=================================================================
                          UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549
                    ------------------------
                            FORM 10-K


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

           For the Fiscal Year Ended December 31, 1996
                  Commission File Number 1-7461

               ACCEPTANCE INSURANCE COMPANIES INC.
     (Exact Name of Registrant As Specified in Its Charter)

                 DELAWARE                    31-0742926
     (State or Other Jurisdiction of     (I.R.S. Employer
     Incorporation or Organization)      Identification No.)

               222 S. 15th Street, Suite 600 North
                     Omaha, Nebraska  68102
            (Address of Principal Executive Offices)


       Registrant's Telephone Number, Including Area Code:
                         (402) 344-8800
                            ________

     Securities Registered Pursuant to Section 12(b) of the Act:

                                      Name of Each Exchange
     Title of Each Class               on Which Registered
     -------------------              ---------------------

 Common Stock $.40 Par Value       New York Stock Exchange, Inc.

   Securities Registered Pursuant to Section 12(g) of the Act:
                              None

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

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

          The aggregate market value of the Registrant's voting
stock held by non-affiliates (10,334,406 shares) on March 24,
1997 was $193,770,112.

          The number of shares of each class of the Registrant's
common stock outstanding on March 24, 1997 was:

     Class of Common Stock              No. of Shares Outstanding
     ---------------------              -------------------------

 Common Stock, $.40 Par Value                     15,258,640


               DOCUMENTS INCORPORATED BY REFERENCE

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

<PAGE>
                   GLOSSARY OF INSURANCE TERMS


          Admitted Insurer:  An insurance company licensed by a
state regulatory authority to transact insurance business in that
state.  An admitted insurer is subject to the rules and
regulations of each state in which it is licensed governing
virtually all aspects of its insurance operations and financial
condition.  A non-admitted insurer, also known as an excess and
surplus lines insurer, is not licensed to transact insurance
business in a given state but may be permitted to write certain
business in that state in accordance with the provisions of
excess and surplus lines insurance laws which generally involve
less rate, form and operational regulation.

          Basic Coverage:  The minimum available level of Multi-
Peril Crop Insurance, providing coverage for 50% of a farmer's
historical yield for eligible crops at 60% of the price per
bushel for such crop set by the RMA.  This coverage is offered
through private insurers and USDA field offices.

          Buy-up Coverage:  Multi-Peril Crop Insurance policy
providing coverage in excess of that provided by Basic Coverage.
Buy-up Coverage is offered only through private insurers.

          Case Reserve:  The estimated liability for loss
established by a claims examiner for a reported claim.

          Combined Ratio:  The sum of the expense ratio and the
loss ratio determined in accordance with GAAP or SAP.

          Crop Revenue Coverage ("CRC"):  An extension of the
MPCI program that insures a producer of crops with varying levels
of protection against loss of revenues caused by changes in crop
prices, low yields, or a combination of the two.

          Direct Written Premiums:  Total premiums collected in
respect of policies issued by an insurer during a given period
without any reduction for premiums ceded to reinsurers.

          Excess and Surplus Lines Insurance:  The business of
insuring risks for which insurance is generally unavailable from
admitted insurers in whole or in part.  Such business is placed
by the broker or agent with nonadmitted insurers in accordance
with the excess and surplus lines provisions of state insurance
laws.

          Excess of Loss Reinsurance:  A form of reinsurance in
which the reinsurer, subject to a specified limit, agrees to
indemnify the ceding company for the amount of each loss, on a
defined class of business, that exceeds a specified retention.

          Expense Ratio:  Under statutory accounting, the ratio
of underwriting expenses to net premiums written.  Under GAAP
accounting, the ratio of underwriting expenses to net premiums
earned.

          Generally Accepted Accounting Principles ("GAAP"):
Accounting practices as set forth in opinions and pronouncements
of the Accounting Principles Board of American Institute of
Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board and which are applicable
in the circumstances as of the date in question.

          Gross Written Premiums:  Direct written premiums plus
premiums collected in respect of policies assumed, in whole or in
part, from other insurance carriers.

          Incurred But Not Reported ("IBNR") Reserves:  The
liability for future payments on losses which have already
occurred but have not yet been reported to the insurer.  IBNR
reserves include LAE (as hereinafter defined) related to such
losses and may also provide for future adverse loss development
on reported claims.

          Loss Adjustment Expenses ("LAE"):  Expenses incurred in
the settlement of claims, including outside adjustment expenses,
legal fees and internal administrative costs associated with the
claims adjustment process, but not including general overhead
expenses.

          Loss Ratio:  The ratio of losses and LAE incurred to
premiums earned.

          Loss Reserves:  Liabilities established by insurers to
reflect the estimated ultimate cost of claim payments as of a
given date.

          MPCI Imputed Premium:  For purposes of the profit/loss
sharing arrangement with the federal government, the amount of
premiums credited to the Company for all Basic Coverages it
sells, as such amount is determined by formula.

          MPCI Premium:  For purposes of the profit/loss sharing
arrangement with the federal government, the amount of premiums
credited to the Company for all Buy-up Coverages paid by farmers,
plus the amount of any related federal premium subsidies.

          MPCI Retention:  The aggregate amount of MPCI Premium
and MPCI Imputed Premium on which the Company retains risk after
allocating farms to the three federal reinsurance pools.

          Multi-Peril Crop Insurance ("MPCI"):  A federally-
regulated subsidized crop insurance program that insures a
producer of crops with varying levels of protection against loss
of yield from substantially all natural perils to growing crops.

          NAIC:  The National Association of Insurance
Commissioners.

          Net Earned Premiums:  The portion of net written
premiums applicable to the expired period of policies and,
accordingly, recognized as income during a given period.

          Net Written Premiums:  Total premiums for insurance
written (less any return premiums) during a given period, reduced
by premiums ceded in respect to liability reinsured by other
carriers.

          Policyholders' or Statutory Surplus:  As determined
under SAP (hereinafter defined), the excess of total admitted
assets over total liabilities.

          Quota Share Reinsurance:  A form of reinsurance whereby
the reinsurer agrees to indemnify the cedent for a stated
percentage of each loss, subject to a specified limit the cedent
pays, on a defined class of business.

          Reinsurance:  The practice whereby a company called the
"reinsurer" assumes, for a share of the premium, all or part of a
risk originally undertaken by another insurer called the "ceding"
company or "cedent."  Reinsurance may be affected by "treaty"
reinsurance, where a standing agreement between the ceding and
reinsuring companies automatically covers all risks of a defined
category, amount and type, or by "facultative" reinsurance where
reinsurance is negotiated and accepted on a risk-by-risk basis.

          Retention:  The amount of liability, premiums or losses
which an insurance company keeps for its own account after
application of reinsurance.

          Risk Management Agency ("RMA"):  A division of the
United State Department of Agriculture ("USDA") which, along with
the Federal Crop Insurance Corporation ("FCIC") administers and
provides reinsurance for the federally-regulated MPCI and CRC
programs.


          Stop Loss Reinsurance:  A form of reinsurance, similar
to Excess of Loss Reinsurance, whereby the primary insurer caps
its loss on a particular risk by purchasing reinsurance in excess
of such cap.

          Statutory Accounting Principles ("SAP"):  Accounting
practices which consist of recording transactions and preparing
financial statements in accordance with the rules and procedures
prescribed or permitted by state regulatory authorities.
Statutory accounting emphasizes solvency rather than matching
revenues and expenses during an accounting period.
                             PART I

Item 1.  BUSINESS.

Company Strategy

          Acceptance underwrites and sells specialty property and
casualty insurance coverages that serve niche markets or
programs.  The Company selects niche markets or programs for
which the Company believes that its expertise affords it a
competitive advantage and which integrate into a diversified-risk
portfolio of coverages.  The Company, through diversifying the
risks insured, seeks to avoid concentration in particular risks
so that, during years when particular lines of business are
experiencing adverse operating results, overall operating results
will remain within targeted returns to shareholders.  The
Company's goal is to achieve underwriting results better than the
industry average, while managing its investment portfolio to
maximize after-tax yield and at the same time emphasize stability
and capital preservation and maintaining adequate liquidity to
meet all cash needs.

          The Company believes that its success in niche markets
and programs requires that it be opportunistic.  The Company
believes its position as both an admitted (licensed) and non-
admitted (excess and surplus lines) carrier provides the
versatility to respond when different market conditions and
opportunities are presented.  At the same time, the Company
manages loss exposure by diversifying its portfolio of coverages
and maintaining reinsurance programs with the goal of reducing
volatility as well as mitigating catastrophic or large loss
exposure.

          The Company has experienced significant revenue growth
over the last five years through growth in existing programs and
through acquisition of insurance operations or books of business.
The Company regularly explores new opportunities where it has or
can acquire experienced underwriters and other managers with a
long and successful operating history in a particular line of
business.

Organization

          The Company underwrites its insurance products through
six wholly-owned insurance company subsidiaries; Acceptance
Insurance Company ("Acceptance Insurance"), Acceptance Indemnity
Insurance Company ("Acceptance Indemnity"), Acceptance Casualty
Insurance Company ("Acceptance Casualty"), American Growers
Insurance Company ("American Growers"), Redland Insurance Company
("Redland"), and Phoenix Indemnity Insurance Company ("Phoenix
Indemnity") (collectively referred to herein as the "Insurance
Companies").

