, Inc. - Florida ("SIGF")

         Goran's  wholly-owned  subsidiary,  Symons  International Group, Inc. -
Florida is a specialized surplus lines underwriting unit. The Company decided to
discontinue  the  operations  of this  unit in 1997 and  expects  a sale of this
operation  to  occur  in 1998.  Such  operations  no  longer  fit the  Company's
strategic   operating  plan  of  concentrating  on  the  business   segments  of
nonstandard automobile,  crop and reinsurance.  Goran wrote third party property
and casualty  coverage  using Pafco,  IGF and other  insurance  companies  under
contract  with SIGF.  The volume of business grew by 15.7% to $9,560,000 in 1997
compared to $8,258,000 in 1996 and $5,414,000 in 1995, however, the underwriting
profits  continued to deteriorate in 1997.  SIGF produced an overall loss to the
Company of  $3,545,000  in 1997 compared to $1,000,000 in 1996 and compared to a
profit of $14,000 for 1995.

Non-U.S. Operations

Granite Insurance Company ("Granite")

         Granite is a Canadian  federally  licensed  insurance  company which is
presently servicing its investment  portfolio and a very few outstanding claims.
Granite  stopped  writing  business  on  December  31, 1989 and sold its book of
Canadian business in June 1990. The outstanding claims continue to be settled in
accordance with actuarial  estimates with some deficiencies  showing in the most
recent year. Granite's invested assets reduced to $3.4 million from $4.5 million
in 1996.  This is the result of the  administration  and  settlement  of claims.
Total outstanding  claims decreased to $1.3 million in 1997 from $1.9 million in
1996.  It is expected  that the run-off of  outstanding  claims will continue at
least until 1998.  Granite recorded a net loss of $261,000 in 1997,  compared to
$50,000  earnings in 1996 and $200,000  earnings in 1995.  This is reflective of
the reduction in investment income.

Granite Reinsurance Company Limited ("Granite Re")

         Granite  Re is  managed  by  Atlantic  Security  Ltd.  of  Bermuda  and
Colybrand in Barbados. Granite Re underwrites finite risk reinsurance, stop loss
reinsurance and quota share  reinsurance.  This  reinsurance  involves a defined
maximum risk at the time of entering into a contract. Granite Re participates in
various programs in Bermuda, the United States and Canada. On December 31, 1995,
its Canadian quota share  terminated and is now in run -off which is expected to
yield investment  revenue and underwriting gains for the next five to six years.
The loss portfolio transfer program implemented on June 30, 1990, is now winding
down in  accordance  with  management's  forecast  and is  producing  profits as
anticipated. During 1997, 1996 and 1995, Granite Re participated in certain stop
loss programs for Goran's crop insurance  subsidiary,  IGF. These covers were in
accordance  with third party  placements  where  Granite Re took a portion after
terms having been established by substantial  third party  reinsurers.  In 1997,
Granite Re participated in Goran's  nonstandard  automobile  subsidiaries  quota
share treaty.  On January 1, 1996, it assumed all of the outstanding  losses and
the  book of  business  of  Pafco's  premium  writings  from the  surplus  lines
operation  in  Florida,  which is expected  to be sold in 1998.  Gross  premiums
written  during the 12 months ended November 30, 1997 (Granite Re has a year-end
different  from Goran)  were $10.5  million  compared  to $12.3  million for the
corresponding  period  in 1996 and $34.8  million  in 1995.  Earnings  were $2.3
million, $2.6 million and $4.0 million in 1997, 1996 and 1995, respectively.

         Total  capital and surplus of Granite Re increased to $18.0  million in
1997 from $15.8 million in 1996.  Granite Re initially started July 1, 1990 with
a capital base of  $825,000.  Granite Re intends to continue to broaden its base
to include captive reinsurance, finite reinsurance, and its existing programs as
outlined above.

         The  programs  currently  underwritten  by Granite  Re  generate a loss
portfolio that is matched with cash and investments.  Such portfolios take about
eight  to  nine  years  to  run-off,  thus  generating  investment  returns  and
underwriting  gains and losses  during  the life of the  run-off.  New  business
underwritten  is added to the  portfolio  of  outstanding  losses  and  invested
assets,  thus  perpetuating  the growth of Granite Re through  fees,  investment
income and underwriting profits.

Liquidity and Capital Resources

         The primary sources of funds available to Goran are from the management
fee  arrangements  with Granite.  At this time SIG pays no dividends to Goran or
any of its  shareholders.  The  primary  source of funds  available  to SIG as a
holding company are dividends from its primary  subsidiaries,  IGF, IGF Holdings
and  GGS  Management.  SIG  also  receives  $150,000  quarterly  pursuant  to an
administration  agreement  with IGF to cover the costs of executive  management,
accounting, investing, marketing, data processing and reinsurance.

         GGS Management  collects billing fees charged to policyholders of Pafco
and  Superior  who elect to make their  premium  payments in  installments.  GGS
Management  also receives  management  fees under its management  agreement with
Pafco  and  Superior.   When  the  Florida  Department  of  Insurance  ("Florida

                                      -11-

<PAGE>

[small Goran logo]
MANAGEMENT'S DISCUSSION AND ANALYSIS


Department") approved the acquisition of Superior by GGS Holdings, it prohibited
Superior from paying any dividends (whether extraordinary or not) for four years
from the date of Acquisition  without the prior written  approval of the Florida
Department. Extraordinary dividends, within the meaning of the Indiana Insurance
Code,  cannot  be paid by  Pafco  without  the  prior  approval  of the  Indiana
Insurance Commissioner. The management fees charged to Pafco and Superior by GGS
Management  are  subject to review by the Indiana  and  Florida  Departments  of
Insurance.

         The nonstandard  automobile insurance  subsidiaries' primary sources of
funds are premiums,  investment income and proceeds from the maturity or sale of
invested  assets.  Such funds are used  principally  for the  payment of claims,
operating expenses (primarily management fees),  commissions,  dividends and the
purchase  of  investments.  There is  variability  to cash  outflows  because of
uncertainties  regarding  settlement  dates for  liabilities  for unpaid losses.
Accordingly,  the  Company  maintains  investment  programs  intended to provide
adequate  funds to pay claims  without  forced  sales of  investments.  As claim
payments  tend to lag premium  receipts and due to the growth in premium  volume
the Company has experienced an increase in its investment  portfolio and has not
experienced  any problems with meeting its  obligations  for claims  payments or
management fees.

         As of December  31,  1997,  IGF has the ability to pay  $13,404,000  in
dividends without prior regulatory approval.

         Cash flows in the Company's  MPCI business  differ from cash flows from
certain more  traditional  lines.  The Company pays insured losses to farmers as
they are  incurred  during  the  growing  season,  with the full  amount of such
payments being reimbursed to the Company by the federal  government within three
business  days.  MPCI premiums are not received from farmers until covered crops
are harvested.  Such premiums are required to be paid in full to the FCIC by the
Company, with interest, if not paid by a specified date in each crop year.

         During 1997,  IGF  continued  the  practice of borrowing  funds under a
revolving line of credit to finance  premiums payable to the FCIC on amounts not
yet received from farmers (the "IGF  Revolver").  The maximum  borrowing  amount
under the IGF  Revolver  was  $6,000,000  until July 1, 1996,  at which time the
maximum  borrowing  amount  increased to $7,000,000.  The IGF Revolver carried a
weighted  average interest rate of 9.7%, 8.6%, and 8.75% in 1995, 1996 and 1997,
respectively. These payables to the FCIC accrue interest at a rate of 15%, as do
the  receivables  from  farmers.  By  utilizing  the IGF  Revolver,  which bears
interest  at a  floating  rate  equal to the prime  rate plus  .25%,  IGF avoids
incurring  interest  expense at the rate of 15% on interest  payable to the FCIC
while  continuing to earn 15% interest on the  receivables  due from the farmer.
Subsequent to December 31, 1997, IGF had reduced its contractual  borrowing rate
to prime minus .75%. The IGF Revolver  contains certain covenants which restrict
IGF's ability to (i) incur indebtedness and (ii) make loans to others, including
affiliates.  The IGF Revolver also contains  other  customary  covenants  which,
among other things,  restricts IGF's ability to participate in mergers,  acquire
another  enterprise or participate in the  organization or creation of any other
business entity.  At December 31, 1997,  $2,918,000  remains available under the
IGF Revolver.

         On August  12,  1997,  SIG  issued  $135  million  in Trust  Originated
Preferred  Securities (the  "Preferred  Securities  Offering").  These Preferred
Securities were offered through a wholly-owned  trust  subsidiary of SIG and are
backed  by Senior  Subordinated  Notes to the Trust  from SIG.  These  Preferred
Securities  were  offered  under  Rule  144A of the  SEC  and,  pursuant  to the
Registration  Rights  Agreement  executed  at  closing,  SIG  filed  a Form S- 4
Registration Statement with the SEC on September 16, 1997 to effect the Exchange
Offer.  The S-4 Registration  Statement was declared  effective on September 30,
1997 and the  Exchange  Offer  successfully  closed on  October  31,  1997.  The
proceeds  of the  Preferred  Securities  Offering  were used to  repurchase  the
remaining  minority  interest in GGSH for $61 million,  repay the balance of the
GGS Senior Credit  Facility of $44.9  million and SIG expects to contribute  the
balance,  after  expenses,  of  approximately  $24  million  to the  nonstandard
automobile  insurers of which $10.5 million was contributed in 1997. Expenses of
the issue  aggregated  $5.1 million and will be  amortized  over the term of the
Preferred  Securities  (30  years).  In the  third  quarter  SIG  wrote  off the
remaining  unamortized  costs of the GGS Senior Credit Facility of approximately
$1.1  million  pre-tax or  approximately  $0.09 per share after income taxes and
minority interest.

         The  Preferred  Securities  have a term of 30  years  with  semi-annual
distribution  payments  at 9.5% per annum  commencing  February  15,  1998.  The
Preferred Securities may be redeemed in whole or in part after 10 years.

         SIG shall not, and shall not permit any  subsidiary,  to incur directly
or indirectly,  any  indebtedness  unless,  on the date of such incurrence ( and
after giving effect thereto),  the consolidated coverage ratio exceeds 2.5 to 1.
The coverage  ratio is the  aggregate of net earnings,  plus  interest  expense,
income taxes,  depreciation and amortization divided by interest expense for the
same period.

         The Company plans to fund the distributions on the Preferred Securities
from the excess  management  and billing fees which are paid by the  nonstandard
automobile insurers to their management company. The Company believes such funds
are  adequate  to pay the  distributions  on the  Preferred  Securities  for the
forseeable  future.  Additionally,  the Company has available  dividend capacity
from IGF to also meet this funding.

