SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.

                                  FORM 10-K

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

  For the fiscal year ended December 31, 1998   Commission file number: 0-2047

                      CAPITOL TRANSAMERICA CORPORATION

       A Wisconsin Corporation                       39-1052658

       4610 University Avenue
         Madison, Wisconsin                          53705-0900

       Registrant's telephone number, including area code  (608) 231-4450

          Securities registered pursuant to Section 12 (g) of the Act:

                         COMMON STOCK, $1 PAR VALUE

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 dur-
ing the preceding twelve months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing re-
quirements for the past 90 days.

                               YES  X      NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will 
not be contained, to the best of the registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this form 
10-K. {  }

Based on the closing average of the bid (14 1/2) and asked price (19 1/2), the 
aggregate market value of voting stock held by non-affiliates of the registrant
as of March 12, 1999 was approximately $190,885,605.

Indicate the number of shares of each of the issuer's class of common stock, as
of the latest practicable date:

                           At March 12, 1999

                     Common Stock, $1.00 Par Value
  
                         Issued:      11,535,761

                         Outstanding: 11,228,565

DOCUMENTS INCORPORATED BY REFERENCE
Schedule P of the Annual Statements of Capitol Indemnity Corporation and Capitol
Specialty Insurance Corporation are incorporated by reference into Part I. Por-
tions of the proxy statement for the annual shareholders meeting to be held 
May 17, 1999 are incorporated by reference into Part III.


                             Total Pages:  39


                         Form 10-K (Annual Report)
                    Capitol  Transamerica Corporation
                                  Part I


Item 1. Business

(a)  General Development of Business
     Capitol Transamerica Corporation (CTC) is a holding company with assets 
     exceeding $277 million. CTC was formed in 1965 and owns 100% of Capitol
     Indemnity Corporation (CIC), Capitol Specialty Insurance Corporation (CSIC)
     and Capitol Facilities Corporation (CFC). Both CIC and CSIC are property 
     and casualty insurance companies. CIC writes a complete portfolio of 
     fidelity and surety bonds and specialty insurance coverages, while CSIC
     has been largely inactive due to market conditions. CIC operates on an 
     admitted basis in thirty-six states and on an excess/surplus lines basis
     in one state.  CFC provides premium financing for the insurance companies.

     Some of the specialty property and casualty coverages written are: Barber &
     Beauty Shops, Bowling Alleys, Contractors/Manufacturers, Day Care Centers,
     Deer Hunters Accident, Detective/Guard Agencies, Equipment Breakdown, Golf 
     Courses, Nurses Professional, Resorts/Campgrounds, Restaurants, Special 
     Events, Clubs, Sportsman's Accident, Tanning/Toning Salons and Taverns.

     The full line of surety and fidelity bonds includes: Contractor's Perfor-
     mance and Payment Bonds, License/Permit Bonds, Fiduciary Bonds, Judicial
     Bonds and Commercial Fidelity Bonds.

     The results of operations have remained most favorable since 1986 with sub-
     stantial increases in premium volume, profitability and shareholders' 
     investment.

(b)  Information about Industry Segments

     General:
     The subsidiaries of the Company, through licensed agents, are involved only
     in the business of underwriting property, casualty, fidelity and surety in-
     surance on selected risks. The Company conducts business with insurance 
     agents located throughout the United States. As of December 31, 1998 and 
     1997, no amount due from agents located in any one state exceeded 15% of 
     total balances; no industry segment other than insurance amounted to 10% or
     more of the Company's gross or net income and no agent had writings in ex-
     cess of 10% of the Company's gross premiums in 1998, 1997 or 1996. During 
     1998, 1997 and 1996, direct premiums written in Wisconsin accounted for 
     approximately 17%, 17% and 18%, respectively, and direct premiums written
     in Illinois accounted for approximately 14%, 13% and 13%, respectively, of
     the total direct premiums written by the Company. No other states exceeded
     10%.

(c)  Narrative Description of Business

     Competitive Conditions:
     All business written by the Company is highly competitive in the areas
     of price, service and agent relationships. The large number of insurers 
     transacting business at rates which are independently regulated by their 
     respective insurance departments compete aggressively for desireable busi-
     ness. Because of limitations in capacity and other regulatory restrictions,
     companies the size of CIC are sometimes at a disadvantage when competing
     with larger insurance companies.

     CIC is required by the Insurance Commissioner of the State of Wisconsin to
     maintain a minimum compulsory surplus (surplus as regards policyholders) of
     25% of net premiums written during the preceding twelve months. As of 
     December 31, 1998, CIC reported $102.9 million in surplus as regards
     policyholders, approximately $82.2 million in excess of the required
     amount. In addition, CIC is required to report a minimum 60% loss and loss
     expense ratio for the most current three years on certain liability lines
     as well as a minimum 65% ratio on the workers compensation line. Based
     upon actual historical experience the Company's ratios are substantially
     less than the requirement and had the company not included the excess
     statutory reserves over statement reserves in reporting to regulatory
     authorities, surplus would have been $111.9 million at December 31, 1998.

     Importance and Effect of Licenses:
     Generally speaking, insurance companies must be licensed in the states in
     which the insurance is written. Forms and rates for each policy offered are
     filed with individual state insurance departments.

     Number of Persons Employed:
     Capitol Transamerica Corporation and subsidiaries employ approximately 200 
     people.

    Information as to Similar Products or Services:
    Gross premiums written, reinsurance ceded and net premiums written for the 
    past five years are as follows:
<TABLE>
<CAPTION>
                                                 1998
                                 Gross          Ceded            Net
    <S>                      <C>             <C>            <C>
    Accident and Health      $ 1,884,645     $1,596,313     $   288,332
    Burglary and Glass             4,897           -              4,897
    Fidelity                   1,172,166         50,915       1,121,251
    Fire and Allied Lines        319,109          5,621         313,488
    Inland Marine                828,791        714,331         114,460
    Liability                  9,669,318        136,386       9,532,932
    Commercial Multiple Peril 49,502,961      1,914,558      47,588,403
    Workers' Compensation      4,059,756           -          4,059,756
    Surety                    20,487,509        735,055      19,752,454
                             $87,929,152     $5,153,179     $82,775,973

<CAPTION>
                                                 1997
                                 Gross          Ceded            Net
    <S>                      <C>             <C>            <C>
    Accident and Health      $ 5,090,314     $4,817,208     $   273,106
    Burglary and Glass             4,189           -              4,189
    Fidelity                   1,230,700         22,697       1,208,003
    Fire and Allied Lines        424,516          4,296         420,220
    Inland Marine              1,076,850        953,052         123,798
    Liability                 10,967,296        143,567      10,823,729
    Commercial Multiple Peril 52,132,045      1,599,619      50,532,426
    Workers' Compensation      3,381,685           -          3,381,685
    Surety                    25,200,251        402,612      24,797,639
                             $99,507,846     $7,943,051     $91,564,795

<CAPTION>
                                                 1996
                                 Gross          Ceded            Net
    <S>                      <C>             <C>            <C>
    Accident and Health      $   238,615     $     -        $   238,615
    Burglary and Glass            32,189           -             32,189
    Fidelity                   1,317,643         25,958       1,291,685
    Fire and Allied Lines        698,783           (271)        699,054
    Inland Marine                987,201          2,802         984,399
    Liability                 13,048,828        130,503      12,918,325  
    Commercial Multiple Peril 48,790,958      1,027,117      47,763,841
    Workers' Compensation      2,470,176         17,104       2,453,072
    Surety                    23,354,994        492,849      22,862,145
                             $90,939,387     $1,696,062     $89,243,325

<CAPTION>
                                                 1995
                                 Gross          Ceded            Net
    <S>                      <C>             <C>            <C>
    Accident and Health      $   222,137     $     -        $   222,137
    Burglary and Glass            52,045           -             52,045
    Fidelity                   1,355,259         66,854       1,288,405
    Fire and Allied Lines        593,309         10,561         582,748
    Inland Marine                 76,325          3,208          73,117
    Liability                 10,575,070        430,641      10,144,429
    Commercial Multiple Peril 41,254,997      1,451,561      39,803,436
    Workers' Compensation      1,942,861         74,422       1,868,439
    Surety                    14,806,489        484,277      14,322,212
                             $70,878,492     $2,521,524     $68,356,968


<CAPTION>
                                                 1994
                                 Gross          Ceded            Net
    <S>                      <C>             <C>            <C>
    Accident & Health        $   223,193     $     -        $   223,193
    Burglary and Glass            50,646           -             50,646
    Fidelity                   1,059,233         90,495         968,738
    Fire and Allied Line         797,229         43,821         753,408
    Inland Marine                 98,927          3,524          95,403
    Liability                  9,309,300        307,242       9,002,058
    Reinsurance                   22,359           -             22,359
    Commercial Multiple Peril 37,639,679        994,496      36,645,183
    Workers' Compensation      1,623,361         57,099       1,566,262
    Surety                     7,740,415        415,724       7,324,691
                             $58,564,342     $1,912,401     $56,651,941

</TABLE>

(d) Copies of "Schedule P" of the Annual Statements filed with State Regulatory
    Authorities by CIC and CSIC are incorporated herein by reference and are 
    available upon request.

(e) Discussion Topics

    The following discussion topics, if applicable, have been included in 
    Management's Discussion and Analysis of Financial Condition and Results of 
    Operations and/or the Notes to Consolidated Financial Statements and the 
    accompanying Schedules which appear elsewhere in this Annual Report:
  
             (1) Reinsurance transactions which have a material effect on earn-
                 ings or reserves.

             (2) Significant reserving assumptions including any recent changes.

             (3) The nature of recent changes in the terms under which reinsur-
                 ance is ceded to other insurers.

             (4) Changes in the mix of business, including but not limited to 
                 changes in the location of business, geographic mix and types
                 of risks assumed.

             (5) Changes in payment patterns due to portfolio loss transfers,
                 structured settlements and other transactions or circumstances.
        
             (6) Unusually large losses or gains.


(f) Reconciliation of Loss and Loss Adjustment Expense Reserves:
<TABLE>
<CAPTION>
                                                 1998          1997           1996
    <S>                                     <C>            <C>            <C>
    Balances as of January 1,               $ 71,472,338   $ 47,702,363   $ 38,584,084
    Reinsurance balances                            (594)       225,367        (45,321)
    Net reserves                              71,471,744     47,927,730     38,538,763

    Incurred losses and loss adjustment expenses related to:
         Current year                         49,862,090     43,042,827     36,041,564
         Prior years:
            Direct losses (net of recoveries)  4,091,923     10,725,730      1,516,382
            Direct loss adjustment expenses    
              (net of recoveries)             (1,956,631)     2,141,661      1,901,083
            Discontinued assumed reinsurance     379,732      5,218,184      1,706,747
                Total prior years              2,515,024     18,085,575      5,124,212

    Total incurred                            52,377,114     61,128,402     41,165,776

    Paid losses and loss adjustment expenses related to:
         Current year                         20,035,517     16,327,601     15,487,239
         Prior years                          26,370,166     21,160,666     16,245,614
    Total paid                                46,405,683     37,488,267     31,732,853

    Other adjustments, net                       (40,895)       (96,121)       (43,956)

    Net balance at December 31                77,402,280     71,471,744     47,927,730
    Reinsurance balances                       1,101,770            594       (225,367)

    Balance at December 31,                 $ 78,504,050   $ 71,472,338   $ 47,702,363


(g) Loss Reserve Development            Consolidated (in millions of dollars)
<CAPTION>
    Year ended:                   1989   1990   1991   1992   1993   1994   1995   1996   1997   1998
    <S>                         <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
    Reserves for losses and loss
      adjustment expense        $ 14.2 $ 14.1 $ 14.5 $ 18.1 $ 19.3 $ 27.5 $ 38.5 $ 47.7 $ 71.5 $ 78.5

    Re-estimated reserves:
      One year later              15.3   15.0   19.5   21.2   25.5   33.8   43.4   65.8   75.1
      Two years later             16.1   18.3   21.3   23.8   31.2   37.5   57.7   65.9    -
      Three years later           18.1   19.9   22.7   28.3   33.5   51.4   56.2    -      -
      Four years later            19.2   21.3   25.9   30.7   43.6   48.2    -      -      -
      Five years later            20.2   23.8   27.9   38.6   42.7    -      -      -      -
      Six years later             21.8   25.6   34.7   38.0    -      -      -      -      -
      Seven years later           23.6   31.6   34.2    -      -      -      -      -      -
      Eight years later           28.6   31.7    -      -      -      -      -      -      -
      Nine years later            29.1    -      -      -      -      -      -      -      -

    Cumulative deficiency        (14.9) (17.6) (19.7) (19.9) (23.4) (20.7) (17.7) (18.2)  (3.6)
       
    Cumulative deficiency from
    discontinued reinsurance
    assumed operations           (14.4) (13.8) (13.0) (11.8) (10.8)  (9.7)  (8.8)  (7.3)  (6.0)

    Cumulative redundancy
    (deficiency) from
    continuing operations         (0.5)  (3.8)  (6.7)  (8.1) (12.6) (11.0)  (8.9) (10.9)   2.4

    Cumulative amount of liability paid through:

      One year later               5.9    5.7    7.6    9.4    9.9   12.2   16.2   21.2   26.4
      Two years later              8.7   10.1   12.7   14.1   17.2   21.4   26.6   34.6     -
      Three years later           12.0   13.4   15.4   18.9   23.6   27.5   34.2     -      -
      Four years later            13.7   15.2   18.7   23.0   27.0   31.7     -      -      -
      Five years later            14.6   17.5   21.6   25.0   28.7     -      -      -      -
      Six years later             15.9   19.7   22.8   26.5     -      -      -      -      -
      Seven years later           17.9   20.6   23.9     -      -      -      -      -      -
      Eight years later           18.7   21.6     -      -      -      -      -      -      -
      Nine years later            19.6     -      -      -      -      -      -      -      -

    This table does not present accident or policy year development data, which readers may be more accustomed to
    analyzing.  Conditions and trends that have effected development of the liability in the past may not necessarily
    occur in the future.  Accordingly, it may not be appropriate to extrapolate future redundancies or deficiencies
    based on this table.  There are no specific provisions for the effects of inflation or other factors which may cause a
    future change in claim costs. 