          Collectively, the Insurance Companies are admitted in
46 states and the District of Columbia, and operate on a non-
admitted basis in 45 states, the District of Columbia, Puerto
Rico and the Virgin Islands.  Two of the Insurance Companies have
received their Certificate of Authority ("T" listing) from the
U.S. Department of Treasury.  Each of the Insurance Companies is
rated A- (Excellent) by A.M. Best, with the exception of American
Growers to which the A.M. Best rating system does not apply.
A.M. Best bases its ratings upon factors that concern
policyholders and agents, and not upon factors concerning
investor protection.

          The Company's insurance agency and insurance service
subsidiaries principally write and service insurance coverages
placed with one of the Insurance Companies.

Business Divisions

          The Company has organized its insurance underwriting
and marketing business by product line into four divisions,
General Agency, Crop Insurance, Program Insurance and Non-
Standard Automobile.

     General Agency

          Specialty insurance coverages written by the General
Agency Division include the following principal lines:

               Specialty Automobile, including liability and
     physical damage coverages for local haulers of specialized
     freight, and other classes of motor vehicles not normally
     underwritten by standard carriers.

               Excess and Surplus Lines Liability and Substandard
     Property Coverages, including general liability, garage
     excess liability, liquor liability, property and commercial
     multi-peril coverages for small businesses which normally do
     not satisfy the underwriting criteria of standard carriers.

               Complex General Liability Risks, including
     products and professional liability.

     Crop Insurance

          The principal lines of the Company's Crop insurance
division are MPCI and crop hail insurance.  MPCI is a federally
subsidized farm price support program designed to encourage
farmers to share, through premium payments, in the federal
government's price support programs.  MPCI provides farmers with
yield coverage for crop damage from substantially all natural
perils.  CRC is an extension of the MPCI program which provides
farmers with protection from revenue loss caused by changes in
crop prices, low yields, or a combination of the two.  As used
herein, the term MPCI includes CRC, unless the context indicates
otherwise.  For the year ended December 31, 1996, the Company was
the fourth largest writer of MPCI business in the United States
with a market share of approximately 15%.

          The Company offers stand alone crop hail insurance,
which insures growing crops against damage resulting from hail
storms and which involves no federal participation.  The Company
also sells a small volume of insurance against damage to specific
crops from other named perils.

     Program Insurance

          This division writes a number of diversified coverages,
including coverages for transportation risks, focused workers'
compensation, standard property and casualty coverages for the
rural market, temporary help agencies, greyhound race tracks,
condominiums, fine arts risks, auto daily rental and auto
dealers.

          Transportation coverages insure long haul truckers and
upper Midwest regional and national trucking companies hauling
rural products.  The workers' compensation program is based
principally in Minnesota, Illinois, Iowa, and Maine and focuses
principally on medium and larger risks where specialized
underwriting and claims techniques can be effectively implemented
to reduce loss ratios.

     Non-Standard Automobile

          The Company writes non-standard private passenger
automobile coverages principally in the southwestern United
States.  The Company has designed this product for drivers who
are unable to obtain coverage from standard carriers due to prior
driving records, other underwriting criteria or market
conditions.  Such drivers normally are charged higher premium
rates than the rates charged for preferred or standard risk
drivers and usually purchase only basic limits of liability in
order to meet state financial responsibility laws.

          The following table reflects the amount of net written
premium for these four insurance divisions for the periods set
forth below.
<TABLE>
<CAPTION>
                                     Years Ended December 31,
                                 --------------------------------
                                   1996        1995        1994
                                 --------    --------    --------
                                         (in thousands)
<S>                              <C>         <C>         <C>
General Agency                   $162,157    $135,125    $114,635
Crop Insurance(1)                  66,649      46,950      34,592
Program Insurance                  95,805      75,279      50,070
Non-Standard Auto                  42,338      28,829      29,879
                                 --------    --------    --------
   Total                         $366,949    $286,183    $229,176
                                 ========    ========    ========
<FN>
---------------
(1)  For a discussion of the accounting treatment of MPCI
     premiums, see "Management's Discussion and Analysis of
     Financial Condition and Results of Operations - General."
</FN>
</TABLE>
Marketing

          The Company markets its property and casualty insurance
products through a network of independent general agents who, in
turn, process and accept applications for insurance coverages
from retail agents who sell insurance to insurance buyers.  The
Company also markets a portion of its property and casualty
insurance products and its crop insurance products through a
network of retail agents which specialize in the lines of
insurance marketed by them.

Combined Ratios

          The statutory combined ratio, which reflects
underwriting results before taking into account investment
income, is a traditional measure of the underwriting performance
of a property and casualty insurer.  A combined ratio of less
than 100% indicates underwriting profitability whereas a combined
ratio in excess of 100% indicates unprofitable underwriting.  The
following table reflects the loss ratios, expense ratios and
combined ratios of the Company and the property and casualty
insurance industry, computed in accordance with SAP, for the
periods shown.
<TABLE>
                                         Years Ended December 31,
                                     ----------------------------
                                      1996       1995       1994
                                     ------     ------     ------
<S>                                  <C>        <C>        <C>
The Company
  Loss Ratio                          69.8%      78.2%(1)   70.8%
  Expense Ratio                       26.6       26.1       25.6
                                     -----      -----      -----
  Combined Ratio                      96.4%     104.3%      96.4%
                                     =====      =====      =====
Industry Average(2)
  Loss Ratio                          78.6%      78.9%      81.0%
  Expense Ratio                       27.3       27.5       27.3
                                     -----      -----      -----
  Combined Ratio                     105.9%     106.4%     108.3%
                                     =====      =====      =====
<FN>

<PAGE>
---------------
(1)  The $22.3 million loss reserve strengthening taken by the
     Company in 1995 accounts for 8.2% of the loss ratio for
     1995.  See "Loss and Loss Adjustment Expense Reserves."

(2)  Source: Best's Aggregates & Averages - Property Casualty
     (1996 Edition).  Ratios for 1996 are from A.M. Best.
</FN>
</TABLE>
Underwriting

          The Company's goal is to achieve overall underwriting
results better than industry averages.  To accomplish this, the
Company organizes its underwriting staff by product line,
enabling underwriters to focus on the unique risks associated
with the specialty coverages written by the Company.  The Company
seeks to ensure that each specialty product or program fits into
the Company's goal through a strategic planning process whereby
divisional managers evaluate the historical and expected levels
of underwriting profitability of the coverages written by such
division.  The Company then allocates its capital among product
lines where it believes the best underwriting opportunities
exist.

          Within each division, each underwriter is required to
comply with risk parameters, retention limits and rates and forms
prescribed by the Company.  All underwriting operations of the
Company are subject to special periodic audit by the Company's
home office personnel and the reinsurers which accept a portion
of these risks.

          Generally, the Company grants general agents the
authority to sell and bind insurance coverages in accordance with
detailed procedures and limitations established by the Company.
The Company promptly reviews coverages bound by agents, decides
whether the insurance is written in accordance with such
procedures and limitations, and, subject to state law limits and
policy terms, may cancel coverages that are not in compliance.

          Within the General Agency Division, Acceptance Risk
Managers and Professional Liability Insurance Managers, which
underwrite more difficult casualty and professional lines
business, grant no authority to general agents but rather each
risk must be submitted to the underwriter for individual
consideration.

          The Company grants limited binding authority to certain
independent agents in certain lines of business, and provides
that all other agents submit all quotes to the Company's
underwriting staff in order for such coverages to be bound.
Business that is outside an agent's binding authority must be
submitted to the Company's underwriting staff to obtain approval
to bind such coverages.

Claims

          The Company's claims department administers all claims
and directs all legal and adjustment aspects of the claims
handling process.  To assist in settling claims the Company
regularly uses independent adjusters, attorneys and
investigators.  Recently, the Company reorganized its claims
department under two recently appointed senior claims vice
presidents.  The first, employed in 1993, supervises litigation
claims files and other complex and serious claims; the second,
employed in 1996, administers the other claim files and
supervises the claims handlers.  Under the new structure, the
Company will emphasize the use of internal staff rather than
independent adjusters, improving claims processing systems and
rapid response mechanisms.  The Company believes that the new
structure will help to reduce loss adjustment expense, shorten
the life of open claim files and permit the Company to estimate
more rapidly and consistently future claim liabilities.

Loss and Loss Adjustment Expense Reserves

          In the property and casualty insurance industry, it is
not unusual for significant periods of time, ranging up to
several years, to elapse between the occurrence of an insured
loss, the report of the loss to the insurer and the insurer's
payment of that loss.  The liability for losses and loss
adjustment expenses is determined by management based on
historical patterns and expectations of claims reported and paid,
losses which have occurred but which are not yet reported, trends
in claim experience, information available on an industry-wide
basis, changes in the Company's claim handling procedures and
premium rates.  The Company's lines of specialty insurance
business are considered less predictable than standard insurance
coverages.  The effects of inflation are implicitly reflected in
these loss reserves through the industry data utilized in
establishing such reserves.  The Company does not discount its
reserves to estimated present value for financial reporting
purposes.

