<TABLE>


                                                             1




                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 1O-K
(Mark One)
[ X ]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

         For the fiscal year ended December 31, 1996
                                       OR

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

         For     the     transition     period     from ______________    to ___________________________
                         Commission file number 1-11238.

                                  NYMAGIC, INC.
             (Exact name of registrant as specified in its charter)
           New York                                                                                      13-3534162
(State or other jurisdiction of                                                                           (I.R.S. Employer
incorporation or organization)                                                                            Identification No.)

330 Madison Avenue, New York, NY                                                                          10017
(Address of principal executive offices)                                                                 (Zip Code)

                               Registrant's telephone number, including area code: (212) 551-0600
                                                           ---------
                                  Securities   registered  pursuant  to  Section
12(b) of the Act:

         Title of each class:                                                                     Name  of  each   exchange   on
which registered:
Common Stock, $1.00 par value                                                     New York Stock Exchange

                                  Securities   registered  pursuant  to  Section
12(g) of the Act:
                                      None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Rule 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
registrant, as of March 1, 1997, was approximately $85,887,845.

The number of shares  outstanding of each of the registrant's  classes of common
stock,  as of March 1, 1997,  was 10,143,052  shares of common stock,  $1.00 par
value.
                       DOCUMENTS INCORPORATED BY REFERENCE

Portions  of the  Company's  Proxy  Statement  for the 1997  Annual  Meeting  of
Shareholders are incorporated by reference in Part III.


<PAGE>


                                     Part I

Item 1.  Business.

General

         NYMAGIC, INC., a New York corporation (the "Company" or "NYMAGIC"),  is
a holding company which owns and operates the following  insurance companies and
insurance underwriters and managers:

         Insurance Companies:

         New York Marine And General Insurance Company - ("New York Marine")
         Gotham Insurance Company - ("Gotham")

The Company's insurance company  subsidiaries,  New York Marine and Gotham, each
maintain an A.M. Best insurance rating of A+.

         Other:
         Mutual Marine Office, Inc. - ("MMO")
         Pacific Mutual Marine Office, Inc. - ("PMMO")
         Mutual Marine Office of the Midwest, Inc. - ("Midwest")
         all of which are collectively referred to hereinafter as the "Company."

         NYMAGIC,  through its subsidiaries,  specializes in underwriting  ocean
marine, inland marine,  aviation and other liability insurance through insurance
pools managed by MMO, PMMO, and Midwest ("MMO and  affiliates")  since 1964. MMO
and affiliates were acquired by NYMAGIC in January 1991. In addition to managing
the insurance  pools,  NYMAGIC  participates in the risks  underwritten  for the
pools through two insurance  company  subsidiaries,  New York Marine and Gotham.
All premiums, losses and expenses are pro-rated among pool members in accordance
with their  pool  participation  percentages.  Effective  January  1, 1994,  the
Company increased to 81.47% its participation in the ocean marine, inland marine
and  aviation  business  produced  by the pools.  Effective  April 1, 1994,  the
Company  increased to 90.00% its  participation  in the inland  marine  business
produced  by the pools and  effective  July 1, 1994,  the Company  increased  to
90.00% its  participation in the ocean marine and aviation  business produced by
the pools and to 100% its participation in the other liability and inland marine
business produced by the pools.  Substantially all of the Company's premiums for
the last three years have resulted  from  participation  in the insurance  pools
managed by MMO and affiliates.

         The  Company  has   approximately   121   employees   of  whom  19  are
underwriters.

The Pools

         MMO, located in New York,  PMMO,  located in San Francisco and Midwest,
located in Chicago (the "Manager" or the "Managers"), manage the insurance pools
in which the Company participates.

         The Manager accepts, on behalf of the pools, insurance risks brought to
the pools by brokers and others. All premiums,  losses and expenses are prorated
among the pool members in accordance with their percentage participations in the
pools. Pursuant to the pool management agreements,  the pool members have agreed
not to accept  ocean  marine  insurance  (other than ocean  marine  reinsurance)
unless  received  through the Manager and have  authorized the Manager to accept
risks on behalf of the pool members and to effect all transactions in connection
with such risks,  including  the issuance of policies and  endorsements  and the
adjustment of claims.  As compensation for its services,  the Manager receives a
fee of 5.5% of gross premiums  written by the pools and a contingent  commission
of 10% on net underwriting profits, subject to adjustment.


<PAGE>


         Inception to date underwriting results for various reinsurance treaties
are used to calculate reinsurance  contingent  commissions on an earned basis in
the period in which the related  profit  commission  is billed.  Adjustments  to
commissions,   resulting  from  revisions  in  coverage,  retroactive  or  audit
adjustments,  are recorded in the period when realized. Subject to review by the
reinsurers,   the  Managers   determine  the  profitability  of  all  contingent
commission agreements placed with various reinsurance companies.

         New York  Marine was  substituted  for  another  member of the pools in
existence in 1979, and Pennsylvania  National Mutual Casualty  Insurance Company
("Pennsylvania  National") was admitted to each of the pools in 1981.  Arkwright
Mutual Insurance Company ("Arkwright")  increased its participation in the pools
effective  December  31,  1985,  by assuming  the  percentage  participation  of
Employers  Mutual Casualty  Company  ("Employers")  and Mutual Fire,  Marine and
Inland Insurance Company ("Mutual Fire"),  both of which withdrew from the pools
effective December 31, 1985. In addition, the Arkwright-Boston Insurance Company
transferred  its  entire  interest  in the  pools to its  affiliate,  Arkwright,
effective December 31, 1985.

         In the case of Employers and  Arkwright-Boston  Insurance Company,  all
loss and unearned  premium reserves as of December 31, 1985, were transferred to
Arkwright and any loss run-off related to such reserves are to be fully absorbed
by Arkwright. In the case of Mutual Fire, all loss and unearned premium reserves
incurred  through  policy year 1985 were  assumed by all members of the pools in
proportion to their respective  interests in the pools at the time such reserves
were incurred.

         Mutual Fire was a member of the pools from 1964  through  1985,  with a
participation  percentage of 3.71% at the time of its withdrawal from the pools.
In 1986,  Mutual  Fire was  placed  under the  supervision  of the  Pennsylvania
Department of Insurance and it has ceased to meet its obligations under the pool
agreements.  Under the terms of the pool agreements,  if any member is unable to
meet its obligations  with respect to business written by the pools while it was
a member,  the remaining  pool members must assume their  pro-rata  share of the
defaulting member's obligations.

         Effective December 31, 1990, Lumber Mutual Insurance Company ("Lumber")
ceased to  participate in the pools and its 6.82%  participation  was assumed by
New York Marine as to policies  incepting  on or after  January 1, 1991.  In the
case of Lumber,  all loss and unearned premium reserves  incurred through policy
year 1990 were  transferred  to New York  Marine.  Effective  December 31, 1991,
Pennsylvania  National ceased to participate in the pools and its  participation
was assumed by New York Marine as to policies  incepting on or after  January 1,
1992.  In the case of  Pennsylvania  National,  all loss  and  unearned  premium
reserves incurred through policy year 1991 were transferred to New York Marine.

         Effective  January  1,  1994,  the  Company  increased  to  81.47%  its
participation in the ocean marine,  inland marine and aviation business produced
by the  pools.  The  Company's  participation  in the other  liability  business
produced by the pools remained at 91.47%.
         Effective April 1, 1994, the Company  increased to 90.00% its  participation in the inland marine business  produced by
the pools.
         Effective   July  1,  1994,   the  Company   increased  to  90.00%  its
participation  in the ocean marine and aviation  business  produced by the pools
and to 100% its  participation in the other liability and inland marine business
produced by the pools.

         The Company's increase in pool  participations  effective July 1, 1994,
followed the assumption of Utica Mutual  Insurance  Company's  ("Utica  Mutual")
pool share and Utica Mutual's  withdrawal  from the pools.  In the case of Utica
Mutual,  all loss  reserves,  including  incurred but not reported  ("IBNR") and
unearned  premium  reserves,   incurred  on  policies  effective  prior  to  its
withdrawal from the pools, remain as obligations of Utica Mutual.

         The  Company  is not aware of any  uncertainties  with  respect  to any
possible defaults by either Arkwright or Utica Mutual with respect to their pool
obligations which might impact liquidity or results of operations.


<PAGE>


         The pool managed by MMO, the largest when measured by premiums written,
was formed in 1964.  The pools  managed by PMMO and Midwest  were formed in 1975
and 1980, respectively.  Effective January 1, 1996, each pool is composed of the
following members:
                                                                                                 Inland Marine,
Pool Member                                                            Ocean Marine,             Other Liability
                                                                       Aviation Pools                            Pools
New York Marine And General Insurance Company..          90.00%                                 100%
Arkwright Mutual Insurance Company ..........................     10.00%                                    --

         The 1995 A.M. Best ratings for  Arkwright  and Utica  Mutual,  the most
recent period for which such ratings are available, were A+ and A, respectively.

         Assets and liabilities resulting from the insurance pools are allocated
to the members of the insurance pools based upon the pro-rata  participation  of
each member of each pool which is set forth in the management  agreement entered
into by and between the pool  participants  and the Managers.  An examination is
made of the  insurance  pools by the Pool's  independent  auditors to ensure the
method of allocation  among pool  participants  is reasonable and accurate.  The
allocation of premiums and losses is not subject to the Managers' discretion and
the Managers do not believe  there exist any conflicts of interest in connection
with this aspect of the pools.

Investment Policy
         The Company  follows an investment  policy which is reviewed  quarterly
and revised  periodically.  For the years ended  December 31, 1996 and 1995, the
yield on the Company's  investment  portfolio  (computed on the basis of average
monthly cost of investment and statutory  investment  income) was 5.8% and 6.1%,
respectively.  At December 31,  1996,  the  weighted  average  maturity of fixed
maturity investments was 7.3 years.

         The investment  policy for New York Marine as of December 31, 1996, was
as follows:
         1.       Liquid Funds - Minimum  7-1/2% of Investable  Funds.  In cash,
                  certificates  of deposit,  prime  bankers  acceptances,  prime
                  commercial paper,  tax-exempts rated AA/AA or MIG 2 or better,
                  tax-exempts  rated AA by one service and unrated by the other,
                  not to exceed  $5,000,000  par  value in any one  institution;
                  obligations  of the U.S.  Government  and its agencies due one
                  year or  less;  tax-exempt  notes  with a  split  A/AA or AA/A
                  rating not to exceed $500,000 in any one institution.

         2.       Bond Funds

                  A)       Tax-exempt  securities  and  obligations  of  private
                           corporations  rated A or better by each service which
                           provides a rating, not to exceed $5,000,000  maturity
                           value per issuing  entity;  maturities  not to exceed
                           December 31 of the 20th year from the purchase  date,
                           to include:

                           1)Pollution - control bonds  guaranteed by industrial
corporations rated A or better.

                           2)Pre-refunded bonds.

                           3)Housingissues sponsored by the U.S.  Government and
                                    its agencies secured by underlying  mortgage
                                    securities  with maturities not in excess of
                                    30  years  and  average  maturities  not  in
                                    excess of 20 years.

                  B)       Preferred  stocks with sinking funds,  rated A/A or better,  limited to $500,000 par value per issuer
                           for new issues; to $500,000 purchase price for outstanding issues.

                  C)       Obligations of the U.S. Government and its agencies.


<PAGE>


         3.                A)       Equities (including convertible  securities) - Not more than 25% of policyholders'  surplus,
                           and investment in any one  institution is not to exceed five percent (5%) of  policyholders'  surplus
                           at the time of purchase as last reported to the New York State Insurance Department.

                  B)       Subsidiaries - the Company's  investments in subsidiary  companies are excluded from the requirements
                           of the Company's Investment Program.

         The  investment  policy of Gotham is similar to that of New York Marine
except  that  Gotham  is  limited  to  $2,000,000  maturity  value  for its bond
investments and $1,000,000 for short-term investments.

         The investments of the Company's  subsidiaries must also conform to the
requirements contained in the New York State Insurance Law and Regulations.

         The Company's investments are monitored by the Finance Committee of the Board of Directors.  New
York  Marine's  fixed income  portfolio is managed by J.P.  Morgan  Investment  Management,  Inc.  ("JPMIM").  New York Marine's
equity portfolio is managed by JPMIM and, in part, by Sorema Asset  Management.  Gotham has its fixed income  portfolio  managed
by JPMIM and its equity portfolio managed by Rorer Asset Management.  See "Subsidiaries".

         As of  December  31,  1996,  New York  Marine's  invested  assets  were
invested as follows:

         Bonds Rated A or better                  $276,090,031
         Bonds Rated below A                        -0-
         Equities$  35,035,480


         As of December  31, 1996,  Gotham's  invested  assets were  invested as
follows:

         Bonds Rated A or better                  $ 69,393,098
         Bonds Rated below A                       -0-
         Equities$ 10,313,256

Lines of Insurance

         The Company writes ocean marine, inland marine, aircraft and non-marine
liability  lines of insurance.  Ocean marine  insurance  covers a broad range of
classes, including marine hull, primary and excess marine liabilities,  drilling
rig, marine cargo,  war risks and assumed  reinsurance.  Inland marine insurance
includes, among other things,  differences in condition ("DIC"), excess property
packages,   miscellaneous  property  insurance  and  assumed  reinsurance.   DIC
insurance  covers those perils not  included  with a fire and extended  coverage
policy, including burglary,  collapse, flood, volcano and earthquake. In 1995, a
decision  was made to reduce the  Company's  exposure  to  natural  catastrophes
through the inland  marine line.  This  resulted in a reduction in the gross and
net  inland  marine  premiums  written  for 1995 and  1996.  Aircraft  insurance
includes hull and engine  insurance as well as liability  insurance.  Non-marine
liability  insurance  includes,  among other things,  umbrella (excess casualty)
insurance, and excess and surplus line risks written primarily through Gotham.

         The  following  tables  set forth  the  pools'  gross  and net  written
premiums.   Insurance   premiums  written  on  a  calendar  year  basis  may  be
attributable to various policy years. Thus, some of the 1996 premium written may
arise from policies incepting in 1995 and prior when the Company had a different
participation  in the pools.  Therefore,  the  Company's  gross and net  written
premiums  cannot be obtained by  multiplying  the amounts below by the Company's
percentage  participation in each year. However, the tables below do reflect the
size and mix of business produced by the Managers for the years so indicated.


<PAGE>


Gross Premium Written by
    Line of Business                                                                       Year Ended December 31,
                                                   1996                        1995                             1994
<S>                                                  <C>        <C>           <C>          <C>           <C>         <C>
                                                                                  (In thousands)
Ocean marine..............                       $  87,519     56%          $ 93,892      50%          $ 93,670      45%
Inland marine...............                         1,651      1%            14,380       8%            36,724      18%
Aircraft............................                61,067     39%            70,707      38%            65,320      32%
Other liability.................                     5,309      4%             7,111       4%            10,868       5%
Other...............................                   358   --                  290    --                  232    --
Total..............................               $155,904    100%          $186,380     100%          $206,814     100%
Net Premium Written by
    Line of Business                                                                       Year Ended December 31,
                                                   1996                          1995                           1994
                                                                                     (In thousands)
Ocean marine.............                         $ 58,771     59%         $  55,749      52%          $ 48,453      42%
Inland marine................                  (    2,087  ) ( 2% )            1,227       1%            15,339      13%
Aircraft............................                37,682     38%            42,339      40%            41,053      36%
Other liability.................                     5,325      5%             6,954       7%            10,467       9%
Other...............................                   374   --                  290   ---                  232   --
Total.............................                $100,065    100%          $106,559     100%          $115,544     100%
Reinsurance Ceded
         A  reinsurance  transaction  takes  place  when  an  insurance  company
transfers (cedes) a portion or all of its exposure on insurance written by it to
another insurer.  The reinsurer  assumes the exposure in return for a portion or
all of the premium.  The ceding of  reinsurance  does not legally  discharge the
insurer from its primary liability for the full amount of the policies,  and the
ceding company is required to pay the loss if the assuming company fails to meet
its obligations under the reinsurance agreement. The Company, through the pools,
cedes the greater part of its reinsurance through annual reinsurance  agreements
(treaties) with other insurance  companies.  These treaties,  which are drawn by
lines or classes of insurance, allow the Company to automatically reinsure risks
without having to cede insurance on a risk by risk (facultative) basis, although
facultative reinsurance is utilized on occasion.
         Generally,  the Managers place reinsurance with companies which have an
A.M. Best rating greater than B+ or which have sufficient financial strength, in
management's  opinion,  to warrant being used for reinsurance  protections.  The
Managers  also  examine  financial  statements  of  reinsurers  and review  such
statements  for  profitability,  reasonable  leverage and adequate  surplus.  In
addition, the Company, through the pools, withholds funds and may obtain letters
of credit  under  reinsurance  treaties.  The Company  continues  to monitor the
financial  status of all  reinsurers on an annual  basis,  as well as the timely
receipt of cash, to assess the ability of reinsurers to pay reinsurance claims.
         The Company,  through the pools,  attempts to limit its  exposure  from
losses on any one occurrence  through the use of various  excess of loss,  quota
share and  facultative  reinsurance  arrangements  and to  minimize  the risk of
default by a reinsurer by reinsuring risks with many different  reinsurers.  The
Company utilizes approximately 80 to 100 separate reinsurance treaties each year
with a range of 8 to 20 reinsurers participating on each treaty. Many reinsurers
participate on multiple  treaties.  The Company utilizes quota share reinsurance
treaties in which the reinsurers participate on a set proportional basis in both
the  premiums  and losses.  Additionally,  the Company  utilizes  excess of loss
reinsurance treaties in which the reinsurers, in exchange for a minimum premium,
subject to upward  adjustment  based upon premium volume,  agree to pay for that
part of each loss in excess of an agreed upon amount. The Company's retention of
exposure,  net of these  treaties,  varies  between  its  different  classes  of
business  and from year to year,  depending  on several  factors  including  the
pricing  environment  on both the  direct  and ceded  book of  business  and the
availability of reinsurance.  In general,  reinsurance is obtained for each line
of business when  necessary to reduce the Company's  exposure to a maximum of $2
million  for any one  insured on any one  occurrence.  The Company can and does,
from time to time,  carry a maximum exposure in excess of $2 million for any one
insured  on any one  occurrence.  Such  instances,  when they  occur,  generally
reflect a business  decision  regarding  the cost of further  reductions  in the
Company's exposure and/or the availability of reinsurance.