    The company withdrew from the reinsurance assumed business in 1976; however, it remains involved with treaties 
    that cover certain risks which have had significant development industry-wide over the past several
    years.  Due to the nature of the assumed business, ultimate losses may, and often do, vary from current estimates.
    See  footnote 4(b) of the notes to the consolidated financial statements.
</TABLE>


(h) Reconciliation of Statutory to Generally Accepted Accounting Principles 
    (GAAP) reserves:
<TABLE>
<CAPTION>
      Balance, December 31, as reported to                For the Year Ended December 31,
      Insurance Commissioner of the                       1998           1997           1996
      State of Wisconsin:
      <S>                                            <C>            <C>            <C>
                  - CIC                              $ 77,094,939   $ 71,117,787   $ 47,458,573

                  - CSIC                                  367,612           -              -

      Funds withheld from reinsurers, reclassified 
        to loss reserves on a GAAP basis                  408,516        447,658        489,808

      Reserve for return of disability premiums, 
        reclassified to loss reserves on a GAAP basis      24,064         18,686         14,820

      GAAP adjustment to gross up reserves
           for the effect of reinsurance                  669,190            594       (225,367)

      Other, net                                          (60,271)      (112,387)       (35,471)

      Balance, December 31, on a GAAP basis          $ 78,504,050   $ 71,472,338   $ 47,702,363
</TABLE>
                                                       
Item 2. Properties

      Capitol Transamerica Corporation leases premises in the Pyare Square 
      building located at 4610 University Avenue, Madison, Wisconsin, 53705, as
      follows:
      
          Approximately 38,098 square feet occupying a portion of the 1st, 2nd, 
          6th, 9th and 10th floors and all of the 11th, 12th, 13th and 14th
          floors. The term of the lease is from June 1, 1996 through May 31,
          1999.

      The Company also leases approximately 2,000 square feet of storage space
      from the President of the Company in a personally owned warehouse at 
      terms as favorable as those available from unaffiliated third parties.

      The Company also leases 1,190 square feet of office space in Las Vegas,
      Nevada.  The term of the lease is from November 1, 1996 to October 31,
      1999.

Item 3. Legal Proceedings

      Capitol Indemnity Corporation (CIC) is a defendant in certain lawsuits 
      involving complaints which demand damages and recoveries for claims and 
      losses allegedly related to risks insured by CIC. In the opinion of 
      management, such lawsuits are routine in that they result from the ordi-
      nary course of business in the insurance industry. The reserves for losses
      and loss adjustment expenses include management's estimates of the 
      probable ultimate cost of settling all claims involving lawsuits. Such 
      estimates are continually reviewed and updated. The reserves for losses
      and loss adjustment expenses at December 31, 1998, are, in the opinion of
      management, adequate to absorb claims arising from those routine legal 
      proceedings presently in process against the Company. 

Item 4. Submission of Matters to a Vote of Shareholders

      No matters were submitted to a vote of shareholders during the Company's
      fourth fiscal quarter ended December 31, 1998.

Item 5. Market Information, Dividends and Other Information

On March 12, 1999, the approximate number of registered shareholders was 2,500.
CTC is publicly owned and traded on the National Over-the-Counter Market,
symbol CATA. The market price of the stock during 1998 was a low of 15 and a
high of 22 3/4 with the equivalent of 3,996,900 shares traded.

Quarterly high and low quoted prices are obtained from the National Association
of Securities Dealers are illustrated below.  

<TABLE>
<CAPTION>
                           1998                             1997
Quarter           High      Low    Dividends       High      Low    Dividends
  <S>           <C>       <C>       <C>          <C>       <C>       <C>
  First         22 1/4    19 3/4    $.07         27 3/8    20 1/8    $.17
  Second        21 7/16   19         .07         27 1/2    19 1/4     .07
  Third         22 3/4    16 3/4     .07         27 1/2    25 1/2     .07
  Fourth        20 1/4    15         .07         28 1/8    21         .07
  Year          22 3/4    15        $.28         28 1/8    19 1/4    $.38

For the period January 1 through March 12, 1999, the high ask price was 19 1/2
and the low bid price was 14 1/2.  A regular cash dividend of $.07 per share
was paid on March 26, 1999, to shareholders of record on March 12, 1999.   

Future dividend payments must be authorized by the Board of Directors and will be dependent on operating 
results, capital requirements and the financial condition of the Company.
</TABLE>

   Subsidiaries                                S.E.C. Form 10-K 

   Capitol Indemnity Corporation               Copies of the Company's Annual 
   Capitol Specialty Insurance Corporation     report filed with the SEC, in-
   Capitol Facilities Corporation              cluding exhibits, are available 
                                               by written request addressed to:
   Independent Public Accountants
                                               Paul J. Breitnauer
   Ernst & Young LLP                           Vice President & Treasurer
   111 East Kilbourn Avenue                    4610 University Ave.
   Milwaukee, Wisconsin 53202                  Madison, Wisconsin 53705-0900

   Transfer Agent and Registrar                Annual Meeting

   Firstar Trust Co.                           The Company's Annual Meeting
   Corporate Trust Department                  will be held Monday, May 17,
   1555 N. RiverCenter Drive                   1999, 4:00 PM at the
   Suite 301                                   Marriot Inn - Madison West
   Milwaukee, Wisconsin 53212                  1313 John Q. Hammond Drive
                                               Middleton, Wisconsin 53562
   Common Stock   

   Listed:  OTC                                
   Quoted:  NASD (CATA)


Item 6.  FIVE YEAR CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA:
<TABLE>
<CAPTION>
                                                       1998          1997          1996          1995          1994
 <S>                                              <C>           <C>            <C>           <C>           <C>
 Gross Premiums Written                           $ 87,929,152  $ 99,507,846  $ 90,939,387  $ 70,878,492  $ 58,564,342
 Net Premiums Written                             $ 82,775,973  $ 91,564,795  $ 89,243,325  $ 68,356,968  $ 56,651,941
 Premiums Earned                                  $ 88,629,476  $ 87,451,620  $ 77,347,319  $ 63,865,500  $ 52,461,456
 Net Investment Income                               9,119,936     8,580,713     7,155,382     6,635,123     5,359,606
 Realized Investment Gains (Losses)                 13,198,139    15,370,384     8,468,911     3,587,323      (106,188)
 Other Revenues                                        113,005        36,801       382,130       144,866       118,353
 Total Revenues                                    111,060,556   111,439,518    93,353,742    74,232,812    57,833,227
 Losses and Loss Adjustment Expenses Incurred       52,377,114    61,128,402    41,165,776    34,099,463    27,536,054
 Underwriting and Other Expenses                    30,682,454    28,587,186    26,680,657    21,497,664    17,883,570
 Total Losses Incurred and Expenses                 83,059,568    89,715,588    67,846,433    55,597,127    45,419,624
 Income from Operations Before Income Taxes         28,000,988    21,723,930    25,507,309    18,635,685    12,413,603
 Income Tax Expense                                  8,577,075     6,532,051     7,158,151     4,705,279     3,166,363
 Consolidated Net Income                          $ 19,423,913  $ 15,191,879  $ 18,349,158  $ 13,930,406  $  9,247,240
 Weighted Average Number of Shares Outstanding      
      - Basic                                       11,206,018    11,151,428    11,077,501    11,049,660    11,012,621
 Weighted Average Number of Shares Outstanding
      - Diluted                                     11,280,442    11,285,751    11,315,758    11,190,198    11,184,566
 Income Per Share - Basic                         $       1.73  $       1.36  $       1.66  $       1.26  $       0.84
 Income Per Share - Diluted                       $       1.72  $       1.35  $       1.62  $       1.24  $       0.83
 Total Cash Dividends Per Share                   $       0.28  $       0.38  $       0.33  $       0.24  $       0.27
 Consolidated Net Income and Cash Dividends Stated
    as a Ratio to Beginning Shareholders' Equity         16.2%         16.7%         23.8%         25.3%         18.6%
 Year End Financial Position:
    Assets                                        $277,359,597  $286,682,275   $228,885,454  $176,730,156 $127,633,195
    Shareholders' Investment                       141,315,973   139,342,141    116,581,883    92,653,880   67,979,174
    Book Value Per Share                          $      12.59  $      12.46   $      10.50  $       8.37 $       6.15
 Shares Outstanding                                 11,222,180    11,178,882     11,103,297    11,068,161    11,032,433
 Insurance Operating Ratios (Statutory Basis):
    Losses and Loss Adjustment Expenses to
      Net Premiums Earned                                59.4%         70.1%          53.5%         53.2%         52.3%
    Underwriting Expenses to Net Premiums Written        35.6%         32.1%          33.5%         32.8%         32.4%
    Combined Ratio                                       95.0%        102.2%          87.0%         86.0%         84.7%
 A. M. BEST Rating                                        A+            A+             A+            A+            A+
                                                      Superior      Superior       Superior       Superior      Superior

 Prior years' information has been restated to reflect the December 31, 1996 three-for-two stock split effected as a 50% 
 stock dividend, and the December 28, 1995 ten percent stock dividend.
</TABLE>

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


OVERVIEW

Capitol Transamerica Corporation (the "Company") is an insurance holding company
operating in 37 states which writes, through its subsidiaries, both property-
casualty and fidelity-surety insurance. The property-casualty segment accounts
for approximately 75% of the business written while the fidelity-surety segement
accounts for approximately 25% of the Company's business.

The underwriting cycles of the property-casualty insurance industry have been
characterized by peak periods of adequate rates, underwriting profits and lower
combined ratios, while the downward side of the cycle is characterized by in-
adequate rates, underwriting losses and, as a result, higher combined ratios.
The adequacy of premium rates is affected primarily by the severity and frequen-
cy of claims which in turn are affected by natural disasters, regulatory 
measures and court decisions which continue to uphold the "deep pocket" theory
in awarding against insurance companies. Unfortunately for the insurance indus-
try, the trend of increasing price competition has continued as has the number
of significant natural disasters. This combination has resulted in a consider-
able reduction in underwriting profitability for the industry as a whole.

Adequate premium rates continue to be of concern to the Company and the
property-casualty insurance industry as a whole. Management feels strongly that
rate regulators have been slow to adjust rates in response to increased claim
costs from the factors noted above. This, when combined with increased compe-
tition in the Company's niche market, has presented an unprecedented challenge
to management. The Company has responded to this challenge with increased mar-
keting efforts as well as the addition of innovative programs and alliances
that should position the Company for continued expansion and profitability.

OPERATING RESULTS

As mentioned in the Overview, the property-casualty insurance industry is in a 
downward cycle. However, despite a decrease in premium writings, the Company
had a profitable year in 1998.  The increased claim activity that the Company
experienced in 1997 has stabilized, as indicated by the decrease in the com-
bined ratio. The marketing strategy of expansion into new states and the 
addition of compatible coverages continues to be the focus as the Company
approaches the new millenium.

Gross premiums written during 1998 were $87,929,152, compared with $99,507,846
in 1997 and $90,939,387 in 1996.