          In examining reserve adequacy, historical data is
reviewed, and, as additional experience and other data become
available and is reviewed, these estimates and judgments are
revised, resulting in increases or decreases to reserves for
insured events of prior years.  In 1995, the Company made an
additional provision through a charge to earnings of $22.3
million for its reestimated liability for losses and loss
adjustment expenses for 1994 and prior accident years.

          The liability established represents management's best
estimate and is based on sources of currently available evidence
including an analysis prepared by an independent actuary engaged
by the Company.  Even with such extensive analyses, the Company
believes that its ultimate liability may from time to time vary
from such estimates.

          The Company annually obtains an independent review of
its loss reserving process and reserve estimates by a independent
professional actuary as part of the annual audit of its financial
statements.

          The following table presents an analysis of the
Company's reserves, reconciling beginning and ending reserve
balances for the periods indicated:
<TABLE>
                                      Years Ended December 31,
                                    ----------------------------
                                      1996      1995      1994
                                    --------  --------  --------
                                            (in thousands)
<S>                                 <C>       <C>       <C>
Net loss and loss adjustment
  expense reserves at beginning
  of year                           $201,356  $141,514  $115,714
                                    --------  --------  --------
Provisions for net losses and
  loss adjustment expenses for
  claims occurring in the current
  year                               233,727   190,019   137,881

Increase in net reserves for
  claims occurring in prior years      9,530    22,318     5,070
                                    --------  --------  --------
                                     243,257   212,337   142,951
                                    --------  --------  --------
Net losses and loss adjustment
  expenses paid for claims
  occurring during:
  The current year                  (102,565)  (80,281)  (60,375)
  Prior years                        (95,296)  (72,214)  (56,776)
                                    --------  --------  --------
                                    (197,861) (152,495) (117,151)
                                    --------  --------  --------
Net loss and loss adjustment
  expense reserves at end of year    246,752   201,356   141,514

Reinsurance recoverable on unpaid
  losses and loss adjustment
  expenses                           185,421   167,888    79,811
                                    --------  --------  --------
Gross loss and loss adjustment
  expense reserves                  $432,173  $369,244  $221,325
                                    ========  ========  ========
</TABLE>
          The following table presents the development of balance
sheet net loss reserves from calendar years 1986 through 1996.
The top line of the table shows the loss reserves at the balance
sheet date for each of the indicated years.  These amounts are
the estimates of losses and loss adjustment expenses for claims
arising in all prior years that are unpaid at the balance sheet
date, including losses that had been incurred but not yet
reported to the Company.  The middle section of the table shows
the cumulative amount paid, expressed as a percentage of the
initial reserve amount, with respect to previously recorded
reserves as of the end of each succeeding year.  The lower
section of the table shows the reestimated amount, expressed as a
percentage of the initial reserve amount, of the previously
recorded reserves based on experience as of the end of each
succeeding year.  The estimate changes as more information
becomes known about the frequency and severity of claims for
individual years.  The "Net cumulative redundancy (deficiency)"
caption represents the aggregate percentage increase (decrease)
in the initial reserves estimated.  It should be noted that the
table presents the "run off" of balance sheet reserves, rather
than accident or policy year loss development.  The Company
computes the cumulative redundancy (deficiency) annually on a
calendar year basis.

          The establishment of reserves is an inherently
uncertain process.  The Company underwrites both property and
casualty coverages in a number of specialty areas of business
which may involve greater risks than standard property and
casualty lines.  These risk components may make more difficult
the task of estimating reserves for losses, and cause the
Company's underwriting results to fluctuate.  Further, conditions
and trends that have affected the development of loss reserves 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 information.

          The Company adopted Statement of Financial Accounting
Standards No. 113 ("SFAS #113"), "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts,"
effective January 1, 1993.  The application of SFAS #113 resulted
in the reclassification of amounts ceded to reinsurers, which
amounts were previously reported as a reduction in unearned
premium and unpaid losses and loss adjustment expenses, to assets
on the consolidated balance sheet.  The table below includes a
reconciliation of net loss and loss adjustment expense reserves
to amounts presented on the consolidated balance sheet after
reclassifications related to the adoption of SFAS #113.  The
gross cumulative deficiency is presented for 1992 through 1995,
the only years on the table for which the Company has restated
amounts in accordance with SFAS #113.


<TABLE>
                                                       Years Ended December 31,
                                          ----------------------------------------------------
                                           1986     1987     1988     1989     1990     1991
                                          -------  -------  -------  -------  -------  -------
<S>                                       <C>      <C>      <C>      <C>      <C>      <C>
Net reserves for unpaid
  losses and loss
  adjustment expenses                     $17,373  $27,730  $34,092  $43,380  $58,439  $66,132
Cumulative amount of net
  liability paid through:
    One year later                          32.5%    30.6%    30.5%    30.0%    40.6%    45.7%
    Two years later                         63.1%    56.7%    52.1%    59.5%    70.8%    72.3%
    Three years later                       84.7%    72.9%    68.7%    76.1%    88.5%    96.6%
    Four years later                        93.4%    81.8%    77.0%    84.5%   101.2%   108.1%
    Five years later                       100.1%    84.7%    81.5%    89.2%   107.5%   115.1%
    Six years later                        100.5%    87.1%    85.3%    93.4%   109.7%
    Seven years later                      100.9%    88.2%    89.8%    94.5%
    Eight years later                      102.2%    95.0%    90.3%
    Nine years later                       112.4%    95.2%
    Ten years later                        112.4%
Net reserves reestimated as of:
    One year later                          99.3%    96.6%    97.9%    99.1%   100.3%   103.5%
    Two years later                        104.7%    97.6%    92.3%    95.2%   102.3%   109.9%
    Three years later                      107.3%    91.3%    87.3%    91.4%   107.4%   116.9%
    Four years later                       103.0%    89.7%    84.9%    92.5%   110.7%   120.1%
    Five years later                       103.6%    88.1%    85.3%    94.0%   112.7%   119.9%
    Six years later                        102.5%    88.8%    86.6%    95.9%   112.0%
    Seven years later                      102.7%    88.9%    91.0%    95.4%
    Eight years later                      103.0%    95.4%    90.7%
    Nine years later                       112.7%    95.2%
    Ten years later                        112.4%
Net cumulative redundancy
   (deficiency)                            -12.4%     4.8%     9.3%     4.6%    -12.0%  -19.9%

<PAGE>
Gross reserves for unpaid loss and
  loss adjustment expenses
Reinsurance recoverable on unpaid
  loss and loss adjustment expenses
Net reserves for unpaid loss and
  loss adjustment expenses

Reestimated gross reserves for unpaid
  loss and loss adjustment expenses
Reestimated reinsurance recoverable
  on unpaid loss and loss adjustment
  expenses

Reestimated net reserves for unpaid
  loss and loss adjustment expenses

Gross cumulative redundancy (deficiency)

<PAGE>
<CAPTION>
                                                          Years Ended December 31,
                                          --------------------------------------------------------
                                           1992       1993         1994       1995          1996
                                          -------    -------      -------    -------       -------
<S>                                       <C>        <C>          <C>        <C>           <C>
Net reserves for unpaid
  losses and loss
  adjustment expenses                     $ 77,627   $115,714    $141,514    $201,356      $246,752
Cumulative amount of net
  liability paid through:
    One year later                           36.1%      49.1%       51.0%       47.3%
    Two years later                          73.6%      80.5%       86.1%
    Three years later                        94.5%     100.9%
    Four years later                        109.0%
    Five years later
    Six years later
    Seven years later
    Eight years later
    Nine years later
    Ten years later
Net reserves reestimated as of:
    One year later                          103.3%     104.4%      115.8%      104.7%
    Two years later                         109.7%     114.5%      115.7%
    Three years later                       117.9%     113.1%
    Four years later                        117.7%
    Five years later
    Six years later
    Seven years later
    Eight years later
    Nine years later
    Ten years later
Net cumulative redundancy
   (deficiency)                             -17.7%     -13.1%      -15.7%(1)    -4.7%

<PAGE>
Gross reserves for unpaid loss and
  loss adjustment expenses                $127,666   $211,600    $221,325    $369,244      $432,173
Reinsurance recoverable on unpaid
  loss and loss adjustment expenses         50,039     95,886      79,811     167,888      $185,421
                                           -------    -------     -------     -------       -------
Net reserves for unpaid loss and
  loss adjustment expenses                  77,627    115,714    $141,514    $201,356      $246,752
                                           =======   ========     =======    ========      ========
Reestimated gross reserves for unpaid
  loss and loss adjustment expenses          108.9%    112.4%      116.6%       98.8%
Reestimated reinsurance recoverable on
  unpaid loss and loss adjustment
  expenses                                    95.2%    111.6%      118.2%       91.7%
                                           --------   -------     -------     -------
Reestimated net reserves for unpaid loss
  and loss adjustment expenses               117.7%    113.1%      115.7%      104.7%
                                            -------   -------     -------     -------
Gross cumulative redundancy (deficiency)     - 8.9%    -12.4%      -16.6%        1.2%
                                           ========   =======     =======     =======
<PAGE>
---------------
<FN>
(1)  Cumulative deficiencies appearing in the Company's reserve estimates for 1994 resulted from
     adverse development of losses occurring in 1994 and prior accident years primarily in its
     commercial automobile, general liability and commercial multi-peril lines of business.  The
     actual loss experience of these lines differed from estimated losses.  See "Management's
     Discussion and Analysis of Financial Condition and Results of Operations - Year Ended December
     31, 1995 Compared To Year Ended December 31, 1994".
</FN>
</TABLE>

<PAGE>
Reinsurance

          A significant component of the Company's business
strategy involves the structuring of reinsurance to reduce
volatility in its business segments as well as to avoid large or
catastrophic loss exposure.  Reinsurance involves an insurance
company transferring, or ceding, all or a portion of its exposure
on insurance to a reinsurer.  The reinsurer assumes the ceded
exposure in return for a portion of the premium received by the
insurance company.  Reinsurance does not discharge the insurer
from its obligations to its insured.  If the reinsurer fails to
meet its obligations, the ceding insurer remains liable to pay
the insured loss, but the reinsurer is liable to the ceding
insurer to the extent of the reinsured portion of any loss.