                                      -12-

<PAGE>

                                                              [small Goran logo]
             [photograph of cars on freeway down right margin]

         Net  cash  provided  by  operating   activities   in  1997   aggregated
$14,027,000  compared to $12,728,000  in 1996,  excluding the sale of subsidiary
stock in 1996 of  $18,169,000.  This  increase in funds  provided  was caused by
additional cash of $15,508,000 from net earnings  adjusted for non-cash expenses
and realized  gains or losses and  continued  premium  growth  which  results in
increased cash flows as loss payments lag receipt of premiums.  Net cash used in
investing  activities increased from $80,482,000 in 1996 to $100,208,000 in 1997
reflecting  investment  of  remaining  proceeds  from the  Preferred  Securities
Offering and cash flow from operations.  In 1997,  financing activities provided
cash of $89,007,000 compared to cash provided of $72,703,000 in 1996, with funds
in 1997 primarily from the Preferred Securities Offering while funds provided in
1996 were primarily from the financing of the acquisition of Superior.

         Net cash provided by operating  activities in 1996 was  $30,897,000
compared to $9,637,000 in 1995 for an increase of $21,260,000. This increase was
due to the $18,169,000  gain from the SIG IPO as well as improved  profitability
and growth in written  premiums.  Loss  payments in the  nonstandard  automobile
insurance  business tend to lag behind  receipt of premiums thus  providing cash
for operations.  Net cash used in investing activities increased from $5,673,000
in 1995 to $80,482,000 in 1996.  Included in 1996 was a $66,590,000  use of cash
for the Acquisition. The remaining increase in cash used in investing activities
in 1996 related to the growth in  investments  due to increased cash provided by
operating  activities.  The primary items  comprising  the  $72,703,000  of cash
provided by financing  activities in 1996 were the  $48,000,000 of proceeds from
the  GGS  Senior  Credit  Facility,  $21,200,000  minority  interest  investment
received  as part of the  formation  of GGS  Holdings  and  the  funding  of the
Acquisition and $37,969,000 of proceeds from the Initial Public Offering.

         The Company believes cash flows in the nonstandard  automobile  segment
from  premiums,  investment  income and billing fees are sufficient to meet that
segment's obligations to policyholders,  operating expenses and debt service for
the foreseeable future. This is due primarily to the lag time between receipt of
premiums  and  claims  payments.  Therefore,  the  Company  does not  anticipate
additional   borrowings  for  this  segment  other  than  in  the  event  of  an
acquisition.  The Company  also  believes  cash flows in the crop  segment  from
premiums  and  expense  reimbursements  are  sufficient  to meet  the  segment's
obligations for the foreseeable  future.  Due to the more seasonal nature of the
crop segment's  operations,  it may be necessary to obtain short term funding at
times during a calendar  year by drawing on an existing  line of credit.  Except
for this short term  funding  and normal  increases  therein  resulting  from an
increase  in the  business  in  force,  the  Company  does  not  anticipate  any
significant  short or long term  additional  borrowing  needs for this  segment.
Accordingly,  while  there  can be no  assurance  as to the  sufficiency  of the
Company's cash flow in future periods,  the Company  believes that its cash flow
will be  sufficient  to meet all of the  Company's  operating  expenses and debt
service  for  the  foreseeable  future  and,  therefore,   does  not  anticipate
additional borrowings except as may be necessary to finance acquisitions.

         While GAAP  shareholders'  equity was $60,332,000 at December 31, 1997,
it does not reflect the  statutory  equity upon which the Company  conducts  its
various insurance operations. Pafco, Superior and IGF individually had statutory
surplus at  December  31,  1997 of  $19,924,000,  $65,146,000  and  $42,809,000,
respectively.

                                      -13-


<PAGE>

[small Goran logo]
MANAGEMENT'S DISCUSSION AND ANALYSIS

Effects of Inflation

         Due to the short term that  claims are  outstanding  in the two product
lines the Company underwrites, inflation does not pose a significant risk to the
Company.

Primary Differences Between GAAP and SAP

         The  financial  statements  contained  herein  have  been  prepared  in
conformity with Generally Accepted  Accounting  Principles ("GAAP") which differ
from  statutory   accounting  practices  ("SAP")  prescribed  or  permitted  for
insurance  companies by regulatory  authorities in the following  respects:  (i)
certain assets are excluded as "Nonadmitted Assets" under statutory  accounting;
(ii) costs incurred by the Company  relating to the  acquisition of new business
are  expensed  for  statutory  purposes,  (iii) the  investment  in wholly owned
subsidiaries is consolidated for GAAP rather than valued on the statutory equity
method.  The net  income  or loss  and  changes  in  unassigned  surplus  of the
subsidiaries  is  reflected  in net income for the period  rather than  recorded
directly to unassigned surplus,  (iv) fixed maturity investments are reported at
amortized cost or market value based on their National  Association of Insurance
Commissioners  ("NAIC") rating; (v) the liability for losses and loss adjustment
expenses and  unearned  premium  reserves  are  recorded net of their  reinsured
amounts for statutory  accounting  purposes,  (vi) deferred income taxes are not
recognized on a statutory  basis and (vii) credits for  reinsurance are recorded
only to the extent considered realizable.

New Accounting Standards

         The  NAIC  is  considering  the  adoption  of a  recommended  statutory
accounting  standard for crop insurers,  the impact of which is uncertain  since
several  methodologies  are  currently  being  examined.  Although  the  Indiana
Department  has permitted the Company to continue,  for its statutory  financial
statements  through March 31, 1998,  its practice of recording its MPCI business
as 100% ceded to the FCIC with net  underwriting  results  recognized  in ceding
commissions,  the Indiana  Department  has indicated  that in the future it will
require the Company to adopt the MPCI  accounting  practices  recommended by the
NAIC or any similar  practice  adopted by the Indiana  Department.  Since such a
standard  would be adopted  industry wide for crop  insurers,  the Company would
also be required to conform its future GAAP financial  statements to reflect the
new MPCI statutory  accounting  methodology  and to restate all historical  GAAP
financial  statements  consistent with this methodology for  comparability.  The
Company  cannot  predict  what   accounting   methodology   will  eventually  be
implemented or when the Company will be required to adopt such methodology.  The
Company  anticipates  that any such new  crop  accounting  methodology  will not
affect GAAP net earnings.

         The NAIC  currently  has a project under way to codify SAP, as existing
SAP does not address all  accounting  issues and may differ from state to state.
Upon completion, the codification is expected to replace prescribed or permitted
SAP in each state as the new  comprehensive  statutory  basis of accounting  for
insurance  companies.  The final format of the codification is uncertain at this
time, yet  implementation  could be required as early as January 1, 1999. Due to
the project's  uncertainty,  the Company has not yet  quantified  the impact any
such  changes  would have on the  statutory  capital  and  surplus or results of
operations of the Company's insurance subsidiaries.  The impact of adopting this
new comprehensive statutory basis of accounting may, however,  materially impact
statutory capital and surplus.

Impact of the Year 2000 Issue

              The Year 2000  issue is the  result  of  computer  programs  being
written using two digits rather than four to define the  applicable  year.  This
could result in recognizing data using "00" as 1900 rather than 2000 which could
result in system failures or miscalculations.  This could create a disruption in
business activities.

         The  Company's  nonstandard  automobile  operations  have  been  in the
process of developing a completely new array of information technology services.
During 1998 the Company will be testing and  implementing  these new systems and
expects to be fully  operational with these new systems in 1998. The new systems
will be  completely  Year 2000  compliant.  However,  the  intention  of the new
systems was to improve  transaction  processing and the Company's  expense ratio
rather than any Year 2000 issue.  The  Company  has  expended  most of the funds
necessary for  implementation  of these new systems prior to January 1, 1998 and
does not expect expenditures in 1998 to be material.

         The  Company's  crop  operations  have  been  implementing  changes  to
incorporate  Year 2000 concerns for the past two years and expect  completion of
such efforts in 1998.  Expenditures for these changes have not been material and
are not expected to be material in the future.

         While  implementation  of these new  systems  or  changes  to  existing
systems carries risks that  modifications will need to be made in order for them
to be  completely  effective,  the  Company  believes  at this  time  that  such
modifications  will  not  require  material  funds  and  will  not be  extensive
subsequent to December 31, 1998. There is no assurance that such systems will be
implemented without a disruption to the Company's operations.

                                      -14-

<PAGE>

                                                              [small Goran logo]
                                               CONSOLIDATED FINANCIAL STATEMENTS
                                                               As at December 31
                           (in thousands of U.S. dollars, except per share data)
                                                     CONSOLIDATED BALANCE SHEETS

<TABLE>


<CAPTION>
ASSETS                                                          1997      1996

<S>                                                           <C>       <C>     
Cash and investments (note 5)                                 $247,124  $202,666
                                                               -------   -------

Accounts Receivable

  Premiums receivable                                           89,762    63,874

  Due from insurance companies                                  13,782    33,905

  Due from associated companies                                  1,442       140

  Accrued and other receivables                                  2,658     3,330
                                                               -------   -------
                                                               107,644   101,249

  Reinsurance recoverable on outstanding claims                 94,424    33,113

  Prepaid reinsurance premiums                                  36,607    14,983

  Capital assets (note 6)                                       12,230     8,181

  Deferred policy acquisition costs                             11,849    13,860

  Deferred income taxes                                          2,098       974

  Intangibles (note 7)                                          42,562     4,089

  Other assets                                                   6,310     2,227
                                                                -------  -------

                                                              $560,848  $381,342
                                                               =======   =======

LIABILITIES

Accounts Payable

  Due to insurance companies                                   $37,350    $5,755

  Accrued and other payables                                    27,266    21,051
                                                               -------   -------
                                                                64,616    26,806

Outstanding claims (notes 2(e) and 4)                          152,871   127,045

Unearned premiums (note 4)                                     118,616    91,207

Bank loans (note 8)                                              4,182    48,000
                                                               -------   -------
                                                               340,285   293,058
                                                               -------   -------

Minority interest:

  Equity in net assets of subsidiaries                          25,231    41,026

  Preferred Securities (note 3)                                135,000       ---
                                                               -------   -------

                                                               160,231    41,026
                                                               -------   -------
Contingent liabilities and commitments (note 12)

SHAREHOLDERS EQUITY                                             60,332    47,258
                                                               -------   -------

                                                              $560,848  $381,342
                                                               =======   =======
</TABLE>

See accompanying notes to Consolidated Financial Statements

Approved on behalf of the board


/s/                                 /s/
Director                            Director

                                      -15-

<PAGE>


[small Goran logo]
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31
(in thousands of U.S. Dollars, except per share data)
CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>

<CAPTION>


REVENUE                                                        1997       1996      1995

<S>                                                          <C>        <C>       <C>     
Gross premiums written                                       $448,982   $299,376  $146,603
                                                              =======    =======   =======
Net premiums written                                         $281,896   $213,778   $81,822
                                                              =======    =======    ======
Net premiums earned                                          $276,540   $208,883   $72,530