<PAGE>


         The Company  attempts to limit its exposure from  catastrophes  through
the purchase of general excess of loss  reinsurance  which provides  coverage in
the event that multiple  insureds incur losses arising from the same occurrence.
These coverages require the Company to pay a minimum premium,  subject to upward
adjustment based upon premium volume.  The treaties,  which extend,  in general,
for a twelve month period, obligate the reinsurers to pay for the portion of the
Company's aggregate losses (net of specific  reinsurance) which fall within each
treaty's  layer or exposure.  The  Company's  retention on any one  catastrophic
occurrence,  after it obtains the benefit of its excess of loss reinsurance, has
not  exceeded  $4  million  during  the  past  three  years.  In the  event of a
catastrophe  loss,  the Company  would incur  additional  reinstatement  premium
charges for its excess of loss  reinsurance,  to the extent  that such  treaties
incur a portion of the loss and in an amount not greater than the original  cost
of the reinsurance.

         The  Company   reinsures  risks  with  several   domestic  and  foreign
reinsurers as well as syndicates  including Lloyd's of London  ("Lloyd's").  The
Company's  largest  reinsurers as of December 31, 1996, were Arkwright,  Lloyd's
and Utica Mutual,  with aggregate net  recoverables of $55 million,  $17 million
and $21 million,  respectively.  The 1995 A.M.  Best ratings for  Arkwright  and
Utica  Mutual are A+ and A,  respectively.  Lloyd's of London  maintains a trust
fund  which  was  established  for  the  benefit  of all  United  States  ceding
companies.  In 1995,  as part of a  reconstruction  process,  the trust fund was
expanded to include certain  obligations on a gross basis. In 1996,  Equitas was
formed to handle the run-off of years 1992 and prior for Lloyd's.  For the three
most recent years for which Lloyd's has reported  results,  1993, 1992 and 1991,
Lloyd's  reported  gains of 2.25  billion  pounds  for 1993 and  losses  of 1.02
billion  pounds and 2.05 billion  pounds for 1992 and 1991.  The Company has not
experienced  difficulties in collecting  amounts due from Lloyd's and the timing
of cash  receipts  has not  materially  affected  the  Company's  liquidity.  At
December  31,  1996,  the  Company's  net  exposure  to  reinsurers,  other than
Arkwright,  Lloyd's and Utica Mutual,  was approximately $85 million,  including
amounts  recoverable  for paid  losses,  outstanding  losses,  IBNR and unearned
premium reserves. This amount is recoverable collectively from approximately 700
reinsurers or  syndicates,  no single one of which was liable to the Company for
an unsecured amount in excess of approximately $3.0 million.

Operating Ratios
         Premium to Surplus Ratio.  The following  table shows,  for the periods
indicated,  the Company's  consolidated statutory ratios of net premiums written
(gross premiums less premiums ceded) to policyholders' surplus:
                                                                                 Year          Ended           December
31,
                                                 1996           1995            1994              1993             1992
                                                                          (Dollars in thousands)
Net premiums written.......                  $ 90,513          $ 97,817         $100,907          $ 79,034         $ 60,872
Policyholders' surplus......                  160,929           148,785          133,813           131,375          127,060
Ratio...............................         .56 to 1          .66 to 1         .75 to 1          .60 to 1         .48 to 1

While  there are no  statutory  requirements  applicable  to the  Company  which
establish permissible premium to surplus ratios,  guidelines  established by the
National Association of Insurance  Commissioners  provide that the statutory net
premium  written to surplus  ratio should be no greater than 3 to 1. The Company
is well within those guidelines.

Combined Loss and Expense Ratios. The underwriting  experience of the Company is
indicated by its  "combined  ratio," which is the sum of (l) the ratio of losses
and loss adjustment  expenses incurred to net premiums earned (the "loss ratio")
and (2) the ratio of policy acquisition costs and other underwriting expenses to
net premiums  written (the "expense  ratio").  The Company's  consolidated  loss
ratios,  expense ratios and combined ratios,  on a statutory basis, are shown in
the following table:
                                                                                 Year Ended December 31,
                                                 1996              1995             1994              1993         1992

Loss Ratio......................                62.6%             69.0%            80.2%             80.3%           77.7%
Expense Ratio..............                     31.9%             30.3%            28.5%             26.6%           28.2%
Combined Ratio.........                         94.5%             99.3%           108.7%            106.9%         105.9%


<PAGE>


         The ratios set forth above have been  calculated  on a statutory  basis
which  reflect  the  operating   results  of  NYMAGIC's  two  insurance  company
subsidiaries, New York Marine and Gotham.
         GAAP Combined Loss and Expense Ratios.  The underwriting  experience of
the Company is indicated by its  "combined  ratio,"  which is the sum of (1) the
ratio of losses and loss  adjustment  expenses  incurred to net premiums  earned
(the  "loss  ratio")  and (2) the  ratio of policy  acquisition  costs and other
underwriting expenses to net premiums earned (the "expense ratio").
         The Company's  consolidated  loss ratios,  expense  ratios and combined
ratios, on a GAAP basis, are shown in the following table:
                                                                                          Year Ended December 31,
                                        1996              1995              1994             1993              1992
Loss Ratio.......................      61.2%             67.4%             78.1%            77.8%             84.6%
Expense Ratio...............           32.3%             31.9%             34.4%            28.2%             20.0%
Combined Ratio..........               93.5%             99.3%            112.5%           106.0%            104.6%

         The ratios set forth above have been  calculated  on a GAAP basis which
reflect the operating results of NYMAGIC's two insurance  company  subsidiaries,
New York Marine and Gotham.

         The GAAP loss ratio differs from the  statutory  loss ratio mainly as a
result  of  accruals  for  salvage  and  subrogation  in years  1992  and  1993,
amortization  of the deferred  income in connection  with the assumption of loss
reserves  from  Pennsylvania  National  and  Lumber  Mutual,  and,  in 1993  and
subsequent,  an accrual on a statutory  basis for  unallocated  loss  adjustment
expenses  which are based on  management  commissions  charged  by the pool and,
therefore,  eliminated  on a GAAP  consolidated  basis.  The GAAP expense  ratio
differs from the statutory  expense ratio  primarily as a result of amortization
of deferred policy  acquisition  costs for GAAP and receivable  write-offs which
are reflected in income for GAAP. In 1992,  the assumption of loss reserves from
two former pool members,  Pennsylvania  National and Lumber,  served to increase
the GAAP loss ratio and decrease the GAAP expense  ratio  inasmuch as there were
no expenses  associated with the assumption of the losses and the funds received
were recorded as premiums. Reserves

         The applicable  insurance laws under which the Company operates require
that  reserves  be  maintained  for the  payment of losses  and loss  adjustment
expenses  with respect to both  reported and incurred but not reported  ("IBNR")
claims under its insurance  policies.  IBNR claims are those losses,  based upon
historical  experience and other relevant data, that the Company  estimates will
be  reported or  ultimately  develop on risks  undertaken  by the  Company.  The
Company maintains a conservative policy in establishing reserves,  especially in
the year the policy is written.  Case loss reserves are determined by evaluating
reported  claims on the  basis of the type of loss  involved,  knowledge  of the
circumstances  surrounding the claim, and the policy provisions  relating to the
type of loss. IBNR claims are estimated on the basis of statistical  information
with  respect  to  the  probable  number  and  nature  of  claims  arising  from
occurrences which have not yet been reported. The establishment of reserves acts
to  reduce  income  while the  downward  adjustment  or  reduction  of  reserves
increases income.

         The loss  settlement  period on insurance  claims may be many years and
during  this  period it often  becomes  necessary  to  adjust  the  estimate  of
liability  on a claim either  upward or  downward.  Among the classes of marine,
aviation and non-marine liability insurance written by the Company are liability
classes which  historically  have had long lead times  between  occurrence of an
insurable event, reporting of the claim to the Company and final settlement.  In
such  cases,  the Company is forced to estimate  reserves  over long  periods of
time, with the possibility of several  adjustments.  Other classes of insurance,
such as property and claims-made non-marine liability classes, historically have
had shorter lead times between  occurrence of an insurable  event,  reporting of
the claim to the Company and final settlement. The reserves with respect to such
classes are less likely to be readjusted.

         The Company,  from time to time, has increased its participation in the
pools.  The effect of each such increase is  prospective  in nature and does not
affect the loss  reserves  herein set forth for the years prior to the effective
date of any such change in participation percent.


<PAGE>


         The insurance pools  participated in the issuance of umbrella  casualty
insurance  for various  Fortune 1000  companies in the period from 1978 to 1983.
Depending on the accident  year,  the  insurance  pools'  maximum  retention per
occurrence  ranged from  $250,000 to  $500,000.  The  Company's  effective  pool
participation  on such risks varied from 11% in 1978 to 30% in 1983. At December
31, 1996 and 1995, the Company's  gross,  ceded and net loss and loss adjustment
expense  reserves for  Asbestos/Pollution  policies  amounted to $23.5  million,
$15.0  million  and $8.5  million,  and $20.6  million,  $13.6  million and $7.0
million,  respectively.  As of December 31, 1996, the Company had  approximately
1,000  policies  which  had at least one claim  relating  to  Asbestos/Pollution
exposures.    The   Company   believes   that   the   uncertainty    surrounding
Asbestos/Pollution  exposures,  including  issues as to  insureds'  liabilities,
ascertainment of loss date, definitions of occurrence, scope of coverage, policy
limits and application and interpretation of policy terms, including exclusions,
all affect the estimation of ultimate losses.  Under such  circumstances,  it is
difficult to determine the ultimate loss for Asbestos/Pollution  related claims.
Given the  uncertainty  in this area,  losses  from  Asbestos/Pollution  related
claims are likely to adversely  impact the Company's  results from operations in
future years and may vary materially from such reserves  reported as of December
31, 1996.  However,  as of December  31, 1996,  the Company  believes  that,  in
aggregate,  the unpaid loss and loss adjustment  expense reserves as of December
31, 1996,  allow for an adequate  provision and that the ultimate  resolution of
the  Asbestos/Pollution  claims will not have a material impact on the Company's
financial position.
         The following  table sets forth  NYMAGIC's net case reserve  experience
for Asbestos/Pollution policies for each of the past three years:
                                                                            1996          1995                 1994
                                                                                               (In
Thousands)
Asbestos
Case Reserves at beginning of period                                   $ 1,307             $1,367          $  1,158
Incurred loss and loss adjustment expenses                               (  186)                7               274
Payments                                                               (      8)         (     67)         (     65)
Case Reserves at end of period                                           1,103              1,307             1,367

Pollution
Case Reserves at beginning of period                                      $2,141           $1,977          $  1,799
Incurred loss and loss adjustment expenses                                   975              642               713
Payments                                                                    (793)        (    478)        (     535)
Case Reserves at end of period                                             2,323            2,141             1,977

The following table sets forth  NYMAGIC's net loss and loss  adjustment  expense
experience for Asbestos/Pollution policies for each of the past three years.
                                                                            1996             1995              1994
                                                                                               (In
Thousands)
Asbestos/Pollution
Unpaid loss and loss adjustment expenses
 (Including IBNR) at beginning of period                                  $7,041           $6,150          $  4,954
Incurred loss and loss adjustment expenses                                 2,270            1,436             1,796
Payments                                                                (    811)        (    545)        (     600)
Unpaid loss and loss adjustment expenses
 (Including IBNR) at end of period                                         8,500            7,041             6,150

The   loss   and   loss   adjustment   payments   related   to   the   Company's
Asbestos/Pollution exposures have not been material in relation to the Company's
total loss and loss adjustment expense payments as shown in the table below:
                                                                            1996          1995              1994
                                                                                               (In
Thousands)
Total loss and loss adjustment expense
 payments for the year ended December 31,                                $61,524          $51,719           $57,356
Asbestos/Pollution loss and loss adjustment expense
 payments for the year ended December 31,                                    811              545               600


<PAGE>



         The insurance pools have written primary insurance relating to products
liability  since 1985.  The insurance  pools' maximum loss per risk is generally
limited to $1,000,000 and the Company's participation percentage ranges from 59%
to 100% based upon  policy  year.  The  Company  believes  that,  based upon the
maximum amount per risk and the Company's  conservative  reserving posture,  the
reserves currently  established are adequate to cover the ultimate resolution of
all product liability claims.

         The following table shows changes in reserves in subsequent  years (the
development)  from the prior loss estimates  based upon experience as of the end
of each  succeeding  year.  The  estimate  is  increased  or  decreased  as more
information  becomes  known  about the  frequency  and  severity  of losses  for
individual  years.  A redundancy  means the original  estimate of the  Company's
consolidated  liability was higher than the current estimate; a deficiency means
that the current estimate is higher than the original estimate.

         The first line of the table  presents,  for each of the last ten years,
the estimated  liability for unpaid losses and loss  adjustment  expenses at the
end of the year,  including  the reserve for incurred  but not reported  losses.
These reserves include reserves  assumed from  Pennsylvania  National and Lumber
pursuant to the assumption of their pool  obligations.  The first section of the
table  shows,  by year,  the  cumulative  amounts of losses and loss  adjustment
expenses paid as of the end of each succeeding  year,  expressed as a percentage
of the estimated liability for such amounts.

         The  second  section  sets  forth the  re-estimates  in later  years of
incurred  losses,  including  payments,  as a percentage of the estimate for the
years indicated.  The cumulative  redundancy represents as of December 31, 1996,
the aggregate  change in the estimates  over all prior years.  The  redundancies
have been reflected in income over the periods shown.

              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


<PAGE>





         The Company  makes no specific  provision  for  inflation in connection
with  reserve  estimates,   but  does  each  year  consider  the  adjustment  of
outstanding  case reserves and current  inflationary  indices in determining the
adequacy of the overall  loss  reserve.  The Company  monitors  historical  loss
payments to determine the sufficiency of this provision.

         The  following  table  provides a  reconciliation  of the  consolidated
liability  for losses and loss  adjustment  expenses at the beginning and end of
1996, 1995 and 1994:
                                                                                    Year ended December 31,
                                                                            1996          1995             1994
                                                                                                  (In Thousands)
Net liability for losses and loss adjustment
  expenses at beginning of year....................                     $229,916         $212,377          $208,366
Provision for losses and loss adjustment
  expenses occurring in current year.............                         71,731           75,618            64,061
Decrease in estimated losses and loss
  adjustment expenses for claims occurring
  in prior years (1)...............................................  (    12,753)      (    6,360)        (   2,694)
Deferred income-loss portfolio
  assumption(2)...................................................           381              458               533
Total losses and loss adjustment expenses
  incurred                                                                59,359           69,716            61,900
Less:
Losses and loss adjustment expense payments
  for claims occurring during:
      current year...............................................         15,012           10,043            11,185
      prior years...................................................      46,512           41,676            46,171
                                                                          61,524           51,719            57,356
Plus:
Deferred income-loss portfolio assumption(2)                          (      381)    (        458)       (      533)
Net liability for losses and loss adjustment
  expenses at year end.............................                      227,370          229,916           212,377
Ceded unpaid losses and loss adjustment
  expenses.......................................................        184,467          187,879           222,695
Gross unpaid losses and loss adjustment
  expenses at year end                                                  $411,837         $417,795          $435,072

         (1) The  adjustment to the  consolidated  liability for losses and loss
adjustment  expenses for losses occurring in prior years reflects the net effect
of the  resolution  of losses for other than full reserve  value and  subsequent
readjustments of loss values.
         (2) Deferred income-loss portfolio assumption represents the difference
between cash received and unpaid loss reserves assumed as a result of the buyout
of Pennsylvania National's and Lumber's net pool obligations which was initially
capitalized and will be amortized over the payout period of the related losses.

         The principal differences between the consolidated liability for unpaid
losses and loss  adjustment  expenses as reported in the Annual  Statement filed
with  state  insurance  departments  in  accordance  with  statutory  accounting
principles and the liability based on generally accepted  accounting  principles
shown in the above tables is due to the reserve for the Company's pro rata share
of the pool obligations of Mutual Fire, a former pool member,  the assumption of
Pennsylvania  National's  and Lumber's loss  reserves  arising from their former
participation in the MMO insurance pools and unpaid  unallocated loss adjustment
expenses  based upon  management  commissions  payable to the Managers which are
eliminated on a consolidated  basis. The loss reserves shown in the above tables
reflect in each year salvage and subrogation accruals of approximately 1% to 6%.
The  estimated  accrual  for  salvage  and  subrogation  is based on the line of
business  and  historical  salvage and  subrogation  recovery  data.  In neither
statutory  nor  generally  accepted  accounting  principles  are  loss  and loss
adjustment expense reserves discounted.


<PAGE>


         The following table sets forth the  reconciliation  of the consolidated
net  liability  for  losses  and loss  adjustment  expenses  based on  statutory
accounting  principles and based on generally accepted accounting  principles as
of December 31, 1996, 1995 and 1994:
                                                                                              Year ended December 31,
                                                                                        1996             1995             1994
                                                                                                      (In Thousands)
Liability for losses and loss adjustment expenses
  reported based on statutory accounting principles...................                $222,953         $225,260          $207,178
Liability for losses and loss adjustment expenses assumed
  from Lumber Mutual and Pennsylvania National........................                   4,508            4,615             5,287
  (excludes $6,653,075, $8,173,000 and $9,907,000 at
  December 31, 1996, 1995 and 1994, accounted for in the
  statutory liability for losses and loss adjustment expenses.)
Estimated share of Mutual Fire, Marine and Inland
  Insurance Company's pool obligations.........................................             61              114               183
Unpaid unallocated loss adjustment expenses.............................           (      152 )       (     73 )         (    271)
Net liability for losses and loss adjustment expenses
  reported based on generally accepted accounting
  principles..............................................................................................227,370         229,916
212,377
Ceded liability for unpaid losses and loss adjustment expenses                         184,467          187,879           222,695
Gross liability for unpaid losses and loss adjustment expenses                        $411,837         $417,795          $435,072
Regulation
         The Company is regulated by the  insurance  regulatory  agencies of the
states in which it is authorized to do business.  New York Marine is licensed to
engage in the insurance business in all states.

         Gotham is permitted to write  excess and surplus  lines  insurance on a
non-admitted basis in all of the states except Arkansas, Massachusetts,  Nevada,
New  Jersey,  New  Hampshire  and  Vermont.  Gotham is licensed to engage in the
insurance  business in the state of New York and, as such,  cannot  write excess
and surplus business in that state.

         Many  aspects  of the  Company's  insurance  business  are  subject  to
regulation.  For example,  minimum  capitalization  must be maintained;  certain
forms of policies must be approved before they may be offered;  reserves must be
established in relation to the amounts of premiums  earned and losses  incurred;
and, in some cases, schedules of premium rates must be approved.