          The Company limits its exposure under individual
policies by purchasing excess of loss and quota share
reinsurance, as well as maintaining catastrophe reinsurance to
protect against catastrophic occurrences where claims can arise
under several policies from a single event, such as a hurricane,
earthquake, wind storm, riot, tornado or other extraordinary
event.

          The Company generally retains the first $500,000 of
risk under its property and casualty lines, ceding the next
$1,500,000 and $2,500,000, respectively, to reinsurers.  On its
complex liability and property exposures, the Company cedes
losses in excess of $1,000,000 to its excess reinsurers and
maintains a separate 80% quota share treaty on the first
$1,000,000 of risk.  To the extent that individual policies
exceed reinsurance treaty limits, the Company purchases
reinsurance on a facultative (specific policy) basis.

          The Company maintains catastrophe reinsurance for its
casualty lines which provides coverages of $17 million in excess
of $3 million of aggregate risk per occurrence, and for its
property lines, which provides catastrophe coverage of 95% of
$77.5 million in excess of $2.5 million per occurrence.  The
Company reviews the concentrations of property values in its
property lines of business continually, and models possible
losses from catastrophic events through computer simulations of
different levels of storm activity, adjusting the required limit
of the liability or the concentrations of property coverages as
appropriate.

          In its workers' compensation line, the Company buys
excess of loss protection on a statutory basis in excess of a
$500,000 per occurrence retention.

          The Company reinsures its MPCI business with various
federal reinsurance pools administered by the RMA.  In 1996, the
Company ceded to the RMA an aggregate of 35% of its gross MPCI
premium.  The Company's net exposure on MPCI business is further
reduced by excess of loss reinsurance purchased from private
carriers.  This excess of loss reinsurance generally provides
coverage for 95% of losses in excess of a $3,000,000 deductible
after the Company's loss ratio reaches specified limits for each
line of business, specifically 77% on crop hail and named peril
business and 100% on MPCI business.  Additionally 50% of the
Company's crop hail business is reinsured through quota share
agreements.

          At December 31, 1996, 93% of the Company's outstanding
reinsurance recoverables were from domestic reinsurance companies
or the federal government, 98% of which was from reinsurance
companies rated A- (excellent) or better by A.M. Best or from the
federal government.  The balance was primarily placed with major
international reinsurers.

Investments

          The Company's investment policy is to maximize the
after-tax yield of the portfolio while emphasizing the stability
and preservation of the Company's capital base.  Further, the
portfolio is invested in types of securities and in an aggregate
duration which reflect the nature of the Company's liabilities
and expected liquidity needs.  The Company manages its portfolio
internally.  The Company's fixed maturity securities are
classified as available-for-sale and carried at estimated fair
value.  The investment portfolio at December 31, 1996 and
December 31, 1995, consisted of the following:


<TABLE>

                                                December 31, 1996     December 31, 1995
                                               -------------------   -------------------
                                               Amortized  Estimated  Amortized  Estimated
                                                 Cost     Fair Value   Cost     Fair Value
                                               ---------  --------   ---------  --------
<S>                                              <C>        <C>        <C>        <C>
Type of Investment
------------------
Fixed maturity securities
  U.S. Treasury and government securities        $86,359    $ 86,253   $ 51,022   $ 51,689
  States, municipalities and political
    subdivisions                                  93,293      94,607     69,433     71,194
  Other debt securities                           34,581      34,309     27,484     28,197
  Mortgage-backed securities                      60,138      52,835     72,359     67,220
                                                 -------    --------   --------   --------
       Total fixed maturity securities           274,371     268,004    220,298    218,300

  Common stocks                                   17,112      20,873     15,211     17,929
  Preferred stocks                                62,628      62,964     31,299     30,608
  Commercial mortgages                            11,149      11,149     11,290     11,290
  Real estate                                      3,342       3,342      3,354      3,354
  Short-term investments(1)                       39,594      39,594     86,520     86,520
                                                --------    --------   --------   --------

       Total                                    $408,196    $405,926   $367,972   $368,001
                                                ========    ========   ========   ========
<FN>
---------------
(1)  Due to the short-term nature of crop insurance, the Company must maintain short-term
     investments to fund amounts due to pay losses.  Historically, these short-term funds
     are highest in the fall corresponding to the cash flow in the agricultural industry.
</FN>
</TABLE>


<PAGE>
          The following table sets forth, as of December 31,
1996, the composition of the Company's fixed maturity securities
portfolio by time to maturity:
<TABLE>
                                        Estimated
         Maturity                       Fair Value    Percent
         --------                        --------     -------
<S>                                      <C>          <C>
1 year or less                           $ 14,300       5.3%
More than 1 year through 5 years           50,689      18.9%
More than 5 years through 10 years         56,133      21.0%
More than 10 years                         94,047      35.1%
Mortgage-backed securities                 52,835      19.7%
                                          -------     -----
     Total                               $268,004     100.0%
                                          =======     =====
</TABLE>
          The Company's investment results for the periods
indicated are set forth below:
<TABLE>
<CAPTION>
                                   Years Ended December 31,
                              ----------------------------------
                                1996         1995         1994
                              --------     --------     --------
                              (in thousands, except percentages)
<S>                           <C>          <C>          <C>
Net investment income         $ 26,491     $ 20,651     $ 13,276
Average investment
  portfolio(1)                 402,404      321,251      220,125
Pre-tax return on average
  investment portfolio             6.6%         6.4%         6.0%
Net realized gains            $  5,216     $  2,707     $    554
<FN>
---------------
(1)  Represents the average of the beginning and ending
     investment portfolio (excluding real estate) computed on a
     quarterly basis.
</FN>
</TABLE>
Regulation

          As a general rule, an insurance company must be
licensed to transact insurance business in each jurisdiction in
which it operates, and almost all significant operations of a
licensed insurer are subject to regulatory scrutiny.  Licensed
insurance companies are generally known as "admitted" insurers.
Most states provide a limited exemption from licensing for
insurers issuing insurance coverages that generally are not
available from admitted insurers.  Their coverages are referred
to as "surplus lines" insurance and these insurers as "surplus
lines" or "non-admitted" companies.

          The Company's admitted insurance business is subject to
comprehensive, detailed regulation throughout the United States,
under statutes which delegate regulatory, supervisory and
administrative powers to state insurance commissioners.  The
primary purpose of such regulations and supervision is the
protection of policyholders and claimants rather than
stockholders or other investors.  Depending on whether the
insurance company is domiciled in the state and whether it is an
admitted or non-admitted insurer, such authority may extend to
such things as (i) periodic reporting of the insurer's financial
condition; (ii) periodic financial examination; (iii) approval of
rates and policy forms; (iv) loss reserve adequacy; (v) insurer
solvency; (vi) the licensing of insurers and their agents; (vii)
restrictions on the payment of dividends and other distributions;
(viii) approval of changes in control; and (ix) the type and
amount of permitted investments.

          The Company also is subject to laws governing insurance
holding companies in Nebraska, Iowa, Arizona and Texas, where the
Insurance Companies are domiciled.  These laws, among other
things, require the Company to file periodic information with
state regulatory authorities including information concerning its
capital structure, ownership, financial condition and general
business operations; regulate certain transactions between the
Company, its affiliates and the Insurance Companies, including
the amount of dividends and other distributions and the terms of
surplus notes; and restrict the ability of any one person to
acquire certain levels of the Company's voting securities
(generally 10%) without prior regulatory approval.

          Except for interest on surplus notes issued by the
Insurance Companies, Acceptance is dependent for funds to pay its
operating and other expenses upon dividends and other
distributions from its subsidiaries, the payment of which are
subject to review and authorization by state insurance regulatory
authorities.  The laws of such states generally restrict
dividends from the Insurance Companies to Acceptance to certain
statutorily approved limits.  During 1997, the statutory
limitation on dividends from the Insurance Companies to
Acceptance without further Insurance Department approval is
approximately $10.4 million.