Fee income                                                     20,309      9,286     2,170

Net investment income                                          12,777      7,745     3,868

Net realized capital gains (losses)                             9,393       (637)     (198)
                                                              -------    -------    ------
Total Revenue                                                 319,019    225,277    78,370
                                                              -------    -------    ------
EXPENSES

Net claims incurred                                           210,634    146,274    51,453

Commissions and operating expenses (note 14)                   66,197     48,647    15,502

Amortization of intangibles                                     1,197        411       ---

Interest expense                                                3,087      4,961     1,761
                                                              -------    -------    ------
Total Expenses                                                281,115    200,293    68,716
                                                              -------    -------    ------
Earnings before undernoted items                               37,904     24,984     9,654

Provision for income taxes (note 10)                           11,596      8,056     2,497

Preferred security distributions, net of tax                    3,120        ---       ---

Minority interest                                               7,205      2,801       ---
                                                               ------     ------     -----
Earnings from continuing operations                            15,983     14,127     7,157

Net earnings (loss) from discontinued operations
 (note 3)                                                      (3,545)    (1,000)       14

Gain on sale of subsidiary stock (note 3)                         ---     18,169       ---
                                                              -------     ------     -----
Net earnings                                                  $12,438    $31,296    $7,171
                                                               ======     ======     =====

Earnings per share from continuing operations                   $2.86      $2.67     $1.43

Earnings per share from continuing operations -
   fully diluted                                                $2.70      $2.48     $1.24

Net earnings per share                                          $2.22      $5.92     $1.43

Net earnings per share - fully diluted                          $2.12      $5.28     $1.24
                                                                 ====       ====      ====

</TABLE>

See accompanying Notes to Consolidated Financial Statements


                                      -16-

<PAGE>


                                                              [small Goran logo]
                                               CONSOLIDATED FINANCIAL STATEMENTS
                                                 For the years ended December 31
                           (in thousands of U.S. Dollars, except per share data)
                      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


<TABLE>

<CAPTION>
                                  Capital                    Cumulative     Retained        Total
                                   Stock      Contributed   Translation     Earnings     Shareholders'
                                 (Note 9)       Surplus      Adjustment     (Deficit)       Equity

<S>                            <C>            <C>            <C>           <C>            <C>
Balance at December 31,
1995                           $16,817,000    $      ---     $(300,000)    $(3,895,000)   $12,622,000

Issuance of common shares          599,000           ---           ---             ---        599,000

Increase in contributed
surplus                                ---     2,775,000           ---             ---      2,775,000

Change in cumulative
translation adjustment                 ---           ---       (34,000)            ---        (34,000)

Net earnings                           ---           ---           ---      31,296,000     31,296,000
                                ----------     ---------       -------      ----------     ----------
Balance at December 31,
1996                            17,416,000     2,775,000      (334,000)     27,401,000     47,258,000

Issuance of common shares          594,000           ---           ---             ---        594,000

Change in cumulative
translation adjustment                 ---           ---        42,000             ---         42,000

Net earnings                            ---          ---           ---      12,438,000     12,438,000
                                -----------    ---------       -------      ----------     ----------
Balance at December 31,
1997                           $18,010,000    $2,775,000     $(292,000)    $39,839,000    $60,332,000
                                ==========     =========       =======      ==========     ==========

</TABLE>

See accompanying Notes to Consolidated Financial Statements

                                      -17-
                                                           
<PAGE>


[small Goran logo]
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31
(in thousands of U.S. Dollars, except per share data)
CONSOLIDATED STATEMENTS OF CHANGES IN CASH RESOURCES

<TABLE>

<CAPTION>


                                                         1997      1996        1995

<S>                                                     <C>        <C>        <C>   
Cash provided by (used in):

Operating activities

  Net earnings                                          $12,438    $31,296    $ 7,171

  Items not involving cash:

    Amortization                                          5,258      2,438        693

    Minority interest share in net earnings               7,205      2,801        (16)

    Loss (gain) on sale of investments                   (9,393)       637        198

    Gain on sale of capital assets                          ---         (4)        (7)
                                                        -------     ------     ------
  Working capital provided by operating activities       15,508     37,168      8,039

  Changes in working capital relating to operations
  (note 15)                                              (1,481)    (6,271)     1,598
                                                        -------     ------     ------
                                                         14,027     30,897      9,637
                                                        -------     ------     ------
Financing activities

  Proceeds from issuance of preferred securities        129,877        ---        ---

  Repayment of debentures                                   ---    (11,085)    (1,462)

  Proceeds from (repayment of) bank loans               (43,818)    42,189        220

  Proceeds from consolidated subsidiary minority
  interest owners                                         2,354     41,000        ---

  Issue of share capital                                    594        599        303
                                                        -------     ------     ------
                                                         89,007     72,703       (939)
                                                        -------     ------     ------
Investing activities

  Purchase of minority interest                         (61,000)       ---        ---

  Acquisition of Superior                                   ---    (66,590)       ---

  Net purchase of marketable securities                 (34,535)   (11,996)    (4,147)

  Net purchase of capital assets                         (5,803)    (2,459)    (1,681)

  Other, net                                              1,130        563        155
                                                        -------     ------     ------
                                                       (100,208)   (80,482)    (5,673)
                                                        -------     ------     ------
Increase in cash resources during the year                2,826     23,118      3,025

Cash resources, beginning of year                        33,731     10,613      7,588
                                                        -------     ------     ------
Cash resources, end of year                             $36,557    $33,731    $10,613
                                                        =======     ======     ======
Cash resources are comprised of:

  Cash                                                  $13,324    $ 4,679    $ 4,171
  Short-term investments                                $23,233     29,052      6,442
                                                        -------     ------     ------
                                                        $36,557    $33,731    $10,613
                                                        =======     ======     ======

</TABLE>

See accompanying Notes to Consolidated Financial Statements

                                      -18-

<PAGE>

                                                              [small Goran logo]
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                      December 31, 1997 and 1996
                 (in thousands of U.S. dollars, except share and per share data)

1.  ORGANIZATION

Goran Capital Inc. ("Goran" or the "Company") is the parent company of the Goran
group of companies.  The consolidated  financial statements include the accounts
of all subsidiary companies of Goran, as follows:

1. Symons  International Group, Inc. ("SIG") is a 67% owned subsidiary of Goran.
SIG is primarily  involved in the sale of nonstandard  automobile  insurance and
crop  insurance.  Its  products  are  marketed  through  independent  agents and
brokers, in 38 states, primarily in the Midwest and Southern United States.

SIG's wholly-owned subsidiaries are as follows:

  GGS Management Holdings, Inc. ("GGSH") - a holding company for the nonstandard
  automobile operations which includes GGS Management, Inc., Pafco General
  Insurance Company and the Superior Insurance Company entities;

  GGS Management, Inc. ("GGS") - a management company for the nonstandard
  automobile operations domiciled in Delaware;

  Superior Insurance Company ("Superior") - an insurance company domiciled in
  Florida;

  Superior American Insurance Company ("Superior American") - an insurance
  company domiciled in Florida;

  Superior Guaranty Insurance Company ("Superior Guaranty") - an insurance
  company domiciled in Florida;

  Pafco General Insurance Company ("Pafco") - an insurance company domiciled in
  Indiana; and

  IGF Holdings, Inc. ("IGFH") - a holding company for the crop operations which
  includes IGF Insurance Company ("IGF") - an insurance company domiciled in
  Indiana.

2. Granite  Reinsurance  Company Ltd. ("Granite Re") - a finite risk reinsurance
company based in Barbados.

3.  Granite  Insurance  Company  ("Granite")  - a  Canadian  federally  licensed
insurance  company  which ceased  writing new  insurance  policies on January 1,
1990.

4. Symons  International  Group,  Inc. of Ft.  Lauderdale,  Florida ("SIGF") - a
Florida based surplus lines insurance agency. (See Note 3.)

On January 31, 1996,  Goran and SIG entered  into an  agreement  with GS Capital
Partners II, L.P.  ("Goldman Sachs") to create a company,  GGSH, to be owned 52%
by SIG and 48% by Goldman Sachs. GGSH created GGS, a management  company for the
nonstandard   automobile  operations  which  includes  Pafco  and  the  Superior
entities.  (See Note 3.)

On April 30,  1996,  GGSH  acquired  the  Superior  entities  through a purchase
business combination.  The Company's  consolidated results of operations for the
year ended  December 31, 1996 include the results of  operations of the Superior
entities  subsequent to April 30, 1996, the date of the  acquisition.  (See Note
3.)

On August 12, 1997, SIG acquired the 48% minority  interest in GGSH from Goldman
Funds through a purchase business combination. (See Note 3.)

                                      -19-
        

<PAGE>

[small Goran logo]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
(in thousands of U.S. dollars, except share and per share data)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These  consolidated  financial  statements have been prepared in conformity with
accounting principles generally accepted in Canada ("Canadian GAAP").

(a)      Basis of Consolidation

         The consolidated financial statements include the accounts of Goran and
         its subsidiary companies.

         All  significant  intercompany  transactions  and  balances  have  been
         eliminated.

(b)      Premiums

         Premiums  are taken into  income  evenly  over the lives of the related
         policies.

(c)      Commissions

         Commission expenses and related reinsurance  commission  recoveries are
         recorded at the effective date of the respective insurance policy.

(d)      Deferred Policy Acquisition Costs

         Deferred  policy  acquisition  costs  comprise of agents'  commissions,
         premium taxes and certain general  expenses which are related  directly
         to the  acquisition of premiums.  These costs,  to the extent that they
         are  considered  recoverable,  are deferred and amortized over the same
         period that the related premiums are taken into income.

(e)      Outstanding Claims

         The reserve for  outstanding  claims  includes  estimates  for reported
         unpaid  losses and  losses  incurred  but not  reported.  Reserves  are
         established  using  case-basis  valuations and statistical  analysis as
         claims are  reported.  Those  estimates  are  subject to the effects of
         trends in loss severity and frequency.  While  management  believes the
         reserves are adequate,  the provision for losses are necessarily  based
         on estimates and are subject to  considerable  variability.  Changes in
         the  estimated  reserves  are charged and  credited  to  operations  as
         additional information on the estimated amount of a claim becomes known
         during the course of its settlement. The reserve for outstanding claims
         has been reported on by  independent  actuaries.  The Company's  policy
         regarding  the  recognition  of the time value of money on  outstanding
         claims is as follows:

         (i)      DIRECT CLAIMS

                  The  reserve  includes  the  recognition  of the time value of
                  money on direct claims liabilities.  Using an interest rate of
                  6.0% (1996 - 7.5%) net claims  incurred  have been  reduced by
                  $504  (1996  increased  by  $66)  and  outstanding  claims  at
                  December 31, 1997 reduced by $1,765 (1996 - $1,261).