         The  insurance  company  subsidiaries  also  file  statutory  financial
statements with each state in the format  requested by the National  Association
of Insurance Commissioners (the "NAIC"). The NAIC provides accounting guidelines
for companies to report and is seeking to provide minimum solvency standards for
all companies in the form of risk-based  capital  requirements.  Such  standards
have been established,  and the Company believes that the surplus of each of the
insurance companies are above the minimum amount required by the NAIC.

         The Company is subject to an examination by the Insurance Department of
the State of New York. The insurance  companies' most recent examination was for
the year ended December 31, 1990.  There were no significant  adjustments  which
resulted from that examination.

         The insurance  company  subsidiaries  are limited under New York law in
the amount of dividends  they can pay to the parent  company,  NYMAGIC,  without
prior approval of the New York State Insurance  Department.  NYMAGIC's principal
source of income is dividends from its  subsidiaries,  which is used for payment
of operating expenses,  including interest expense,  loan repayments and payment
of dividends to NYMAGIC's shareholders. The maximum amount of dividends that may
be paid to  NYMAGIC  by the  insurance  company  subsidiaries  is limited to the
lesser of 10% of statutory surplus or 100% of net investment  income, as defined
under New York  insurance  law.  The maximum  amount  which could be paid to the
Company out of December 31, 1996, surplus was approximately $16,093,000.


<PAGE>


         Insurance  companies are being  regulated  more strictly by the various
states in recent years. The state of California is seeking to regulate  premiums
more strictly under  Proposition  103. The California  Insurance  Department has
advised the Company that it has no rate  rollback  liability  under  Proposition
103.  Many states have also  increased  regulation  of surplus  lines  insurance
thereby  requiring  stricter  standards for  authorization.  Several states have
established  guaranty  funds which serve to provide the assured with payment due
under  policies  issued  by  insurance  companies  that have  become  insolvent.
Insurance  companies  that are authorized to write in states are assessed a fee,
normally based on direct  writings in a particular  state, to cover any payments
drawn from insolvency  funds.  The Company is subject to such assessments in the
various states. Subsidiaries
         NYMAGIC's largest  insurance company  subsidiary is New York Marine And
General Insurance  Company which was formed in 1972.  NYMAGIC was formed in 1989
to serve as a holding  company for the  subsidiary  insurance  companies.  Prior
thereto,  New York Marine And General  Insurance  Company was the parent company
and shares of its common stock,  $1.00 par value, were traded publicly.  NYMAGIC
became  the  holding  company,  and New York  Marine its  subsidiary,  effective
October 2, 1989, following regulatory and shareholder approval.

         NYMAGIC's other insurance company subsidiary, Gotham Insurance Company,
was organized in 1986 as a means of expanding  into the excess and surplus lines
marketplace.  New York Marine and Gotham  entered into a Reinsurance  Agreement,
effective  January 1, 1987,  under  terms of which  Gotham will cede 100% of its
gross  direct  writings to New York  Marine and assume 15% of New York  Marine's
total retained business,  beginning with the 1987 policy year. Accordingly,  for
policy year 1987 and subsequent,  Gotham's underwriting  statistics are expected
to be similar to New York  Marine's.  As of December  31,  1996,  75% and 25% of
Gotham's common stock is owned by New York Marine and NYMAGIC, respectively.

         Gotham  does not assume or cede  business  to or from  other  insurance
companies. Gotham had certain operating expenses of its own, however, for policy
year 1987 and subsequent,  and Gotham's underwriting  statistics are expected to
be similar to New York  Marine's.  As of December 31, 1996,  New York Marine had
aggregate  recoverables due from Gotham of  approximately  $37 million or 25% of
New York Marine's statutory surplus.  Gotham had aggregate recoverables due from
New York Marine as of December 31, 1996, of approximately  $32 million or 66% of
Gotham's statutory surplus.

         New York  Marine's  and  Gotham's  combined  net income on a GAAP basis
represented  substantially all of the consolidated net income of the Company for
each of the years ended December 31, 1996, 1995 and 1994.
         Mutual Marine Office,  Inc. was acquired in 1991 and was formed in 1964
to underwrite a book of ocean marine insurance.  MMO's activities  expanded over
the years and it now underwrites a book of ocean marine, inland marine, aviation
and other liability insurance.

         Mutual  Marine  Office of the Midwest,  Inc. was acquired in 1991 and was formed in 1978 to underwrite a varied book of
business located in the Midwest region.

         Pacific  Mutual  Marine  Office,  Inc.  was  acquired  in 1991 and was formed in 1975 to  underwrite  a varied  book of
business in the West Coast region.
Competition
         The insurance  industry is highly  competitive and the companies,  both
domestic and foreign,  against which the Company  competes are often larger with
greater capital  resources than the Company and the pools. The principal methods
of  competition  are  pricing and  responsiveness  to the  individual  insured's
coverage requirements.  The competitive nature of the business reached a peak in
1990 after several major catastrophes forced the withdrawal of several insurance
companies  from various  markets.  As a result,  the aviation,  ocean and inland
marine market hardened in 1991 and remained favorable through 1994.  However, in
1995 and 1996 as  competition  intensified,  rates  softened in the aviation and
ocean marine lines.  Competition  remains intense as a result of excess capacity
in the casualty market. Accordingly,  the Company is not planning to renew those
policies which would result in an underwriting loss.


<PAGE>


         Sufficient  capacity  currently  exists in the catastrophe  reinsurance
market which the Company relies upon to purchase  reinsurance to protect its net
retention per occurrence or event.  As a consequence,  such  reinsurance is more
costly and adversely impacts the Company's net income.

         The  Company  believes  it  can  successfully   compete  against  other
companies in the insurance market due to its philosophy of underwriting  quality
insurance,  its  reputation as a conservative  well-capitalized  insurer and its
willingness to forego unprofitable business.

Employees

         The Company currently employs approximately 121 persons, of whom 19 are
insurance underwriters.

Item 2.  Properties.

         The Company does not own, directly or indirectly,  any real estate. The
Company leases office space for day to day operations in the following cities:
                           New York         -        37,000 square feet
                           Chicago          -          3,500 square feet
                           San Francisco            -           4,050 square feet

         The Company's principal executive offices are approximately  37,000 sq.
ft. in size and are located in New York City. In 1993 the Company moved into its
location at 330 Madison Avenue,  New York, New York,  which was renovated and is
in excellent condition.  The lease for the Company's principal executive offices
expires December 30, 2003. The minimum annual rent under the lease is $1,074,000
until 1998 and $1,184,000 from 1999 until the expiration of the lease. The lease
included a cash payment by the lessor to the Company of  $1,853,000 of which the
benefit was deferred and amortized over the lease term.

Item 3.   Legal Proceedings.

          None.

Item 4.   Submission of Matters to a Vote of Security Holders.

          None.



<PAGE>


                                     PART II

Item 5.  Market for Registrant's Common Stock and Related Stockholder Matters.

         The Company's  common stock trades on the New York Stock  Exchange (NYSE Symbol:  NYM). The following  table sets forth
representative high and low closing prices for the periods indicated.
                                                          1996                                     1995

                                                High         Low                            High         Low

First Quarter..................                $22.00       $16.38                         $18.88       $17.88

Second Quarter..........                        19.88        18.38                          17.88        15.38

Third Quarter...............                    19.13        17.00                          17.88        15.88

Fourth Quarter............                      19.00        17.25                          17.25        15.38


         As of March 1, 1997,  there were 73  shareholders  of record.  However,
management  believes there are in excess of 2,500 beneficial owners of NYMAGIC's
common stock.

Dividend Policy

         A cash  dividend of ten (10) cents per share was  declared  and paid to
shareholders  of record as of March 31, June 30,  September 30, and December 31,
1996 and 1995. For a description of restrictions on the ability of the Company's
insurance  subsidiaries  to  transfer  funds  to  the  Company  in the  form  of
dividends,  see "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."

Item 6. Selected Financial Data.
OPERATING                    DATA                   Year                    Ended                    December
31,
                                                      1996        1995           1994              1993          1992
                                                                          (In thousands, except per share amounts)
Revenues:

Net premiums earned.............                  $ 97,036       $103,461       $ 79,255          $ 65,276     $ 78,639
Net investment income..........                     21,270         21,659         18,854            17,746       17,856
Commission income................                    1,981          3,438          2,052             2,498        6,780
Realized investment gains ....                       4,589          4,111          2,992             6,458        6,277
Other income.........................                  690            661            420               275          249

Total revenues..........................          $125,566       $133,330       $103,573         $ 92,253      $109,801

Expenses:

Losses and loss adjustment
  expenses incurred.................              $ 59,359       $ 69,716       $ 61,900          $ 50,816     $ 66,550
Policy acquisition expenses...                      18,828         21,017         14,260            10,429        8,037
General and administrative
  expenses.................................         16,168         16,236         16,742            14,749       17,658
Interest expense......................               1,035           438             495               661          996

Total expenses..........................           $95,390       $107,407        $93,397           $76,655      $93,241
Selected Financial Data (continued)
                                                                             Year Ended December 31,
                                                      1996        1995            1994             1993          1992
                                                                          (In thousands, except per share amounts)
Income before income taxes                          30,176        25,923          10,176            15,598       16,560
Income taxes
  Current............................................   7,495       5,393          2,306             2,236        5,398
Deferred.........................................       56            410       (  1,827)       (       66)   (   4,023)
Total income taxes..........................         7,551          5,803            479             2,170        1,375
Income before
  cumulative effect.........................        22,625         20,120          9,697            13,428       15,185
Cumulative effect of change
  in accounting for income taxes.                  --            --             ---                  1,221      --
Net income.......................................  $22,625        $20,120       $  9,697          $ 14,649     $ 15,185
Average shares outstanding.........                 10,524         11,341         11,392            11,449       11,429

PER SHARE DATA:
Income before
  cumulative effect..........................        $2.15          $1.77        $   .85           $  1.17      $  1.33
Cumulative effect of change
  in accounting for income taxes                    --             --            ---                   .11     ---
Net income.......................................    $2.15          $1.77        $   .85           $  1.28      $  1.33
Dividends declared........................          $  .40         $  .40        $   .40          $    .40     $    .40

BALANCE SHEET DATA
 AT PERIOD END:
                                                                                 Year Ended December 31,
                                                      1996        1995           1994              1993           1992
                                                                                (In thousands)
Total investments.............................    $409,209(2)    $403,306 (2)     $341,643  (2)   $334,722       $303,608
Total assets........................................695,195(1)    705,824 (1)      705,986  (1)    663,268(1)     419,200
Unpaid losses and loss
  adjustment  expenses...................          411,837(1)     417,795 (1)     435,072 (1)     407,321 (1)     203,735
Notes payable..................................     20,438         12,727            7,020          10,294         16,176
Total shareholders' equity...............         $188,852       $182,717         $164,313        $166,482       $158,115
-----------------------------
(1)      Includes  reserve  liabilities  reported gross of  reinsurance  credits  pursuant to Statement of Financial  Accounting
         Standards No. 113.
(2)      Fixed  maturities held for sale are carried at fair value pursuant to Statement of Financial  Accounting  Standards No.
         115.

         For a description of factors that materially  affect the  comparability
of the information  reflected in the Selected  Financial Data, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" below.

Item 7.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations.

         Results of Operations
         The Company  participates in pools of insurance  covering ocean marine,
inland marine,  aircraft and non-marine  liability  insurance managed by MMO and
affiliates.  The Company's  participation in the ocean marine, inland marine and
aviation business produced by the pools increased to 81.47% effective January 1,
1994.  The Company's  participation  in the inland marine pool increased to 100%
effective July 1, 1994, and its  participation  in the ocean marine and aviation
pools  increased to 90% at the same time.  Effective July 1, 1994, the Company's
participation in the other liability business produced by the pools increased to
100% from 91.47% effective July 1, 1994.


<PAGE>


NYMAGIC Net Premiums Written
    by Line of Business                                                                 Year Ended December 31,
                                                      1996                        1995                      1994
                                                                                    (In thousands)
Ocean Marine................                  $54,093        60%           $48,944        50%         $ 41,437        41%
Inland Marine.................               ( 1,658)       (2%)             2,803         3%           13,847        14%
Aircraft.............................          32,482        36%            38,962        40%           35,389        35%
Other liability..................               5,238         6%             6,818         7%           10,002        10%
Other................................             358       -                  290      --                 232       ---
Total..................................       $90,513       100%           $97,817       100%         $100,907       100%
NYMAGIC Net Premiums Earned
    by             Line             of             Business             Year             Ended             December
31,
                                                      1996                        1995                      1994
                                                                                    (In thousands)
Ocean Marine................                  $52,483        54%           $48,110        47%          $38,006        48%
Inland Marine.................                  2,408         3%            11,563        11%            5,231         7%
Aircraft.............................          35,416        36%            35,496        34%           24,584        31%
Other liability..................               6,355         7%             8,022         8%           12,203        14%
Other................................             374       -                  270      --                 231      ---
Total..................................       $97,036       100%          $103,461       100%         $ 79,255       100%
-----------------------------
         Unlike many types of property and  casualty  insurance,  ocean  marine,
inland  marine,  aviation  and other  liability  premium  rates are not strictly
regulated  by  governmental  authorities.  Consequently,  the Company is able to
adjust premium rates quickly in response to competition, varying degrees of risk
and other  factors.  In  addition,  the Company,  by virtue of its  underwriting
flexibility,  is able to  emphasize  specific  lines of  business in response to
advantageous  premium  rates  and  the  anticipation  of  positive  underwriting
results.
         The Company's general and administrative  expenses consist primarily of
compensation   expense,   employee   benefits  and  rental  expense  for  office
facilities. The Company's policy acquisition costs include brokerage commissions
and premium taxes and are primarily  based on a percentage of premiums  written.
Such costs have generally  changed in proportion with changes in premium volume.
Losses and loss adjustment expenses incurred in connection with insurance claims
in any  particular  year depend upon a variety of factors  including the rate of
inflation,  accident or claim frequency,  the occurrence of natural catastrophes
and the number of policies written.

         The Company estimates  reserves each year based upon, and in conformity
with, the factors discussed under  "Business-Reserves".  The Company maintains a
conservative policy for establishing  reserves,  especially in the year a policy
is written.  Changes in estimates of reserves are reflected in operating results
in the year in which the change occurs. 1996 as Compared to 1995
         The Company's net premiums  earned  decreased by 6% in 1996 as compared to 1995. The decline  primarily  relates to the
inland marine and other liability lines of business.

         The inland marine line recorded the largest  decline in earned premiums
at 79%.  This is  consistent  with the  Company's  plan in 1996 to withdraw from
writing the larger multi-location  assureds. After several years of unprofitable
results  caused by large  catastrophe  losses  and  expensive  reinsurance,  the
Company  limited  its 1996  writings  to those that are  ancillary  to its ocean
marine risks.  Negative  premiums  written for 1996 occurred as a consequence of
purchasing  reinsurance  to cover the  run-off of the prior  year's  catastrophe
oriented  business  still in force in 1996. In 1997,  the Company's  strategy in
this line should remain consistent with 1996.
         The other liability earned premiums decreased 21% as compared the prior
year. Due to fierce competition in this line, casualty market rates remain soft.
The Company will continue to selectively underwrite in this line, as it has over
the past several years, and premiums in 1997 are expected to further decline.


<PAGE>


         The ocean marine line recorded the largest growth in written and earned
premiums among the Company's  various lines of business.  An 11% and 9% increase
over the prior year's written and earned premium,  respectively, was achieved by
additional  production  in the hull and cargo  classes of business  coupled with
changes  in the  ocean  marine  reinsurance  program.  Gross  premiums  are down
slightly as rate  reductions  in various  marine  classes  have  outweighed  the
additional  production in the hull and cargo classes.  Rates in the ocean marine
line have  softened  as  competition  intensifies.  Reinsurance  changes  in the
Company's hull,  cargo and energy classes have enabled it to retain more premium
income without  sustaining  much  additional  exposure.  The 1997 premiums could
decrease as a result of this underwriting climate.
         Although net earned  premiums in the aviation  line  remained flat when
compared to 1995,  gross and net writings  decreased 14% and 16%,  respectively.
1995 was a peak year for aviation rates after insurers suffered several years of
losses. As industry gross losses improved in 1995,  competition  intensified and
rates subsequently softened. As a casualty of this competitive rate environment,
certain accounts were not renewed in 1996 and thereby contributed to the overall
decline. The Company expects this competitive environment to remain in 1997.
         Losses and loss adjustment  expenses as a percentage of premiums earned
were 61.2% in 1996 as compared to 67.4% in 1995. Improved net loss experience in
the Company's core ocean and aviation lines contributed to the overall decline.

         Although the inland loss ratio in 1996 was adversely affected by severe
weather  experienced  during the past  winter  season,  such ratio  improved  as
compared to the prior year. The 1995 year included  large  property  catastrophe
losses from various hurricanes.

         The  other  liability  line  deteriorated  in 1996  from  adverse  loss
development  in both  the  umbrella  and  the  non-marine  liability  occurrence
classes.
         Commission   income,   consisting   primarily  of  reinsurance   profit
commissions  and insurance  pool profit and  management  commissions  charged to
members of the insurance  pools other than New York Marine,  decreased by 42% in
1996.  Larger  reinsurance  contingent  commissions  were  recorded in 1995 as a
result of greater profitability in various marine war classes of business. Also,
management  commission  from a  non-affiliated  member  of the  insurance  pools
decreased  overall in proportion to the decline in the pool's gross  writings in
1996.
         Net investment  income for the year ended December 31, 1996,  decreased
by 2% from the prior year.  Investment  yields  decreased on the Company's fixed
maturity  portfolio due to both market  conditions  and a greater  investment in
tax-exempt securities which was applied against a larger investment asset base.
         Policy acquisition costs as a percentage of net premiums earned for the
year ended  December 31, 1996 was 19.4% as compared to 20.3% for the prior year.
The inland  marine line has the largest  acquisition  ratio among the  Company's
various lines of business. Reductions in inland premium writings in 1996 had the
effect of decreasing policy acquisition costs and the overall ratio.

         Interest expense  increased by 137% in 1996 primarily as a result of an
         increase in loan  principal  outstanding.  General  and  administrative
         expenses  remained  flat as compared with the prior year as a result of
         continuing efforts
to contain personnel costs and cost effective reductions in administrative expenses.

         Realized  investment  gains for the year ended December 31, 1996 amounted to $4,589,133  and result  primarily from the
sale of appreciated equity securities.

         Net income  increased by 12% to $22,624,618 for the year ended December
31, 1996, from $20,119,862 for the prior year. Net income per share increased to
$2.15 in 1996 as compared to $1.77 in 1995.
         Unrealized appreciation of investments as of December 31, 1996 included
gross  unrealized  gains and  losses  on equity  securities  of  $8,754,704  and
$567,677 respectively, and gross unrealized gains and losses on fixed maturities
held for sale of $5,537,330 and $1,184,493, respectively. Declines in unrealized
gains were recorded in the Company's fixed  maturities  resulting from increases
in interest rates in 1996.