          Other regulatory and business considerations may
further limit the ability of the Insurance Companies to pay
dividends.  For example, the impact of dividends on surplus could
affect an insurers' competitive position, the amount of premiums
that it can write and its ability to pay future dividends.
Further, the insurance laws and regulations of Nebraska, Iowa,
Arizona and Texas require that the statutory surplus of an
insurance company domiciled therein, following any dividend or
distribution by such company, be reasonable in relation to its
outstanding liabilities and adequate for its financial needs.

          While the non-insurance company subsidiaries are not
subject directly to the dividend and other distribution
limitations, insurance holding company regulations govern the
amount which a subsidiary within the holding company system may
charge any of the Insurance Companies for services (e.g., agents'
commissions).

          The Company's MPCI program is federally-regulated and
supported by the federal government by means of premium subsidies
to farmers and expense reimbursement and federal reinsurance
pools for private insurers.  Consequently, the MPCI program is
subject to oversight by the legislative and executive branches of
the federal government, including the RMA.  The MPCI program
regulations prescribe premiums which may be charged and generally
require compliance with federal guidelines with respect to
underwriting, rating and claims administration.  The Company is
required to perform continuous internal audit procedures and is
subject to audit by several federal government agencies.

          During the past several years, various regulatory and
legislative bodies have adopted or proposed new laws or
regulations to deal with the cyclical nature of the insurance
industry, catastrophic events and insurance capacity and pricing.
These regulations include (i) the creation of "market assistance
plans" under which insurers are induced to provide certain
coverages, (ii) restrictions on the ability of insurers to cancel
certain policies in mid-term, (iii) advance notice requirements
or limitations imposed for certain policy non-renewals and (iv)
limitations upon or decreases in rates permitted to be charged.

          The NAIC has approved and recommended that states adopt
and implement several regulatory initiatives designed to be used
by regulators as an early warning tool to identify deteriorating
or weakly capitalized insurance companies and to decrease the
risk of insolvency of insurance companies.  These initiatives
include the implementation of the Risk Based Capital ("RBC")
standards for determining adequate levels of capital and surplus
to support four areas of risk facing property and casualty
insurers: (a) asset risk (default on fixed income assets and
market decline), (b) credit risk (losses from unrecoverable
reinsurance and inability to collect agents' balances and other
receivables), (c) underwriting risk (premium pricing and reserve
estimates), and (d) off-balance sheet/growth risk (excessive
premium growth and unreported liabilities).  At December 31, 1996
the Insurance Companies meet the RBC requirements as promulgated
by the domiciliary states of the Insurance Companies and the
NAIC.

          The eligibility of the Insurance Companies to write
insurance on a surplus lines basis is dependent on their
compliance with certain financial standards, including the
maintenance of a requisite level of capital and surplus and the
establishment of certain statutory deposits.  State surplus lines
laws typically: (i) require the insurance producer placing the
business to show that he or she was unable to place the coverage
with admitted insurers; (ii) establish minimum financial
requirements for surplus lines insurers operating in the state;
and (iii) require the insurance producer to obtain a special
surplus lines license.  In recent years, many jurisdictions have
increased the minimum financial standards applicable to surplus
lines eligibility.

          The Insurance Companies also may be required under the
solvency or guaranty laws of most states in which they are
licensed to pay assessments (up to certain prescribed limits) to
fund policyholder losses or liabilities of insolvent or
rehabilitated insurance companies.  These assessments may be
deferred or forgiven under most guaranty laws if they would
threaten an insurer's financial strength and, in certain
instances, may be offset against future premium taxes.  Some
state laws and regulations further require participation by the
Insurance Companies in pools or funds to provide types of
insurance coverages which they would not ordinarily accept.

Uncertainties Affecting the Insurance Business

          The property and casualty insurance business is highly
competitive, with over 3,000 insurance companies in the United
States, many of which have substantially greater financial and
other resources, and may offer a broader variety of coverages
than those offered by the Company.  Beginning in the latter half
of the 1980s, there has been severe price competition in the
insurance industry which has resulted in a reduction in the
volume of premiums written by the Company in some of its lines of
businesses, because of its unwillingness to reduce prices to meet
competition.  The specialty property and casualty coverages
underwritten by the Company may involve greater risks than more
standard property and casualty lines.  These risks may include a
lack of predictability, and in some instances, the absence of a
long-term, reliable historical data base upon which to estimate
future losses.

          Pricing in the property and casualty insurance industry
is cyclical in nature, fluctuating from periods of intense price
competition, which led to record underwriting losses during the
early 1980's, to periods of increased market opportunity as some
carriers withdrew from certain market segments.  Despite
increased price competition in recent years, the Company has
maintained consistent earned premium income during such periods,
principally through geographic expansion, acquisitions and
implementation of new insurance programs.

          The Company's results also may be influenced by factors
influencing the insurance industry generally and which are
largely beyond the Company's control.  Such factors include (a)
weather related catastrophes; (b) taxation and regulatory reform
at both the federal and state level; (c) changes in industry
standards regarding rating and policy forms; (d) significant
changes in judicial attitudes towards liability claims; (e) the
cyclical nature of pricing in the industry; and (f) changes in
the rate of inflation, interest rates and general economic
conditions.  The Company's crop insurance results are
particularly subject to wide fluctuations because of weather
factors influencing crop harvests.  Crop insurance results are
not generally known until the last half of the year.  See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations -- General."

          The insurance business is highly regulated and
supervised in the states in which the Insurance Companies conduct
business.  The crop insurance lines are subject to significant
additional federal regulation.  The regulations relating to the
property and casualty and crop insurance business at both the
state and federal level are frequently modified and such
modifications may impact future insurance operations.  See
"Regulation."

          Adverse loss experience for 1994 and prior years
resulted in a strengthening of loss reserves for the year ended
December 31, 1995, in the amount of $22.3 million.  The
establishment of appropriate loss reserves is an inherently
uncertain process, and, it has been necessary, and over time may
continue to be necessary, to revise estimated loss reserve
liabilities.  See "Loss and Loss Adjustment Reserves," for a
further discussion of the impact of the loss reserve
strengthening in 1995 and other factors which may, in the future,
influence loss reserve estimates.

          Property and casualty insurance is a capital intensive
business and the Company is obliged to maintain minimum levels of
surplus in the Insurance Companies in order to continue writing
insurance at current levels or to increase its writings, and also
to meet various operating ratio standards established by state
insurance regulatory authorities and by insurance rating bureaus.
Without additional capital, the Company could be required to
curtail growth or even to reduce its volume of premium writings
in order to satisfy state regulations or to maintain its current
A- (excellent) rating from A.M. Best.  The Company's history is
one of continuing premium growth, and it may be expected to
require additional capital from time to time, through additional
offerings of its securities, increase in its debt or otherwise.
The Company continually reviews the surplus needs of the
Insurance Companies, and may, from time-to-time, need to seek
additional funding.

Employees

          At March 24, 1997 the Company and its subsidiaries
employed 18 salaried executives and 1,102 other personnel.
Acceptance believes that relations with its employees are good.


<PAGE>
Item 2.  Properties.

          The following table sets forth certain information
regarding the principal properties of the Company.
<TABLE>
                           General                     Leased/
Location                  Character        Size        Owned(1)
--------                  ---------        ----        --------
<S>                        <C>       <C>                <C>
Omaha, NE                  Office     80,000 sq. ft.    Leased
Council Bluffs, IA-A       Office    142,000 sq. ft.    Leased
Council Bluffs, IA-B       Office     33,000 sq. ft.    Leased
Council Bluffs, IA-C       Office     11,000 sq. ft.    Leased
Burlington, NC             Office     18,000 sq. ft.    Leased
Phoenix, AZ                Office     33,000 sq. ft.    Leased
Scottsdale, AZ             Office     27,000 sq. ft.    Leased
<FN>
---------------
(1)  The range of expiration dates for these leases is
     November 30, 2001 (Omaha), December 31, 2001 with five year
     option (Council Bluffs-A), June 30, 1997 (Council Bluffs-B),
     November 30, 1997 (Council Bluffs-C), December 31, 2000
     (Burlington), February 21, 2000 (Phoenix), and December,
     1998 (Scottsdale).
</FN>
</TABLE>
Item 3.  Legal Proceedings.

          There are no material legal proceedings pending
involving the Company or any of its subsidiaries which require
reporting pursuant to this Item.

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

          No matters were submitted to a vote of security holders
during the fourth quarter of the fiscal year ended December 31,
1996.


<PAGE>
                            PART II.

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

          The Common Stock is listed and traded on the New York
Stock Exchange ("NYSE").  The following table sets forth the high
and low sales prices per share of Common Stock as reported on the
NYSE Composite Tape for the fiscal quarters indicated.
<TABLE>
                                             High         Low
                                             ----         ---
<S>                                         <C>          <C>
Year Ended December 31, 1995
  First Quarter                             16 5/8       14 1/8
  Second Quarter                            16           13 1/2
  Third Quarter                             17 1/2       13 1/2
  Fourth Quarter                            15 3/4       13 1/8

Year Ended December 31, 1996
  First Quarter                             15 1/2       13 7/8
  Second Quarter                            18 1/4       14 3/4
  Third Quarter                             19           17
  Fourth Quarter                            22 1/2       19 1/8

Year Ending December 31, 1997
  First Quarter
    (through March 24, 1997)                23 1/8       18 1/4
</TABLE>
          The closing sales price of the Common Stock on March
24, 1997, as reported on the NYSE Composite Tape, was $18 3/4 per
share.  As of March 24, 1997, there were approximately 1,800
holders of record of the Common Stock.