Premiums earned are recognized as net revenues after reduction for reinsurance
ceded and after establishment of the provision for the pro rata unearned portion
of premiums written. Net premiums earned in 1998 totaled $88,629,476, compared
with $87,451,620 and $77,347,319 in 1997 and 1996, respectively. The net un-
earned premium reserve was $41,541,432, $47,411,849 and $43,258,833 at each
yearend.

<TABLE>
<CAPTION>
                                       1998          1997          1996
      <S>                     
      Gross Premiums Written       $87,929,152   $99,507,846   $90,939,387
      Reinsurance Ceded              5,153,179     7,943,050     1,696,062
      Net Premiums Written         $82,775,973   $91,564,796   $89,243,325
      Net Premiums Earned          $88,629,476   $87,451,620   $77,347,319
      Net Unearned Premium Reserve $41,541,432   $47,411,849   $43,258,833
 
The large increase in ceded premiums in 1997 and 1998 is due to a new reinsur-
ance agreement entered into during 1997. CIC assumes and fully cedes certain 
accident and health premiums while retaining a brokerage fee. Management be-
lieves the Company should not incur any net losses from this business.

The Company's underwriting results can be measured by reference to the combined loss and expense ratios. This
tabulation includes the operating results of the two subsidiary insurance companies on a statutory basis. Losses and loss
adjustment expenses are stated as a ratio of net premiums earned, while underwriting expenses are state as a ratio of net
premiums written.  The combined ratios were as follows:

<CAPTION>
Insurance Operating Ratios (Statutory Basis):          1998        1997        1996
      <S>                                             <C>         <C>         <C>    
      Losses and Loss Adjustment Expenses             59.4%       70.1%       53.5%
      Underwriting Expenses                           35.6%       32.1%       33.5%
      Combined Ratios                                 95.0%      102.2%       87.0%

The Companys' combined ratio continues to compare favorably with the industry average, which is
projected to be 105% for the year 1998.
</TABLE>

REINSURANCE

The Company follows the customary practice of reinsuring with other companies, 
i.e., ceding a portion of its exposure on the policies it has written. This pro-
gram of reinsurance permits the Company greater diversification of business and
the ability to write larger policies while limiting the extent of its maximum 
net loss.  It provides protection for the Company against unusually serious 
occurrences in which a number of claims could produce a large aggregate loss. 
Management continually monitors the Company's reinsurance program to obtain pro-
tection that should be adequate to ensure the availability of funds for losses 
while maintaining future growth. 

NET INVESTMENT INCOME AND REALIZED GAINS

The Company's fixed maturities and equity securities are classified as 
available-for-sale and are carried at fair value.  The unrealized gains and 
losses, net of tax, are reported as a separate component of shareholders' 
investment.

Interest and Dividend Income:  Interest on fixed maturities is recorded as in-
come when earned and is adjusted for any amortization of purchase premium or 
accretion of discount. Dividends on equity securities are recorded as income on
ex-dividend dates.
<TABLE>
<CAPTION>
Investments:                                  1998          1997          1996
       <S>                                <C>           <C>           <C>
       Invested Assets                    $238,140,592  $245,644,042  $184,801,846
       Net Investment Income                 9,119,936     8,580,713     7,155,382
       Percent of Return to 
        Average Carrying Value                    4.5%          4.9%          5.1%
       Realized Gains                       13,198,139    15,370,384     8,468,911
       Change in Unrealized Gains         $(21,787,587) $ 16,746,284  $ 12,672,783

The net decrease in unrealized gains of $21,787,587 for 1998 was comprised of a $2,214,372 increase in fixed maturities and
a decrease of $24,001,959 in equity securities.  

Net investment income in 1998 amounted to $9,119,936, compared with $8,580,713 and $7,155,382 in 1997 and 1996, respectively.
Unrealized gains were $27,722,374, $49,509,958 and $32,763,674 at each respective year end.
</TABLE>

INCOME TAXES

Income tax expense is based on income reported for financial statement purposes
and tax laws and rates in effect for the years presented.  Deferred federal in-
come taxes arise from timing differences between the recognition of income de-
termined for financial reporting purposes and income tax purposes.  Such timing 
differences are related principally to the deferral of policy acquisition costs,
the recognition of unearned premiums, and discounting the claims reserves for
tax purposes. Deferred taxes are also provided on unrealized gains and losses.

LOSS RESERVES

Reserves for losses and loss adjustment expenses reflect the Company's best 
estimate of the liability for the ultimate cost of reported claims and incurred 
but not reported (IBNR) claims as of the end of each period.  The estimates are
based on past claim experience and consider current claim trends as well as 
social and economic conditions.  The Company's reserves for losses and loss ad-
justment expenses were $78,504,050 at December 31, 1998 compared with 
$71,472,338 at December 31, 1997. This increase is a combination of giving con-
sideration for increases in premium volume, increased retention on all lines
of coverages written and an increase in the IBNR reserves.  Management continues
to closely monitor the reserve development trends and projections as it attempts
to stabilize the loss reserve development which has occurred in recent years.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity refers to the Company's ability to meet obligations as they become 
due. The obligations and cash outflow of the Company include claim settlements,
acquisition and administrative expenses, investment purchases and dividends to
shareholders. In addition to satisfying obligations and cash outflow through 
premium collections, there is cash inflow obtained from interest and dividend 
income, maturities and sales of investments.  Because cash inflow from premiums
is received in advance of cash outflow required to settle claims, the Company 
accumulates funds which it invests pending liquidity requirements. Therefore, 
investments represent the majority (85.9% in 1998, 85.7% in 1997 and 80.7% in 
1996) of the Company's assets.  Cash outflow can be unpredictable for two 
reasons: first, a large portion of liabilities representing loss reserves have 
uncertainty regarding settlement dates; and second, there is potential for 
losses occurring either individually or in the aggregate. As a result, the Com-
pany maintains adequate short-term investment programs necessary to ensure the 
availability of funds.  The investment program is structured so that a forced
sale liquidation of fixed maturities should not be necessary during the course 
of ordinary business involvement and activities. The Company has no material 
capital expenditure commitments.

MARKET RISK

Market risk is defined by the Securities Exchange Commission as exposure to ad-
verse fluctuations in interest rates and commodity or other price changes. The
Company does not invest in derivatives or similar financial instruments which
are highly sensitive to market risk and which are the main focus of the new re-
quirements. However, the requirements are broad enough in scope to encompass 
the potential impact of interest rate fluctuations on the Company's fixed in-
come portfolio, as well as the potential impact of a severe drop in the stock
market on the Company's common stock portfolio.

The following table shows the interest rate sensitivity of the Company's fixed
income investments (bonds and preferred stock) by presenting the projected im-
pact of a parallel rise or decline in interest rates of 100 and 200 basis 
points. The interest rate fluctuation is assumed to have occurred on January 1,
1999 and remain in effect for the life of the fixed income portfolio.

<TABLE>
                                                          Basis Point Increase/(Decrease)
<CAPTION>
                                                                    Current Mkt
     Portfolio Characteristics            (200)          (100)          Rate          100          200
     <S>                                 <C>            <C>           <C>           <C>          <C>  
     Market Value ($000's)               $90,664        $87,044       $82,913       $70,576      $74,155
     Mkt Value/Statement Value (%)        119.7%         114.9%        109.5%        103.7%        97.9%
     Effective Duration (years)             3              4             4             4            4

The valuation of the Company's common stock portfolio is subject to equity price risk. Based on a similar drop
in the Dow Jones industrial average in 1998, a decrease in market prices of 10% would reduce the fair value of
the Company's common stock portfolio approximately $16.5 million, from $135.4 million to $118.9 million.

The Company's investment portfolio is actively managed to minimize downward price risk.
</TABLE>

YEAR 2000

A significant issue facing not only the insurance industry but society as a
whole is potential problems related to the approaching year 2000.  Older 
computer programs were written using two digits rather than four to define the
applicable year.  As a result, those computer programs may misinterpret a 
date, using "00" as the year 1900 rather than year 2000.

Over the past three years the Company has incurred approximately $2.3 million
of expenses in updating its mangement system to alleviate potential year 2000
problems. This process is substantially completed, with only final testing and
minor adjustments remaining.  The additional expense for the testing and ad-
justments is expected to be less than $100,000.  As a result of these efforts,
the Company is confident that the year 2000 will not cause a significant dis-
ruption to its business.

The Company has also assessed the potential impact of year 200 related problems
that may be encountered by our agents and third parties, and determined that
any impact would not be material relative to the operations of the Company.
However, there can be no guarantee that actual results would not differ 
materially from those anticipated; therefore, the Company has developed a con-
tingency plan in the event of a worst-case scenario.

Item 8. Financial Statements and Supplementary Data

      Financial Statements

      The financial statements filed by CTC in connection with this Annual 
      Report are consolidated financial statements which present all of the 
      operations of the parent company and its subsidiaries.

         (1) Capitol Transamerica Corporation Consolidated Financial Statements:

         (2) Report of independent auditors.

         (3) Consolidated balance sheets - December 31, 1998 and 1997.

         (4) Consolidated statements of income - for each of the three years 
                in the period ended December 31, 1998.

         (5) Consolidated statements of shareholders' investment and compre- 
                hensive income- for each of the three years in the period ended
                December 31, 1998.

         (6) Consolidated statements of cash flows - for each of the three 
                years in the period ended December 31, 1998.

         (7) Notes to consolidated financial statements.

Item 9. Disagreements of Accounting and Financial Disclosures

      None.

Item 10. Directors and Executive Officers of CTC
                                              Part III  
(a) Directors
<TABLE>
<CAPTION>
<S>                       <C>                               <C>                                       <C>        
      Name (Age)                                                 Other Directorships, Business           Expire at
Date of Original Election       Principal Occupation       Experience and Miscellaneous Information   Annual Mtg. in:

Paul J. Breitnauer (59)   Vice President and Treasurer of    Mr. Breitnauer has been associated with        1999
        1986              the Company; Senior Vice Presi-    the insurance industry in various 
                          dent & Treasurer of CIC, CSIC      capacities since 1963.
                          and CFC, wholly-owned subsidi- 
                          aries of the Company.
                          Sun Prairie, Wisconsin

George A. Fait (72)       Chairman of the Board and          Mr. Fait is a director of Bank One and         2000
        1960              President of the Company and its   has been associated with the insur-
                          wholly-owned subsidiaries;  Di-    ance industry in various capacities 
                          rector of Bank One.                since 1950.
                          Madison, Wisconsin

Larry Burcalow (57)       Owner & President                  Mr. Burcalow has been Owner and President      2001
        1997              Yahara Materials, Inc.             of Yahara Materials, Inc. for over 30 
                          Waunakee, Wisconsin                years.

Michael J. Larson (57)    Retired, formerly with             Mr. Larson has been associated with the        2001
        1991              American National Bank             banking industry in various capacities 
                          Madison, Wisconsin                 since 1965.                                       

Reinhart H. Postweiler(69)Retired, formerly with Flad        Mr. Postweiler is a Director of Bank One.      1999
        1977              Affiliated Corporation; Director   He is a member of the Wisconsin Society of 
                          of Bank One, Madison, Wisconsin.   Professional Engineers and the National  
                                                             Society of Professional Engineers.

Kenneth P. Urso (64)      Owner & Operator                   Mr. Urso has been in the insurance             2000
        1997              Urso & Associates, LLC             business for over 30 years.
                          Madison, Wisconsin


                          None of the above directors are related and there are no arrangements or understandings 
                          between directors since each is acting solely in their described capacity. There have been
                          no events during the past five years which are material to the evaluation of the ability 
                          and integrity of any director of CTC.
</TABLE>

Item 10. (continued)
      (b) Executive Officers:

          Chairman of the Board and President- George A. Fait (72 years of age)
          Elected in 1960. Chairman of the Board and President - CIC, CSIC and 
          CFC, wholly-owned subsidiary companies.

          Vice President and Treasurer - Paul J. Breitnauer (59 years of age)
          Elected Treasurer in 1970 and Vice President in 1982.  Senior Vice 
          President and Treasurer - CIC, CSIC and CFC.

          Secretary - Virgiline M. Schulte   (70 years of age)
          Elected in 1988.  Secretary - CIC, CSIC and CFC.

      (c) Additional Executive Officers -
          CIC & CSIC - Wholly-Owned Subsidiary Insurance Companies:

          Vice President - P & C Claims          Vice President - Personnel
          Robert F. Miller (60 years of age)     Virgiline M. Schulte (70 years
          Elected in 1986.                       old) Elected in 1993.

          Vice President - Agency                Vice President- Data Processing
          Joel G. Fait (40 years of age)         Frank S. Zillner (37 years old)
          Elected in 1993.                       Elected in 1993.