<PAGE>


         Premiums and other  receivables,  net  decreased 19% as of December 31,
1996.  Declines in premium  writings  and  increases in ceded  balances  payable
contributed to the overall decline.

         Notes  payable  increased to  $20,438,413  as of December 31, 1996 and resulted from loans  obtained to repurchase  the
Company's common stock.

         Prepaid   reinsurance   premiums  and  reserve  for  unearned  premiums
decreased in 1996 by 38% and 16%, respectively. The decline in gross writings in
1996 is consistent with the change in the reserve for unearned  premiums.  Also,
as the Company retained additional premium with modifications in its reinsurance
program,  further  reductions  in  ceded  premiums  occurred  in 1996  which  is
consistent with the change in prepaid reinsurance premiums.

1995 as Compared to 1994

         The  Company's  net  premiums  earned  increased  by 31% in 1995 as compared to 1994.  Increases  were  recorded in the
aviation, ocean and inland line of business.

         The ocean marine line recorded the largest  growth in written  premiums
among the  Company's  various  lines of business  with an 18% increase  over the
prior year.  Additional  accounts within the marine liability class of this line
contributed to the overall  increase.  Rates in this line have started to soften
as competition intensifies.

         The aviation line recorded a 44% increase in earned premiums  primarily
as a result of rates remaining firm on those accounts with poor loss records. As
1995 saw an  improvement  in  industry  gross  losses,  rates  softened on those
accounts with good records. In addition,  certain unprofitable accounts were not
renewed.

          The inland marine line recorded the largest growth in earned  premiums
at 121%  despite an 80% drop in  premiums  written.  During  1995,  the  Company
curtailed   inland  marine   production  to  reduce  its  exposure  to  property
catastrophe  losses.  As a result  of  unprofitable  underwriting  results,  the
Company  decided to withdraw  from writing the larger  multi-location  assureds.
Rate  increases  obtained in the latter half of 1994,  a large  portion of which
remained  unearned in 1994,  became  earned in 1995 and  accounted for the large
increase in earned premiums over the prior year.

         The other liability earned premiums  decreased 34% when compared to the
prior year. The casualty market remains soft from excess capacity.

         Losses and loss adjustment  expenses as a percentage of premiums earned
were 67.4% in 1995 as compared to 78.1% in 1994.  Improvements were noted in the
aviation and inland marine loss ratios in 1995 as severity losses decreased.

         The 1994 year  included the Company's  worst loss in history  resulting
from the Northridge earthquake where net losses and reinstatement costs amounted
to $5.8 million.  In 1995,  the Company also  sustained  another large  property
catastrophe  loss from  Hurricane Luis amounting to gross losses of $5.5 million
and net losses of $3.5 million.

         The aviation line improved as severity  losses  decreased from the record levels in 1994 and premiums  remained  strong
for most of 1995.

         Commission   income,   consisting   primarily  of  reinsurance   profit
commissions  and insurance  pool profit and  management  commissions  charged to
members of the  insurance  pools other than New York  Marine,  increased  68% in
1995. Increases in reinsurance  contingent commissions resulting from profitable
underwriting  in various  ocean  marine and  aviation  classes of  business  was
offset,  in part, by a decrease in  management  commission  from  non-affiliated
members of the insurance pools as a result of their declining  participation and
a decline in gross premiums in the pools.

         Net investment income for the year ended December 31, 1995 increased by
15% over the prior year.  Additional cash flow from operations  contributed to a
larger asset base and increased  investments in taxable securities accounted for
the overall increase.


<PAGE>


         Policy acquisition costs as a percentage of net premiums earned for the
year ended  December 31, 1995 was 20.3% as compared to 18.0% for the prior year.
In 1995  premiums  earned  included  large  increases in the aviation and inland
marine  lines of  business.  These  lines of  business  utilize  excess  of loss
reinsurance  which has the effect of reducing  premiums  without a corresponding
reduction in policy acquisition costs. Consequently,  this ratio increased since
both the aviation and inland  marine lines have greater  acquisition  costs as a
percentage of net premiums earned than other lines of business.

         Interest  expense  decreased by 12% in 1995  primarily as a result of a
decrease in average loan principal  outstanding,  however offset by increases in
short term interest rates.

         General and  administrative  expenses  decreased  by 3% from the prior year as a result of a decline in  personnel  and
reductions in bad debt write-offs.

         Realized  investment  gains as of  December  31, 1995  amounted to  $4,110,000  and result  primarily  from the sale of
appreciated equity securities.

         Net income  increased to  $20,120,000  for the year ended  December 31, 1995 from  $9,697,000  and net income per share
increased to  $1.77 in 1995 compared to $.85 in 1994.

         Unrealized appreciation of investments as of December 31, 1995 included
gross  unrealized  gains and  losses  on equity  securities  of  $6,158,237  and
$350,518,   respectively,  and  gross  unrealized  gains  and  losses  on  fixed
maturities held for sale of $9,607,383 and $237,438, respectively.  Increases in
unrealized gains were recorded in the Company's  investments resulting from both
the strong stock and bond markets in 1995.

         Reinsurance  receivables  decreased  17  %  as  of  December  31,  1995
primarily as a result of gross losses on the 1994 earthquake  being paid in 1995
and reinsurance on those losses being collected.

         Deferred  income  taxes  as of  December  31,  1995  decreased  by  43%
primarily as a result of an increase in  unrealized  appreciation  in both fixed
maturities held for sale and equity securities.

         Notes  payable  increased  to  $12,727,000  as  of  December  31,  1995
resulting  from a loan  obtained to buy back  approximately  $ 9,000,000  of the
Company's common stock.

Liquidity and Capital Resources

         The Company  monitors cash and short-term  investments in order to have
an adequate  level of funds  available  to satisfy  claims and  expenses as they
become due. As of December 31, 1996, the Company's assets included approximately
$19,078,000  in cash and  short-term  investments.  The  primary  sources of the
Company's  liquidity are funds  generated  from insurance  premiums,  investment
income and maturing or liquidating investments.

         Historically,  cash  provided  by  operating  activities  was  used  in
investing  and  financing  activities.  Cash  flows  from  operating  activities
increased in 1995,  but declined in 1996.  Cash  outflows  from  increased  loss
payments on the  Company's  maturing book of casualty  business and  catastrophe
losses in 1996, 1995 and 1994 were offset by increased cash received on premiums
written  in 1995 and  1994.  As  premiums  declined  in 1996,  so did cash  from
operations.  Investment  income  which  declined in 1996,  increased in 1994 and
1995,  thereby  contributing to cash received from operating  activities in 1995
and 1994.

         Investing and financing activities increased further as a result of the
Company  borrowing  $25,000,000 from a bank in 1990. This amount was invested in
its principal  insurance  subsidiary,  New York Marine,  to further  bolster its
surplus in order to support  larger  participation  interests  in the  insurance
pools.  Repayments  of the loan started in 1991 and  continued  through 1995. In
1994, the Company entered into a $10,000,000  revolving  credit  agreement which
increased  to  $25,000,000  in 1996 with the same  bank.  The  Company  borrowed
approximately  $2,608,000  under this  facility in 1994 to assist the Company in
short-term  liquidity  needs and borrowed  approximately  $9,000,000  in 1995 to
repurchase 540,000 shares of the Company's Common Stock.  Additional  borrowings
of approximately $9,200,000 were made in 1996 mainly to repurchase stock.


<PAGE>


         The  Company  adheres  to  investment  guidelines  set by  the  Finance
Committee  of  the  Board  of   Directors.   The   investment   guidelines   are
conservatively  designed to provide the Company with adequate capital growth and
sufficient liquidity to meet existing obligations. Such guidelines consider many
factors including anticipated tax position and regulatory requirements.

         The Company's largest  investments are in bonds from various states and
municipalities.  Such securities  receive favorable tax treatment under existing
tax laws, and our position is monitored  regularly as the Company is effected by
the alternative  minimum tax. As interest rates increased in 1994 and unrealized
gains  evaporated,  sales of fixed  maturities  slowed to further  increase  the
taxable investment position. As the Company's tax position changed with improved
earnings in 1996, additional investments were made in tax-exempt securities.

         The Company has an unsecured  credit  facility  with a bank that allows
for a maximum credit of $10,000,000. The use of this credit facility will assist
the Company as a source of short-term liquidity. In 1994, 1995 and 1996, amounts
were borrowed under this credit  facility to assist the insurance  pools managed
by the Company in the payment of gross losses.  The amounts  borrowed  under the
line of  credit  were  fully  repaid  after  collecting  recoverables  due  from
reinsurers on such losses.

         Under the common stock  Repurchase Plan, the Company may purchase up to
$45,000,000 of the Company's  issued and  outstanding  shares of common stock on
the open market. As of December 31, 1996, the Company had repurchased a total of
1,552,982 shares of common stock at a total cost of approximately $27,639,768 at
market prices ranging from $16.50 to $24.25 per share.

         NYMAGIC's principal source of cash flow is dividends from its insurance
company  subsidiaries  which  is  used  to fund  operating  expenses,  including
interest expense, loan repayments and payment of dividends to shareholders.  The
Company's insurance company subsidiaries are limited by statute in the amount of
dividends that may be declared or paid during a year.  The limitation  restricts
dividends paid or declared to the lower of 10% of policyholders' surplus or 100%
of  net  investment  income  as  defined  under  New  York  insurance  law.  The
limitations  on  dividends  from  the  insurance  company  subsidiaries  are not
expected  to have an  impact  on the  Company's  ability  to meet  current  cash
obligations  or  materially  limit  the  current  payment  of  dividends  to the
Company's shareholders.

         In October, 1995, the FASB issued its Statement of Financial Accounting
Standards  No.  123,  "Accounting  for  Stock-Based  Compensation."  SFAS 123 is
effective  for years  beginning  after  December  15, 1995 and  establishes  new
accounting  standards and reporting  requirements  for stock-based  compensation
arrangements.  Companies may choose between valuation method based on fair value
or the existing  accounting may be used under the Accounting  Principles Board's
(APB)  Opinion  No. 25. The Company  has  elected to remain  under the  existing
accounting   requirements  of  APB  Opinion  No.  25.,  however,  the  necessary
disclosure requirements under SFAS 123 are included in 1996.

Inflation

         Periods of inflation  have  prompted the pools,  and  consequently  the
Company,  to react  quickly to actual or  potential  imbalances  between  costs,
including  claim  expenses,  and  premium  rates.  These  imbalances  have  been
corrected mainly through improved underwriting  controls,  responsive management
information systems and frequent review of premium rates and loss experience.

         Inflation also affects the final  settlement  costs of claims which may
not be paid for  several  years.  The longer a claim  takes to settle,  the more
significant  the impact of  inflation  on final  settlement  costs.  The Company
periodically reviews outstanding claims and adjusts reserves for the pools based
on a number of factors, including inflation.

Item 8.  Financial Statements and Supplementary Data.

                  The  consolidated  financial  statements  required in response to this item are included as part of Item 14(a)
of this report.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

                  None.


<PAGE>


                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

         The  information  required by this Item is  incorporated  by  reference
herein from the  "Compensation and Other  Information"  section of the Company's
Proxy  Statement  for the  1996  Annual  Meeting  of  Shareholders,  except  for
information with respect to Directors and Executive  Officers which is set forth
below.

         NYMAGIC's  charter  and  by-laws  provide  for  a  Board  of  Directors
consisting of not fewer than thirteen nor more than nineteen  Directors  divided
into three classes as nearly equal as possible.  NYMAGIC  presently has thirteen
Directors.  The three year terms of  classes  III,  II and I expire in the years
1998,  1997 and 1996  respectively.  References to the Company  include,  as the
context  requires,  NYMAGIC  and its  predecessor,  New York  Marine And General
Insurance  Company.  The Executive  Officers and Directors of the Company are as
follows:

                                                                   Class of
                           Name                   Age              Directors              Position(s)
         Mark W. Blackman(1)                       45                II         President, Chief Executive Officer and
                                                                                   Director
         John N. Blackman, Jr. (1)(2)              50                 I         Chairman of the Board, Director
         Thomas J. Condon (2)                      52                 I         Director
         Jean H. Goulding                          55               III         Director
         James A. Lambert (1)                      41               III         General Counsel, Chief Operating Officer,
                                                                                   Secretary and Director
         John Kean, Jr. (4)                        72               III         Director
         Charles A. Mitchell                       48                II         Vice-President, Director
         William R. Scarbrough                     68                II         Director
         Michael S. Shaffet (3)                    61                 I         Director
         Richard T. Soper(1)(2 )                   71                II         Director
         William A. Thorne (1)(2)(4)               71                 I         Director
         Sergio B. Tobia (4)                       58                 I         Director
         Louise B. Tollefson (4)                   73                II         Director
         Thomas J. Iacopelli                       36                           Chief Financial Officer

         (1) Member of Executive Committee.
         (2) Member of Finance Committee.
         (3) Member of Audit Committee.
         (4) Member of Stock Option & Compensation Committee.

         Mark W. Blackman has been a Director  since 1979 and was appointed  President in 1988.  Mr.  Blackman has been employed
by the Company or its  subsidiaries  since 1977. Mr. Blackman is the son of Louise B. Tollefson and brother of John N. Blackman,
Jr.

         John N.  Blackman,  Jr. has been a Director since 1975 and was appointed  Chairman of the Board in 1988.  Mr.  Blackman
has been  employed by MMO and  affiliates  since 1973 and in  December,  1988 became  Chairman  of the Board of MMO,  PMMO,  and
Midwest. Mr. Blackman is the son of Louise B. Tollefson and brother of Mark W. Blackman.

         Thomas J.  Condon was  elected to the Board of  Directors  in June 1987.  He is a  Vice-President  of  Investments  and
Investment  Advisor with A.G.  Edwards & Sons,  Inc.  which he joined in September  1993. Mr. Condon  formerly  served as Senior
Vice President at Peoples Westchester Savings Bank from 1981 through September 1993.

         Jean H. Goulding has been a Director  since 1976.  Ms.  Goulding was employed by the Company or its  subsidiaries  from
1965 to 1992 and served as Executive Vice President-Underwriting from 1988 until her retirement in 1992.


<PAGE>


         James A. Lambert has been a Director  since 1986.  Mr. Lambert was appointed  Chief  Operating  Officer in 1989 and has
served as General Counsel and Secretary since 1986.

         John Kean,  Jr. has been a Director  since 1991.  Until his  retirement in 1991,  Mr. Kean was a Senior Vice  President
and Director of Guy Carpenter & Co., Inc.

         Charles A. Mitchell has been a Director and Vice President  since 1981.
He has been employed by the Company or its subsidiaries since 1976.

         William R.  Scarbrough  became a Director in June,  1995.  Until his  retirement  in 1993,  Mr.  Scarbrough  was a Vice
President and Director of Wm. H. McGee & Co, Inc.

         Michael S. Shaffet has been a Director since September  1990. Mr. Shaffet is the Treasurer and Chief Financial  Officer
of M.  Fabrikant  & Sons,  Inc.  Prior to assuming  that  position in 1989,  he was a partner in Berman,  Shaffet & Schain,  the
accountants for MMO and affiliates.

         Richard T. Soper has been a Director  since 1972.  Mr. Soper is Vice Chairman of Argent Marine  Operations,  Inc. Prior
to assuming  that  position in 1990,  Mr. Soper served from 1986 as Chairman and  President of the American  Bureau of Shipping.
From 1978 to 1986, he was Executive  Vice President of Sea Land Service,  Inc. and from 1983 to 1986,  served as Chairman of the
Board of Intersea Operations, Ltd., Inc.

         William A. Thorne has been a Director since 1972. Mr. Thorne has been employed by Hydrocarbon  Products  Company,  Inc.
as its Treasurer and has been its Chairman of the Board since March 1983.

         Sergio B. Tobia has been a Director  since 1981.  Mr.  Tobia was a Senior Vice  President  and Director of Sorema North
America Reinsurance Co. from 1989 until his retirement in 1996.

         Louise B. Tollefson has been a Director since 1986. Mrs. Tollefson owns approximately 18.0% of the Company's Common
Stock and is the mother of John N. Blackman, Jr. and Mark W. Blackman.

         Thomas J.  Iacopelli  joined the Company in 1985 as its  Assistant  Controller.  In 1987,  Mr.  Iacopelli was appointed
Controller of the Company and in 1989 he was appointed  Chief  Financial  Officer of the Company.  Prior to joining the Company,
Mr.  Iacopelli was employed by the accounting  and consulting  firm of Coopers & Lybrand.  Mr.  Iacopelli is a Certified  Public
Accountant.

         The Board of Directors,  as well as its Audit, Finance and Stock Option
and  Compensation  Committees meet on a quarterly  basis. In 1996, all Directors
attended at least 75% of the meetings of the Board and the  Committees  on which
they sit.

Item 11.  Executive Compensation.

         The information set forth under "Compensation and Other Information" in
the  Company's  Proxy  Statement  for the  Annual  Meeting  of  Shareholders  is
incorporated herein by reference.

Stock Option Plans

         In 1986, the Company's Board of Directors and Shareholders approved the
Company's  1986 Stock Option Plan (the "1986 Plan"),  to provide a means whereby
the Company,  through the grant of non-qualified  stock options to key officers,
may attract and retain persons of ability as officers.  The 1986 Plan authorizes
the issuance of options to purchase up to 500,000 shares of the Company's common
stock at not less than 95 percent of the fair market value at the date of grant.
The 1986 Plan is administered by a committee appointed by the Board of Directors
of the Company.

         On January 12, 1987 and October 21,  1987,  options for the purchase of
6,000 and 75,500 common  shares,  respectively,  were granted to officers of the
Company, with an exercise price of $14.50 and $13.78,  respectively.  The market
value  of the  common  stock  on each of  these  days  was  $15.25  and  $14.50,
respectively.


<PAGE>


         On January 14, 1988,  options for the purchase of 69,000  common shares
were granted to officers of the Company,  with an exercise price of $13.78.  The
market value of the common stock on that day was $14.50.

         On June 14, 1989,  and September 13, 1989,  options for the purchase of
2,000 and 1,000 common shares,  respectively,  were granted to an officer of the
Company with an exercise  price of $17.10 and $18.41,  respectively.  The market
value  of the  common  stock  on each of  these  days  was  $18.00  and  $19.38,
respectively.

         On June 13,  1991,  options for the purchase of 58,500  common  shares,
respectively,  were granted to officers of the Company with an exercise price of
$25.48.  The  market  value of the  common  stock on the date of the  grant  was
$26.82.