          The Company has not paid cash dividends to its
shareholders during the periods indicated above and does not
anticipate that it will pay cash dividends in the foreseeable
future.  The Company's credit agreement with its lenders ("Credit
Agreement") prohibits the payment of cash dividends to
shareholders.  See "Regulation" for a description of restrictions
on payment of dividends to the Company from the Insurance
Companies; and see "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and
Capital Resources" for a description of the Company's Credit
Agreement.

Item 6.  Selected Consolidated Financial Data.

          The following table sets forth certain selected
consolidated financial data and should be read in conjunction
with, and is qualified in its entirety by, the Consolidated
Financial Statements and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere herein.  This selected
consolidated financial data has been derived from the audited
Consolidated Financial Statements of the Company and its
subsidiaries.

<TABLE>
                                                            Years Ended
                                                            December 31,
                                     -----------------------------------------------------------
                                      1996(1)     1995(1)     1994(1)       1993(1)      1992
                                     ---------   ---------   ---------   -----------  ----------
                                           (In thousands, except per share data and ratios)
<S>                                  <C>         <C>         <C>        <C>           <C>
Income Statement Data:
  Insurance Revenues:
    Gross premiums written           $651,060    $537,349    $447,483    $256,042     $152,091
                                      =======     =======     =======     =======      =======
    Net premiums written             $366,949    $286,183    $229,176    $137,505     $ 84,085
                                      =======     =======     =======     =======      =======
    Net premiums earned              $348,653    $271,584    $202,659    $128,082     $ 79,164
    Net investment income              25,677      19,851      12,864      10,467        8,220
    Net realized capital gains          5,206       2,531         554       2,250        1,046
    Agency income                       1,035       2,863       3,629       4,119        3,992
                                      -------     -------     -------     -------      -------
      Insurance revenues              380,571     296,829     219,706     144,918       92,422
  Non-insurance revenues                  824         976         412         377        2,610
                                      -------     -------     -------     -------      -------
  Total revenues                      381,395     297,805     220,118     145,295       95,032

  Insurance expenses:
    Losses and loss adjustment
      expenses                        243,257     212,337     142,951      92,805       60,025
    Underwriting and other expenses    95,803      72,602      52,627      36,905       23,523
    Agency expenses                     1,024       2,596       3,180       3,794        3,736
                                      -------     -------     -------     -------      -------
      Insurance expenses              340,084     287,535     198,758     133,504       87,284
  Non-insurance expenses                2,015       2,165       1,684       1,225        3,107
                                      -------     -------     -------     -------      -------
  Total expenses                      342,099     289,700     200,442     134,729       90,391
                                      -------     -------     -------     -------      -------
  Operating profit                     39,296       8,105(2)   19,676      10,566        4,641(3)


<PAGE>
  Other income (expense):
    Interest expense                  (4,896)      (2,591)     (1,693)     (2,235)      (4,428)
    Other income (expense), net         (910)        (171)       (271)       (340)        (823)
                                      -------     -------     -------     -------      -------
    Income (loss) from continuing
      operations before income taxes
      and minority interests           33,490       5,343      17,712       7,991         (610)

  Provision (benefit) for income
    taxes(4)                            3,210       1,188      (3,443)        167           --
  Minority interests in net income
    (loss) of consolidated
    subsidiaries                           --          --          80         238          216
                                      -------     -------     -------     -------      -------
  Net income (loss) from
    continuing operations            $ 30,280    $  4,155(2) $ 21,075    $  7,586     $   (826)(3)
                                      =======     =======     =======     =======      =======
  Net income (loss) from
    continuing operations
    per share:
    - Primary                        $   2.00    $    .28    $   1.71    $   0.86     $  (0.24)
    - Fully diluted                      1.96         .27        1.68        0.85        (0.24)

GAAP Ratios:
  Loss ratio                            69.8%       78.2%       70.5%       72.5%        75.8%
  Expense ratio                         27.5%       26.7%       26.0%       28.8%        29.7%
                                      -------     -------     -------     -------      -------
  Combined loss and expense ratio       97.3%      104.9%       96.5%      101.3%       105.5%
                                      =======     =======     =======     =======      =======
</TABLE>

<TABLE>
                                                            December 31,
                                     ---------------------------------------------------------
                                       1996        1995        1994        1993         1992
                                     --------    --------    --------    --------     --------
<S>                                  <C>         <C>         <C>         <C>          <C>
Balance Sheet Data:
  Investments                        $405,926    $368,001    $264,743    $187,986     $124,311
  Total assets                        884,380     781,034     543,087     409,385      257,734
  Loss and loss adjustment
    expense reserves                  432,173     369,244     221,325     211,600      127,666
  Unearned premiums                   140,217     124,122      97,170      60,114       41,709
  Borrowings and term debt             69,000      69,000      29,000      18,951       33,567
  Stockholders' equity                207,820     177,787     159,754      95,717       34,523

Other Data:
  Statutory Surplus of Insurance
    Companies(5)                      191,455     169,628     126,272      73,910       34,527
<FN>

<PAGE>
__________________

(1)  For a discussion of the accounting treatment of the Company's MPCI business, the results of
     which are included beginning July 1, 1993, see "Management's Discussion and Analysis of
     Financial Condition and Results of Operations -- General."

(2)  Net income was reduced in 1995 by the strengthening of loss reserves in the amount of
     approximately $22.3 million relating principally to 1994 and prior year losses in the
     commercial auto liability and general liability and commercial multi-peril lines of insurance.
     See "Management's Discussion and Analysis of Financial Condition and Results of Operations --
     Year Ended December 31, 1995 Compared to Year Ended December 31, 1994."

(3)  Net Income was reduced in 1992 by the strengthening of loss reserves in the amount of
     approximately $2.1 million on two lines of insurance and $1.7 million of incurred losses
     relating to two hurricanes.

(4)  Results for 1994 and 1993 reflect the utilization of tax loss carryforwards and other temporary
     differences resulting from prior non-insurance operations.

(5)  Statutory data has been derived from the separate financial statements of the Insurance
     Companies prepared in accordance with SAP.
</FN>
</TABLE>

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

          The following discussion and analysis of financial
condition and results of operations of the Company and its
consolidated subsidiaries should be read in conjunction with the
Company's  Consolidated Financial Statements and the notes
thereto included elsewhere herein.

General

          Over the past five years, premiums written in the
Company's insurance operations have consistently increased, both
as the result of acquisitions and through internal growth.  In
the third quarter of 1995, the Company's decision to strengthen
loss reserves resulted in a loss for that quarter of $5,961,000.
Otherwise, the Company has reported net income in each quarter
beginning with the third quarter of 1992, when the phasing out of
its prior non-insurance operations was substantially completed.

          Increased premium volume in recent periods has been the
result of the Company's strategy of acquiring niche businesses
and increasing premiums written in selected lines.   The
Company's most significant recent acquisition was its purchase in
July 1993 of The Redland Group, Inc., which provides MPCI, crop
hail and other named peril crop insurance and certain standard
property and casualty coverages to the rural market.  Following
its acquisition by the Company, Redland has increased the volume
of its MPCI Premium, and was the fourth largest MPCI writer in
the United States in 1996.

          MPCI is a government-sponsored program with accounting
treatment which differs from more traditional property and
casualty insurance lines.  For income statement purposes, gross
premiums written consist of the aggregate amount of MPCI premiums
paid by farmers, and does not include any related federal premium
subsidies or expense reimbursement.  The Company's profit or loss
from its MPCI business is determined after the crop season ends
on the basis of a profit sharing formula established by law and
the RMA.  For income statement purposes, any such profit share
earned by the Company, net of the cost of third party
reinsurance, is shown as net premiums written, which equals net
premiums earned for MPCI business; whereas, any share of losses
payable by the Company is charged to losses and loss adjustment
expenses.  Due to various factors, including timing and severity
of losses from storms and other natural perils and crop
production cycles, the profit or loss on MPCI premiums is
primarily recognized in the second half of the calendar year.
The Company relies on loss information from the field to
determine (utilizing a formula established by the RMA) the level
of losses that should be considered in estimating the profit or
loss during this period.  Based upon available loss information,
the Company records an estimate of the profit or loss during the
third quarter and then re-evaluates the estimate using additional
loss information available at year-end to determine any remaining
portion to be recorded in the fourth quarter.  All expense
reimbursements received are credited to underwriting expenses.