         (ii)     ASSUMED CLAIMS

                  The  Company has not  recognized  the time value of money with
                  respect to assumed claims  liabilities  over which it does not
                  have  direct  control  over the  timing of  settlement  of the
                  liabilities.  If the Company had discounted these claims using
                  an  interest  rate of 6.0% (1996 - 7.5%) net  claims  incurred
                  would have been  increased  by $64 (1996 - increased by $730 )
                  and  outstanding  claims at December  31, 1997 would have been
                  reduced by $1,554 (1996 - $1,618).

                                      -20-

<PAGE>

                                                              [small Goran logo]
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                      December 31, 1997 and 1996
                 (in thousands of U.S. dollars, except share and per share data)

(f)      Investments

         Investments in bonds, mortgages and debentures are carried at amortized
         cost  providing  for the  amortization  of the  discount  or premium to
         maturity date. Investments in short-term investments,  real estate, and
         equities  are  carried  at  cost.  Gains  and  losses  on  disposal  of
         investments are taken into income when realized.  When there has been a
         loss in value of an investment that is other than a temporary  decline,
         the investment is written down to recognize the loss.

(g)      Capital Assets

         Capital assets are recorded at cost,  net of accumulated  amortization.
         Amortization is provided at rates sufficient to amortize the costs over
         the estimated useful lives of the assets.

(h)      Foreign Currency Translation

         Foreign  currency  transaction  gains and  losses are  included  in the
         statement of  earnings.  Goran and each of its  subsidiaries  have been
         determined to be self-sustaining  foreign operations and are translated
         using the current rate method  whereby all assets and  liabilities  are
         translated  into  U.S.  dollars  at the year end rate of  exchange  and
         revenue  and  expense  items  are  translated  at the  average  rate of
         exchange for the year.  The resulting  unrealized  translation  gain or
         loss is deferred and shown  separately in shareholders'  equity.  These
         adjustments  are not included in operations  until  realized  through a
         reduction in the Company's net investment in such operations.

(i)      Use of Estimates

         The preparation of financial statements of insurance companies requires
         management  to make  estimates  and  assumptions  that  affect  amounts
         reported in the  financial  statements  and  accompanying  notes.  Such
         estimates and  assumptions  could change in future as more  information
         becomes  known which could impact the amounts  reported  and  disclosed
         herein.

(j)      Comparative Figures

         Certain  comparative  figures have been  reclassified to conform to the
         basis of presentation adopted in 1997.

(k)      Preferred Securities

         Preferred securities  represent  SIG-obligated  mandatorily  redeemable
         securities  of subsidiary  holding  solely  parent  debentures  and are
         reported  at  their   liquidation   value  under   minority   interest.
         Distributions  on these  securities  are charged  against  consolidated
         earnings.

3.  CORPORATE REORGANIZATION, ACQUISITIONS AND PUBLIC OFFERINGS

In April 1996, Pafco contributed all of the outstanding  shares of capital stock
of IGF to IGFH, a  wholly-owned  and newly formed  subsidiary of Pafco,  and the
Board of Directors of IGFH declared an $11,000 distribution to Pafco in the form
of cash or $7,500 and a note payable of $3,500 ("Pafco Note"). IGFH borrowed the
$7,500 portion of the  distribution  from a bank ("IGFH  Note").  The notes were
paid in full  from the  proceeds  of the  Offering.  Immediately  following  the
distribution,  Pafco distributed all of the outstanding  common stock of IGFH to
SIG. Although SIG believes the plan of reorganization or spin off did not result
in gain or loss,  no assurance  can be given that the Internal  Revenue  Service
will not challenge the transaction.

                                      -21-


<PAGE>

[small Goran logo]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
(in thousands of U.S. dollars, except share and per share data)

On January 31, 1996, the Company and SIG entered into an agreement ("Agreement")
with GS Capital  Partners II, L.P. (the  "Goldman  Funds") to create GGSH, to be
owned 52% by the Company and 48% by the Goldman  Funds.  In accordance  with the
Agreement,  on April 30, 1996, the Company  contributed certain fixed assets and
Pafco with a combined  book  value,  determined  in  accordance  with  generally
accepted accounting  principles,  of $17,186, to GGSH. Goldman Funds contributed
$21,200  to GGSH,  in  accordance  with the  Agreement.  In return  for the cash
contribution  of $21,200,  Goldman Funds  received a minority  interest share in
GGSH at the date of contribution  of $18,425,  resulting in a $2,775 increase to
additional  paid-in  capital.  At December 31,  1996,  Goldman  Funds'  minority
interest share consisted of the following:

     Contribution April 30, 1996       $18,425
     GGSH earnings                       2,801
                                        ------  
                                       $21,226
                                        ======

In connection with the above transactions, GGSH acquired (the "Acquisition") all
of the  outstanding  shares of common  stock of  Superior  and its  wholly-owned
subsidiaries, domiciled in Florida, (collectively referred to as "Superior") for
cash of $66,590. In conjunction with the Acquisition,  the Company's funding was
through a senior bank facility of $48,000 and a cash  contribution  from Goldman
Funds of $21,200.

The  acquisition  of Superior  was  accounted  for as a purchase and recorded as
follows:

     Assets acquired                  $165,826
     Liabilities assume                100,566
     Net assets acquire                 65,260
     Purchase price                     66,590
                                        ------ 
     Goodwill                           $1,330
                                        ======

The  Company's  results  from  operations  for the year ended  December 31, 1996
include the results of Superior subsequent to April 30, 1996.

On August 12, 1997,  the Company  purchased the remaining  minority  interest in
GGSH for $61  million  in cash.  The  excess of the  acquisition  price over the
minority interest liability of $25,355 aggregated  approximately $35,645 and was
assigned to goodwill as the fair market  value of acquired  assets  approximated
their carrying value.

Goodwill is amortized over a 25-year period on a straight-line  basis based upon
management's estimate of the expected benefit period.

On November 5, 1996, SIG sold 3,000,000 shares at $12.50 per share in an initial
public offering ("IPO") of common stock. An additional  450,000 shares were sold
in December 1996  representing  the exercise of the  overallotment  option.  SIG
generated net proceeds  after  underwriter's  discount and expenses,  of $37,969
from the  offering,  the proceeds of which were used to repay the IGFH and Pafco
Notes,  repay  indebtedness to Goran and Granite Re of approximately  $7,500 and
pay Goran a dividend  of $3,500.  The Company  used its  proceeds to pay off the
balance of its debentures.

Assuming that these  transactions  took place  (including the IPO) at January 1,
1995 or at January 1, 1996,  the pro-forma  effect of these  transactions  would
result in summarized company consolidated statements of earnings as follows:

                                                          1996        1995
                                                            (unaudited)

Revenues                                                $269,362    $185,629
Earnings from continuing operations                      $16,318      $9,421
Earnings per share from continuing operations              $3.08       $1.88

                                      -22-

<PAGE>

                                                              [small Goran logo]
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                      December 31, 1997 and 1996
                 (in thousands of U.S. dollars, except share and per share data)

As a result of the IPO,  the Company  effectively  disposed of a 33% interest in
SIG. The change in the Company's share of SIG's net  identifiable  assets at the
time of the IPO, represented by the Company's 67% proportionate  interest in the
net IPO  proceeds  over the 33%  proportionate  share  of the book  value of SIG
disposed,  amounts to a gain of $18,169  and is  reported  as unusual  income in
1996.

On August 12,  1997,  SIG issued  $135  million  in Trust  Originated  Preferred
Securities  ("Preferred  Securities").  These Preferred  Securities were offered
through  a  wholly-owned  trust  subsidiary  of SIG and  are  backed  by  Senior
Subordinated  Notes to the  Trust  from SIG.  These  Preferred  Securities  were
offered  under  Rule  144A of the SEC  ("Preferred  Securities  Offering")  and,
pursuant to the Registration  Rights Agreement executed at closing,  SIG filed a
Form S-4 Registration Statement with the SEC on September 16, 1997 to effect the
Exchange  Offer.  The S-4  Registration  Statement  was  declared  effective  on
September  30, 1997 and the Exchange  Offer  successfully  closed on October 31,
1997. The proceeds of the Preferred  Securities Offering were used to repurchase
the remaining  minority  interest in GGSH for $61 million,  repay the balance of
the term debt of $44.9 million and SIG expects to contribute the balance,  after
expenses, of approximately $24 million to the nonstandard automobile insurers of
which $10.5 million was  contributed in 1997.  Expenses of the issue  aggregated
$5.1 million and will be amortized over the term of the Preferred Securities (30
years).  In the third quarter the Company  wrote off the  remaining  unamortized
costs of the term debt of  approximately  $1.1 million pre-tax or  approximately
$0.09 per share after income taxes and minority interest.

The Preferred  Securities have a term of 30 years with semi-annual  distribution
payments  at  9.5%  per  annum  commencing  February  15,  1998.  The  Preferred
Securities may be redeemed in whole or in part after 10 years.

SIG shall  not,  and shall not  permit  any  subsidiary,  to incur  directly  or
indirectly,  any indebtedness  unless, on the date of such incurrence (and after
giving effect thereto),  the  Consolidated  Coverage Ratio exceeds 2.5 to 1. The
Coverage Ratio is the aggregate of net earnings,  plus interest expense,  income
taxes,  depreciation,  and amortization divided by interest expense for the same
period.

Assuming the Preferred  Securities  Offering took place at January 1, 1997,  the
proforma  effect of this  offering on the  Company's  consolidated  statement of
earnings for the year ended December 31, 1997 is as follows:

                                            Unaudited
                                          (In thousands)

    Revenues                                 $319,019
    Net earnings                              $11,163
    Net earnings per common share               $1.99

Proforma results for the Preferred  Securities Offerings for 1996 and 1995 would
not be meaningful due to the Acquisition and IPO in 1996.

The pro-forma results are not necessarily indicative of what actually would have
occurred  if  these  transactions  had been in  effect  for the  entire  periods
presented.  In  addition,  they are not  intended to be a  projection  of future
results.

In December 1997, the Company discontinued the operations of SIGF.  Accordingly,
the results of these  operations  have been  accounted for  separately  from the
results of ongoing  operations.  The net loss from  discontinued  operations was
$3,545 and $1,000 and net earnings of $14 for the years ended December 31, 1997,
1996 and 1995, respectively.

                                      -23-
    

<PAGE>

[small Goran logo]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
(in thousands of U.S. dollars, except share and per share data)

4.  REINSURANCE

The  Company's  insurance  subsidiaries  follow a  policy  of  underwriting  and
reinsuring  contracts  of insurance  which  limits their  liability to a maximum
amount on any one claim for  nonstandard  automobile  of $250 (1996 - $250) with
the result that claims incurred are stated net of reinsurance. The crop division
reinsures losses through stop loss in excess of 80% loss ratio for crop hail and
100% loss ratio for MPCI.  As the  primary  insurers,  the  Company's  insurance
subsidiaries maintain the principal liability to the policyholder.