          Vice President - Rating                Corporate Counsel
          Vacant                                 Vacant

          Vice President - P & C Underwriting    Vice President-F&S Underwriting
          Vacant                                 Jess J. Wadle

      (d) Disclosure of Delinquent Filers

          The section captioned "Compliance with Section 16(a) of the Securities
          Exchange Act of 1934" in the Capitol Transamerica Corporation ("CTC") 
          Proxy Statement dated April 9, 1999 is incorporated herein by 
          reference.         

Item 11. Executive Compensation and Transactions

       The sections captioned "Compensation of Directors", "Report on Executive
       Compensation" and "Executive Compensation Committee Report" in the CTC
       Proxy Statement dated April 9, 1999 are incorporated herein by 
       reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

      The sections captioned "Principal Shareholders", "Option/SAR Exercised in
      Last Fiscal Year" and "Compensation Plans" in the CTC Proxy Statement 
      dated April 9, 1999 are incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

      The section captioned "Compensation Committee Interlocks and Insider 
      Participation" and the three sections referenced in Item 11 above, 
      all included in the CTC Proxy Statement dated April 9, 1999, are in-
      corporated herein by reference.

      George Fait and Virgiline Schulte are brother and sister; Joel Fait is 
      George Fait's son and Frank Zillner is his son-in-law; none of the other 
      officers are related and there are no arrangements or understandings 
      between officers since each is acting solely in their described capacity.
      There have been no events during the past five years which are material 
      to the evaluation or the ability and integrity of any executive officer 
      of the Company or its subsidiaries.

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

      (a) 1 and 2.  Financial statements and financial statement schedules

          The following financial statements of Capitol Transamerica Corporation
          and Subsidiaries are included in Item 8.

               Consolidated balance sheets - December 31, 1998 and 1997.

               Consolidated statements of income - for each of the three years 
               in the period ended December 31, 1998.

               Consolidated statements of shareholders' investment and compre-
               hensive income -  for each of the three years in the period end-
               ed December 31, 1998.

               Consolidated statements of cash flows - for each of the three 
               years in the period ended December 31, 1998.

               Notes to consolidated financial statements.

          The following financial statement schedules of Capitol Transamerica 
          Corporation and Subsidiaries are included in Item 14(d).

            Schedule I    Summary of Investments Other than Investments in 
                          Related Parties

            Schedule II   Condensed Financial Information of Registrant - Parent
                          Company

            Schedule III  Supplementary Insurance Information

            Schedule IV   Reinsurance

            Schedule VI   Supplemental Information Concerning Property-Casualty
                          Insurance Operations

          All other schedules required by Article 7 of Regulation S-K are not 
          required under the related instructions or are inapplicable, and 
          therefore have been omitted.

      (b) No Reports on Form 8-K were filed during the fourth quarter of the 
          fiscal year ended December 31, 1998.

      (c) Exhibits
          None

      (d) Financial Statement Schedules
          Reference is made to the financial statement schedules above.


                              SIGNATURES

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

                   CAPITOL TRANSAMERICA CORPORATION


By                                       By
   George A. Fait                           Paul J. Breitnauer
   Chairmant of the Board,                  Vice President,
   President and Director                   Treasurer and Director


By                                       By
   Virgiline M. Schulte                     Larry Burcalow
   Secretary                                Director


By                                       By
   Michael J. Larson                        Reinhart H. Postweiler
   Director                                 Director


By  
   Kenneth P. Urso
   Director


March 25, 1999


RESPONSIBILITY FOR FINANCIAL REPORTING

To The Shareholders and Board of Directors of Capitol Transamerica Corporation:

The Company has prepared the consolidated financial statements, related notes,
and other financial data appearing in this Annual Report. The statements were 
developed using generally accepted accounting principles and policies considered
appropriate in the circumstances. They reflect, where applicable, management's 
best estimates and judgements. The financial data also includes disclusures and
explanations which are relevant to an understanding of the financial affairs of
the Company.

To meet management's responsibility for financial reporting, internal control
systems and procedures are designed to provide reasonable assurances as to the 
reliability of the financial records and compliance with corporate policy
throughout the organization.

Ernst & Young LLP, independent auditors, have audited the financial statements.
To express an opinion thereon, they review and evaluate the Company's internal
accounting controls and conduct such tests of the accounting records and other
auditing procedures as they deem necessary. The Board of Directors oversees the
Company's financial reporting through its Audit Committee, which regularly meets
with management representatives and jointly with the independent auditors, to 
review accounting, auditing and financial reporting matters. A policy of busines
ethics is communicated annually to the Company's directors, officers and respon-
sible employees. The Company monitors compliance with the policy to help assure
that operations are conducted in a responsible and professional manner with a
committment to the highest standard of business conduct.

                                                   Paul J. Breitnauer
                                                   Vice President and Treasurer

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors of Capitol Transamerica Corporation:

We have audited the accompanying consolidated balance sheets of Capitol Trans-
america Corporation (the "Company") as of December 31, 1998 and 1997, and the
related consolidated statements of income, shareholders investment and compre-
hensive income and cash flows for the three years in the period ended December
31, 1998. Our audits also included the financial statement schedules listed in
the Index at Item 14(a). These financial statements and schedules are the re-
sponsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing stan-
dards. 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 Capitol
Transamerica Corporation at December 31, 1998 and 1997, and the consolidated re-
sults of its operations and its cash flows for each of the three years in the 
period ended December 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.

Milwaukee, Wisconsin                                         Ernst & Young LLP
February 19, 1999

                           CAPITOL TRANSAMERICA CORPORATION
                              CONSOLIDATED BALANCE SHEETS
                              December 31, 1998 and 1997
<TABLE>
<CAPTION>
                                                                                       1998            1997
<S>                                                                                 <C>             <C>
Assets
  Investments (Notes (1)(b) and (2)):
     Available-for-sale investment securities, at fair value 
        Fixed maturities (amortized cost $68,210,546 and $69,434,974 respectively)  $ 75,061,460     $ 74,071,516
        Equity securities:
          Common stock, (cost $115,583,088 and $101,409,300, respectively)           135,373,036      145,208,469
          Nonredeemable preferred stock, (cost $6,769,703 and              
               $5,854,291, respectively)                                               7,851,215        6,928,541
 Investment real estate, at cost, net of depreciation                                  9,999,919        8,122,638
     Short-term investments, at cost which approximate fair value (Note(2)(d)          9,854,962       11,312,878
Total Investments                                                                    238,140,592      245,644,042

  Cash                                                                                 1,544,438        1,202,548
  Accrued investment income                                                            1,678,998        1,707,692
  Receivables from agents, insureds and others, less allowance               
     for doubtful accounts of $500,000 and $440,000, respectively                     17,217,646       20,820,481
  Balances due from reinsurers                                                           913,186          122,916
  Funds held by ceding reinsurers                                                         35,756             -
  Deferred insurance acquisition costs (Note (1)(e))                                  13,524,777       14,186,941
  Prepaid reinsurance premiums                                                           727,074          743,988
  Due from securities brokers                                                          1,633,833             -
  Income taxes recoverable                                                               141,982          684,342
  Other assets                                                                         1,801,315        1,569,325
Total Assets                                                                        $277,359,597     $286,682,275

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

                            CAPITOL TRANSAMERICA CORPORATION
                              CONSOLIDATED BALANCE SHEETS
                               December 31, 1998 and 1997

<CAPTION>
                                                                                      1998            1997
Liabilities
  <S>                                                                               <C>              <C>
  Policy Liabilities and Accruals (Notes (1)(d), (3) and (4)):
     Reserve for losses                                                             $ 55,336,376     $ 48,570,173
     Reserve for loss adjustment expenses                                             23,167,674       22,902,165
     Unearned premiums                                                                41,541,432       47,411,849
  Total Policy Liabilities and Accruals                                              120,045,482      118,884,187

  Accounts payable                                                                     3,340,980        2,822,208
  Claim drafts outstanding                                                             2,836,566        2,983,360
  Due to securities brokers                                                              231,185        5,318,372
  Balances due to reinsurers                                                           1,038,967        1,337,564
  Accrued premium taxes                                                                  237,171          337,163
  State income taxes payable                                                              91,444             -
  Deferred income taxes (Notes (1)(f) and (5))                                         8,221,829       15,657,280
  Total Other Liabilities                                                             15,998,142       28,455,947
Total Liabilities                                                                    136,043,624      147,340,134
  Commitments and contingent liabilities (Notes (4) and (8))                                -                -

Shareholders' Investment (Notes (6) and (7))
     Common stock, $1.00 par value, authorized 15,000,000 shares,              
        issued 11,529,376 and 11,502,520, respectively                                11,529,376       11,502,520
     Paid-in surplus                                                                  22,246,366       21,832,206
     Accumulated other comprehensive income, net of deferred taxes of
     $9,702,829 & $16,833,386, respectively(Notes(1)(b)&(2)                           18,019,545       32,676,572
     Retained earnings                                                                90,016,245       73,732,118
Shareholders' investment before treasury stock                                       141,811,532      139,743,416
     Treasury stock, 307,196 and 323,638 shares, respectively, at cost                  (495,559)        (401,275)
Total Shareholders' Investment                                                       141,315,973      139,342,141
Total Liabilities and Shareholders' Investment                                      $277,359,597     $286,682,275

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

<CAPTION>
                           CAPITOL TRANSAMERICA CORPORATION
                          CONSOLIDATED STATEMENTS OF INCOME
                 For The Years Ended December 31, 1998, 1997 and 1996



                                                                    1998         1997           1996
                                                                 <S>          <C>            <C>       
Revenues:                                      
   Premiums earned (Note (1)(c))                               $ 88,629,476   $ 87,451,620   $ 77,347,319
   Net investment income (Note (2)(e))                            9,119,936      8,580,713      7,155,382
   Realized investment gains (Notes (1)(b) and (2))              13,198,139     15,370,384      8,468,911
   Other revenues                                                   113,005         36,801        382,130
Total Revenues                                                  111,060,556    111,439,518     93,353,742

Losses and Expenses Incurred (Notes (1)(d), (3) and (4)):
   Losses incurred                                               43,994,221     49,055,296     29,694,168
   Loss adjustment expenses incurred                              8,382,893     12,073,106     11,471,608
   Underwriting, acquisition and insurance expenses (Note(10))   28,558,650     28,458,021     29,136,689
   Decrease (Increase) in deferred insurance acquisition costs      662,164     (1,208,627)    (3,749,446)
   Other expenses                                                 1,461,640      1,337,792      1,293,414
Total Losses and Expenses Incurred                               83,059,568     89,715,588     67,846,433

Income from operations before income taxes                       28,000,988     21,723,930     25,507,309
Income tax expense (Note (5))                                     8,577,075      6,532,051      7,158,151

Net Income                                                     $ 19,423,913   $ 15,191,879   $ 18,349,158


Income Per Share- basic (Note (1)(g))                          $       1.73   $       1.36   $       1.66

Weighted avg. number of shares outstanding-basic (Note (1)(g))   11,206,018     11,151,428     11,077,501

Income Per Share- diluted (Note (1)(g))                        $       1.72   $       1.35   $       1.62

Weighted avg. number of shares outstanding-diluted (Note (1)(g)) 11,280,442     11,285,751     11,315,758