          Certain characteristics of the Company's crop business
may affect comparisons, including: (i) the seasonal nature of the
business whereby profits or losses are generally recognized
predominately in the second half of the year; (ii) the nature of
crop business whereby losses are known within a short time
period; and (iii) the limited amount of investment income
associated with crop business.  In addition, cash flows from such
business differ from cash flows from certain more traditional
lines.  See "Liquidity and Capital Resources" below.  The
seasonal and short term nature of the Company's crop business, as
well as the impact on such business of weather and other natural
perils, may produce more volatility in the Company's operating
results on a quarter to quarter or year to year basis than has
historically been the case.

Forward-Looking Information

          Except for the historical information contained in this
Annual Report on Form 10-K, matters discussed herein may
constitute forward-looking information.  Such forward-looking
information reflects the Company's current best estimates
regarding future operations, but, since these are only estimates,
actual results may differ materially from such estimates.

          A variety of events, most of which are outside the
Company's control, cannot be accurately predicted and may
materially impact estimates of future operations.  Important
among such factors are weather conditions, natural disasters,
changes in state and federal regulations, price competition
impacting premium levels, changes in tax laws, financial market
performance, changes in court decisions effecting coverages and
general economic conditions.

          The Company's results are significantly impacted by its
crop business, particularly its MPCI line.  Results from the crop
lines are not generally known until the third and fourth quarters
of the year, after crops are harvested.  Crop results are
particularly dependent on events beyond the Company's control,
notably weather conditions during the crop growing seasons in the
states where the Company writes a substantial amount of its crop
insurance, and, with the introduction of the Company's new Crop
Revenue Coverage, the market price of grains on various commodity
exchanges.  Additionally, federal regulations governing aspects
of crop insurance are frequently modified, and any such changes
may impact crop insurance results.

          Forward-looking information set forth herein does not
take into account any impact from any adverse weather conditions
during the 1997 crop season, or the various other factors noted
above which may affect crop and non-crop operation results.

RESULTS OF OPERATIONS

Year Ended December 31, 1996
Compared to Year Ended December 31, 1995

          The Company's net income increased approximately 629%
from $4.2 million in the year ended December 31, 1995 to $30.3
million in the year ended December 31, 1996.  This increase in
net income resulted from improved underwriting results in the
Company's Crop and General Agency divisions, growth in premium
revenues, increased investment income and realized gains, and a
decrease in the effective tax rate of the Company.  These
positive factors were offset by deteriorating results in the
Company's Program division, increased interest expense, and a
somewhat higher expense ratio for the Company.

          The combined underwriting loss and expense ratio
improved from 104.9% for the year ended December 31, 1995 to
97.3% for the 1996 year.  This improvement in the Company's
combined ratio was enhanced by growth in net premiums earned of
28.4%.  The greatest contribution to these improved underwriting
results was made by the Company's Crop division.  The Company's
Crop division increased its MPCI writings from $183.3 million for
the year ended December 31, 1995 to $248.3 million for the 1996
year.  In addition to this growth in MPCI premium, the Company
increased its retained pool from $104.3 million in 1995 to $161.4
million in 1996.  This growth in premium was aided by an increase
in commodity prices for the major crops insured by the Company
and the introduction of an enhancement to the MPCI policy, CRC,
which generated significantly higher premiums per policy than the
traditional MPCI policy.  Improved weather conditions also
contributed significantly to the improved results in the Crop
division as the Company's MPCI profit sharing percentage realized
during 1996 increased to 23.5% from 13.4% realized during 1995.
In addition, the 1996 year benefited from $4.3 million of
additional profit sharing realized in the first quarter of 1996
as final results of the late 1995 harvest were available.

          Underwriting results in the Company's General Agency
division also improved in 1996 as compared to 1995, as the
Company's combined ratio in this division improved from 116.4% in
1995 to 106.9% in 1996.  The Company's 1995 results were affected
by a $22.3 million strengthening of reserves for prior year
losses (see results of operations for year ended December 31,
1995 compared to year ended December 31, 1994), and $16.5 million
of the $22.3 million affected the General Agency division,
contributing to the 116.4% combined ratio recorded during 1995.
When comparing accident year loss ratios for 1995 and 1996 in the
General Agency division, the results are similar.  In the year
ended December 31, 1995, the General Agency division 1995
accident year loss ratio was 69.8% as compared to a 1996 accident
year loss ratio of 69.9%.  The General Agency division was also
able to improve its combined ratio through a reduction in
expenses during 1996 as its expense ratio fell to 31.9% in 1996
as compared to 34.1% in 1995.

          The Company also benefited from a 28.3% increase in
investment income during 1996 as compared to that of 1995, and an
increase in the realized investment gains of the Company of 92.7%
when comparing the same periods.  The increase in investment
income was principally due to an increase in the average size of
the investment portfolio.  The average size of the Company's
investment portfolio increased by 25.3% from $321.3 million for
the twelve months ended December 31, 1995 to $402.4 million for
the twelve months ended December 31, 1996, while the pre-tax
yield on the portfolio increased from 6.4% in 1995 to 6.6% in
1996.  The size of the Company's investment portfolio increased
from retained earnings and positive cash flows from operations.

          While the Company's income tax expense increased from
$1.2 million for the twelve months ended December 31, 1995 to
$3.2 million for the 1996 year, the Company's effective tax rate
declined from 22.2% in 1995 to 9.6% in 1996.  The Company's 1996
taxes were positively effected by the decrease in the valuation
allowance relating to the unrealized loss from the Company's
investment in Major Realty.  In October 1995, Major Realty
announced that its Board of Directors had determined that it was
in the best interest of the stockholders to seek a merger partner
or otherwise seek a transaction for the sale of the company.  At
December 31, 1996, the Company believed that the realization of
the capital loss associated with such a transaction was more
likely than not due to sufficient carryforwards of capital gains
as well as the likelihood of future capital gains.

          Positive factors effecting net income were partially
offset by deteriorating underwriting results in the Company's
Program division.  The Program division's combined loss and
expense ratio increased from 113.6% during 1995 to 117.5% during
1996.  A variety of factors combined to cause this deterioration
in underwriting results.  In two of the division's departments,
Rural America and Special Products, weather related incidents
increased the frequency of losses.  In the Rural America
department, storms in areas where the Company had concentrations
of farm business adversely effected the Company's loss ratio,
while in the Company's Special Products department, prolonged
sub-zero temperatures in the greater Chicago area increased the
number and severity of freeze losses experienced in the Company's
condominium program.  The Company has taken steps to reduce its
geographic concentrations in the Rural America department, and is
making changes in the reinsurance structure of both of these
departments in order to reduce volatility and improve net
underwriting results.

          Additionally in the Program division, the Company
changed its strategies within its Workers' Compensation
underwriting activities during 1996.  In 1995 and previous years,
the Company had followed a strategy of depopulating assigned risk
pools through the application of intensive case management
techniques with risks which had become unacceptable to the
standard market due to frequency rather than severity.  With the
improvement of workers' compensation results for the industry as
a whole, more companies were willing to write workers'
compensation, and therefore, the number of risks fitting the
Company's profile for removal from assigned risk pools was
substantially depleted.  During 1996, the Company moved to a
strategy of partnership arrangements with select agencies in
which the agent accepts part of the underwriting risk in return
for an enhanced profit sharing from the Company.  Due to the
competitive market, this strategy is developing slowly, and,
thus, the Company experienced a 65% decrease in its direct
written premiums in this line of business.  This transition phase
caused the expense ratio in this line of business to increase
more than 100%, and resulted in an underwriting loss for this
line of business.  The Company believes that this line of
business can return to profitability as the new partnership
arrangements grow.

          Offsetting these deteriorating results in the Program
division were improved results in the Company's Transportation
department.  Within the Transportation department, the Company's
loss and expense ratio improved from 120.6% during the year ended
December 31, 1995 to 103.6% during 1996.  While the department
did not produce an underwriting profit, the Company believes that
the improvement in the Company's underwriting ratios indicates
that the actions taken during 1995 and 1996 to reorganize this
department are having a positive effect.

          The Company's Non-Standard underwriting activities
experienced unprofitable results for the first time in six years
as a result of an increase in both the severity and frequency of
losses, particularly in the area of physical damage losses.  The
Company has increased rates beginning in 1996 and continuing into
1997, reduced commissions in certain areas with poor experience,
and canceled agents with loss ratio problems.  This division is
also beginning to see a slow improvement in its expense ratio,
and the Company expects this improvement in the expense ratio to
accelerate during 1997.

          The Company's interest expense also increased during
1996 as compared to 1995.  This increase in interest expense was
due to an increase in the Company's borrowings under its bank
facility which increased from an average of $34.3 million during
the 1995 to $69.0 million during 1996.  Offsetting this increase
in the size of borrowings was a decline in the average interest
rate under the bank facility from 7.6% during 1995 to 7.1% during
1996.  The additional borrowings under the bank facility were
contributed to the Company's subsidiaries in order to support
underwriting activities and maintain capital adequacy ratios at a
level commensurate with the Company's current A- rating by A.M.
Best & Company.