The effect of  reinsurance  on the  activities of the Group can be summarized as
follows:

<TABLE>
<CAPTION>


1997                                                    Gross       Ceded          Net
<S>                                                    <C>        <C>           <C>  

Premiums written                                       $448,982   $(167,086)    $281,896

Premiums earned                                         422,200    (145,660)     276,540

Incurred losses and loss adjustment expenses            312,079    (101,445)     210,634

Commission expense (note 14)                             65,529     (74,426)       8,898

Outstanding claims                                      152,871     (94,424)      58,447

Unearned premiums                                       118,616     (36,607)      82,009

1996                                                    Gross       Ceded          Net

Premiums written                                       $299,376    $(85,598)    $213,778

Premiums earned                                         303,187     (94,304)     208,883

Incurred losses and loss adjustment expenses            237,882     (91,608)     146,274

Commission expense (note 14)                             48,601     (44,096)       4,505

Outstanding claims                                      127,045     (33,113)       93,932

Unearned premiums                                        91,207     (14,983)       76,224

1995                                                    Gross       Ceded          Net

Premiums written                                       $146,603    $(64,781)    $ 81,822

Premiums earned                                         141,824     (69,294)      72,530

Incurred losses and loss adjustment expenses            145,261     (93,808)      51,453

Commission expense (note 14)                             25,069     (25,950)        (881)

Outstanding claims                                       87,655     (41,667)      45,988

Unearned premiums                                        33,159      (6,263)      26,896

</TABLE>

5.  CASH AND INVESTMENTS

<TABLE>
                                           1997                    1996
<CAPTION>
                                     Book        Market       Book       Market
                                     Value       Value        Value      Value

<S>                                <C>         <C>         <C>        <C>   
Cash                                $13,324     $13,324      $4,679      $4,679

Short-term investments               23,233      23,233      29,052      29,052

Equities                             35,446      36,631      28,443      29,431

Bonds and debentures                172,401     174,215     137,521     138,383

Mortgages                             2,220       2,220       2,430      2,430

Real Estate                             450         450         466        466

Other loan receivable                    50          50          75         75
                                    -------     -------     -------    -------

Total Cash & Investments           $247,124    $250,123    $202,666   $204,516
                                    =======     =======     =======    =======

</TABLE>
                                      -24-

<PAGE>

                                                              [small Goran logo]
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                      December 31, 1997 and 1996
                 (in thousands of U.S. dollars, except share and per share data)

At December 31, 1997,  cash and  investments  of  approximately  $42,367 (1996 -
$41,659)  are on deposit or held in trust by  cedents,  and to a limited  amount
regulatory  authorities,  to secure  certain  of the  outstanding  claims of the
Company.

6.  CAPITAL ASSETS

<TABLE>
<CAPTION>
                                                     1997
                                                 Accumulated           1996
                                          Cost   Depreciation   Net     Net

<S>                                     <C>         <C>       <C>     <C> 
Land                                       $226       $---      $226    $226
Buildings                                 5,421      1,323     4,098   3,154
Furniture, fixture and equipment         12,119      4,242     7,877   4,788
Automobiles                                  46         17        29      13
                                         ------      -----     -----   -----
Total                                   $17,812     $5,582    $12,230 $8,181
                                         ======      =====     ======  =====
</TABLE>

Depreciation  expense related to capital assets for the years ended December 31,
1997, 1996 and 1995, was $1,754, $1,811 and $483, respectively.

7.  INTANGIBLES

Intangible assets at December 31 are as follows:

<TABLE>
<CAPTION>

                                                     1997
                                                 Accumulated           1996
                                          Cost   Depreciation   Net     Net

<S>                                     <C>         <C>       <C>      <C>   
Goodwill                                $36,975       $654    $36,321  $1,330
Deferred preferred security debt costs    5,123         70      5,053     ---
Deferred debt costs                         ---        ---        ---   1,232
Organization costs                        1,527        339      1,188   1,527
                                         ------      -----      ------  -----
Total                                   $43,625     $1,063     $42,562 $4,089
                                         ======      =====      ======  =====

</TABLE>

Amortization  expense related to intangible  assets for the years ended December
31, 1997, 1996, and 1995 was $1,197, $411 and $0, respectively.

8.  BANK LOANS

IGF  maintained a secured  revolving line of credit,  bearing  interest at prime
plus 25 basis points, in the amount of $7,000,000 at December 31, 1997.

Interest  on this  line of  credit  was at the New York  prime  rate  (8.50%  at
December 31, 1997) plus 0.25%  adjusted  daily.  Subsequent to December 31, 1997
this rate was adjusted to prime minus .75%. This line is  collateralized  by the
crop-related  uncollected  premiums,  reinsurance  recoverable  on paid  losses,
Federal Crop Insurance Corporation (FCIC) annual settlement and FCIC premium tax
recoverables,  and a first  lien on the  real  estate  owned  by IGF.  The  line
requires IGF to maintain its primary banking relationship with the issuing bank,
limits  capital  purchases  and requires the  maintenance  of certain  financial
ratios.  At  December  31,  1997,  IGF  was in  compliance  with  all  covenants
associated with the line or had received proper  waivers.  The weighted  average
interest rate on the line of credit was 8.75%,  8.6% and 9.7% during 1997,  1996
and 1995, respectively.

At December 31, 1997,  IGF had  outstanding  borrowings  in the amount of $4,182
(1996 - $NIL).

                                      -25-

<PAGE>

[small Goran logo]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
(in thousands of U.S. dollars, except share and per share data)

The term debt at GGS,  was repaid in full on August 12,  1997.  Interest  on the
term debt was payable  quarterly at LIBOR plus 2.75%.  In 1996, SIG entered into
an interest rate swap agreement to protect SIG against interest rate volatility.
As a  result,  SIG  fixed its  interest  rate on the term debt at 8.31%  through
November  1996,  8.85%  through  January 1997,  9.08% through April 1997,  9.24%
through July 1997 and 8.80% through repayment.

9.  CAPITAL STOCK

The Company's authorized share capital consists of:

    (a) First Preferred Shares

    An  unlimited  number  of first  preferred  shares  of  which  none are
    outstanding at December 31, 1997 (1996 NIL).

    (b) Common Shares

    An unlimited number of common shares of which 5,730,276 are outstanding
    as at December 31, 1997 (1996 - 5,405,820).

During the year,  pursuant to the exercise of warrants and options,  the Company
issued 324,456 (1996 - 341,591) common shares for aggregate consideration in the
amount of $594 (1996 - $599).

The  Company has  reserved  for issue  546,856  (1996 - 709,149)  common  shares
consisting of:

     i)  0 (1996 - 182,250) shares issuable on the exercise of warrants for the
         purchase of common shares at $2.19 per share, issued to former
         debenture holders; and


    ii)  546,856 (1996 - 526,899) shares pursuant to the employee incentive
         share option plan as follows:


         Number of Shares      Exercise Price ($ Cdn)       Expiry Date
         ----------------      ----------------------       ------------

               2,000                   7.25                 April 25, 2000

               8,000                  11.00                 December 7, 2000

              47,049                   2.48                 March 8, 2001

              45,000                   5.25                 July 14, 2002

              47,364                   7.25                 April 25, 2003

               1,000                   5.25                 July 14, 2004

               1,000                   7.25                 April 25, 2005

               7,861                  39.00                 August 11, 2005

             207,088                  16.50                 May 13, 2006

             180,494                  29.00                 January 29, 2007
             -------
             546,856
             =======

             The  warrants  expired on December 31,  1997,  leaving  24,625
             warrants unexercised.

   iii)  On November 1, 1996 SIG adopted the SIG 1996 Stock Option Plan.  The
         SIG 1996 Stock Option Plan provides authority to grant nonqualified
         stock options and incentive stock options to officers and key employees
         of SIG and its subsidiaries and nonqualified stock options to
         nonemployee directors of SIG and Goran.  The options granted to the
         Company's Chairman (436,567 shares)
 
                                      -26-

<PAGE>

[small Goran logo]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
(in thousands of U.S. dollars, except share and per share data)

         vest and become exercisable in full on the first anniversary of the
         grant date.  All of the remaining outstanding stock options vest and
         become exercisable in three equal installments on the first, second
         and third anniversaries of the date of grant.  All options were granted
         at an exercise price equal to the fair market value of the Company's
         common stock at time of grant.

Information regarding the SIG Stock Option Plan is summarized below:

<TABLE>
<CAPTION> 
                                                                   1997                       1996
                                                                 Weighted                   Weighted
                                                                  average                   average
                                                                 exercise                   exercise
                                                     Shares        price       Shares        price
------------------------------------------------------------------------------------------------------
<S>                                                <C>             <C>         <C>            <C>

Outstanding at the beginning of the year             830,000       $12.50          ---        $  ---
------------------------------------------------------------------------------------------------------
Granted                                              185,267        15.35      830,000         12.50
------------------------------------------------------------------------------------------------------
Exercised                                            (1,667)        12.50          ---           ---
------------------------------------------------------------------------------------------------------
Forfeited                                           (13,600)        12.50          ---           ---
                                                    -------                        ---
------------------------------------------------------------------------------------------------------
Outstanding at the end of the year                 1,000,000       $13.03      830,000        $12.50
                                                   =========                   =======
------------------------------------------------------------------------------------------------------
Options exercisable at year end                      521,578                       ---
------------------------------------------------------------------------------------------------------
Available for future grant                               ---                   170,000
------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                                               Options                      Options
                                                Weighted     outstanding                   exercisable
                                                 average       weighted                     weighted
                                                remaining      average                      average
                                    Number      life (in       exercise      Number         exercise
Range of exercise prices         outstanding      years)        price       exercisable       price
------------------------------------------------------------------------------------------------------
<S>                               <C>              <C>         <C>           <C>              <C>

$12.50-$13.75                       933,733        8.9         $12.66        521,578          $12.50
------------------------------------------------------------------------------------------------------
$17.75-$19.25                        66,267        9.7          18.23            ---             ---
                                     ------                                      ---
------------------------------------------------------------------------------------------------------
                                  1,000,000                                  521,578
                                  =========                                  =======
------------------------------------------------------------------------------------------------------
</TABLE>

The Board of Directors of GGSH adopted the GGS Management  Holdings,  Inc. Stock
Option Plan (the "GGS Stock Option  Plan"),  effective  April 30, 1996.  The GGS
Stock Option Plan  authorizes the granting of  nonqualified  and incentive stock
options to such  officers and other key  employees as may be  designated  by the
Board of Directors of GGSH. Options granted under the GGS Stock Option Plan have
a term of ten years and vest at a rate of 20% per year for the five years  after
the date of the grant.  The exercise price of any options  granted under the GGS
Stock Option Plan shall be subject to the following  formula:  50% of each grant
of options having an exercise price determined by the Board of Directors of GGSH
at its discretion,  with the remaining 50% of each grant of options subject to a
compound  annual increase in the exercise price of 10%, with a limitation on the
exercise price escalation as such options vest.