The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
 
                                     
                                                 CAPITOL TRANSAMERICA CORPORATION
                            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT AND COMPREHENSIVE INCOME
                                       For the Years Ended December 31, 1996, 1997 and 1998
                                                    Common                                 
                                      Common         Stock                                    Accumulated
                                      Stock     Distributable                                   Other
                                   (Par Value)   (Par Value      Paid-In     Comprehensive  Comprehensive   Retained     Treasury
                                      $1.00)        $1.00)       Surplus         Income        Income       Earnings       Stock
<S>                                 <C>           <C>           <C>          <C>            <C>           <C>           <C>
Balance, January 1, 1996            $ 6,899,060   $   689,545   $20,949,100  $      -       $13,259,988   $51,177,894   $  (321,707)
 Comprehensive income
   Net income                             -             -             -       18,349,518           -       18,349,158          -
   Other comprehensive income
   Unrealized appreciation on 
    available-for-sale securities,
    net of deferred taxes                 -             -             -       13,953,518           -             -             -
   Less: reclassification adjust-
    ment, net of tax of $2,879,430
    for gain included in net income       -             -                     (5,589,481)          -             -             -
   Other comprehensive income             -             -             -        8,364,037      8,364,037          -             -
 Comprehensive income                     -             -             -       26,713,195           -             -             -
   Stock options exercised              24,106          -          165,544          -              -             -          (15,799)
   Stock dividend                      689,545     3,116,810          -             -              -       (3,806,355)         -  
   Cash dividends declared                -             -             -             -              -       (2,959,043)         -
Balance, December 31, 1996            7,612,711     3,806,355    21,114,644         -        21,624,025    62,761,654      (337,506)
 Comprehensive income
   Net income                             -             -             -       15,191,879           -       15,191,879          -
   Other comprehensive income
   Unrealized appreciation on
    available-for-sale securities,
    net of deferred taxes                 -             -             -       21,197,000           -             -             -
   Less: reclassification adjust-
    ment, net of tax of $5,225,931,
    for gain included in net income       -             -             -      (10,144,453)          -             -             -
   Other comprehensive income             -             -             -       11,052,547     11,052,547          -             -
 Comprehensive income                     -             -             -       26,244,426           -             -             -
   Stock options exercised              83,678          -          542,344          -              -             -          (63,769)
   Purchases and sales of treasury 
    stock, net                            -             -          175,218          -              -             -             -
   Stock dividend                    3,806,131     3,806,355          -             -              -             -             -
   Cash dividends declared                -             -             -             -              -       (4,221,415)         -
Balance, December 31, 1997          11,502,520          -       21,832,206          -        32,676,572    73,732,118      (401,275)
 Comprehensive income
   Net income                             -             -             -       19,423,913           -       19,423,913          -
   Other comprehensive income    
   Unrealized depreciation on
    available-for-sale securities,
    net of deferred taxes                 -             -             -       (6,078,237)          -             -             -
   Less: reclassification adjust-
    ment, net of tax of $4,619,349,
    for gain included in net income       -             -             -       (8,578,790)          -             -             -
   Other comprehensive income             -             -             -      (14,657,027)   (14,657,027)         -             -
 Comprehensive income                     -             -             -        4,766,886           -             -             -
   Stock options exercised              26,856          -          142,409          -              -             -          (18,952)
   Purchases and sales of treasury
    stock, net                            -             -          271,751          -              -             -          (75,332)
   Cash dividends declared                -             -             -             -              -       (3,139,786)         -
Balance, December 31, 1998         $11,529,376   $      -      $22,246,366  $       -       $18,019,545   $90,016,245    $ (495,559)

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

<CAPTION>
                                                         CAPITOL TRANSAMERICA CORPORATION
                                                       CONSOLIDATED STATEMENT OF CASH FLOWS
                                               For the Years Ended December 31, 1998, 1997 and 1996
 

                                                                      1998          1997          1996
<S>                                                                 <C>          <C>            <C>      
Cash flows provided by operating activities:
 Net Income                                                         $ 19,423,913  $ 15,191,879  $ 18,349,158
    Adjustments to reconcile net income to net cash
        provided by operating activities:
          Depreciation                                                 1,195,955     1,018,894       805,784
          Realized investment gains                                  (13,198,139)  (15,370,384)   (8,468,911)
          Change in:                                    
              Deferred insurance acquisition costs                       662,164    (1,208,627)   (3,749,446)
              Unearned premiums                                       (5,870,417)    4,153,016    11,703,105
              Allowance for doubtful accounts receivable from agents      60,000        60,000        60,000
              Accrued investment income                                   28,694       (22,752)       33,314
              Receivables from agents, insureds and others             3,542,835    (2,168,094)   (6,898,262)
              Balances due to/from reinsurers                           (191,361)     (284,774)     (136,449)
              Reinsurance recoverable on paid and unpaid losses         (897,506)      755,956      (151,080)
              Funds held by ceding reinsurers                            (35,756)       44,791        32,326
              Income taxes payable/receivable                            633,804    (2,554,594)    1,980,343
              Deferred income taxes                                     (304,896)      (78,292)      (68,247)
              Due to/from securities brokers                          (6,721,020)   11,191,845    (6,028,431)
              Prepaid reinsurance premiums                                16,914       (39,840)      192,901
              Other assets                                                (5,305)      339,684      (123,731)
              Reserves for losses and loss adjustment expenses         7,031,712    23,769,975     9,118,279
              Accounts payable                                           371,977      (806,814)    2,250,075
              Accrued premium taxes                                      (99,992)     (225,410)      180,029
                      Net cash provided by operating activities        5,643,576    33,766,459    19,080,757

Cash flows provided by (used for) investing activities:
     Proceeds from sales of available-for-sale investments            40,484,195    44,747,214    27,579,131
     Purchases of available-for-sale investments                     (49,573,482)  (78,773,489)  (49,010,584)
     Maturities of available-for-sale investments                      7,660,719     5,064,056     6,917,920
     Purchases of depreciable assets                                  (1,080,065)     (477,992)   (1,279,331)
                      Net cash used for investing activities          (2,508,633)  (29,440,211)  (15,792,864)

Cash flows provided by (used for) financing activities:
     Cash dividends paid                                              (3,139,786)   (4,226,165)   (3,699,525)
     Stock options exercised                                             265,799       626,022       189,650
     Net proceeds from sale (purchase) of treasury stock                  80,934       111,449       (15,799)
                      Net cash used for financing activities          (2,793,053)   (3,488,694)   (3,525,674)

     Net (decrease) increase in cash                                     341,890       837,554      (237,781)
     Cash, beginning of year                                           1,202,548       364,994       602,775
     Cash, end of year                                               $ 1,544,438   $ 1,202,548   $   364,994

Cash paid during the year for:
     Income taxes                                                    $ 8,358,132   $ 9,164,506   $ 5,292,665
     

The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
</TABLE>
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies
    Capitol Transamerica Corporation (the "Company") is an insurance holding 
    company which writes, through its subsidiaries, commercial insurance 
    coverages in 37 states. The property-casualty insurance coverages represent 
    approximately 75% of the Company's premiums written while fidelity-surety 
    coverages represent approximately 25% of the Company's premiums written. The
    Company's products are marketed through independent agents located through-
    out the United States.

    The consolidated financial statements are presented in accordance with 
    generally accepted accounting principles. The preparation of financial 
    statements of insurance companies requires management to make estimates and
    assumptions that affect amounts reported in the financial statements and 
    accompanying notes. Actual results could differ significantly from those
    estimates.

    (a)   Principles of Consolidation
          The consolidated financial statements include the accounts of the 
          Company and its wholly-owned subsidiaries, Capitol Indemnity Corpora-
          tion ("CIC"), Capitol Specialty Insurance Corporation ("CSIC") and 
          Capitol Facilities Corporation ("CFC"). All significant intercompany
          accounts and transactions have been eliminated in consolidation. 

    (b)   Investments
          The Company classifies all of its fixed maturities and equity securi-
          ties as available-for-sale. Accordingly, investments in fixed maturi-
          ties and equity securities are reported at fair value, with unrealized
          gains and losses reported in a separate component of shareholders' 
          investment, net of tax effect. The cost of fixed maturities is adjust-
          ed for amortization of premiums and accretion of discounts to maturi-
          ty. Fixed maturities and equity securities deemed to have declines in
          value that are other than temporary are written down through the
          statement of income to carrying values equal to their estimated fair
          values.

          Investment real estate is carried at cost net of accumulated deprecia-
          tion of $789,597 and $444,381 as of December 31, 1998 and December 
          31, 1997, respectively. The real estate is depreciated over the esti-
          mated useful life of the asset.

          Cost of investments sold is determined under the specific identifica-
          tion method.

    (c)   Premiums
          Premiums are recognized as revenue on a pro rata basis over the term 
          of the contracts. Approximately 17% and 14% of the total premiums
          written are on risks located in Wisconsin and Illinois, respectively.
          No other state exceeds 10%.

    (d)   Losses and Loss Adjustment Expenses
          Losses and loss adjustment expenses, less related reinsurance and sub-
          rogation recoverable, are provided for as claims are incurred. The 
          reserves for losses and loss adjustment expenses include: (1) the   
          accumulation of individual estimates for claims reported on direct 
          business prior to the close of the accounting period; (2) estimates
          received from other insurers with respect to reinsurance assumed; (3)
          estimates for incurred but not reported claims based on past experi-
          ence modified for current trends; and (4) estimates of expenses for 
          investigating and settling claims based on past experience. The lia-
          bilities recorded are based on estimates resulting from the continu-
          ing review process, and differences between estimates and ultimate
          payments are reflected in expense for the period in which the esti-
          mates are changed. 

    (e)   Deferred Insurance Acquisition Costs
          Insurance acquisition costs that vary with, and are directly related
          to, the production of premiums(principally commissions, premium taxes
          compensation and certain underwriting expenses) are deferred. Deferred
          insurance acquisition costs are amortized to expense as the related 
          premiums are earned.

    (f)   Income Taxes
          Deferred income taxes reflect the net tax effects of temporary dif-
          ferences between the carrying amounts of assets and liabilities for
          financial statement purposes and the amounts used for income tax 
          reporting.

    (g)   Income Per Share
          Net income per share is computed by dividing net income by the weight-
          ed average number of shares of stock outstanding during the year.

          In 1997, the Financial Accounting Standards Board issued Statement of
          Financial Accounting Standards No. 128 ("SFAS 128") "Earnings per 
          Share," which replaces the presentation of primary and fully diluted
          earnings per share (EPS) with a presentation of basic and diluted EPS.
          The following table sets forth the computation of basic and diluted
          EPS:
<TABLE>
<CAPTION>
                                                                                December 31,
                                                                       1998         1997         1996
              <S>                                                   <C>          <C>          <C>
              Numerator:
               Consolidated net income                              $19,423,913  $15,191,879  $18,349,158

              Denominator:
              Denominator for basic EPS- weighted avg shares         11,206,018   11,151,428   11,077,501
               Effect of dilutive securities- employee stock options     74,424      134,323      238,257
              Denominator for diluted EPS                            11,280,442   11,285,751   11,315,758

              Basic EPS                                             $      1.73  $      1.36  $      1.66
              Diluted EPS                                           $      1.72  $      1.35  $      1.62

(2)Investments
   (a)  The amortized cost and estimated fair value of fixed maturities and 
        equity securities are as follows:
<CAPTION>
                                                             Gross          Gross   
                                              Amortized    Unrealized     Unrealized       Fair
   Type of investment                           Cost         Gains          Losses        Value
   <S>                                       <C>           <C>           <C>           <C>
   December 31, 1998
   Fixed maturities:
        U.S. Government bonds                $     51,204  $      4,146   $      -      $     55,350
        State, municipal and political            
             subdivision bonds                 67,339,664     6,845,376         (3,039)   74,182,001
       Corporate bonds and notes                  819,678        11,211         (6,780)      824,109
      Total fixed maturities                 $ 68,210,546  $  6,860,733         (9,819) $ 75,061,460

   Equity securities:
        Common stock                         $115,583,088  $ 30,815,779   $(11,025,831) $135,373,036
        Non-redeemable preferred stock          6,769,703     1,357,227       (275,715)    7,851,215
      Total equity securities                $122,352,791  $ 32,173,006   $(11,301,546) $143,224,251


   December 31, 1997
   Fixed maturities:
        U.S. Government bonds                $     67,192  $      4,883   $       -     $     72,075
        State, municipal and political            
             subdivision bonds                 68,651,060     4,592,852         (4,408)   73,239,504
        Corporate bonds and notes                 716,722        47,106         (3,891)      759,937
      Total fixed maturities                 $ 69,434,974  $  4,644,841   $     (8,299) $ 74,071,516

   Equity securities:
        Common stock                         $101,409,300  $ 46,194,740   $ (2,395,571) $145,208,469
        Non-redeemable preferred stock          5,854,291     1,099,250        (25,000)    6,928,541
      Total equity securities                $107,263,591  $ 47,293,990   $ (2,420,571) $152,137,010

   (b)  The amortized cost and estimated fair value of fixed maturities at December 31, 1998, by contractual maturity, is
        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.
<CAPTION>
                                                     Amortized          Fair
                                                       Cost             Value
           <S>                                      <C>              <C>
           Due in one year or less                  $   245,000      $   248,802
           Due after one year through five years      2,763,848        2,931,642
           Due after five years through ten years     7,355,359        7,940,756
           Due after ten years                       57,846,339       63,940,260
           Total                                    $68,210,546      $75,061,460


   (c)  Realized gains (losses) and change in unrealized gains (losses) for the three years ended December 31, 1998,
        1997 and 1996, are as follows:
<CAPTION>
                                                     1998         1997         1996
        <S>                                     <C>            <C>           <C>
        Realized gains (losses):
           Fixed maturities                                        
                Gross gains                     $     64,575   $     53,584   $     88,664
                Gross losses                          (5,040)        (7,250)       (36,388)
           Equity securities                                       
                Gross gains                       13,138,613     15,323,242      8,454,726
                Gross losses                              (9)          -           (22,041)
           Other                                        -               808        (16,050)
        Net realized gains                      $ 13,198,139   $ 15,370,384   $  8,468,911

        Change in unrealized gains (losses):
           Fixed maturities                     $  2,214,372   $   (123,135)  $ (2,416,907)
           Equity securities                     (24,001,959)    16,869,422     15,089,690
        Net change in unrealized gains           (21,787,587     16,746,287     12,672,783
           Effect of applicable deferred taxes     7,130,560     (5,693,740)    (4,308,746)
        Net (decrease) increase in unrealized 
                          gains                 $(14,657,027)  $ 11,052,547      8,364,037
        
        Following is a summary of total unrealized gains (losses) as of December 31, 1998, 1997 and 1996:
<CAPTION>
                                                       1998         1997         1996
        <S>                                          <C>          <C>          <C>
        Unrealized gains (losses):
           Fixed maturities
                Gross unrealized gains               $ 6,860,733  $ 4,644,841  $ 4,785,917
                Gross unrealized losses                   (9,819)      (8,299)     (26,240)
           Equity securities                                       
                Gross unrealized gains                32,173,006   47,293,990   29,775,195
                Gross unrealized losses              (11,301,546)  (2,420,571)  (1,771,198)
        Gross unrealized gains                        27,722,374   49,509,961   32,763,674
           Effect of applicable deferred taxes        (9,702,829) (16,833,389) (11,139,649)
        Net unrealized gains                         $18,019,545  $32,676,572  $21,624,025
</TABLE>                                                  

   (d)  The amortized cost of securities on deposit with insurance regulators 
        in accordance with statutory requirements was $3,670,000 on December 
        31, 1998 and $3,689,284 on December 31, 1997.