         In 1991,  the Company's  Board of Directors and  Shareholders  approved the Company's 1991 Stock Option Plan (the "1991
Plan").

         On September 2, 1992, options for the purchase of 172,500 common shares
were granted to officers and employees of the Company with an exercise  price of
$22.33. The market value of the common stock on that day was $23.50.

         In December,  1993,  options for the purchase of $116,000 common shares
were granted to officers and employees of the Company with an exercise  price of
$22.92. The market value of the common stock on the date of the grant was $24.13
per share.

         In  September,  1994,  options for the purchase of 12,500 common shares
were granted to an officer of the Company with an exercise price of $17.34.  The
market value of the common stock on the date of the grant was $18.25 per share.

         In December,  1994,  options for the purchase of 68,500  common  shares
were granted to officers and employees of the Company with an exercise  price of
$15.56. The market value of the common stock on the date of the grant was $16.38
per share.

         In December,  1995,  options for the purchase of 210,500  common shares
were granted to officers and employees of the Company with an exercise  price of
$15.79.  The  market  value of the  common  stock on the date of the  grant  was
$16.625 per share.  The grant of these options was made in  connection  with the
surrender by the option holders of options of equal amounts which had previously
been granted at higher exercise prices.

         In  September,  1996,  options for the purchase of 10,000 common shares
were granted to officers and employees of the Company with an exercise  price of
$17.58. The market value of the common stock on the date of the grant was $18.50
per share.

         In December,  1996,  options for the purchase of 10,000  common  shares
were granted to officers and employees of the Company with an exercise  price of
$17.22. The market value of the common stock on the date of the grant was $18.12
per share.

Retirement Plans

         The  Company   maintains  two  retirement  plans  for  the  benefit  of
employees. Both plans provide for 100% vesting upon completion of three years of
service.  The Money  Purchase Plan provides for a yearly  contribution  equal to
7-1/2% of an employee's cash compensation, for each year of service during which
the employee has completed 1000 hours of service and is employed on the last day
of the plan year.  The Profit  Sharing  Plan does not provide for any  specified
level of contribution but any  contribution  made is subject to the restrictions
set forth above for the Money  Purchase  Plan.  For the most recent plan year, a
contribution  equal to 7-1/2%  of cash  compensation,  was made to all  eligible
participants in the Profit Sharing Plan.


<PAGE>



Item 12.  Security Ownership of Certain
            Beneficial Owners and Management.

         The following  table sets forth  information as of March 1, 1997,  with
respect to beneficial  ownership of NYMAGIC  Common Stock by  beneficial  owners
known by the Company to own more than 5% of such stock,  directors  and nominees
and directors  and officers as a group.  Except as described in the notes below,
all owners listed have power to vote and dispose of the shares held by them.
                                                                                                          Percent of
                                                                       Amount and Nature              Common Stock
                  Name                                             of  Ownership                        Outstanding
         The Capital Group Companies, Inc.                         846,500(5)                               8.35%
           333 South Hope Street
           Los Angeles, Ca. 90071
         David L. Babson & Co.                                     577,500(6)                               5.69%
            One Memorial Drive
            Cambridge, MA  02142
         John N. Blackman, Jr.                                    2,010,996(1)                            19.83%
         Mark W. Blackman                                         1,962,674(2)                            19.35%
         Thomas J. Condon                                               100
         Jean H. Goulding                                            26,600                                    *
         James A. Lambert                                            40,944(3)                                 *
         Charles A. Mitchell                                          5,700(3)                                 *
         William R. Scarbrough                                          100                                    *
         Michael S. Shaffet                                           1,150(4)                                 *
         William A. Thorne                                           32,400(4)                                 *
         Sergio B. Tobia                                              3,220                                    *
         Louise B. Tollefson                                      1,914,211                               18.87%
         All directors and officers as a
         group (14 persons)                                      6,001,845                                58.89%

         * Less than 1% of issued and outstanding Common Stock.

         (1) Mr.  Blackman  is also the Trustee of trusts for the benefit of his
minor children which own, in total, 92,822 shares of the Company's Common Stock,
which shares are included herein.

         (2) Trusts for the benefit of Mr.  Blackman's  children  own, in total,
54,876 shares of the Company's Common Stock, which shares are included herein.

         (3)             Of the shares shown as  beneficially  owned by the  following  individuals,  the amount  listed next to
each name are shares with respect to which options are  currently  exercisable  by that person:  Mr.  Mitchell - 5,000,  and Mr.
Lambert - 39,944.

         (4)      Of the shares shown as  beneficially  owned by Mr.  Thorne,  16,200  shares are held by him  individually  and
16,200 shares are held by Mr. Thorne and his wife as joint tenants.  Of the shares shown as  beneficially  owned by Mr. Shaffet,
400 are held individually by his wife.

         (5)      Capital Guardian Trust Company,  a bank and an operating  subsidiary of The Capital Group Companies,  Inc. has
filed a report on Schedule 13G disclosing beneficial ownership of 846,500 shares.

         (6)      David L. Babson & Co.,  Inc. has filed a report on Schedule  13G  disclosing  beneficial  ownership of 577,500
shares.

         (7) Of the  6,001,845  shares  indicated as  beneficially  owned by all
directors  and  officers  as a group,  48,444 are shares  with  respect to which
options are currently exercisable. See "Compensation and Other Information-Stock
Option  Plans".  These shares are  included in the total  number of  outstanding
shares  for  the  purpose  of   determining   the  percentage  of  Common  Stock
beneficially owned by all directors and officers as a group.


<PAGE>



Item 13.   Certain Relationships and Related Transactions.

             The Company made annual  charitable  donations to the John N. Blackman,  Sr.  Foundation (the  "Foundation") in the
amount of  approximately  $480,000 in 1996,  1995 and 1994.  The Foundation  was  established by Mr. John N. Blackman,  Sr., the
founder of the Company,  shortly before his death in 1988. The Foundation  supports  numerous  charities with a primary emphasis
on those charities assisting the indigent,  disabled or disadvantaged.  The Foundation is managed by Mr. John N. Blackman,  Jr.,
Mr. Mark W.  Blackman  and Mr. James A.  Lambert,  all of whom donate  their time and receive no form of  remuneration  from the
Foundation.

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

         (a)      1.       Financial Statements

                           The  list  of  financial  statements  appears  in the
accompanying index on page 41.

                  2.       Financial Statement Schedules

                                            The  list  of  financial   statement
                                            schedules     appears     in     the
                                            accompanying index on page 41.

                  3.       Exhibits

                  3.1.     Charter.  (Incorporated  by reference to Exhibit 3-1 to the Registrant's  Registration  Statement No.
33-27665).

                  3.3.     By-laws.  (Incorporated by reference to Exhibit 3.3. of the Registrant's  Registration  Statement No.
33-27665).

                  4.0.     Specimen  Certificate  of common stock  (Incorporated  by reference to Exhibit 4 to the  Registrant's
Registration Statement No. 33-27665).

                  10.2.  Restated  Management  Agreement  dated as of January 1,
1986, by and among Mutual Marine Office, Inc. and Arkwright-Boston Manufacturers
Mutual  Insurance  Company,  Utica  Mutual  Insurance  Company,   Lumber  Mutual
Insurance  Company,  the Registrant and  Pennsylvania  National  Mutual Casualty
Insurance Company (Incorporated by reference to Exhibit 10.2 of the Registrant's
Annual Report Form 1O-K for the fiscal year ended December 31, 1986.)

                           10.2.2.  Amendment to Restated Management Agreement,  dated as of December 30, 1988, and among Mutual
Marine Office,  Inc. and Arkwright Mutual Insurance Company,  Utica Mutual Insurance  Company,  Lumber Mutual Insurance Company,
the Registrant and Pennsylvania  National Mutual Casualty  Insurance  Company.  (Incorporated by reference to Exhibit 10.2.2. of
the Registrant's Report on Form 8-K dated January 6, 1989.)

                           10.2.3.  Amendment to Restated Management Agreement,  dated as of December 31, 1990, and among Mutual
Marine Office,  Inc. and Arkwright Mutual Insurance  Company,  Utica Mutual Insurance  Company,  the Registrant and Pennsylvania
National Mutual Casualty  Insurance  Company.  (Incorporated by reference to Exhibit 10.2.3.  of the Registrant's  Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.)

                  10.4.  Restated  Management  Agreement  dated as of January 1,
1986,  by and among Mutual  Inland  Marine  Office,  Inc.  and  Arkwright-Boston
Manufacturers Mutual Insurance Company,  Utica Mutual Insurance Company,  Lumber
Mutual  Insurance  Company,  the Registrant  and  Pennsylvania  National  Mutual
Casualty  Insurance  Company  (Incorporated  by reference to Exhibit 10.4 of the
Registrant's  Annual  Report  Form 10-K for the fiscal year ended  December  31,
1986.)


<PAGE>



                           10.4.2.  Amendment to Restated Management Agreement,  dated as of December 30, 1988, and among Mutual
Inland Marine Office,  Inc. and Arkwright Mutual Insurance  Company,  Utica Mutual  Insurance  Company,  Lumber Mutual Insurance
Company,  the Registrant and  Pennsylvania  National Mutual Casualty  Insurance  Company  (Incorporated  by reference to Exhibit
10.4.2 of the Registrant's Report on Form 8-K, dated January 6, 1989.)

                           10.4.3.  Amendment to Restated  Management  Agreement,  dated as of December  31, 1990,  by and among
Mutual Inland Marine Office,  Inc. and Arkwright Mutual Insurance Company,  Utica Mutual Insurance  Company,  the Registrant and
Pennsylvania  National Mutual Casualty  Insurance  Company.  (Incorporated  by reference to Exhibit 10.4.3.  of the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992.)

                  10.6.  Restated  Management  Agreement  dated as of January 1,
1986,   by  and  among  Mutual   Marine   Office  of  the   Midwest,   Inc.  and
Arkwright-Boston  Manufacturers Mutual Insurance Company, Utica Mutual Insurance
Company,  Lumber Mutual  Insurance  Company,  the  Registrant  and  Pennsylvania
National  Mutual  Casualty  Insurance  Company.  (Incorporated  by  reference to
Exhibit 10.6 of the Registrant's  Annual Report on Form 10-K for the fiscal year
ended December 31, 1986.)

                           10.6.2.  Amendment to Restated  Management  Agreement  dated as of December  30,  1988,  by and among
Mutual  Marine  Office of the  Midwest,  Inc.  and  Arkwright  Mutual  Insurance
Company,  Utica Mutual Insurance Company,  Lumber Mutual Insurance Company,  the
Registrant  and  Pennsylvania   National  Mutual  Casualty   Insurance  Company.
(Incorporated by reference to Exhibit 10.6.2 of the Registrant's  Report on Form
8-K, dated January 6, 1989.)

                           10.6.3.  Amendment to Restated  Management  Agreement  dated as of December  31,  1990,  by and among
Mutual  Marine  Office of the Midwest,  Inc. and  Arkwright  Mutual  Insurance  Company,  Utica Mutual  Insurance  Company,  the
Registrant and Pennsylvania  National Mutual Casualty  Insurance  Company.  (Incorporated by reference to Exhibit 10.6.3. of the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992.)

                  10.8.  Restated  Management  Agreement  dated as of January 1,
1986,  by and among  Pacific  Mutual Marine  Office,  Inc. and  Arkwright-Boston
Manufacturers Mutual Insurance Company,  Lumber Mutual Insurance Company,  Utica
Mutual  Insurance  Company,  the Registrant  and  Pennsylvania  National  Mutual
Casualty  Insurance  Company.  (Incorporated by reference to Exhibit 10.8 of the
Registrant's  Annual Report on Form 10-K for the fiscal year ended  December 31,
1986.)

                           10.8.2.  Amendment to Restated  Management  Agreement  dated as of December  30,  1988,  by and among
Pacific Mutual Marine Office,  Inc. and Arkwright  Mutual  Insurance  Company,  Lumber Mutual  Insurance  Company,  Utica Mutual
Insurance Company,  the Registrant and Pennsylvania  National Mutual Casualty  Insurance Company.  (Incorporated by reference to
Exhibit 10.8.2 of the Registrant's Report on Form 8-K, dated January 6, 1989.)

                           10.8.3.  Amendment to Restated  Management  Agreement  dated as of December  31,  1990,  by and among
Pacific Mutual Marine Office,  Inc. and Arkwright Mutual Insurance Company,  Utica Mutual Insurance Company,  the Registrant and
Pennsylvania  National Mutual Casualty  Insurance  Company.  (Incorporated  by reference to Exhibit 10.8.3.  of the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992.)

                  21.  Subsidiaries of the Registrant.

                  23.  Consent of KPMG Peat Marwick LLP.

                  28.   Schedule P as of December 31, 1996.

         (b)      Reports on Form 8-K

                  None.


<PAGE>



                                   SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                                                                NYMAGIC, INC.
                                                                                (Registrant)


                                                                                By:  /s/ Mark W. Blackman
                                                                                       Mark W. Blackman
                                                                                       Chief Executive Officer


                                                                                Date: March 5, 1997


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  Report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the date indicated.

Name                                        Title                                              Date

/s/ John N. Blackman, Jr.                   Chairman of the Board                       March 5, 1997
John N. Blackman, Jr.                          and Director


/s/ Mark W. Blackman                        President, Chief Executive                  March 5, 1997
Mark W. Blackman                              Officer and Director


/s/ Thomas J. Condon                        Director                                    March 5, 1997
Thomas J. Condon


/s/ Jean H. Goulding                        Director                                    March 5, 1997
Jean H. Goulding


/s/ James A. Lambert                        Director, General Counsel,                  March 5, 1997
James A. Lambert                              Chief Operating Officer
                                              and Secretary


/s/ John Kean, Jr.                          Director                                    March 5, 1997
John Kean, Jr.




<PAGE>



Name                                        Title                                              Date

/s/ Charles A. Mitchell                     Director and Vice President                 March 5, 1997
Charles A. Mitchell


/s/ Michael S. Shaffet                      Director                                    March 5, 1997
Michael S. Shaffet


/s/ William R. Scarbrough                   Director                                    March 5, 1997
William R. Scarbrough


/s/ Richard T. Soper                        Director                                    March 5, 1997
Richard T. Soper


/s/ William A. Thorne                       Director                                    March 5, 1997
William A. Thorne


/s/ Sergio B. Tobia                         Director                                    March 5, 1997
Sergio B. Tobia


/s/ Louise B. Tollefson                     Director                                    March 5, 1997
Louise B. Tollefson


/s/ Thomas J. Iacopelli                     Principal Accounting Officer                March 5, 1997
Thomas J. Iacopelli                           and Chief Financial Officer








<PAGE>


                                                                NYMAGIC, INC.
                                                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





Independent Auditors' Report......................................................                        34

Consolidated Balance Sheets.......................................................                        35

Consolidated Statements of Income...........................................                              36

Consolidated Statements of Shareholders' Equity.......................                             37

Consolidated Statements of Cash Flows.....................................                         38

Notes to Consolidated Financial Statements.............................                            39

Financial Statement Schedule II...................................................                        57

Financial Statement Schedule V..................................................                          59

Financial Statement Schedule VI..................................................                         60



<PAGE>




                                                        INDEPENDENT AUDITORS' REPORT



The Board of Directors and Shareholders NYMAGIC, INC.:


We have audited the accompanying  consolidated  balance sheets of NYMAGIC,  INC.
and subsidiaries as of December 31, 1996 and 1995, and the related  consolidated
statements of income, shareholders' equity, and cash flows for each of the years
in the three year period ended December 31, 1996. In connection  with our audits
of the  consolidated  financial  statements,  we have also audited the financial
statement  schedules as listed in the  accompanying  index.  These  consolidated
financial statements and financial statement schedules are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedules based on our
audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
NYMAGIC,  INC.  and  subsidiaries  as of  December  31,  1996 and 1995,  and the
consolidated  results of their  operations  and their cash flows for each of the
years in the three year  period  ended  December  31,  1996 in  conformity  with
generally  accepted  accounting  principles.  Also, in our opinion,  the related
financial  statement  schedules,  when  considered  in  relation  to  the  basic
consolidated  financial  statements  taken as a whole,  present  fairly,  in all
material respects, the information set forth therein.

As discussed in Note 1 to the  consolidated  financial  statements,  the Company
adopted the provisions of the Financial  Accounting  Standards Board's Statement
of Financial Accounting Standards No. 115 "Accounting for Certain Investments in
Debt and Equity Securities," effective January 1, 1994.