                                      -27-

<PAGE>

[small Goran logo]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
(in thousands of U.S. dollars, except share and per share data)

Information regarding the GGS Stock Option Plan is summarized below:

<TABLE>
<CAPTION>

                                                                       1997                             1996
                                                                     Weighted                         Weighted
                                                                     average                          average
                                                                     exercise                         exercise
                                                    Shares             price          Shares           price
---------------------------------------------------------------------------------------------------------------

<S>                                                 <C>               <C>            <C>               <C>
Outstanding at the beginning of the year            55,972            $51.75            ---            $  ---
---------------------------------------------------------------------------------------------------------------
Granted                                                ---               ---         55,972             51.75
---------------------------------------------------------------------------------------------------------------
Forfeited                                           (1,950)            51.75            ---               ---
                                                    ------                               ---
---------------------------------------------------------------------------------------------------------------
Outstanding at the end of the year                  54,022            $51.75         55,972            $51.75
                                                    ======                           ======
---------------------------------------------------------------------------------------------------------------
Options exercisable at year end                     10,804                              ---
---------------------------------------------------------------------------------------------------------------
Available for future grant                          57,089                           55,139
---------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                   Options                            Options
                                                   Weighted       outstanding                        exercisable
                                                   average        weighted                           weighted
                                                  remaining        average                            average
                                 Number            life (in        exercise           Number          exercise
Range of exercise prices      outstanding          years)           price          exercisable         price
-----------------------------------------------------------------------------------------------------------------

<S>                             <C>                  <C>            <C>               <C>              <C>                
$44.17-$53.45                   37,815               8.3            $46.13            10,804           $46.38
-----------------------------------------------------------------------------------------------------------------
$58.79-$71.14                   16,207               8.3             64.87               ---              ---
                                ------                                                   ---
-----------------------------------------------------------------------------------------------------------------
                                54,022                                                10,804
                                ======                                                ======
-----------------------------------------------------------------------------------------------------------------
</TABLE>

10.  INCOME TAXES

The provision for (recovery of) income taxes is analyzed as follows:

<TABLE>
<CAPTION>
                                                                   1997    1996      1995
                                                                   ----    -----     ----

<S>                                                              <C>      <C>       <C>
Consolidated net earnings before income taxes and
   discontinued operations                                       $37,904  $43,153   $9,654
                                                                  ======   ======    =====

Incomes taxes at Canadian statutory rates                        $16,867  $19,203   $4,287

Effect on taxes resulting from:
  Tax exempt income                                               (1,714)  (1,495)  (1,571)
  U.S. statutory rate differential                                (3,262)  (2,566)    (750)
  Application of losses carried forward and reserves                (292)     ---     (399)
  Nontaxable gain on IPO                                             ---   (8,085)     ---
  Operating loss for which no current income tax
     benefit is recognized                                           116    1,027      785
  Timing differences                                               1,124      (73)    (145)
  Other, net                                                        (119)     (28)     145
                                                                  -------  -------   ------
Current tax provision                                              12,720    7,983    2,352
Deferred tax provision (recovery)                                  (1,124)      73      145
                                                                  -------  -------   ------
                                                                 $11,596  $  8,056  $2,497
                                                                  ======   =======   ======
</TABLE>

At December 31, 1997, the Company's Canadian subsidiary had reserves,  unclaimed
for income tax purposes,  of $677 (1996 - $1,027). In addition,  the Company and
its   consolidated   subsidiaries   have   operating   loss  carry  forwards  of
approximately  $8,444 (1996 - $12,591) for tax purposes  which expire  primarily
after  1997.  The  Company  also  has net  capital  losses  carried  forward  of
approximately $7,875 (1996 - $8,097) which can be applied to reduce income taxes
on any future taxable  capital gains.  The potential tax benefit of the reserves
and losses carried forward have not been recorded in these financial statements.

                                      -28-
<PAGE>

                                                              [small Goran logo]
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                      December 31, 1997 and 1996
                 (in thousands of U.S. dollars, except share and per share data)

11. RELATED PARTY TRANSACTIONS

In 1989,  the Company  wrote off a loan of $5,135 owed by a subsidiary of Symons
International  Group Ltd.  ("SIGL").  SIGL,  the majority  shareholder of Goran,
guaranteed  this loan and pledged 1.2 million  escrowed  common  shares of Goran
(the "escrowed shares") as security for the loan. During 1994, SIGL entered into
agreements with Goran whereby as consideration for the release of 766,600 of the
escrowed shares,  SIGL repaid $1,465 of the loan. During 1997, SIGL entered into
an agreement with Goran whereby as  consideration  for release of 333,400 of the
escrowed  shares,  SIGL repaid  $1,444 of the loan.  The balance due to Goran of
$2,226  continues  to be  guaranteed  by  SIGL  and is  secured  by the  100,000
remaining escrowed shares.

Included  in  other  receivables  are  $346  (1996  -  $595)  due  from  certain
shareholders  and directors which relate to the purchase of common shares of the
Company.  Approximately half of the amounts due bear interest and are subject to
principal repayment schedules.

12. CONTINGENT LIABILITIES AND COMMITMENTS

The Company,  and its subsidiaries,  are named as defendants in various lawsuits
relating to their business. Legal actions arise from claims made under insurance
policies  issued by the  subsidiaries.  These  actions  were  considered  by the
Company  in  establishing  its loss  reserves.  The  Company  believes  that the
ultimate  disposition of these lawsuits will not materially affect the Company's
operations or financial position.

On October 27, 1997,  IGF reached an agreement with the FCIC to settle a lawsuit
started  March 23, 1995,  with both parties  dismissing  all claims  against one
another which were subject to the  litigation.  The FCIC has agreed to pay IGF a
lump sum payment of $60,000.

The Company bought an office building in Des Moines, Iowa, as its crop insurance
division home office.  The purchase price was $2.6 million.  The sale of the old
building is expected to close on April 1, 1998 for $1,350,000.

13.  SEGMENTED INFORMATION

<TABLE>
<CAPTION>

                                                                                   United States
                                                                   United States    Nonstandard
1997                                                                   Crop           Auto           Other      Consolidated

<S>                                                                  <C>             <C>           <C>            <C>     
Gross premiums written                                               $126,401        $323,915      $(1,334)       $448,982
                                                                      =======         =======        =====         =======

Net premiums written                                                  $20,796        $256,745        $4,355       $281,896
                                                                       ======         =======         =====        =======

Net premiums earned                                                   $20,794        $251,020        $4,726       $276,540

Fee income                                                              4,764          15,515            30         20,309

Net investment income                                                     191          10,969         1,617         12,777

Net realized capital gains (losses)                                      (18)           9,462          (51)          9,393
                                                                         ---            -----       ------       ---------

Total revenue                                                          25,731         286,966         6,322        319,019
                                                                       ------         -------         -----        -------

Net claims incurred                                                    16,185         195,900       (1,451)        210,634

Commission and operating expenses                                    (11,551)          72,463         5,285         66,197

Interest and amortization of intangibles                                  235             ---         4,049          4,284
                                                                          ---             ---         -----          -----

Total expenses                                                          4,869         268,363         7,883        281,115
                                                                        -----         -------         -----        -------

Earnings (loss) before income taxes, minority interest
   and discontinued operations                                        $20,862         $18,603      $(1,561)        $37,904
                                                                       ======          ======        =====          ======

Identifiable assets                                                  $108,650        $302,795      $149,403       $560,848
                                                                      =======         =======       =======        =======
</TABLE>

                                      -29-
<PAGE>
[small Goran logo]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
(in thousands of U.S. dollars, except share and per share data)

<TABLE>
<CAPTION>

                                                                              United States
                                                             United States     Nonstandard
1996                                                             Crop            Auto            Other       Consolidated

<S>                                                            <C>             <C>             <C>            <C>     
Gross premiums written                                         $110,059        $187,176        $2,141         $299,376
                                                                =======         =======         =====          =======

Net premiums written                                            $23,013        $186,569        $4,196         $213,778
                                                                 ======         =======         =====          =======

Net premiums earned                                             $23,013        $168,746       $17,124         $208,883

Fee income                                                        1,672           7,578            36            9,286

Net investment income                                               181           6,489         1,075            7,745

Net realized capital gains (losses)                                 (1)         (1,014)           378            (637)
                                                                    --           -----            ---            ----

Total revenue                                                    24,865         181,799        18,613          225,277
                                                                 ------         -------        ------          -------

Net claims incurred                                              12,724         124,385         9,165          146,274

Commission and operating expenses                               (6,095)          46,796         7,946           48,647

Interest and amortization of intangibles                            551             ---         4,821            5,372
                                                                    ---             ---         -----            -----

Total expenses                                                    7,180         171,181        21,932          200,293
                                                                  -----         -------        ------          -------

Earnings (loss) before income taxes, minority interest
   and discontinued operations                                  $17,685         $10,618      $(3,319)          $24,984
                                                                 ======          ======        =====            ======
            
Identifiable assets                                             $72,916        $260,332       $48,094         $381,342
                                                                 ======         =======        ======          =======
</TABLE>


<TABLE>
<CAPTION>
                                                                           United States
                                                         United States      Nonstandard
1995                                                          Crop             Auto            Other       Consolidated

<S>                                                             <C>             <C>           <C>             <C>     
Gross premiums written                                          $70,374         $49,005       $27,224         $146,603
                                                                 ======          ======        ======          =======

Net premiums written                                            $11,608         $37,302       $32,912          $81,822
                                                                 ======          ======        ======           ======

Net premiums earned                                             $11,608         $34,460       $26,462          $72,530

Fee income                                                          384           1,787           (1)            2,170

Net investment income                                               674             624         2,570            3,868

Net realized capital gains (losses)                                 164           (508)           146            (198)
                                                                    ---            ---            ---             ---

Total revenue                                                    12,830          36,363        29,177           78,370
                                                                 ------          ------        ------           ------

Net claims incurred                                               8,629          25,423        17,401           51,453

Commission and operating expenses                               (7,466)          12,929        10,039           15,502

Interest and amortization of intangibles                            627             ---         1,134            1,761
                                                                    ---             ---         -----            -----

Total expenses                                                    1,790          38,352        28,574           68,716
                                                                  -----          ------        ------           ------

Earnings (loss) before income taxes, minority interest
   and discontinued operations                                  $11,040        $(1,989)          $603           $9,654
                                                                 ======         ======           ===            =====

Identifiable assets                                             $59,733         $47,372       $53,711         $160,816
                                                                 ======          ======        ======           ======
</TABLE>


         Other  results are comprised of the  operations of Granite,  Granite Re
and corporate operations of Goran and SIG.
         The negative  premiums for other in 1997 result from return premiums on
prior periods for reinsurance  transactions  which has no significant  impact on
net earnings.