        In connection with the runoff of the reinsurance assumed operations, CIC
        has established a security trust fund agreement with a bank, consisting
        of cash and securities in the amount of $835,000 at December 31, 1998
        and $832,192 at December 31, 1997. 

   (e)  Following is a summary of investment income from each category of 
        investments:
<TABLE>
<CAPTION>
                                                1998         1997         1996
           <S>                                <C>          <C>          <C>
           Fixed maturities                   $ 4,619,471  $ 4,800,978  $ 4,936,902
           Equity securities                    3,907,213    3,292,615    2,260,094
           Investment real estate               2,383,255    2,340,878    1,280,669
           Short-term                             186,341      149,879      119,542
           Total investment income             11,096,280   10,584,350    8,597,207
           Investment expenses - real estate    1,310,113    1,361,092      945,777
           Other investment expenses              321,016      401,994      419,201
           Depreciation on real estate            345,215      240,551       76,847
           Net investment income              $ 9,119,936  $ 8,580,713  $ 7,155,382
</TABLE)                                         

   (f)  The Company had investments in state, municipal and political subdivi-
        sion bonds with amortized costs of $67,339,664 and $68,651,062 at De-
        cember 31, 1998 and 1997, respectively.  Approximately 92% of these
        bonds were special assessment revenue bonds and approximately 8% of
        these bonds were state and political subdivision obligations at Decem-
        ber 31, 1998 and 1997. The Company monitors its exposure by investing
        its funds in accordance with guidelines set by the Company's investment
        committee.  At December 31, 1998, approximately 45% of the municipal
        bond portfolio consisted of securities of Wisconsin and Minnesota muni-
        cipalities.  No other state total exceeded 10%.

   (g)  Fair values for fixed maturities and equity securities are determined 
        from quoted market prices where available, or are estimated using values
        obtained from independent pricing services. Thinly traded fixed maturi-
        ties are individually priced based upon year-end market conditions, type
        of security, interest rate and maturity of the issue.

(3) Reserves for Losses and Loss Adjustment Expenses
    The table below provides a reconciliation of the beginning and ending re-
    serves for losses and loss adjustment expenses, net of reinsurance:

</TABLE>
<TABLE>
<CAPTION>
                                                               1998          1997          1996
    <S>                                                      <C>            <C>           <C>
    Balance as of January 1,                                 $71,472,338    $47,702,363   $38,584,084
    Reinsurance balances                                            (594)       225,367       (45,321)
    Net reserves                                              71,471,744     47,927,730    38,538,763

    Incurred losses and loss adjustment expenses related to:
         Current year                                         49,862,090     43,042,827    36,041,564
         Prior years:
            Direct losses (net of ceded)                       4,091,923     10,725,730     1,516,382
            Direct loss adjustment expenses (net of ceded)    (1,956,631)     2,141,661     1,901,083
            Discontinued assumed reinsurance                     379,732      5,218,184     1,706,747
                Total prior years                              2,515,024     18,085,575     5,124,212

    Total incurred                                            52,377,114     61,128,402    41,165,776

    Paid losses and loss adjustment expenses related to:
         Current year                                         20,035,517     16,237,601    15,487,239
         Prior years                                          26,370,166     21,160,666    16,245,614
    Total paid                                                46,405,683     37,488,267    31,732,853

    Other adjustments, net                                       (40,895)       (96,121)      (43,956)

    Net balance at December 31,                               77,402,280     71,471,744    47,927,730
    Plus (less) reinsurance balances                           1,101,770            594      (225,367)
    Balance at December 31,                                  $78,504,050    $71,472,338   $47,702,363
                                               
    As explained in Note (1)(d), differences between estimates and ultimate payments are reflected in expense for the period
    in which the estimates are changed.  The Company continually reviews its reserves for losses and loss adjustment expenses
    and the related reinsurance recoverables.  As a result of the variability in these estimates, reserves have differed from
    actual experience during 1998, 1997 and 1996.  The estimates are based on past claim experience and consider current
    claim trends as well as social and economic conditions.  During 1997 it was determined that, due to increased claim de-
    velopment on all lines of business, a substantial increase in incurred but no reported (IBNR) reserves was necessary. 
    The Company increased IBNR reserves by $10.0 million on direct business and $4.5 million on assumed reinsurance.  The 
    Company increased IBNR reserves an additional $5.9 million in 1998. While the Company has recorded its best estimate of 
    its reserves for losses and loss adjustment expenses, it is reasonably possible these estimates, net of estimated rein-
    surance recoverables, may increase in the future.  See Note 4(b) for discussion of assumed reinsurance.
</TABLE>

(4) Reinsurance 
    (a)Ceded
       From 1996 through 1998, the Company generally reinsured losses in excess
       of $1,000,000 with various other companies through reinsurance ceded
       contracts. These arrangements provide for greater diversification of
       business, allow the Company to control exposure to potential losses aris-
       ing from large risks, and provide additional capacity for growth. Rein-
       surance ceded contracts do not relieve the Company from its obligations
       to policyholders. The Company remains liable to its policyholders for
       the portion reinsured to the extent that any reinsurer does not meet the
       obligations assumed under the reinsurance agreements. To minimize its ex-
       posure to significant losses from reinsurer insolvencies, the Company
       evaluates the financial condition of its reinsurers. Amounts recoverable
       from reinsurers are estimated in a manner consistent with the claim lia-
       bility associated with the reinsured policies.

    (b)Assumed- Discontinued
       CIC was involved in providing reinsurance coverage by assuming a portion
       of risks underwritten by other insurance companies and pools. Although
       CIC withdrew from this reinsurnace business in 1976, its liability re-
       mains for losses on policies written during the period in which it par-
       ticipated as a reinsurer. The Company is involved with treaties that 
       cover certain risks which have had significant development industry-wide
       over the past several years. The reinsurance assumed loss reserves are 
       based on current information available from the ceding companies and are
       continually reviewed for accuracy and reasonableness. Management is con-
       fident that the reserves of $8,917,014 at December 31, 1998 are adequate,
       but recognizes the uncertainty industry-wide concerning these exposures.
       The Company has provided letters of credit relating to reinsurance as-
       sumed of $130,000 and $503,585 at December 31, 1998 and 1997, respec-
       tively.

    (c)Assumed - Active
       In 1997 the Company entered into a reinsurance program whereby CIC as-
       sumed and then fully ceded certain accident and health exposures. The
       Company receives a brokerage fee on this business and management be-
       lieves the Company is not likely to incur any losses on this business.

       Net written and earned premiums and losses and loss adjustment expenses 
       include reinsurance activity as follows:
<TABLE>
<CAPTION>
                                                                Written Premiums
                                                       1998            1997            1996
       <S>                                           <C>             <C>             <C>
       Direct                                        $86,329,672     $94,690,638     $90,939,387
       Assumed                                         1,599,480       4,817,208            -
       Ceded                                          (5,153,179)     (7,943,050)     (1,696,062)
       Net premiums written                          $82,775,973     $91,564,796     $89,243,325

                                                                 Earned Premiums
                                                       1998            1997            1996
       Direct                                        $92,203,082     $90,537,623     $79,236,282
       Assumed                                         1,596,487       4,817,208            -   
       Ceded                                          (5,170,093)     (7,903,211)     (1,888,963)
       Net premiums earned                           $88,629,476     $87,451,620     $77,347,319

                                                            Losses and Loss Adjustment Expenses
                                                       1998            1997            1996
       Direct                                        $53,447,519     $57,314,915     $40,476,441
       Assumed - losses                                  280,900       5,162,726       1,606,731
       Assumed - legal and audit                          98,832          55,458         100,016
       Ceded                                          (1,450,137)     (1,404,697      (1,017,412)
       Net losses and loss adjustment expenses       $52,377,114     $61,128,402     $41,165,776
</TABLE>                                          

(5) Income Taxes
    (a)The Company and its subsidiaries file a consolidated federal income tax 
      return and separate state franchise and premium tax returns as applicable.

    (b)The components of income tax expense for the years 1998, 1997 and 1996 
       are as follows:
<TABLE>
<CAPTION>
                                                    1998         1997         1996
       <S>                                       <C>          <C>          <C>    
       Current expense:
          Federal                                $ 8,096,181  $ 6,055,422  $ 6,683,429
          State                                      785,787      554,922      559,972
       Total current expense                       8,881,968    6,610,344    7,243,401

       Deferred expense(benefit):
         Deferred insurance acquisition costs       (231,757)     410,933    1,274,812
         Unearned premiums                           409,745     (279,696)    (808,929)
         Discount on loss and loss adjustment       
                  expense reserves                  (322,034)    (582,307)    (315,137)
         Unpaid commissions                         (140,748)     400,699     (211,404)
         Other                                       (20,099)     (27,922)     (24,592)
       Total deferred benefit                       (304,893)     (78,293)     (85,250)
                                                          
       Income tax expense                        $ 8,577,075  $ 6,532,051  $ 7,158,151

    (c)A reconciliation of the effective income tax rate, as reflected in the consolidated statements of income, to the
       statutory federal income tax rate, is as follows:
<CAPTION>       
                                                                    1998     1997     1996
       <S>                                                         <C>       <C>       <C>
       Statutory tax rate                                          35.0%     35.0%     35.0%
       Municipal bond income, net of proration                     (4.9%)    (6.5%)    (5.7%)
       Dividend received exemption, net of proration               (1.7%)    (2.0%)    (1.9%)
       State income tax expense, net of federal tax benefit         1.7%      1.7%      1.5%  
       Other, net                                                   0.5%      1.9%     (0.8%)
       Effective income tax rate                                   30.6%     30.1%     28.1% 

    (d)Significant components of the deferred tax liabilities and assets are as follows:
<CAPTION>
                                                                December 31,    December 31,
                                                                    1998            1997
       <S>                                                      <C>             <C>
       Deferred tax liabilities:
          Deferred insurance acquisition costs                  $ 4,733,672     $ 4,823,560
          Net unrealized gains on investment securities           9,737,421      16,833,386
          Other, net                                                 81,512          94,218
          Total deferred tax liabilities                         14,552,605      21,751,164

       Deferred tax assets:
          Unearned premium reserve discounting                    2,857,005       3,173,414
          Loss and loss adjustment expense reserve discounting    2,571,677       2,201,277
          Unpaid commissions                                        506,308         355,115 
          Other                                                     395,786         364,078
           Total deferred tax assets                              6,330,776       6,093,884

       Net deferred tax liability                              $ (8,221,829)    $(15,657,280)
</TABLE>

(6) Common Stock Options
    The company has elected to follow Accounting Principles Board Opinion No. 25
    "Accounting for Stock Issued to Employees" (APB 25) and related Interpreta-
    tions in accounting for its stock options. Under APB 25, since the exer-
    cise price of the Company's stock options  equals the market price of the
    underlying stock on the date of grant, no compensation expense is recog-
    nized.  