KPMG Peat Marwick LLP
New York, New York
February 14, 1997










<PAGE>


                                  NYMAGIC, INC.
                           CONSOLIDATED BALANCE SHEETS


                                                                                     December 31,
                                                                              1996                    1995

                                     ASSETS
Investments:  (Note 2)
Fixed maturities available for sale at fair value
   (amortized cost $341,130,292 and $319,279,410).................          $  345,483,129           $  328,649,365
Equity securities at fair value
   (cost $37,161,709 and $27,986,694).......................................     45,348,736              33,794,413
Short-term investments.................................................................    18,377,180    40,862,313
   Total investments.......................................................................             409,209,045
403,306,091
Cash................................................................................................         701,086
        1,175,024
Accrued investment income......................................................       5,960,197           6,110,402
Premiums and other receivables, net (less
   allowance for doubtful accounts of $750,000 and $775,000)                    43,285,450               53,254,864
Reinsurance receivables (less allowance for doubtful
   accounts of $4,075,000 and $2,250,000) ..................                   197,988,073              197,395,689
Deferred policy acquisition costs ..................................            10,904,241               11,660,903
Prepaid reinsurance premiums .....................................              10,562,213               16,956,441
Deferred income taxes (Note 6)................................................     11,131,603            10,264,908
Property, improvements & equipment, net (Note 5).............                    2,107,087                2,273,538
Other assets...................................................................................           3,345,826
      3,425,983
   Total assets.................................................................................       $695,194,821
$705,823,843

                                   LIABILITIES
Unpaid losses and loss adjustment expenses
   (Note 4)...........................................................................$411,836,981     $417,794,525
Reserve for unearned premiums ..................................                66,651,933               79,568,955
Notes payable (Note 9)..............................................................20,438,413           12,726,941
Other liabilities..............................................................................           6,401,463
11,947,637
Dividends payable......................................................................    1,014,305      1,069,181
         Total liabilities.................................................................             506,343,095
523,107,239
Commitments and contingent liabilities (Notes 4 and 10)

                              SHAREHOLDERS' EQUITY
Common stock............................................................................     14,911,992    14,749,192
Paid-in capital..............................................................................            26,258,259
23,933,587
Unrealized appreciation of investments
   (net of deferred income taxes).............................................      8,150,910             9,865,486
Retained earnings....................................................................... 171,089,462    152,646,915
                                                                               220,410,623              201,195,180
Treasury stock, at cost, 4,768,940 and 4,057,380
   shares (Note 11).......................................................................  (31,558,897)  (18,478,576)

         Total shareholders' equity...........................................  188,851,726             182,716,604
         Total liabilities and shareholders' equity...................        $695,194,821             $705,823,843

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



<PAGE>


                                                   NYMAGIC, INC.
                                         CONSOLIDATED STATEMENTS OF INCOME


                                                                              Year ended December
31,
                                                                  1996                1995                1994

Revenue:
   Net premiums earned  ............................          $ 97,036,021          $103,461,499       $ 79,255,390
   Commission income ................................            1,980,632             3,438,418          2,052,132
   Net investment income (Note 2).......................        21,270,194            21,658,931         18,854,067
   Realized investment gains (Note 2)..................          4,589,133             4,110,515          2,992,259
   Other income.......................................................         689,641         660,924        419,742
     Total revenues...................................................  125,565,621  133,330,287        103,573,590

Expenses:
   Losses and loss adjustment expenses
    incurred (Note  4).....................................     59,358,857            69,716,186         61,900,419
   Policy acquisition expenses (Note 4).....                    18,827,794            21,017,503         14,260,494
   General and administrative expenses.............             16,168,162            16,236,323         16,741,824
   Interest expense..................................................     1,035,058       437,653           494,730
     Total expenses..................................................95,389,871      107,407,665         93,397,467

Income before income taxes...............................       30,175,750            25,922,622         10,176,123
   Income tax provision (Note 6):
   Current..................................................................           7,494,593          5,392,637
       2,306,264
   Deferred................................................................               56,539            410,123
    (1,827,394)
     Total income taxes...........................................   7,551,132         5,802,760            478,870

   Net income...........................................................$22,624,618  $20,119,862       $  9,697,253

Weighted average number of shares of
   common stock outstanding..............................       10,523,996            11,341,370         11,392,064

Net income per share ............................                    $2.15                 $1.77              $ .85


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


<PAGE>


                                                   NYMAGIC, INC.
                                  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


                                                                                  Year ended December
31,
                                                                                 1996 1995 1994

Common stock, authorized shares,
par value $1 each.......................................................  30,000,000  30,000,000         30,000,000
Balance, beginning of year...................................   $14,749,192          $14,747,292        $14,742,192
Shares issued................................................................            162,800              1,900
           5,100
         Balance, end of year................................    14,911,992           14,749,192         14,747,292
Paid-in capital:
Balance, beginning of year...................................    23,933,587           23,736,024         23,623,113
Shares issued................................................................          2,324,672            197,563
       112,911
         Balance, end of year...............................     26,258,259           23,933,587         23,736,024
Unrealized appreciation (depreciation) of investments:
Balance, beginning of year..................................      9,865,486          (4,132,749)          2,648,444
Cumulative effect, as of January 1, 1994, of
   change in accounting principle, net (Note 1)...                   -----                -----           4,640,331
Net change during year........................................  (2,637,810)           21,439,413       (17,305,340)
Applicable deferred income taxes on the
change........................................................................           923,234        (7,441,178)
    5,883,816
         Balance, end of year..............................       8,150,910            9,865,486        (4,132,749)
Retained earnings:
Balance, beginning of year.................................     152,646,915          137,000,454        131,857,815
Net income.................................................................           22,624,618         20,119,862
9,697,253
Dividends declared..................................................  (4,182,071)    (4,473,401)        (4,554,614)
         Balance, end of year.............................      171,089,462          152,646,915        137,000,454
Treasury stock:
Balance, beginning of year.................................    (18,478,576)          (7,037,640)        (6,389,105)
Net repurchase of common stock.........................        (13,080,321)         (11,440,936)          (648,535)
         Balance, end of year..............................   ($31,558,897)        $(18,478,576)      $ (7,037,640)


                                                    Number of Shares

Common stock, par value $1 each:
   Issued, beginning of year................................     14,749,192           14,747,292         14,742,192
   Shares Issued.........................................................     162,800         1,900           5,100

   Issued, end of year...........................................14,911,992           14,749,192         14,747,292

   Common stock, shares outstanding................              10,143,052           10,691,812         11,379,034

   Dividends declared per share..........................   $           .40      $           .40    $           .40




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



<PAGE>


                                  NYMAGIC, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                 Year ended December
31,
                                                                  1996                   1995
1994
Cash flows from operating activities:
  Net income                                                  $ 22,624,618         $  20,119,862        $  9,697,253
Adjustments to reconcile net income to
   net cash provided by operating
   activities:
   Provision for deferred taxes                                     56,539               410,123         (1,827,394)
   Realized investment gains                                   (4,589,133)           (4,110,515)         (2,992,259)
   Net bond amortization                                         1,933,151             1,492,577           1,662,500
   Depreciation and other, net                                     442,945               520,011             547,686
Changes in:
   Premiums and other receivables                                9,969,414             5,213,463         (7,133,570)
   Reinsurance receivables                                       (592,384)            41,589,294        (22,403,089)
   Accrued investment income                                       150,205             (359,831)           (217,004)
   Deferred policy acquisition costs                               756,662             1,797,197         (4,711,678)
   Prepaid reinsurance premiums                                  6,394,228             6,202,940           1,569,185
   Other assets                                                     80,157              (59,531)           1,239,278
   Unpaid losses and loss adjustment
     expenses                                                  (5,957,544)          (17,277,135)          27,750,472
   Reserve for unearned premiums                              (12,917,022)          (11,847,234)          20,082,034
   Other liabilities                                           (5,546,174)             4,920,993             331,982
       Total adjustments                                       (9,818,956)            28,492,352          13,898,143

Net cash provided by operating activities                       12,805,662            48,612,214          23,595,396
Cash flows from investing activities:
   Fixed maturities acquired                                 (231,515,433)         (272,053,730)        (50,377,503)
   Equity securities acquired                                 (37,880,911)          (21,224,924)        (22,794,461)
   Short-term investments sold or matured                      631,722,760           835,378,875         501,112,681
   Short-term investments acquired                           (609,264,339)         (844,049,317)       (492,460,664)
   Fixed maturities matured                                     36,302,944            33,726,487          11,997,585
   Fixed maturities sold                                       171,112,392           209,230,556          13,053,400
   Equity securities sold                                       33,637,805            21,385,913          23,603,258
   Acquisition of property & equipment, net                      (276,494)             (121,852)           (508,966)

Net cash used in investing activities                          (6,161,276)          (37,727,992)        (16,374,670)
Cash flows from financing activities:
   Proceeds from stock issuance                                  2,487,472               199,463             118,011
   Cash dividends paid to stockholders                         (4,236,947)           (4,542,123)         (4,557,814)
   Net repurchase of common stock                             (13,080,321)          (11,440,936)           (648,535)
   Proceeds from borrowings                                     14,211,472            15,118,449           7,608,491
   Loan principal payments                                     (6,500,000)           (9,411,764)        (10,882,353)

   Net cash used in financing activities                       (7,118,324)          (10,076,911)         (8,362,200)
Net (decrease) increase in cash                                  (473,938)               807,311         (1,141,474)
   Cash at beginning of year                                     1,175,024               367,713           1,509,187
   Cash at end of year                                     $       701,086         $   1,175,024      $      367,713



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


<PAGE>


                                                   NYMAGIC, INC.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)      Summary Of Significant Accounting Policies:

Nature of Operations

         NYMAGIC,  through its subsidiaries,  specializes in underwriting  ocean
marine, inland marine,  aviation and other liability insurance through insurance
pools managed by Mutual Marine  Office,  Inc. - ("MMO"),  Pacific  Mutual Marine
Office,  Inc.  -  ("PMMO"),  and Mutual  Marine  Office of the  Midwest,  Inc. -
("Midwest").  MMO,  located  in New York,  PMMO  located in San  Francisco,  and
Midwest,  located in Chicago,  manage the insurance pools in which the Company's
insurance  subsidiaries,  New York Marine and General  Insurance Company - ("New
York  Marine")  and  Gotham  Insurance  Company  ("Gotham"),   participate.  All
premiums, losses and expenses are prorated among pool members in accordance with
their pool  participation  percentages.  Effective  January 1, 1994, the Company
increased to 81.47% its  participation  in the ocean  marine,  inland marine and
aviation  business  produced by the pools.  Effective April 1, 1994, the Company
increased to 91.47% its  participation in the inland marine business produced by
the pools,  and  effective  July 1, 1994,  the Company  increased  to 90.00% its
participation  in the ocean marine and aviation  business  produced by the pools
and to 100% its  participation in the other liability and inland marine business
produced by the pools.  Substantially all of the Company's premiums for the last
three years have resulted from  participation  in the insurance pools managed by
MMO and affiliates.

Basis of Reporting

         The consolidated  financial  statements have been prepared on the basis
of generally  accepted  accounting  principles  which differ in certain material
respects  from  the  accounting  practices  prescribed  or  permitted  by  state
insurance regulatory  authorities for the Company's two insurance  subsidiaries.
The  principal   differences   recorded  under  generally  accepted   accounting
principles  are deferred  policy  acquisition  costs,  an allowance for doubtful
accounts,  fixed  maturities  available  for sale are  carried at market  value,
reinsurance receivables and prepaid reinsurance premiums are reflected as assets
and deferred income taxes.

         Management  is required  to make  estimates  that  affect the  reported
amounts of assets,  liabilities,  revenues and  expenses.  Actual  amounts could
differ from those amounts previously estimated.

Consolidation

         The  consolidated  financial  statements  include  the  accounts of the
Company,  two  insurance  subsidiaries,  New York Marine and  Gotham,  and three
agency subsidiaries  collectively referred to as ("MMO"). Gotham is owned 25% by
the Company and 75% by New York Marine. All other subsidiaries are wholly owned.
All   intercompany   accounts  and   transactions   have  been   eliminated   in
consolidation.

Investments

         Fixed  maturities  are classified as available for sale and are carried
at fair value.  Fair value is generally  based upon quoted market value.  Equity
securities  (common stocks and  non-redeemable  preferred stocks) are carried at
fair value.  Short-term  investments are carried at cost which approximates fair
value.

         Realized  investment  gains  and  losses  (determined  on the  basis of
specific  identified  cost),  also  include  any  declines  in value  which  are
considered to be other than temporary.  Unrealized  appreciation or depreciation
of  investments,   net  of  related  deferred  income  taxes,  is  reflected  in
shareholders' equity.


<PAGE>


                                                   NYMAGIC, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


Premium and policy acquisition cost recognition

         Premiums  and  policy  acquisition  costs are  reflected  in income and
expense on a monthly pro rata basis over the terms of the  respective  policies.
Accordingly,  unearned  premium  reserves  are  established  for the  portion of
premiums  written  applicable to unexpired  policies in force,  and  acquisition
costs,  consisting  mainly  of net  brokerage  commissions  and  premium  taxes,
relating to these unearned premiums are deferred to the extent recoverable.  The
determination  of  acquisition  costs to be deferred  considers  historical  and
current loss and loss adjustment expense experience. Consideration is also given
to  anticipated  investment  income in measuring the carrying  value of deferred
policy acquisition costs.

Revenue recognition

         Management  commission  income on policies written by the MMO insurance
pools is recognized  primarily as of the effective date of the policies  issued.
Adjustments to the policies,  resulting principally from changes in coverage and
audit adjustments, are recorded in the period reported.

         Contingent  profit  commission  revenue  derived  from the  reinsurance
transactions  of the  insurance  pools is  recognized  when such amount  becomes
reasonably estimable.

Reinsurance

         The Company's insurance subsidiaries participate in various reinsurance
agreements on both an assumed and ceded basis  through the MMO insurance  pools.
The Company uses various types of reinsurance including  quota-share,  excess of
loss  and  facultative  agreements  to  spread  the risk of loss  among  several
reinsurers  and to limit its  exposure  from losses on any one  occurrence.  Any
recoverable  due from  reinsurers is recorded in the period in which the related
gross liability is established.

Depreciation

         Property,  equipment and leasehold  improvements are depreciated  using
both straightline and accelerated methods over their useful lives.

Income Taxes

         The Company  provides  deferred  income taxes on temporary  differences
between the financial  reporting basis and the tax basis of the Company's assets
and liabilities.

Fair Values of Financial Instruments

         The fair value of the Company's fixed maturity investments is disclosed
in  Note  2.  The  Company's  other  financial  instruments  include  short-term
receivables,  notes  payable  and  other  payables  which  are  recorded  at the
underlying transaction value and approximate fair value.


<PAGE>


                                                   NYMAGIC, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

Effects of recent accounting pronouncements

         In 1993, the Financial  Accounting  Standards Board ("FASB") issued its
Statement of Financial  Accounting  Standards No. 115,  "Accounting  for Certain
Investments in Debt and Equity  Securities"  (SFAS 115).  SFAS 115 was effective
for years  beginning  after  December 15, 1993 and required  companies to report
debt and equity  securities into one of three  categories.  The held to maturity
category is valued at amortized  cost and includes  those  securities  where the
company has both the intent and ability to hold those  securities  to  maturity.
The  trading  category  is valued at fair value and  includes  those  securities
purchased with the intent of selling them shortly thereafter.  The available for
sale  category  is  valued at fair  value  and  includes  those  securities  not
categorized as held to maturity nor as trading.  Unrealized gains and losses for
trading securities are recorded in the income statement and unrealized gains and
losses for available for sale securities are recorded in shareholders' equity.

         The Company  adopted SFAS 115 as of January 1, 1994.  The effect on the
Company's  financial  statements  was to  increase  shareholders'  equity by the
unrealized gain in the available for sale account net of applicable income taxes
which amounted to $4,640,331.

         In  November,  1995,  the FASB  issued a  report  entitled  "A Guide to
Implementation  of Statement 115 on Accounting  for Certain  Investments in Debt
and Equity  Securities," which allowed companies to reassess the classifications
of all securities held and permitted transfers among  classifications,  prior to
December 31, 1995,  without  tainting the securities'  previous  classification.
Accordingly,  the  Company  transferred  the entire  fixed  maturities  held for
investment  portfolio at December 1, 1995 at a fair value of $89.6  million into
the available  for sale account.  The effect of the transfer at December 1, 1995
was to increase  shareholders'  equity by $2.7 million  without an effect on net
income.

         In October, 1995, the FASB issued its Statement of Financial Accounting
Standards  No.  123,  "Accounting  for  Stock-Based  Compensation."  SFAS 123 is
effective  for years  beginning  after  December  15, 1995 and  establishes  new
accounting  standards and reporting  requirements  for Stock-Based  Compensation
arrangements.  SFAS 123 allows  companies to choose  between a valuation  method
based on fair value or the existing  accounting may be used under the Accounting
Principles Board's (APB) Opinion No. 25. The Company has elected to remain under
the  existing  accounting  requirements  of APB Opinion No.  25.,  however,  the
necessary  disclosure  requirements  under SFAS 123 are included in footnote 12,
Stock Options.

Incurred losses
         Unpaid  losses  are  based on  individual  case  estimates  for  losses
reported.  A provision is also included,  based on past  experience,  for losses
incurred  but not  reported,  salvage and  subrogation  recoveries  and for loss
adjustment  expenses.  The method of making such estimates and for  establishing
the  resulting  reserves  is  continually  reviewed  and updated and any changes
resulting therefrom are reflected in operating results currently.

Net income per share

         Net income per share is based on the weighted  average number of common
shares outstanding during the year and common stock equivalents.


<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


(2)      Investments:

         A summary of investment components at December 31, 1996 consists of the
following:

                                                                                                          Amount at which
                                                                                         Fair             shown in the
Type of Investment                                                Cost                   Value            balance sheet
Fixed maturities available for sale
   Bonds:
     United States Government and
         government agencies and
         authorities....................................     $   91,871,356          $   91,552,024        $   91,552,024
     States, municipalities and
         political subdivisions..................               188,150,708             192,309,500           192,309,500
     Public utilities......................................      28,607,218              28,816,150            28,816,150
     All other corporate bonds...............                    32,501,010              32,805,455            32,805,455
         Total fixed maturities
              available for sale.........................       341,130,292             345,483,129           345,483,129
Equity securities:
   Common stocks:
     Public utilities......................................       2,218,763               2,347,180             2,347,180
     Banks, trusts and insurance
         companies...................................             4,437,836               5,770,115             5,770,115
     Industrial, miscellaneous and
         all other........................................       30,326,510              37,052,841            37,052,841
     Non-redeemable preferred stock..                               178,600                 178,600               178,600
         Total equity securities................                 37,161,709              45,348,736            45,348,736
Short term investments.........................                  18,377,180              18,377,180            18,377,180
         Total investments.......................             $ 396,669,181           $ 409,209,045         $ 409,209,045



         Unrealized   depreciation  or   appreciation  of  investments   (before
applicable income taxes) at December 31, 1996 and 1995 included gross unrealized
gains on equity securities of $8,754,704 and $6,158,237, respectively; and gross
unrealized losses on equity  securities of $567,677 and $350,518,  respectively;
and gross unrealized gains on fixed maturities  available for sale of $5,537,330
and $9,607,383 at December 31, 1996 and 1995, respectively; and gross unrealized
losses on fixed  maturities  available for sale of $1,184,493 and $237,428 as of
December 31, 1996 and 1995, respectively.

         Included in  investments at December 31, 1996 are bonds on deposit with
various  regulatory  authorities  as  required  by  law  with a  fair  value  of
$8,383,750.

         There were no non-income  producing fixed maturity investments for each
of the years ended December 31, 1996, 1995 and 1994.

         All mortgage  backed  securities  held as of December 31, 1996 and 1995
are obligations of various U.S.  Government  agencies and consist of GNMA, FHLMC
or FNMA pass through securities. These securities are readily marketable.


<PAGE>


                                                   NYMAGIC, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


         The gross unrealized gains and losses on debt securities as of December
31, 1996 and 1995 are as follows:



                                                                                               1996
                                                                           Gross            Gross
Amortized                                            Unrealized        Unrealized          Fair
                                                         Cost              Gains            Losses          Value


Fixed maturities available for sale:

US Treasury securities and
   obligations of US government
   corporations and agencies...................     $  91,871,356     $     314,995     $  (634,327)      $ 91,552,024

Obligations of states and
   political subdivisions................................188,150,708      4,458,433        (299,641)       192,309,500

Corporate securities...................................    61,108,228       763,902        (250,525)        61,621,605

         Totals.................................................$341,130,292$  5,537,330$(1,184,493)      $345,483,129




                                                                                               1995
                                                                           Gross            Gross
                                                     Amortized         Unrealized       Unrealized           Fair
                                                         Cost              Gains            Losses          Value


Fixed maturities available for sale:

US Treasury securities and
   obligations of US government
   corporations and agencies...................   $   102,411,229      $  1,802,616   $     (41,038)    $  104,172,807

Obligations of states and
   political subdivisions................................155,606,844      6,301,839        (196,390)       161,712,293

Corporate securities...................................     61,261,337    1,502,928          -0-            62,764,265

         Totals.................................................$  319,279,410$  9,607,383$  (237,428)   $ 328,649,365




<PAGE>


                                                   NYMAGIC, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


         The  amortized  cost and fair value of debt  securities at December 31,
1996, by contractual maturity,  are shown below. Expected maturities will differ
from  contractual  maturities  because  borrowers  may have the right to call or
prepay obligations with or without call or prepayment penalties.