         See also Note 1.

                                      -30-
<PAGE>

                                                              [small Goran logo]
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                      December 31, 1997 and 1996
                 (in thousands of U.S. dollars, except share and per share data)


14.  REGULATORY MATTERS

Goran's  insurance   subsidiaries  are  subject  to  certain   requirements  and
restrictions   in  accordance   with  the   regulations   of  their   respective
jurisdictions.  Statutory  regulations require that the subsidiaries  maintain a
minimum  amount of  capital to support  outstanding  insurance  in force and new
premium  writing.  This  requirement  and other  regulations  in the  respective
jurisdictions,  restricts  the  amount of  dividends  payable in any year by the
subsidiaries  to the  parent.  The  statutory  surplus of the  Company's  active
insurance  subsidiaries  at  December  31, 1997  amounted  to  $145,859  (1996 -
$120,229).

Superior,  Pafco and IGF,  domiciled  in  Florida  and  Indiana,  prepare  their
statutory   financial   statements  in  accordance  with  accounting   practices
prescribed or permitted by the Indiana  Department of Insurance  ("IDOI") or the
Florida  Department  of  Insurance  ("FDOI").  Prescribed  statutory  accounting
practices  include a variety of  publications  of the  National  Association  of
Insurance Commissioner ("NAIC"), as well as state laws, regulations, and general
administrative  rules.  Permitted statutory  accounting  practices encompass all
accounting practices not so prescribed.

IGF received written approval from IDOI to reflect its business  transacted with
the FCIC as a 100%  cession  with any net  underwriting  results  recognized  in
ceding  commissions  for  statutory  accounting  purposes,  which  differs  from
prescribed  statutory  accounting  practices.  As of  December  31,  1997,  that
permitted practice had no effect on statutory surplus or net earnings.

The net underwriting  results,  included in commissions and operating  expenses,
for the years  ended  December  31,  1997,  1996 and 1995 were gains of $26,589,
$12,277 and $9,653, respectively.

15.  CHANGES IN WORKING CAPITAL RELATING TO OPERATIONS

<TABLE>
<CAPTION>
                                                                     1997       1996        1995

<S>                                                                <C>        <C>         <C>     
Increase in accounts receivable                                    $(6,395)   $(19,448)   $(5,252)

Decrease (increase) in reinsurance recoverable on
outstanding claims                                                 (61,311)      8,464    (25,930)

Decrease (increase) in prepaid reinsurance premiums                (21,624)     (8,785)       916

Decrease (increase) in deferred policy acquisition costs             2,011       1,649     (3,058)

Decrease (increase) in deferred income taxes                        (1,124)         73        147

Increase in other assets                                            (4,083)     (2,433)      (470)

Increase (decrease) in accounts payable                             37,810       5,576     (2,291)

Increase (decrease) in outstanding claims                           25,826      (4,545)    28,289

Increase in unearned premiums                                       27,409      13,178      9,247
                                                                    ------      ------     ------
                                                                  $(1,481)     $(6,271)    $1,598
                                                                    ======      =======    ======
</TABLE>

16.  RECONCILIATION OF CANADIAN GAAP AND UNITED STATES GENERALLY ACCEPTED
     ACCOUNTING PRINCIPLES ("U.S. GAAP") AND ADDITIONAL INFORMATION

The consolidated  financial  statements are prepared in accordance with Canadian
GAAP. Material differences between Canadian and U.S. GAAP are described below:

                                      -31-

<PAGE>

[small Goran logo]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
(in thousands of U.S. dollars, except share and per share data)

(a) Earnings and retained earnings

<TABLE>
<CAPTION>
                                                            1997       1996      1995

<S>                                                      <C>         <C>        <C>   
      Net earnings in accordance with Canadian GAAP      $12,438     $31,296    $7,171

      Add effect of difference in accounting for:
      Deferred income taxes (see note (d))                   177         (64)     (344)
      Minority interest                                      107        (177)      ---
      Outstanding claims (see note (e))                     (504)         62      (161)
                                                          ------      -------    -----

      Net earnings in accordance with U.S. GAAP          $12,218     $31,117    $6,666
                                                          ======      ======    ======
</TABLE>

Applying U.S. GAAP,  deferred income tax assets would be increased by $1,975 and
$1,798,  outstanding  claims  would be  increased  by  $1,765  and  $1,261,  and
cumulative  translation  adjustment  would  be  increased  by $0  and  $41 as at
December  31,  1997 and 1996,  respectively.  As a result of these  adjustments,
retained earnings would be increased by $140 and increased by $360, which is net
of related minority  interest of $70 and $177, as at December 31, 1997 and 1996,
respectively.  The effect of the above  noted  differences  on other  individual
balance sheet items and on working capital is not significant.
  
(b) Earnings per share

Earnings per share,  as  determined  in  accordance  with U.S.  GAAP are set out
below.  Basic  earnings  per share are computed  based on the  weighted  average
number of common shares  outstanding during the year. Fully diluted earnings per
share are calculated  using the Treasury  Stock method and assume  conversion of
securities when the result is dilutive.

The following  average  number of shares were used for the  compilation of basic
and fully diluted earnings per share:

<TABLE>
<CAPTION>

                                                     1997           1996         1995

<S>                                                <C>            <C>          <C>      
      Basic                                        5,590,576      5,286,270    5,012,005

      Fully Diluted                                5,886,211      5,724,476    5,567,644
                                           
</TABLE>

Earnings per share, as determined in accordance with U.S. GAAP, are as follows:


<TABLE>
<CAPTION>
                                                     1997    1996      1995

<S>                                                 <C>     <C>       <C>
      Basic earnings per share from continuing
       operations                                   $2.82   $2.67     $1.33

     Fully diluted earnings per share from
       continuing operations                        $2.68   $2.47     $1.20

     Basic earnings per share                       $2.19   $5.89     $1.33

     Fully diluted earnings per share               $2.08   $5.44     $1.20
</TABLE>


(c)  Supplemental cash flow information

Cash paid for interest and income taxes is summarized as follows:

<TABLE>
<CAPTION>

                                                         1997    1996     1995

<S>                                                    <C>      <C>      <C>   
     Cash paid for interest                            $ 3,467  $4,005   $1,548

     Cash paid for income taxes, net of refunds        $10,979  $9,825   $1,953

</TABLE>

(d)  Income taxes

The difference in accounting for deferred income taxes reflects the adoption for
U.S.  GAAP,  effective  January 1, 1993,  of Statement  of Financial  Accounting
Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes." This standard
requires an asset and liability  approach that takes into account changes in tax
rates when valuing the deferred tax amounts to be reported in the balance sheet.
(See note (a))

                                      -32-
<PAGE>

                                                              [small Goran logo]
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                      December 31, 1997 and 1996
                 (in thousands of U.S. dollars, except share and per share data)

(e)  Outstanding claims

The difference in accounting for outstanding claims reflects the application for
U.S.  GAAP  of  SEC  Staff   Accounting   Bulletin  No.  62,   "Discounting   by
Property/Casualty Insurance Companies". This standard does not allow discounting
of  unpaid  claim   liabilities   by  public   companies,   except  in  specific
circumstances that are not applicable to the Company.

(f)  Receivables from sale of capital stock

The SEC Staff  Accounting  Bulletins  require that accounts or notes  receivable
arising  from  transactions  involving  capital  stock  should be  presented  as
deductions from shareholders' equity and not as assets. Accordingly, in order to
comply with U.S. GAAP, shareholders' equity would be reduced by $346 and $595 as
at  December  31,  1997 and 1996,  respectively,  to reflect  the loans due from
certain  shareholders  which  relate to the  purchase  of  common  shares of the
Company.

(g)  Unrealized gain (loss) on investments

U.S. GAAP require that unrealized  gains and losses on investment  portfolios be
included as a component in determining  shareholders' equity. In addition,  SFAS
No. 115  permits  prospective  recognition  of  unrealized  gains on  investment
portfolios  for  year-ends  commencing  after  December 15,  1993.  As a result,
shareholders'  equity would be increased by $1,336 and by $820,  which is net of
deferred tax of $1,005 and $625 and related minority  interest of $658 and $405,
as at  December  31,  1997 and  1996,  respectively,  before  consideration  for
deferred  taxes.  As the Company  classifies  its debt and equity  securities as
available  for sale,  the  adoption of SFAS No. 115 in 1994 has no effect on net
earnings.

(h)  Changes in shareholders' equity

A reconciliation  of shareholders' equity from Canadian GAAP to U.S. GAAP is as
follows:

<TABLE>
<CAPTION>

                                                                     1997        1996

<S>                                                                <C>          <C>    
    Shareholders' equity in accordance with Canadian GAAP          $60,332      $47,258
    Add (deduct) effect of difference in accounting for:
      Deferred income taxes (see note (a))                           1,975        1,798
      Outstanding claims (see note (a))                             (1,765)      (1,261)
      Minority interest portion                                        (70)        (177)
      Receivables from sale of capital stock (see note (f))           (346)        (595)
      Unrealized gain on investments (see note (g))                  1,336          820
                                                                    ------       ------
    Shareholders' equity in accordance with U.S. GAAP              $61,462      $47,843
                                                                    ======       ======
</TABLE>

17.  SUBSEQUENT EVENT

On March 2, 1998,  the Company  announced  that its  subsidiary,  IGF,  signed a
definitive  agreement  with  CNA to  purchase  its  multi-peril  and  crop  hail
operations. IGF will reinsure back to CNA a small portion of the Company's total
crop book of business.  CNA wrote  approximately $110 million of multi-peril and
crop hail  insurance  business in 1997.  Starting in the year 2000,  assuming no
event of change of control as defined in the  agreement,  IGF can  purchase  the
insurance  premiums reinsured to CNA through a call provision or CNA can require
IGF to buy the insurance premiums reinsured to CNA.  Regardless of the method of
takeout of CNA,  CNA must not  compete in MPCI or crop hail for a period of time
after the  buyout.  The formula for the buyout is based on a multiple of average
pre-tax earnings that CNA receives from reinsuring IGF's book of business.