    Had the company elected the fair value approach required under FASB 123
    "Accounting for Stock-Based Compensation," net income and earnings per share
    would not be materially different for the years 1998, 1997 and 1996. Pro
    forma disclosure is required and has been determined as if the Company had
    accounted for its stock options under this method. The fair value for these
    options was estimated at the date of grant using a Black-Scholes option pri-
    cing model with the following weighted-average assumptions for 1998, 1997 
    and 1996, respectively: risk-free interest rates of 4.4%, 6.3% and 6.5%; 
    dividend yields of 1.4%, 1.2% and 2.3%; volatility factors of the expected
    market price for the Company's common stock of .345, .256 and .229; and a 
    weighted-average expected life of the options of three years. The weighted-
    average fair value of options granted for the years 1998, 1997 and 1996 was
    $3.92, $5.20 and $8.44, respectively. The estimated fair value is amortized
    to expense over the options' vesting period. The Company's pro forma infor-
    mation follows:
<TABLE>
<CAPTION>
                                             1998          1997          1996
           <S>                           <C>            <C>           <C>
           Pro forma net income          $19,156,540    $14,871,823   $18,149,961
           Pro forma earnings per share:
                      Basic                    $1.71          $1.33         $1.64
                      Diluted                  $1.70          $1.32         $1.60

    The Company's 1993 Stock Option Plan has authorized the grant of options
    for up to 1,072,500 shares of the Company's common stock.  All options 
    granted have a five year term and become fully vested at the end of four 
    years. Stock options available to be granted in the future equal 706,330
    shares at December 31, 1998.

    A summary of the Company's stock activity, and related information for the 
    years ended December 31 follows:

</TABLE>
<TABLE>
<CAPTION>                                   1998                     1997                         1996         
                                               Weighted Avg              Weighted Avg                Weighted Avg
                                     Options   Exercise Price  Options   Excercise-Price  Options   Excercise-Price
     <S>                             <C>         <C>           <C>          <C>          <C>         <C>
     Outstanding, beginning of year  237,111     $  11.80      327,123      $  10.30      238,910    $   7.30
     Granted                          97,900        15.75        5,700         22.44      122,319       14.40
     Exercised                       (26,856)        6.30      (83,678)         7.48      (24,106)       5.40
     Forfeited                       (27,231)       15.15      (12,034)        10.06      (10,000)       9.50
     Outstanding, end of year        280,924     $  13.38      237,111      $  11.80      327,123     $ 10.30
     
     Options currently exercisable at December 31, 1998 were 116,725. The weighted average remaining exercise
     period for all outstanding options as of December 31, 1998 was 2.9 years. Exercise prices for options 
     outstanding as of December 31, 1998 ranged from $2.42 to $26.00 with 93% of these options having 
     exercise prices between $9.20 and $15.50.
</TABLE>



(7) Statutory Reporting
    (a)The financial statements of the insurance subsidiaries have been prepared
       in accordance with generally accepted accounting principles, which differ
       in certain respects from accounting practices prescribed or permitted by
       insurance regulatory authorities (statutory basis). The statutory capital
       and surplus and net income of the insurance subsidiaries as reported to 
       state regulatory authorities, were as follows:
<TABLE>
<CAPTION>
                                                   Policyholders' Surplus As Of December 31,
                                                         1998          1997         1996
       <S>                                             <C>           <C>          <C>
       Capitol Indemnity Corporation                   $102,902,836  $109,324,111 $86,880,871
       Capitol Specialty Insurance Corporation            5,865,245     6,437,879   6,561,248
       Total                                           $108,768,081  $115,761,990 $93,442,119
<CAPTION>
                                                   Net Income for the Year Ended December 31,
                                                         1998         1997         1996
       <S>                                             <C>          <C>          <C>
       Capitol Indemnity Corporation                   $19,051,239  $13,162,055  $13,566,036
       Capitol Specialty Insurance Corporation             479,019      297,036      285,640
       Total                                           $19,530,258  $13,459,091  $13,851,676
</TABLE>

    (b)CIC is required by the Insurance Commissioner of the State of Wisconsin 
       to maintain a minimum compulsory surplus (surplus as regards policyhold-
       ers) of 25% of net premiums written during the preceeding twelve months.
       As of December 31, 1998, the amount of compulsory surplus required to be
       maintained by CIC was $20,662,367.

    (c)State insurance regulations limit the transfer of assets, including divi-
       dends, from insurance subsidiaries to the Company without regulatory 
       approval.

(8) Contingent Liabilities
    CIC is a defendant in certain lawsuits involving complaints which demand 
    damages and recoveries for claims and losses allegedly related to risks in-
    sured by CIC. In the opinion of management, such lawsuits are routine in 
    that they result from the ordinary course of business in the insurance in-
    dustry. The reserves for losses and loss adjustment expenses include manage-
    ment's estimates of the probable ultimate cost of settling all losses in-
    volving lawsuits. See Notes (1)(d), (3) and (4).

(9) Employee Benefit Plans
    The Company has a defined contribution benefit plan (the Plan) in which all
    qualified employees are eligible to participate. The Plan incorporates a 
    contributory feature under Section 401(k) of the Internal Revenue Code 
    allowing employees to defer portions of their income through contributions
    to the Plan. The Company's annual contribution to the Plan is 150% of the 
    first $1,500 of each participant's contribution during the plan year. The 
    Company made contributions of $214,839, $192,738 and $165,397 in 1998, 
    1997 and 1996, respectively.  

    The Company also has an  Employee Stock Ownership Plan  in which all quali-
    fied employees are eligible to participate. The plan provides for discre-
    tionary employer contributions of shares of Company stock or cash to pur-
    chase shares of Company stock. The Company made contributions of $100,000, 
    $100,103 and $120,500 in 1998, 1997 and 1996, respectively.

(10)Underwriting, Acquisition and Insurance Expenses
    A summary of underwriting, acquisition and insurance expenses incurred 
    during the years ended December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
                                                               1998          1997          1996
    <S>                                                     <C>           <C>           <C>
    Net commissions                                         $18,459,299   $19,066,258   $20,629,905
    Salaries and other compensation                           4,710,297     4,163,019     3,714,706
    Other expenses                                            5,389,054     5,228,744     4,792,078
    Total costs                                              28,558,650    28,458,021    29,136,689
    Decrease (Increase) in deferred insurance 
            acquisition costs                                   662,164    (1,208,627)   (3,749,446)

    Total underwriting, acquisition and insurance expenses  $29,220,814   $27,249,394   $25,387,243

    Substantially all insurance contracts written by CIC are for a term of one year or less and deferred insurance acquisition
    costs are amortized over the same term.  The amount of deferred insurance costs amortized was $27,833,262, $26,141,226
    and $22,801,709 in 1998, 1997 and 1996, respectively.
</TABLE>

(11)Line of Credit
    The Company has a line of credit of $10,000,000.  There were no significant
    borrowings under the line of credit in 1998, and none were outstanding as
    of December 31, 1998.

(12)Quarterly Results of Operations (Unaudited)
<TABLE>
<CAPTION>
    For the Year Ended December 31, 1998 
                                            First       Second       Third        Fourth        Total
    <S>                                 <C>          <C>          <C>          <C>          <C>
    Revenues                            $25,467,589  $31,516,526  $25,107,417  $28,969,024  $111,060,556
    Losses incurred and expenses         20,787,325   21,504,889   21,144,534   19,622,820    83,059,568
    Net income                            3,460,541    7,032,357    2,806,682    6,124,333    19,423,913
    Net income per share- basic         $      0.31  $      0.62  $      0.25  $      0.55  $      1.73
    Net income per share- diluted       $      0.31  $      0.62  $      0.25  $      0.54  $      1.72
    Dividends per share                 $      0.07  $      0.07  $      0.07  $      0.07  $      0.28

    For the Year Ended December 31, 1997
                                             First       Second       Third       Fourth        Total
    Revenues                            $22,860,193  $23,561,331  $28,429,980  $36,588,014  $111,439,518
    Losses incurred and expenses         20,385,851   22,966,573   22,715,370   23,647,794    89,715,588
    Net income                            2,040,337      623,705    3,997,078    8,530,759    15,191,879
    Net income per share- basic         $      0.18  $      0.06  $      0.36  $      0.76  $      1.36
    Net income per share- duiluted      $      0.18  $      0.06  $      0.35  $      0.76  $      1.35 
    Dividends per share                 $      0.17  $      0.07  $      0.07  $      0.07  $      0.38
</TABLE>
(13) Industry Segment Disclosures
     Effective January 1, 1998 the Company adopted the Financial Accounting
     Standards Board's Statement of Financial Standard No. 131, "Disclosures a-
     bout Segments of an Enterprise and Related Information". SFAS No. 131 su-
     percedes SFAS No. 14, "Financial Reporting for Segments of a Business En-
     terprise". SFAS No. 131 establishes standards for the way that public 
     business enterprises report information about operating segments in pub-
     lished financial reports. It also establishes standards for related dis-
     closures about products and services, geographic areas, and major custo-
     mers. The adoption of SFAS No. 131 did not affect results of operations or
     financial position, but did affect the disclosures of segment information.

     The Company has three business segments, which are segregated based on the
     types of products and services provided. The segments are 1) property and
     casualty, 2) fidelity and surety, and 3) discontinued reinsurance assumed
     operations.These segments constitute 100% of the operations of the Company.

     The property and casualty segment provides specialty commercial coverages
     for beauty and barber shops, bowling alleys, contractors/manufacturers, day
     care centers, restaurants, detective/guard agencies, golf courses and ta-
     verns. This segment also provides nurses professional, deerhunters and
     sportsman's accident and special event coverages. The fidelity and surety
     segment offers a full range of surety and fidelity bonds, including con-
     tractor's payment and performance bonds, license/permit bonds, fiduciary 
     and judicial bonds, as well as commercial fidelity bonds. The reinsurance
     assumed segment was discontinued in 1976, but due to the nature of the 
     coverages the Company continues to experience loss activity related to
     this business. The Company maintains and monitors its segment information
     on a statutory basis. Financial data by segment, including a reconciliation
     to Consolidated GAAP basis, for 1996 through 1998 is as follows:
<TABLE>
<CAPTION>                                                1998              1997              1996
       <S>                                           <C>               <C>               <C>
       Revenue, excluding net investment income
         and realized investment gains:
                     Property and Casualty           $ 65,678,284      $ 61,953,576      $ 56,560,140
                     Fidelity and Surety               22,948,025        25,498,044        20,786,234
                     Reinsurance Assumed                    3,167              -                  945
                             Totals:                 $ 88,629,476      $ 87,451,620      $ 77,347,319

       Losses and loss adjustment expenses:
                     Property and Casualty           $ 40,400,269      $ 42,598,229      $ 33,924,353
                     Fidelity and Surety               11,818,682        13,531,066         5,710,164
                     Reinsurance Assumed                  379,732         5,218,184         1,706,747
                             Totals:                 $ 52,598,683      $ 61,347,479      $ 41,341,264
         Reconciliation to Consolidated GAAP:
                     Inter-company adjustments           (221,569)         (219,077)         (175,488)
                       Consolidated GAAP:            $ 52,377,114      $ 61,128,402      $ 41,165,776

       Other underwriting expenses:
                     Property and Casualty           $ 20,226,965      $ 18,872,812      $ 19,825,337
                     Fidelity and Surety                9,239,049        10,524,643        10,046,062
                     Reinsurance Assumed                   34,509            (2,825)           23,954
                             Totals:                 $ 29,500,523      $ 29,394,630      $ 29,895,353
         Reconciliation to Consolidated GAAP:
                     Decrease (increase) in D.I.A.C.      662,164        (1,208,627)       (3,749,446)
                     Inter-company adjustments            519,767           401,183           534,750
                       Consolidated GAAP:            $ 30,682,454      $ 28,587,186      $ 26,680,657

       Net investment gain and other income:
                     Property and Casualty           $  6,742,389      $  7,106,636      $  4,490,999
                     Fidelity and Surety                  692,572           727,037           295,676
                     Reinsurance Assumed                  821,247           824,387           749,637
                             Totals:                 $  8,256,208      $  8,658,060      $  5,536,312
         Reconciliation to Consolidated GAAP:
                     Capital and Surplus               13,419,217        14,465,107         9,226,166
                     Inter-company adjustments            755,655           864,731         1,243,945
                       Consolidated GAAP:            $ 22,431,080      $ 23,987,898      $ 16,006,423

       Income tax expense (benefit):
                     Property and Casualty           $  3,652,050      $  2,552,145      $  2,499,947
                     Fidelity and Surety                  803,964           630,081         1,818,781
                     Reinsurance Assumed                  128,293        (1,432,002)         (337,071)
                             Totals:                 $  4,584,307      $  1,750,224      $  3,981,657
         Reconciliation to Consolidated GAAP:
                     Capital and Surplus                4,091,130         4,623,364         3,039,847
                     GAAP & inter-company adjustments     (98,362)          158,463           136,647
                     Consolidated GAAP:              $  8,577,075      $  6,532,051      $  7,158,151