                                                          Fixed maturities available
                                                                          for sale

                                                 Amortized                      Fair
                                                     Cost                      Value


Due in one year or less.....................       $12,236,656               $12,306,960

Due after one year
     through five years......................      124,394,664               126,605,945

Due after five years
     through ten years.......................       84,055,847                86,070,650

Due after ten years..........................       56,716,006                56,982,500

                                                  $277,403,173              $281,966,055

Mortgage backed securities........                  63,727,119                63,517,074


       Totals......................................$341,130,292             $345,483,129


<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


         Proceeds from sales of investments in debt securities during 1996, 1995
and 1994 were $171,112,392,  $209,230,556 and $13,053,400,  respectively.  Gross
gains of  $1,121,305,  $2,324,039  and $409,990 and gross losses of  $1,437,369,
$1,330,386  and $117,644  were  realized on those sales in 1996,  1995 and 1994,
respectively.

         Realized and unrealized investment appreciation (depreciation) on fixed
maturities and equity securities for the years ended December 31, 1996, 1995 and
1994 are as follows:

                                                                             Year ended December
31,
                                                                   1996                1995
1994

Realized gains (losses) on sale of investments:
       Fixed maturities.........................................$  (316,064)      $      993,653          $    292,346
       Equity securities.........................................4,931,909             3,089,104             2,699,913
       Short-term investments............................        (26,712)                 27,758           -----
       Realized investments gains....................           4,589,133              4,110,515             2,992,259
       Less: applicable income taxes..............             (1,606,197)            (1,438,680)           (1,017,368)
Net realized investment gains..........................       $ 2,982,936          $   2,671,835         $   1,974,891

Change in unrealized investment appreciation (depreciation) of securities:

       Fixed maturities.........................................$(5,017,118)        $ 15,368,821         $(21,372,055)
       Equity securities.........................................    2,379,308         5,059,901            (3,264,978)
         Net unrealized investment
           gains (losses)......................................$(2,637,810)         $ 20,428,722         $(24,637,033)

Net  investment  income from each major  category of  investments  for the years
indicated is as follows:

                                                                                   Year ended December
31,
                                                                   1996                1995
1994

Fixed maturities............................................. $19,938,840            $19,933,777           $17,454,307
Short-term investments................................          1,316,992              1,779,497             1,476,386
Equity securities.............................................       734,939             678,038               604,346
         Total investment income..............                 21,990,771             22,391,312            19,535,039
Investment expenses...................................           (720,577)              (732,381)             (680,972)
         Net investment income................                $21,270,194            $21,658,931           $18,854,067



<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


(3)      Fiduciary Funds:

         The  Company's   insurance  agency   subsidiaries   maintain   separate
underwriting accounts which record all the underlying insurance  transactions of
the insurance  pools which they manage.  These  transactions  primarily  include
collecting  premiums  from  the  insured,   collecting  paid  recoverables  from
reinsurers,  paying claims as losses become payable, paying reinsurance premiums
to reinsurers and remitting net account balances to member  insurance  companies
in the pools which MMO manages.  Unremitted  amounts to members of the insurance
pools are held in a fiduciary  capacity and interest income earned on such funds
inure to the  benefit  of the  members  of the  insurance  pools  based on their
pro-rata participation in the pool.

         A summary of the underwriting accounts as of December 31, 1996 and 1995
is as follows:

                                                                                                   December
31,
                                                                                   1996                            1995


Cash and short-term investments..............................................$   3,554,109               $   10,880,183
Premiums receivable...................................................................50,372,575             54,317,375
Reinsurance and other recoverables.......................................     34,366,554                     23,308,691

Total Assets.....................................................................................         $  88,293,238    $
88,506,249

Due to insurance pool members...............................................$  69,698,410                 $  70,890,247
Reinsurance payable...................................................................11,108,853              8,952,834
Funds withheld from reinsurers....................................................2,756,157                   3,521,286
Other liabilities................................................................................             4,729,818
      5,141,882

Total Liabilities.................................................................................        $  88,293,238    $
88,506,249


         The  underwriting  accounts above were not included in the accompanying
consolidated balance sheets.



<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


(4)      Insurance Operations:

Reinsurance Transactions

         Approximately 42%, 47% and 50% of the Company's insurance subsidiaries'
direct and assumed gross premiums written for the years ended December 31, 1996,
1995 and  1994,  respectively,  have been  reinsured  by the  pools  with  other
companies on both a treaty and a facultative basis.

         In the event that all or any of the pool  companies  might be unable to
meet their obligations to the pools, the remaining companies would be liable for
such  defaulted  amounts on a pro rata pool  participation  basis.  A contingent
liability also exists with respect to reinsurance  ceded since such transactions
generally  do  not  relieve  the  Company  of  its  primary  obligation  to  the
policyholder  and  such  reinsurance  ceded  would  become  a  liability  of the
Company's insurance subsidiaries in the event that any reinsurer might be unable
to meet the obligations assumed under the reinsurance agreements. All reinsurers
must meet certain minimum standards of financial condition as established by the
pools.  The Company's  largest  reinsurers at December 31, 1996,  were Arkwright
Mutual Insurance Company ("Arkwright"),  Lloyd's of London ("Lloyd's") and Utica
Mutual Insurance  Company ("Utica Mutual"),  with aggregate  recoverables of $55
million, $17 million and $21 million,  respectively.  The 1996 A.M. Best ratings
for  Arkwright  and Utica Mutual are A+ and A,  respectively.  Lloyd's of London
maintains  a trust  fund  which was  established  for the  benefit of all United
States ceding companies.  Lloyd's has reported  substantial losses over the past
several years; however, the Company has not experienced difficulty in collecting
amounts due from Lloyd's and the settlement of recoverables  due the Company has
not  materially  impacted its liquidity.  The Company's  exposure to reinsurers,
other than Arkwright,  Lloyds and Utica Mutual include reinsurance  recoverables
collectively from approximately 700 reinsurers or syndicates, and as of December
31,  1996,  no single one of which was liable to the  Company  for an  unsecured
amount in excess of approximately $3.0 million.

         Funds withheld and letters of credit obtained under various reinsurance
treaties  amounted  to  approximately  $50  million  as of  December  31,  1996.
Reinsurance  receivables  as of December 31, 1996 and 1995 included an allowance
for bad debts of $4,075,000 and $2,250,000 respectively.

         Unpaid  losses  are  based on  individual  case  estimates  for  losses
reported  and include a provision  for losses  incurred but not reported and for
loss adjustment expenses.




<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         Reinsurance  ceded and assumed  relating to  premiums  written  were as
follows:

                                            Gross               Ceded           Assumed
                                          (direct)              to other        from other
Year Ended                                amount              companies         companies        Net amount
December 31, 1996                        $113,566,184          $64,752,583       $41,699,626       $90,513,227
December 31, 1995                         150,647,712           87,527,861        34,697,354        97,817,205
December 31, 1994                         169,101,502           99,208,294        31,013,401       100,906,609

         Reinsurance  ceded and  assumed  relating  to  premiums  earned were as
follows:

                                           Gross                Ceded           Assumed                           Percentage
                                          (direct)              to other        from other                        of assumed
Year Ended                                amount              companies         companies        Net amount           to net

December 31, 1996                        $128,483,112        $  71,146,813     $  39,699,722      $ 97,036,021         41%
December 31, 1995                         164,713,618           93,730,801        32,478,682       103,461,499         31
December 31, 1994                         156,631,239          100,777,505        23,401,656        79,255,390         30

         Losses  and  loss  adjustment   expenses  incurred  are  net  of  ceded
reinsurance  recoveries  amounting to $62,516,373,  $22,138,211 and $119,827,995
for the years  ended  December  31,  1996,  1995 and 1994,  respectively.  Ceded
reinsurance payable at December 31, 1996 and 1995 included in premiums and other
receivables, net amounted to $19,753,943 and $16,426,347, respectively.

Unpaid Losses
         The  following  table  provides a  reconciliation  of the  consolidated
liability  for losses and loss  adjustment  expenses at the beginning and end of
1996, 1995 and 1994:

                                                                         Year ended December 31,
                                                            1996                     1995                 1994
                                                                                (In Thousands)
Net liability for losses and loss adjustment
  expenses at beginning of year...................        $ 229,916                 $ 212,377          $ 208,366
Provision for losses and loss adjustment
 expenses occurring in current year............              71,731                    75,618             64,061
Decrease in estimated losses and loss
  adjustment expenses for claims occurring
  in prior years (1).............................................(    12,753)   (      6,360)      (      2,694)
Deferred income-loss portfolio
  assumption(2).................................................         381              458                533
Total losses and loss adjustment expenses incurred      59,359                            69,716          61,900
Less:
Losses and loss adjustment expense payments for claims occurring during:
      current year...............................................15,012                10,043             11,185
      prior years..................................................                    46,512             41,676
     46,171
                                                             61,524                    51,719             57,356
Add:
Deferred income-loss portfolio assumption (2)         (        381)             (        458)      (        533)
Net liability for losses and loss adjustment
  expenses at year end.............................         227,370                   229,916            212,377
Ceded unpaid loss and loss adjustment
 expenses.....................................................   184,467              187,879            222,695
Gross unpaid losses and loss adjustment
  expenses at year end                                    $ 411,837                 $ 417,795          $ 435,072


<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


         (1) The  adjustment to the  consolidated  liability for losses and loss
adjustment  expenses for losses occurring in prior years reflects the net effect
of the  resolution  of losses for other than full reserve  value and  subsequent
readjustments of loss values.

         (2) Deferred income loss portfolio assumption represents the difference
between cash received and unpaid loss reserves assumed as a result of the buyout
of Pennsylvania  National's and Lumber Mutual's net pool  obligations  which was
initially  capitalized  and will be  amortized  over the  payout  period  of the
related losses.

         Substantially  all of the Company's  exposure to umbrella losses result
from the  insurance  pools  participating  in the issuance of umbrella  casualty
insurance  for various  Fortune 1000  companies in the period from 1978 to 1983.
Depending on the accident  year,  the  insurance  pools'  maximum  retention per
occurrence  ranged from  $250,000 to  $500,000.  The  Company's  effective  pool
participation  on such risks varied from 11% in 1978 to 30% in 1983. At December
31, 1996 and 1995, the Company's  gross,  ceded and net loss and loss adjustment
expense  reserves for  Asbestos/Pollution  policies  amounted to $23.5  million,
$15.0  million  and $8.5  million,  and $20.6  million,  $13.6  million and $7.0
million,  respectively. Net paid losses resulting from Asbestos/Pollution losses
during  1996,  1995  and 1994  amounted  to  $811,000,  $545,000  and  $600,000,
respectively.  As of December  31,  1996,  the Company had  approximately  1,000
policies which had at least one claim relating to Asbestos/Pollution  exposures.
Unpaid  losses and loss  adjustment  expenses are  recorded for reported  claims
regarding  Asbestos/Pollution  exposures,   including  the  cost  of  litigation
expenses,  when sufficient information is present to indicate the involvement of
a specific  insurance  policy  and the  Company  can  reasonably  estimate  this
liability.    The   Company   believes   that   the   uncertainty    surrounding
Asbestos/Pollution  exposures,  including  issues as to  insureds'  liabilities,
ascertainment of loss date, definitions of occurrence, scope of coverage, policy
limits and application and interpretation of policy terms, including exclusions,
all affect the  estimation of ultimate  losses.  Given the  uncertainty  in this
area,  losses from  Asbestos/Pollution  related  claims are likely to  adversely
impact  the  Company's  results  from  operations  in future  years and may vary
materially  from such  reserves  reported as of December  31,  1996.  Under such
circumstances,   it  is   difficult  to   determine   the   ultimate   loss  for
Asbestos/Pollution related claims. However, as of December 31, 1996, the Company
believes  that, in aggregate,  the net unpaid loss and loss  adjustment  expense
reserves as of December 31, 1996,  allow for an adequate  provision and that the
ultimate  resolution of the  Asbestos/Pollution  claims will not have a material
impact on the Company's financial position.

Salvage and Subrogation

         Estimates  of salvage  and  subrogation  recoveries  on paid and unpaid
losses  have  been  recorded  as a  reduction  of  unpaid  losses  amounting  to
$6,888,733 and $6,910,449 at December 31, 1996 and 1995, respectively.

Deferred Policy Acquisition Costs

         Deferrable  acquisition  costs amortized to income amounted to $18,827,794,  $21,017,503,  and $14,260,494
for the years ended December 31, 1996, 1995 and 1994, respectively.



<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


(5)      Property, Improvements and Equipment, Net:

         Property improvements and equipment,  net at December 31, 1996 and 1995
include the following.


                                                                             1996                    1995

Office furniture and equipment................................          $  1,335,519            $  1,268,027
Computer equipment.................................................        1,346,960               1,137,958
Leasehold improvements...........................................          2,255,928               2,255,928
                                                                           4,938,407               4,661,913

Less:  accumulated depreciation
     and amortization...................................................  (2,831,320)            (2,388,375)

Property, improvements and equipment, net........                      $   2,107,087           $   2,273,538

         Depreciation  and  amortization  expense for the years ended December 31, 1996,  1995 and 1994 amounted to
$442,945, $520,011 and $547,686, respectively.

(6)      Income Taxes:


         The  components of deferred tax assets and  liabilities  as of December
31, 1996 and 1995 are as follows:

                                                                                          December 31,
                                                                                  1996                             1995

Deferred Tax Assets:

Loss reserve discounting...................................................$  14,390,810           $  14,775,310
Unearned premiums..........................................................    3,926,280               4,382,876
State and local income tax carryforward.....................                      68,748                  48,187
Deferred rent liability..........................................................446,258                 462,841
Bad debt reserve................................................................1,688,750              1,058,750
Alternative minimum tax credit carryforward...............                         -----                 267,132
Other.....................................................................................               331,643
470,722
Total deferred tax assets...................................................    20,852,489            21,465,818



<PAGE>


                                                   NYMAGIC, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued




Deferred Tax Liabilities:                                                                December 31,

                                                                                  1996                             1995

Deferred policy acquisition costs...........................................   3,816,484               4,081,316
Unrealized appreciation of investments...............................          4,388,952               5,312,186
Deferred income-loss portfolio assumption..........................              352,409                 485,898
Discount on accrued salvage and subrogation.................                     376,987                 386,525
Other..........................................................................................          269,338
         222,279
Total deferred tax liabilities......................................................      9,204,170     10,488,204
                                                                              11,648,319              10,977,614
Less:  Valuation allowance......................................................         516,716         712,706

Net deferred tax assets................................................... $  11,131,603           $  10,264,908


         The state and local income tax  carryforward  of $68,748 as of December
31, 1996 can be carried  forward  against future state and local tax liabilities
until the year 2011.

         The Company's  valuation allowance account with respect to deferred tax
assets and the change in the account is as follows:

                                                         1996                    1995

Balance, beginning of year                             $ 712,706               $ 767,083
Change in valuation allowance                          (195,990)                 (54,377)
Balance, end of year                                   $ 516,716               $ 712,706


         The  Company  believes  that the  total  deferred  tax asset net of the
recorded  valuation  allowance  account as of December 31, 1996 will more likely
than not be fully realized.

         Income tax provisions  differ from the amounts computed by applying the
Federal statutory rate to income before income taxes as follows:

                                                                            Year ended December 31

                                                                        1996             1995              1994

Income taxes at the Federal statutory rate........................       35.0%             35.0%             34.0%
Tax exempt interest................................................................      (12.8)            (15.2)   (41.4)
State income taxes................................................................          0.2               1.3  1.9
Net bond amortization..........................................................             1.8               1.7     5.1
Investment income proration...............................................1.7               2.1               5.4
Effect of change in tax rates..................................................           ----              (1.7)  ----
Other, net.................................................................................  (0.9)          (0.8)    (0.3)
Income tax provisions............................................................          25.0%             22.4% 4.7%




<PAGE>


                                                   NYMAGIC, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


         The  Company's  Federal  statutory  income  tax rate  increased  to 35% in 1996 and 1995 as a result of an
increase in taxable income.

         Federal  income tax  payments  amounted  to  $7,339,913,  $4,332,559  and  $1,200,000  for the years ended
December 31, 1996, 1995 and 1994, respectively.

         Federal  income taxes  payable at December  31, 1996 and 1995  included in other  liabilities  amounted to
$640,336 and $820,088, respectively.


(7)      Statutory Income and Surplus:

         The Company's insurance  subsidiaries are limited,  based on the lesser
of 10% of statutory basis surplus or 100% of net investment  income,  as defined
under New York  Insurance Law, in the amount of dividends they could pay without
regulatory approval. The maximum amount which may be paid to the holding company
out of December 31, 1996 surplus is approximately $16,093,000.

         Consolidated   statutory  net  income  and  surplus  of  the  Company's
insurance subsidiaries were as follows for the years indicated:

                                                              Consolidated              Consolidated
                                                                  Statutory                Statutory
                                                               net income                  surplus

December 31, 1996                                              $  26,541,561               $160,929,000
December 31, 1995                                                 20,476,000                148,785,000
December 31, 1994                                                  7,902,000                133,813,000



<PAGE>


                                                   NYMAGIC, INC.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


(8)      Employee Retirement Plans:

         The  Company   maintains  two  retirement  plans  for  the  benefit  of
substantially all employees. Both plans provide for 100% vesting upon completion
of three years of service.  The Money  Purchase Plan provides for a contribution
equal to 7-1/2% of an employee's cash compensation,  including bonuses, for each
year of service  during which the employee has  completed  1000 hours of service
and is employed on the last day of the plan year.  The Profit  Sharing plan does
not require any specific  contribution but any  contribution  made is subject to
the restrictions  set forth above for the Money Purchase Plan.  Contribution and
related administration  expenses for the years ended December 31, 1996, 1995 and
1994 amounted to $991,469, $1,038,633 and $1,019,913, respectively.