                                      -33-

<PAGE>

FORWARD-LOOKING STATEMENTS

The statements  contained in this Annual Report which are not historical  facts,
including but not limited to,  statements  concerning  (i) the impact of federal
and  state  laws and  regulations  on the  Company's  business  and  results  of
operations,  (ii) the  competitive  advantage  afforded  to the  Company's  crop
insurance  operations  by  approaches  adopted  by  management  in the  areas of
information, technology, claims handling and underwriting, (iii) the sufficiency
of the  Company's  cash  flow to  meet  the  operating  expenses,  debt  service
obligations and capital needs of the Company and its subsidiaries,  and (iv) the
impact of declining MPCI Buy-up Expense  Reimbursements on the Company's results
of  operations,  are  forward-looking  statements.  The Company  desires to take
advantage  of the "safe  harbor"  afforded  such  statements  under the  Private
Securities Litigation Reform Act of 1995 when they are accompanied by meaningful
cautionary  statements  identifying  important  factors  that could cause actual
results to differ materially from those in the forward-looking  statements. Such
cautionary  statements which discuss certain risks associated with the Company's
business including the variability of the results of operations of the Company's
crop insurance  business as a result of weather and natural  perils,  the highly
competitive  nature  of  both  the  Company's  crop  insurance  and  nonstandard
automobile  insurance business and the effects of state and federal  regulation,
the capital intensive nature of the property and casualty business and potential
limitations  on the ability of the Company to raise  additional  capital are set
forth under the heading  "Forward-Looking  Statements -- Safe Harbor Provisions"
in Item 1 - Business in the  Company's  Annual  Report on Form 10-K for the Year
Ended December 31, 1997.

MANAGEMENT RESPONSIBILITY

Management recognizes its responsibility for conducting the Company's affairs in
the  best  interests  of  all  its  shareholders.   The  consolidated  financial
statements and related  information in this Annual Report are the responsibility
of  management.  The  consolidated  financial  statements  have been prepared in
accordance with generally accepted  accounting  principles which involve the use
of judgement and estimates in applying the accounting principles selected. Other
financial  information  in this  Annual  Report is  consistent  with that in the
consolidated financial statements.

The Company maintains systems of internal controls which are designed to provide
reasonable  assurance that accounting records are reliable and to safe-guard the
Company's assets. The independent  accounting firm of Schwartz Levitsky Feldman,
Chartered  Accountants  has audited  and  reported  on the  Company's  financial
statements.  Their opinion is based upon audits  conducted by them in accordance
with generally accepted auditing  standards to obtain reasonable  assurance that
the consolidated financial statements are free of material misstatements.

The Audit  Committee  of the Board of  Directors,  the members of which  include
outside directors,  meets with the independent  external auditors and management
representatives  to review the internal  accounting  controls,  the consolidated
financial  statements  and other  financial  reporting  matters.  In addition to
having  unrestricted  access  to the  books  and  records  of the  Company,  the
independent  external  auditors  also  have  unrestricted  access  to the  Audit
Committee. The Audit Committee reports its findings and makes recommendations to
the Board of Directors.


/s/ Alan G. Symons
Alan G. Symons
Chief Executive Officer


/s/ Gary P. Hutchcraft
Gary P. Hutchcraft
Vice President and Chief Financial Officer


February 27, 1998


AUDITORS' REPORT

To the Shareholders of Goran Capital Inc.

We have  audited the  consolidated  balance  sheets of Goran  Capital Inc. as at
December  31,  1997  and  1996  and the  consolidated  statements  of  earnings,
shareholders'  equity and changes in cash  resources for each of the three years
in the period ended  December  31,  1997.  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

                                      -34-

<PAGE>
                                                              [small Goran logo]
                                                              MARKET INFORMATION

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, 1997
and 1996 and the results of its operations and the changes in its cash resources
for each of the three years in the period ended  December 31, 1997 in accordance
with generally accepted accounting principles.



Chartered Accountants
Toronto, Ontario
February 27, 1998

MARKET INFORMATION

The Company's  common shares began trading on the Toronto Stock  Exchange  under
the symbol "GNC" in 1986.  The  Company's  common  shares  began  trading on the
NASDAQ National Market under the symbol "GNCNF" on November 8, 1994.

As of December  31, 1997 there were  approximately  100 Common  shareholders  of
record,  including many brokers holding shares for the individual  clients.  The
number of individual shareholders on the same date is estimated at 1,000.

The number of common shares  outstanding on December 31, 1997 totaled 5,730,276.
Information  relating  to the  common  shares is  available  through  the NASDAQ
National Market system and the Toronto Stock Exchange.  The following table sets
forth the high and low  closing  sale  prices  for the  common  shares  for each
quarter of 1997, 1996 and 1995.

<TABLE>

                             TORONTO STOCK EXCHANGE
<CAPTION>

                                   1997                 1996                    1995

Quarter Ended                High       Low        High        Low          High      Low

<S>   <C>                    <C>        <C>        <C>         <C>          <C>      <C> 
March 31                     29.15      18.98      14.02       8.76         6.19     4.92

June 30                      26.05      19.31      14.05      10.59         6.10     5.37

September 30                 39.35      24.27      19.35      11.32         7.10     6.10

December 31                  39.32      27.75      20.26      16.79         8.74     7.47


</TABLE>

<TABLE>

                                     NASDAQ
<CAPTION>

                                   1997                 1996                    1995
Quarter Ended                 High       Low      High        Low          High      Low

<S>   <C>                    <C>        <C>       <C>         <C>           <C>      <C> 
March 31                     29.25      18.75     13.125      8.625         6.25     3.80

June 30                      26.25      19.75     13.125      10.75        6.125    5.125

September 30                 40.00      24.50     19.375     11.125        7.125     5.25

December 31                  39.50      27.75      22.00      17.00         8.75    6.625

</TABLE>

DIVIDEND POLICY

Since 1988, the Company has not paid a dividend on its stock. The Company has no
present intention to pay dividends on its common stock.

                                      -35-

<PAGE>
[small Goran logo]
CORPORATE DIRECTORY

Directors

G. Gordon Symons
Hamilton, Bermuda
Chairman of the Board
Goran Capital Inc.

J. Ross Schofield
Toronto, Ontario
President
Schofield Insurance Brokers

David B. Shapira
Toronto, Ontario
President
Medbers Limited

Douglas H. Symons
Indianapolis, Indiana
Vice President and Chief Operating Officer

*James G. Torrance, Q.C.
Toronto, Ontario
Partner Emeritus
Smith, Lyons, Barristers & Solicitors

*John K. McKeating
Montreal, Quebec
Partner
Vision 2120, Inc.

*Alan G. Symons
Indianapolis, Indiana
President and Chief Executive Officer
Goran Capital Inc.

*Members of Audit Committee

Officers

G. Gordon Symons
Chairman of the Board

Alan G. Symons
President and Chief Executive Officer

Douglas H. Symons
Vice-President and Chief Operating Officer

Gary P. Hutchcraft, C.P.A.
Vice President and Chief Financial Officer

David L. Bates, J.D., C.P.A.
Vice President, General Counsel and Secretary

Actuaries

Tillinghast
Philadelphia, Pennsylvania

J.S. Cheng & Partners Inc.
Toronto, Ontario

Trustee and Registrar
Montreal Trust Company of Canada
Toronto, Ontario

Auditors
Schwartz Levitsky Feldman
Chartered Accountants
Toronto, Ontario

Coopers and Lybrand, L.L.P.
Indianapolis, Indiana

Managers - Granite Reinsurance Company Ltd.

Atlantic Security Ltd.
Hamilton, Bermuda

                                      -36-

<PAGE>

                                                              [small Goran logo]

SUBSIDIARIES AND BRANCH OFFICES

HEAD OFFICE CANADA
Goran Capital Inc.
181 University Avenue
Box 11, Ste 1101
Toronto, Ontario
Canada M5H 3M7
Tel: 416-594-1155
Fax: 416-594-0711

HEAD OFFICE U.S.
Goran Capital Inc.
4720 Kingsway Drive
Indianapolis, IN 46205
Tel: 317-259-6400
Fax: 317-259-6395

SHAREHOLDER INFORMATION

Stock Exchange Listings
The common shares are listed on The Toronto Stock
Exchange (GNC) and on NASDAQ (GNCNF)

Annual Meeting
The Annual Meeting of Shareholders
will be held on May 19, 1998
at 10:00 a.m.
181 University Avenue, Suite 1101,
Toronto, Ontario Canada

Shareholder Inquiries
Inquiries should be directed to:

Alan G. Symons
President and Chief Executive Officer
Goran Capital Inc.
Tel: 416-594-1155 (Canada)
     317-259-6302 (U.S.)

SUBSIDIARIES AND BRANCHES

Granite Insurance Company
181 University Avenue,
Box 11, Ste 1101
Toronto, Ontario Canada M5H 3M7
Tel: 416-594-1155
Fax: 416-594-0711

Symons International Group, Inc.
4720 Kingsway Drive
Indianapolis, IN 46205
Tel: 317-259-6300
Fax: 317-259-6395

Pafco General Insurance Company
4720 Kingsway Drive
Indianapolis, Indiana 46205
Tel:   317-259-6300
Fax:  317-259-6395

Symons International Group, Inc.
(Florida)
5900 North Andrews Drive
Suite 800
Fort Lauderdale, Florida 33309
Tel:   954-772-5061
Fax:  954-772-9873

Superior Insurance Company
280 Interstate North Circle N.W.
Atlanta, Georgia 30339
Tel:   770-952-4885
Fax: 770-9567504

Superior Insurance Company
3030 N. Rocky Point Drive, Ste 770
Tampa, Florida 33607
Tel: 813-281-2444
Fax: 813-281-8036

Superior Insurance Company
1745 W. Orangewood Road
Orange, CA 92868
Tel: 714-978-6811
Fax: 714-978-0353

IGF Insurance Company
Corporate Office
6000 Grand Avenue
Des Moines, Iowa 50312
Tel: 515-633-1000
Fax:  515-633-1010

IGF Mid West
6000 Grand Avenue
Des Moines, Iowa 50312
Tel: 515-633-1000
Fax: 515-633-1012

IGF Mid East
3900 Wood Duck Drive, Suite B
Springfield, Illinois 62707
Tel: 217-726-2450
Fax: 217-726-2451

IGF Southwest
7914 Abbeville Avenue
Lubbock, Texas 79424
Tel: 806-783-3010
Fax: 806-783-3017

IGF South
101 Business Park Drive, Suite C
Jackson, Mississippi 39213
Tel: 601-957-9780
Fax: 601-957-9793

IGF East
8000 Regency Park, Suite 280
Cary, North Carolina 27511
Tel: 919-462-7850
Fax: 919-462-7863

IGF West
1750 Bullard Avenue, Suite 106
Fresno, California 93710
Tel: 209-432-0196
Fax: 209-432-0294

IGF North
116 South Main, Box 1090
Stanley, North Dakota 58784
Tel: 701-628-3536
Fax: 701-628-3537

Granite Reinsurance Company Ltd.
Bishop's Court Hill
St. Michael, Barbados, W.I.
(Managers: Atlantic Security Ltd.)
Tel:  441-295-5425
Fax:  441-295-5444
       

<PAGE>


BACK PAGE
[Goran logo]

GORAN CAPITAL INC.

181 University Avenue      4720 Kingsway Drive
Box 11, Suite 1101         Indianapolis, Indiana
Toronto, Ontario           46205
Canada  M5H 3M7

Tel:  416-594-1155         Tel:  317-259-6400
Fax:  416-594-0711         Fax:  317-259-6395