       Net income (loss):
                     Property and Casualty           $  8,141,389      $  5,037,026      $  4,801,502
                     Fidelity and Surety                1,778,902         1,539,291         3,506,903
                     Reinsurance Assumed                  281,880        (2,958,970)         (643,048)
                             Totals:                 $ 10,202,171      $  3,617,347      $  7,665,357
         Reconciliation to Consolidated GAAP:           9,221,742        11,574,532        10,683,801
                     Consolidated GAAP:              $ 19,423,913      $ 15,191,879      $ 18,349,158

       Assets:
                     Property and Casualty           $105,614,860      $114,384,689      $ 87,184,725
                     Fidelity and Surety               20,432,187        22,128,793        16,866,704
                     Reinsurance Assumed                9,996,577        10,826,652         8,252,142
                             Totals:                 $136,043,624      $147,340,134      $112,303,571
         Reconciliation to Consolidated GAAP:
                     Capital and Surplus              141,315,973       139,342,141       116,581,883
                     Consolidated GAAP:              $277,359,597      $286,682,275      $228,885,454

     The Company operates in 37 states, with all business conducted within the United States. No customer
     represents greater than 10% of the Company's revenue. There have been no material intersegment transactions.
</TABLE>

                                                               SCHEDULE I

                              CAPITOL TRANSAMERICA CORPORATION
                                 SUMMARY  OF  INVESTMENTS
                         OTHER THAN INVESTMENTS IN RELATED PARTIES
                                 As of December 31, 1998
                                      (Consolidated)

<TABLE>
<CAPTION>
                                                                                      Amount at
                                                                                     Which Shown
                                                                         Fair         in Balanc
                   Type of Investment                       Cost        Value            Sheet
<S>                                                      <C>            <C>            <C>
Fixed maturity securities, available-for-sale:
   Bonds:
      United Stated Government and government
        agencies and authorities                         $     51,204   $     55,350   $     55,350
      State, municipalities, and political subdivisions    67,339,664     74,182,001     74,182,001
      All other corporate bonds                               819,678        824,109        824,109

   Total                                                   68,210,546     75,061,460     75,061,460

Equity securities, available-for-sale:
   Common stocks:
      Public utilities                                      2,065,853      1,858,777      1,858,777
      Banks, trusts, and insurance companies               67,411,592     85,409,961     85,409,961
      Industrial, miscellaneous, and all other             46,105,643     48,104,298     48,104,298
   Nonredeemable preferred stocks                           6,769,703      7,851,215      7,851,215
                                      
   Total                                                  122,352,791    143,224,251    143,224,251

Real estate, net of depreciation                            9,999,919           -         9,999,919
Short-term investments                                      9,854,962           -         9,854,962

Total Investments                                        $210,418,218    218,285,711   $238,140,592


                                                                                  SCHEDULE II
                                    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                             CAPITOL TRANSAMERICA CORPORATION
                                                        (Parent Company)
<CAPTION> 
    CONDENSED BALANCE SHEETS                                           December 31,
    Assets                                                         1998           1997
      <S>                                                        <C>            <C>
      Investments                                                $10,749,331    $  9,925,434
      Cash                                                             3,171          10,461
      Accrued investment income                                       60,454          45,340
      Investment in subsidiaries                                 129,393,891     128,967,449
      Other assets                                                 1,651,444       1,416,571  
         Total assets                                           $141,858,291    $140,365,255

    Liabilities and shareholders' equity
    Liabilities:
      Accounts payable                                           $    33,933    $    40,717
      Income taxes payable                                            18,338          5,461
      Deferred income taxes                                          490,047        976,936
         Total liabilities                                           542,318      1,023,114

    Shareholders' equity:                            
      Common stock                                                11,529,376     11,502,520
      Additional paid-in-capital                                  21,799,397     21,656,988
      Unrealized appreciation (depreciation) on available-for-
        sale securities, net of deferred taxes                       910,087      1,896,403
      Retained earnings (including undistributed earnings of
      subsidiaries of $102,271,184 and $81,151,740, respectively)107,572,672    104,687,505
                                                                 141,811,532    139,743,416
    Less treasury stock, at cost                                    (495,559)      (401,275)
    Total shareholders' investment                               141,315,973    139,342,141
    Total liabilities and shareholders' investment              $141,858,291   $140,365,255 

                                                                          December 31,
    STATEMENTS OF INCOME                                           1998         1997         1996
    <S>                                                          <C>          <C>          <C>
    Dividends received from subsidiaries                         $ 5,000,000  $ 4,500,000  $ 4,200,000
    Management fees received from subsidiaries                     2,031,293    1,768,789    1,515,478
    Investment income                                                350,901      270,678      272,035
    Realized investment gains                                             13      236,914      448,156
    Other income                                                       7,100       14,577          646
          Total Income                                             7,389,307    6,790,958    6,436,315
  Administrative expenses                                          1,495,240    1,371,392    1,363,770
    Net income before tax and equity in undistributed
        net income of subsidiaries                                 5,894,067    5,419,566    5,072,545
    Income tax expense                                               346,794      238,511      220,197
    Net income before equity in undistributed 
      net income of subsidiaries                                   5,547,273    5,181,055    4,852,348
    Equity in undistributed net income of
      subsidiaries, net of dividends paid                         13,876,640   10,010,824   13,496,810
      Net Income                                                 $19,423,913  $15,191,879  $18,349,158

                             The accompanying condensed financial information should be read in conjunction with the
                             consolidated financial statements and notes thereto of Capitol Transamerica Corporation.

                                                                             SCHEDULE II
                                                                             (continued)
<CAPTION>
                                                   CAPITOL TRANSAMERICA CORPORATION
                                                         (Parent Company)


                                                                           December 31,
   STATEMENTS OF CASH FLOWS                                         1998         1997         1996
   <S>                                                           <C>           <C>          <C> 
   Cash flows provided by operating activities:
   Net income                                                    $19,423,913   $15,191,879   $18,349,158
   Adjustments to reconcile net income to
      net cash provided by operating activities:
      Depreciation                                                   850,739       778,343       728,940
      Realized investment gains                                          (13)     (236,914)     (448,156)
      Change in:
          Equity in net income of subsidiaries                   (13,876,640)  (10,010,824)  (13,496,810)
          Other assets                                               (21,410)      671,601      (488,710)
          Other liabilities                                            6,093      (412,478)     (189,618)

   Net cash provided by operating activitities                     6,382,682     5,981,607     4,454,804

   Cash flows provided by (used for) investing activities:
      Proceeds from investments sold/matured                          70,022       471,238     1,091,372
      Purchases of investments                                    (2,367,149)   (2,276,930)         -  
      Purchase of depreciable assets                              (1,079,278)     (477,992)   (1,279,331)

      Net cash used for investing activitities                    (3,376,405)   (2,283,684)     (187,959)

   Cash flows provided by (used for) financing activities:
      Cash dividends paid                                         (3,163,880)   (4,281,405)   (3,731,375)
      Capital contribution to subsidiaries                              -             -         (700,000)
      Stock options exercised                                        169,265       626,022       189,650
      Net proceeds from sale (purchase) of treasury stock            (18,952)      (63,769)      (15,799)
      Net cash used for financing activitities                    (3,013,567)   (3,719,152)   (4,257,524)

   Net decrease) increase in cash                                     (7,290)      (21,229)        9,231

   Cash, beginning of year                                            10,461        31,690        22,369

   Cash, end of year                                               $   3,171     $  10,461   $    31,690
                                                       
Cash paid during the year for:
      Income taxes                                                 $ 333,917     $ 175,400   $    48,761
      Interest                                                         4,190          -           51,417


                     The accompanying condensed financial information should be read in conjunction with the
                     consolidated financial statements and notes thereto of Capitol Transamerica Corporation.

                                                                                                 SCHEDULE III
                                                       CAPITOL TRANSAMERICA CORPORATION
                                                      SUPPLEMENTARY INSURANCE INFORMATION


<CAPTION>
                                    December 31,                                 
                     Deferred       Future Policy                              
                      Policy        Benefits, Losses,               Other     
                     Acquisition    Claims, and       Unearned    Policyholde  
   Segment            Costs         Loss Expense      Premiums      Funds      
<S>                  <C>             <C>             <C>            <C> 
1998
Property-casualty
      insurance      $13,524,777     $78,504,050     $41,541,432    $   -

1997
Property-casualty
  insurance          $14,186,941     $71,472,338     $47,411,849    $   -  

1996:
Property-casualty 
  insurance          $12,978,314     $47,702,363     $43,258,833    $   -    
  
<CAPTION>
                                        Year ended December 31
                                                              Benefits,     Amortization of
                                                  Net      Claims, Losses,  Deferred Policy     Other
                                   Premium    Investment   and Settlement    Acquisition      Operating   Premiums
Sement                             Revenue      Income        Expenses          Costs          Expenses    Written
<S>                             <C>          <C>          <C>             <C>               <C>           <C>
1998
Property-casualty insurance     $88,629,476  $ 9,119,936  $52,377,114     $27,833,262       $ 1,461,640   $87,929,152

1997
Property-casualty insurance     $87,451,620  $ 8,580,713  $61,128,402     $26,141,226       $ 1,337,792   $99,507,846

1996:
Property-casualty insurance     $77,347,319  $ 7,155,382  $41,165,776     $22,801,709       $ 1,293,414   $90,939,387

                                                                     SCHEDULE IV

                                  CAPITOL TRANSAMERICA CORPORATION
                                            REINSURANCE
                      For The Years Ended December 31, l998, l997 and l996
<CAPTION>
                                                              Assumed                            Percentage
                                      Gross      Ceded to        From      Assumed                of Amount
                                     Premiums      Other         Other       From        Net          Assumed 
                                     Written     Companies     Companies   Affiliates    Amount       To Net
<S>                                <C>          <C>          <C>           <C>          <C>          <C>
December 31, 1998
Premiums Written:
   Accident and Health insurance   $   288,332  $ 1,596,313  $   270,803   $ 1,325,510  $   288,332     553.6%

   Property & casualty and
    fidelity & surety insurance    $86,041,340  $ 3,556,866  $     3,167   $      -     $82,487,641       0.0%

   Total premiums written          $86,329,672  $ 5,153,179  $   273,970   $ 1,325,510  $82,775,973       1.9%

December 31, 1997
Premiums Written:
   Accident and Health insurance   $   273,106  $ 4,817,208  $ 2,406,951   $ 2,410,257  $   273,106   1,763.9%

   Property & casualty and
   fidelity & surety insurance      94,417,533    3,125,843        -             -       91,291,690      -

   Total premiums written          $94,690,639  $ 7,943,051  $ 2,406,951   $ 2,410,257  $91,564,796       5.3% 

December 31, 1996
Premiums Written:
   Accident and Health insurance   $   238,615  $     -      $     -       $     -      $   238,615       -
 
   Property & casualty and
    fidelity & surety insurance     90,700,772  $  1,696,062 $     -       $     -      $89,004,710       -

   Total premiums written          $90,939,387  $  1,696,062 $     -       $     -      $89,243,325       -

                                                                      SCHEDULE VI

                                CAPITOL TRANSAMERICA CORPORATION
                                     SUPPLEMENTAL INFORMATION
                       CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS
                                         December 31, l998
<CAPTION>
                                                            As of December 31,
BALANCE SHEET DATA:                                       1998            1997
<S>                                                    <C>             <C>
Deferred insurance acquisition costs                   $13,524,777     $14,186,941

Outstanding loss and loss adjustment expense reserves   78,504,050      71,472,338

Discount deducted from reserves                               -               -

Unearned premiums                                      $41,541,432     $47,411,849


<CAPTION>
INCOME STATEMENT DATA:                                           Year Ended
                                                 1998          1997          1996
<S>                                           <C>           <C>           <C>
Earned premiums                          $88,629,476        $87,451,620   $77,347,319

Net investment income                      9,119,936          8,580,713     7,155,382


Incurred losses and loss adjustment
   expenses related to:

      Current year                       49,862,090          43,042,827    36,041,564
      Prior years                         2,515,024          18,085,575     5,124,212

Amortization of deferred policy 
   acquisition costs                     27,833,262          26,141,226    22,801,709

Paid claims and claim adjustment 
    expenses                             46,405,683          37,488,267    31,732,853

Gross premiums written                  $87,929,152         $99,507,846   $90,939,387
</TABLE>