(9)      Debt:

         In 1994  the  Company  and a bank  entered  into a  $10,000,000  credit
agreement which was  subsequently  amended in 1996 to $25,000,000.  The interest
rate on the loan is fixed, at the Company's  option,  for a period of one to six
months. The Company has elected to pay interest at an effective rate of 6.30625%
on the  outstanding  principal  balance  of the  loan at  December  31,  1996 of
$20,438,413. The interest rate was equal to the bank's Adjusted London Interbank
Offered Rate at the time of the interest rate adjustment period, plus .65 of 1%.
Principal  repayments are required to be paid quarterly in equal installments of
$1,250,000  commencing  on September  30, 1997 and ending on June 30, 2002.  The
Company has the option to prepay  amounts in excess of the required  repayments.
At the  Company's  option,  the  interest  rate may be based on either  the rate
chosen  above or (a) the  higher  of the  bank's  prime  rate or the  applicable
Federal Funds Rate,  plus 1/2 of 1% or (b) the bank's  adjusted  certificate  of
deposit rate, plus .775 of 1%.

         The bank loan agreement  requires the Company to maintain a minimum net
worth of  $125,000,000  plus 50% of net  profits  earned  during  each year on a
cumulative basis. In addition,  other significant  covenants include limitations
on total indebtedness,  investment  purchases,  pledging and sales of assets and
requires the Company's  insurance  subsidiaries to maintain a certain  statutory
surplus,  gross and net premiums written to surplus ratios and total liabilities
to surplus ratio. The Company was in compliance with all financial  covenants as
stipulated  in the bank loan  agreement  as of  December  31,  1996.  The credit
agreement provides for a facility fee of .15 of 1% on the outstanding balance.

         The Company has an unsecured  credit  facility  with the same bank that
allows the Company to borrow up to $10,000,000.  Interest is based on the bank's
international  short-term  lending  rate.  The credit  facility  provides  for a
commitment fee of 1/8 of 1% on the average unused available  credit balance.  No
amounts were outstanding  under this credit facility as of December 31, 1996 and
1995, respectively.

         Interest paid amounted to $1,020,737,  $437,653 and $531,413 for the years ended  December 31, 1996,  1995
and 1994.



<PAGE>


                                                   NYMAGIC, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued



(10)     Commitments:

         The Company maintains various non-cancelable operating leases to occupy
office space. The lease terms expire on various dates through December 30, 2003.

         The aggregate  minimum annual rental  payments under various  operating
leases for office facilities as of December 31, 1996 are as follows:




1997.......................................................................................................
1,182,247

1998.......................................................................................................
1,139,247

1999.......................................................................................................
1,205,122

2000.......................................................................................................
1,184,832

2001.......................................................................................................
1,184,832

thereafter through December 30, 2003.........................................      2,369,664

Total                                                                 $    8,265,944


         The operating  leases also include  provisions for additional  payments
based on  certain  annual  cost  increases.  Rent  expense  for the years  ended
December  31,  1996,  1995 and  1994  amounted  to  $1,001,295,  $1,017,380  and
$1,028,963.

         As of December 31, 1996, the Company is not involved in any litigation,
except in the ordinary course of business in connection  with  insurance,  which
would require  disclosure  in the financial  statements or would have a material
effect on the Company's financial statements.



<PAGE>


                                                   NYMAGIC, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


(11)     Common Stock Repurchase Plan and Shareholders' Equity:

         The Company has a common stock  repurchase  plan which  authorizes  the
repurchase of up to $45,000,000,  at prevailing  market prices, of the Company's
issued and outstanding shares of common stock on the open market. As of December
31, 1996,  the Company had  repurchased  a total of  1,552,982  shares of common
stock under this plan at a total cost of  $27,639,768  at market prices  ranging
from $16.50 to $24.25 per share.

         In connection  with the  acquisition  of MMO in 1991,  the Company also
acquired  3,215,958 shares of its own common stock held by MMO and recorded such
shares as treasury stock at MMO's original cost of $3,919,129.


(12)     Stock Option Plans:

         The Company has two stock option plans.

         The first plan,  approved by shareholders in 1986, and the second plan,
approved by shareholders in 1991,  provide a means whereby the Company,  through
the grant of non-qualified stock options to key officers, may attract and retain
persons of  ability as  officers  to exert  their best  efforts on behalf of the
Company.  Each plan authorizes the issuance of options to purchase up to 500,000
shares of the  Company's  common  stock at not less than 95  percent of the fair
market  value at the date of grant.  Options  are  exercisable  over a period as
determined in each option agreement and expire at a maximum term of ten years.



<PAGE>


                                                   NYMAGIC, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


         A summary of activity  under the stock  option  plans for the years ended  December 31, 1996 1995 and 1994
follows:

                                     1996                            1995
1994
                           Number         Option            Number       Option           Number        Option
Shares Under               of             Price                 of       Price                of        Price
    Option                 Shares         Per Share         Shares       Per Share        Shares        Per Share


Outstanding,
     beginning of
     year                   528,500      $13.00-$22.92      623,400    $ 13.00-$23.87      557,500     $  4.00-$23.87

Granted                      20,000      $17.22-$17.58      210,500            $15.79       81,000      $15.56-$17.34

Exercised                  (162,800)     $13.00-$15.56      (1,900)    $ 13.00-$13.78      (5,100)     $  4.00-$13.00

(Forfeited)                 (12,500)     $15.79-$22.33    (303,500)     $22.92-$23.87     (10,000)             $22.33

Outstanding,
     end of year            373,200      $13.78-$22.92      528,500     $13.00-$22.92     623,400      $ 13.00-$23.87

Exercisable,
     end of year            135,389      $13.78-$22.92      240,533     $13.00-$22.92      300,061     $ 13.00-$23.87


         In 1995,  certain  options  granted in prior years with option  prices  ranging from $22.33 to $23.87 were
repriced at $15.79.

         The Company has elected to measure  compensation  expense for  employee
stock options under APB No. 25 as permitted by SFAS 123,  "Accounting  for Stock
Based Compensation." Under SFAS 123, the Company is required to disclose the pro
forma  effects  on net  income of  applying  a fair  value  method of  measuring
compensation expense.

         The pro forma effect for the years ended  December 31, 1996 and 1995 is
as follows:

                                                                                1996                      1995
Net income - as reported                                                 $ 22,624,618              $ 22,119,862


Net income - pro forma                                                   $ 22,513,184              $ 20,114,511
Net income per share - as reported                                             $ 2.15                    $ 1.77

Net income per share - pro forma                                               $ 2.14                    $ 1.77

         In  determining  the pro forma effect on net income,  the fair value of
options  granted  in 1996 and 1995 was  estimated  at the grant  date  using the
Black-Scholes   option-pricing   model  with  the  following   weighted  average
assumptions  in 1996 and 1995,  respectively;  dividend  yield of 2.2% and 2.4%;
expected  volatility of 25% and 28%; expected lives of 5 years for each year and
a risk-free interest rate of 6% and 5.38%.

         The full impact of calculating  compensation  expense for stock options
under SFAS 123 is not  reflected in the pro forma net income  amounts  presented
above because options granted prior to January 1, 1995 are not considered in the
determination of the compensation expense.


<PAGE>


                                           FINANCIAL STATEMENT SCHEDULES
                             SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                                                   NYMAGIC, INC.

                                                  Balance Sheets
                                                 (Parent Company)


                                                                                        December 31,

1996                               1995

Assets:
     Cash.................................................................................      $         17,000
$         19,203
     Short Term Investments.................................................   5,000,000                   -----
     Investment in subsidiaries............................................. 201,367,648             192,416,574
     Due from subsidiaries.................................................... 2,227,007               2,754.875
     Other assets....................................................................      1,829,191      1,469,788
              Total assets........................................................$210,440,846      $196,660,440

Liabilities:
     Notes payable...............................................................$  20,438,413    $   12,726,941
     Dividends payable.......................................................  1,014,305               1,069,181
     Other liabilities...............................................................         136,402        147,714
         Total Liabilities.........................................................    21,589,120     13,943,836

Shareholders' equity:
     Common stock.............................................................14,911,992              14,749,192
     Paid in capital...............................................................26,258,259         23,933,587
     Unrealized appreciation of  investments
       (net of deferred income taxes)............                              8,150,910               9,865,486
     Retained earnings........................................................171,089,462            152,646,915
     Treasury stock................................................................  (31,558,897)   (18,478,576)
              Total shareholders' equity.............................        188,851,726             182,716,604
              Total liabilities and shareholders' equity.....               $210,440,846            $196,660,440


                                               Statements of Income
                                                 (Parent Company)

                                                             Year Ended           Year Ended         Year Ended
                                                             December 31,         December 31,       December 31,
                                                                 1996                   1995
     1994
Income:
     Cash dividends from subsidiary..............................$12,950,071        $ 12,357,008         $ 5,650,527
     Net investment income............................................  676                ----                  129
Expenses:
     Operating expenses.................................................1,552,852      2,604,577             778,026
     Income tax benefit...................................................    (561,073)     (955,981)      (187,222)
                                                                    991,779            1,648,596             590,804

Income before equity income......................................11,958,968           10,708,412           5,059,852
Equity in undistributed earnings
     of subsidiaries.............................................................     10,665,650           9,411,450
    4,637,401
Net income.......................................................................... $22,624,618       $  20,119,862
$  9,697,253



<PAGE>


                             SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                                                   NYMAGIC, INC.

                                             Statements of Cash Flows
                                                 (Parent Company)


                                                             Year Ended           Year Ended         Year Ended
                                                             December 31,         December 31,       December 31,
                                                                 1996                   1995
     1994

Cash flows from operating activities:
Net income ..................................................................       $ 22,624,618        $ 20,119,862
$ 9,697,253

Adjustments to reconcile net income
     to cash provided by operating activities:
     Equity in undistributed earnings of
         subsidiaries.....................................................(10,665,650)(9,411,450)        (4,637,401)
     (Increase) in other assets....................................(359,403)           (222,715)           (293,087)
     (Increase)decrease in due from subsidiaries.                   527,868            (429,902)          3,497,833
     (Decrease) Increase in other liabilities.............         (11,312)               6,586              18,374
Net cash provided by operating activities............            12,116,121           10,062,381           8,282,972

Cash flows from investing activities:
     Short term investments acquired                            (5,000,000)           ----                 ----

Cash flows from financing activities:
     Proceeds from stock options exercised..........              2,487,472              199,463             118,011
     Cash dividends paid to stockholders..............          (4,236,947)          (4,542,123)         (4,557,814)
     Repurchase of common stock.........................       (13,080,321)         (11,440,936)           (648,535)
     Proceeds from borrowings................................    14,211,472           15,118,449           7,608,491
     Loan principal payments...................................  (6,500,000)         (9,411,764)        (10,882,353)

Net cash used in
     financing activities.............................................(7,118,324)   (10,076,911)         (8,362,200)

Net (decrease) in cash............................                  (2,203)             (14,530)            (79,228)

Cash at beginning of year .................................          19,203               33,733             112,961

Cash at end of year.............................................$       17,000    $       19,203      $       33,733



<PAGE>


                                                   NYMAGIC, INC.
                                   SCHEDULE V-VALUATION AND QUALIFYING ACCOUNTS

                                      YEARS ENDED DECEMBER 31, 1996 AND 1995


COLUMN A                       COLUMN B            COLUMN C              COLUMN D                COLUMN E

DESCRIPTION                    Balance at                                                        Balance
                               beginning                                                         close of
                               of year             Additions             Deductions              year


December 31, 1996:
   Allowance for
      doubtful accounts.....     $3,025,000         $2,155,271             ($355,271)               $4,825,000

December 31, 1995:
   Allowance for
     doubtful accounts.......     3,845,000          1,540,006            (2,360,006)                3,025,000


<PAGE>



                                                            74



         NYMAGIC, INC.
         SCHEDULE VI - SUPPLEMENTARY INFORMATION CONCERNING PROPERTY/CASUALTY INSURANCE OPERATIONS.
         (In Thousands)
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------

CLAIMS AND
------------------------------------------------------------------------------------------------------------------------------------
                       DEFERRED        RESERVE FOR                                                                     EXPENSES
INCURRED            OF DEFERRED
------------------------------------------------------------------------------------------------------------------------------------
                        POLICY       UNPAID CLAIMS                     UNEARNED              NET              NET
         RELATED TO                      POLICY                        PAID CLAIMS
------------------------------------------------------------------------------------------------------------------------------------
   AFFILIATION WITH ACQUISITION        AND CLAIMS                       PREMIUM           EARNED         INVESTMENT    CURRENT
   PRIOR            ACQUISITION      AND CLAIMS                        PREMIUMS
   REGISTRANT           COSTS            EXPENSES       DISCOUNT        RESERVE         PREMIUMS          INCOME       YEAR
   YEAR                  COSTS       EXPENSES           WRITTEN
------------------------------------------------------------------------------------------------------------------------------------


   DECEMBER 31, 1996     $10,904  $411,837   ------   $66,652    $ 97,036  $21,270   $71,731 ($12,753)    $18,828   $61,524  $90,513
   CONSOLIDATED SUBSIDIARIES

   DECEMBER 31, 1995      11,661   417,795   ------    79,569     103,461   21,659    75,618   (6,360)     21,018    51,719   97,817
   CONSOLIDATED SUBSIDIARIES

   DECEMBER 31, 1994      13,458   435,072   ------    91,416      79,255   18,854    64,061   (2,694)     14,260    57,356  100,907
   CONSOLIDATED SUBSIDIARIES


                                      NYMAGIC, INC.
                                        FORM 10-K
                         For Fiscal Year Ended December 31, 1996


                                         Exhibit Index


      Exhibit                                               Sequentially
      Number      Description                               Numbered Page


      3.1         Charter                                   Incorporated herein by reference

      3.3         By-laws                                   Incorporated herein by reference

      4.0         Specimen Certificate of Common Stock      Incorporated herein by reference

      10.2        Restated Management Agreement dated as    Incorporated herein by reference
                  of  January  1,  1986,  by and among
                  Mutual  Marine   Office,   Inc.  and
                  Arkwright-Boston       Manufacturers
                  Mutual  Insurance   Company,   Utica
                  Mutual  Insurance  Company,   Lumber
                  Mutual   Insurance   Company,    the
                  Registrant     and      Pennsylvania
                  National Mutual  Casualty  Insurance
                  Company

      10.2.2      Amendment to Restated Management          Incorporated herein by reference
                   Agreement,  dated  as  of  December
                  30, 1988,  and among  Mutual  Marine
                  Office,  Inc. and  Arkwright  Mutual
                  Insurance   Company,   Utica  Mutual
                  Insurance  Company,   Lumber  Mutual
                  Insurance  Company,  the  Registrant
                  and  Pennsylvania   National  Mutual
                  Casualty Insurance Company

       10.2.3     Amendment to Restated Management          Incorporated herein by reference
                   Agreement,  dated  as  of  December
                  31, 1990,  and among  Mutual  Marine
                  Office,  Inc. and  Arkwright  Mutual
                  Insurance   Company,   Utica  Mutual
                  Insurance  Company,  the  Registrant
                  and  Pennsylvania   National  Mutual
                  Casualty Insurance Company

      10.4        Restated Management Agreement dated       Incorporated herein by reference
                   as of January 1, 1986, by and among
                  Mutual Inland Marine Office, Inc. and
                  Arkwright-Boston Manufacturers Mutual
                  Insurance Company, Utica Mutual Insurance
                  Company, Lumber Mutual Insurance Company,
                  the Registrant and Pennsylvania National
                  Mutual Casualty Insurance Company



<PAGE>



      10.4.2      Amendment to Restated Management          Incorporated herein by reference
                  Agreement, dated as of December 30, 1988,
                  and among Mutual Inland Marine Office, Inc.
                  and Arkwright Mutual Insurance Company,
                  Utica Mutual Insurance Company, Lumber
                  Mutual Insurance Company, the Registrant
                  and Pennsylvania National Mutual Casualty
                   Insurance Company

      10.4.3      Amendment to Restated Management          Incorporated herein by reference
                  Agreement, dated as of December 31, 1990,
                  by and among Mutual Inland Marine Office, Inc.
                  and Arkwright Mutual Insurance Company, Utica
                  Mutual Insurance Company, the Registrant
                  and Pennsylvania National Mutual Casualty
                  Insurance Company


      10.6        Restated Management Agreement dated       Incorporated herein by reference
                   as of January 1, 1986, by and among Mutual
                   Marine Office of the Midwest, Inc. and
                   Arkwright-Boston Manufacturers Mutual
                   Insurance Company, Utica Mutual Insurance
                   Company, Lumber Mutual Insurance

      10.6.2      Amendment to Restated Management          Incorporated herein by reference
                   Agreement dated as of December 30, 1988,
                   by and among Mutual Marine Office of the
                   Midwest, Inc. and Arkwright Mutual Insurance
                   Company, Utica Mutual Insurance Company,
                   Lumber Mutual Insurance Company, the
                   Registrant and Pennsylvania National Mutual
                   Casualty Insurance Company

      10.6.3      Amendment to Restated Management          Incorporated herein by reference
                  Agreement  dated as of December 31, 1990,
                  by and among Mutual  Marine  Office of the
                  Midwest, Inc. and Arkwright Mutual
                  Insurance Company, Utica Mutual
                  Insurance  Company,  the Registrant and
                  Pennsylvania     National    Mutual Casualty
                  Insurance Company

       10.8       Restated Management Agreement             Incorporated herein by reference
                  dated as of January 1, 1986, by and
                  among Pacific Mutual Marine Office,
                  Inc. and Arkwright-Boston Manufacturers
                  Mutual Insurance Company, Lumber Mutual
                  Insurance Company, Utica Mutual Insurance
                  Company, the Registrant and Pennsylvania
                  National Mutual Casualty Insurance Company



<PAGE>



      10.8.2      Amendment to Restated Management          Incorporated herein by reference
                   Agreement dated as of December 30, 1988, by
                   and  among  Pacific  Mutual  Marine  Office,
                  Inc.
                   and Arkwright Mutual Insurance Company,
                   Lumber Mutual Insurance Company, Utica
                   Mutual Insurance Company, the Registrant
                   and Pennsylvania National Mutual Casualty
                   Insurance Company.

      10.8.3      Amendment to Restated Management          Incorporated herein by reference
                  Agreement dated as of December 31, 1990, by
                  and among Pacific Mutual Marine Office, Inc. and
                  Arkwright Mutual Insurance Company, Utica
                  Mutual Insurance Company, the Registrant and
                  Pennsylvania National Mutual Casualty Insurance
                  Company

      21          Subsidiaries of the Registrant.

      23          Consent of KPMG Peat Marwick LLP.

      28          Schedule P as of December 31, 1996.






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