          The Company experienced a somewhat higher expense ratio
during 1996 than during 1995.  This ratio increased from 26.7% in
1995 to 27.5% in 1996 primarily due to higher net commission
expense in the Program division of the Company.  This higher net
commission expense was a result of a changing mix of business
with a lesser percentage of premiums produced in lower commission
programs such as Workers' Compensation and Transportation and a
higher percentage of premiums produced in higher commission lines
of business.  In addition, the Company decreased the use of quota
share reinsurance within the Program division during 1996.
During 1997, the Company expects to again increase the use of
quota share reinsurance within the Program division, and with the
continued growth in new programs offsetting high initial
expenses, expects the expense ratio of this division to fall in
1997.

Year Ended December 31, 1995
Compared to Year Ended December 31, 1994

          The Company's net income fell 80.3% from the year ended
December 31, 1995 from $21.1 million in 1994 to $4.2 million in
1995.  This reduction in net income resulted as premium growth in
the Company's General Agency and Program divisions, an increase
in investment income and an increase in underwriting profits from
the Company's Crop division were offset by higher than expected
losses in the General Agency and Program divisions, an increase
in the Company's expense ratio and a change in the Company's tax
status.

          The Company experienced strong premium growth in its
General Agency division as direct premiums written increased
26.5% for the year ended December 31, 1995 as compared to the
year ended December 31, 1994, and net premiums earned grew 39.8%
from 1994 to 1995.  Earned premiums grew more rapidly than direct
premiums as premium growth slowed progressively in each quarter
of 1995.  The growth in this division came from the continued
growth in new business produced from the Company's Scottsdale
office which was established in late 1993.  The rate of premium
growth in 1995 slowed due to an increase in the competitive
environment for lines of business written in the General Agency
division.

          The Company's Program division also experienced
excellent premium growth during 1995 as direct premiums written
increased from $83.9 million in 1994 to $115.4 million in 1995,
an increase of 37.5%.  Net earned premium increased at a rate of
50.8% from $42.6 million in 1994 to $64.3 million in 1995.  This
premium growth was principally from new programs established
during 1994 and 1995.  The Company continues to seek and
establish new lines of business within the Program division but
competitive factors in the marketplace have resulted in somewhat
lower growth rates than expected in many of these new programs.

          The Company's Non-Standard Auto division did not grow
during 1995 as premiums remained relatively stable with $29.3
million in direct written premium during 1995 as compared to
$29.4 million during 1994.  This lack of growth during 1995
resulted primarily from the Company's desire to establish new
computer software for its principal programs before seeking
additional growth opportunities.

          The Company's Crop division also experienced strong
premium growth in 1995 as direct written premiums and net earned
premiums increased 21.9% and 30.1% respectively from 1994 to
1995.  This premium growth resulted from an increase in the
Federal MPCI program, and increases in premium levels under the
Company's crop hail insurance program resulting from an increase
in rates and the writing of more exposure units in certain
states.  In late 1994, Congress expanded the MPCI program by
enacting the Reform Act. The Act seeks to encourage farmers to
participate in the MPCI program and thereby reduce dependencies
on traditional disaster relief measures.  As a result, the
Company's MPCI premium increased 42.8% from $128.4 million in
1994 to $183.3 million in 1995.  In addition, the Company's MPCI
retention also increased from $77.4 million in 1994 to $104.3
million in 1995.  The crop industry had experienced several years
of adverse experience in the crop hail business prior to 1995,
and as a result, crop hail rates have increased while capacity
has decreased.   Therefore, the Company was able to increase its
crop hail writings from $46.5 million in direct written premiums
in 1994 to $62.8 million in direct written premiums for 1995.

          The Company's investment income increased 55.6% from
$13.3 million in 1994 to $20.7 million in 1995 while the
Company's net realized capital gains increased 388.6% from $0.6
million in 1994 to $2.7 million in 1995.  Investment income
increased from both an increase in the average size of the
Company's investment portfolio as well as an increase in the
average yield on the Company's fixed income investments.  The
average size of the investment portfolio increased from $220.1
million in 1994 to $321.3 million in 1995 while the Company's
pre-tax yield on its portfolio increased from 6.0% in 1994 to
6.4% in 1995.  The Company's investment portfolio increased from
additional borrowings under the Company's credit facility,
positive cash flows from operations, funds from the exercise of
warrants in December of 1994 as well as retained earnings.
Investment yields increased as the overall interest rate
environment provided higher yields during 1995 as compared to
1994.

          While 1995 was a difficult growing season, the
Company's underwriting income within its Crop division increased
from $12.3 million in 1994 to $14.9 million in 1995.  This
increase was a result of the growth in the MPCI premium and
better results in the Company's hail division, offsetting
negative results in the Company's named peril crop programs
principally from an active storm season in California during
1995.  The 1995 growing season in the upper midwest was afflicted
with wet weather during the planting season resulting in delayed
planting of crops, followed by periods of severe heat in July,
stressing newly emerging crops, and an early frost in September
of 1995.  No such adverse activity occurred in 1994.  In
addition, the Reform Act changed the profit sharing matrix for
participants in the MPCI program providing a higher degree of
profit sharing, particularly for companies accepting risks in the
commercial underwriting pool.  These two factors combined to
change the percentage of the Company's profit sharing under the
MPCI program from 22.0% in 1994 to 13.4% in 1995.  This decrease
in the profit sharing percentage was more than offset by the
described increase in MPCI premiums and improved crop hail
results.  The Reform Act was not passed until October of 1994,
and therefore, the federal agencies charged with the oversight of
the program had a limited time frame in which to enact guidelines
and administrative rules and procedures for changes brought about
by the Reform Act.  In addition, the wet planting season created
additional stress on the MPCI program which required further
administrative changes by the federal government.  As a result,
exact results of the MPCI program were more difficult to estimate
at December 31, 1995 than they had been in previous years.

          The aforementioned positive factors were offset by
higher than expected losses in the Company's General Agency and
Program division, including losses resulting from the
strengthening of reserves during 1995 for prior year losses.
During the second quarter of 1995, the Company experienced a
deterioration in the loss ratio of its commercial automobile
liability business.  At that time, this was principally
attributable to a more rapid emergence of losses from the 1994
year than had been expected by the Company.  This trend continued
in the third quarter of 1995, and while the noted deterioration
was principally in the automobile liability business, the Company
believed that similar deviations were likely to appear in other
lines of business which develop more slowly than automobile, and
therefore, the Company chose in the third quarter to evaluate all
major lines of business.  After an extensive study by the Company
in consultation with its independent actuaries, a pre-tax charge
of $17.5 million was made in the third quarter for prior year
losses.  For the year, the Company increased its reserves for
1994 and prior year losses by $22.3 million pre-tax.

          After the Company completed its review of prior year
losses, the new development pattern assumptions were used to
estimate ultimate losses for the current 1995 accident year.
These new assumptions, severe wind and hail storms in Texas
during the second quarter of the year, and adverse results in a
few of the Company's business lines such as nursing home
liability, homeowners business in South Carolina and used car
dealer business in California, combined to create a $5.7 million
underwriting loss in the property and casualty divisions of the
Company for the 1995 accident year.  For the accident year 1995,
the Company's accident year loss ratio was 70.7% for the property
and casualty division.  The Company's underwriting results in the
Non-Standard Automobile division were fairly consistent from 1994
to 1995 with this division experiencing a loss ratio of 66.8% in
1995 as compared to 68.9% in 1994.  Management intends to
continue to closely monitor statistical and other information
with respect to loss reserves, in particular those lines of
insurance that are more difficult to predict.  However, the
estimates of loss reserves are inherently uncertain and such
estimates may continue to change as more information becomes
available.

          Underwriting expenses for 1995 increased as a
percentage of earned premium from 26.0% during 1994 to 26.7%
during 1995.  General and administrative expenses also increased
by $0.5 million from 1994 to 1995, and expenses in the Company's
Crop division net of ceding commissions from reinsurers and
expense reimbursements from the Federal Government under the MPCI
program decreased slightly from $0.8 million in 1994 to $0.7
million in 1995.  The increase in the underwriting expense levels
was principally attributable to increases in Non-Standard
Automobile division expenses related to the implementation of new
computer software programs designed to make the Company's product
more saleable in the marketplace and to reduce expenses in future
years as the division grows.  In addition, the Company sought to
strengthen its information systems and audit procedures within
the Program and General Agency divisions.  The cost of
implementation of several new programs in the Program division
also added to the higher expense ratio for 1995 as compared to
1994.  The Company expects the implementation of the new computer
program for the Non-Standard Automobile division as well as the
investments in systems for the General Agency and Program
divisions to begin to slowly reduce its expense ratio over the
next few years.  Offsetting these internal expense reductions,
the Company is experiencing intense competition in the area of
agent's commissions as capacity in the insurance marketplace
continues to exceed demand.

          The Company's net income during 1995 was also effected
by the impact of income taxes.  The Company received a benefit of
$3.4 million from income taxes in 1994 as opposed to an expense
of $1.2 million from income taxes in 1995.  As a result of prior
non-insurance operations, the Company generated significant tax
loss carryforwards and other temporary differences, all of which
were used by the end of 1994.

LIQUIDITY AND CAPITAL RESOURCES

          The Company has included a discussion of the liquidity
and capital resources requirement of the Company and the
Insurance Subsidiaries.

The Company - Parent Only

          As an insurance holding company, the Company's assets
consist primarily of the capital stock of its subsidiaries, two
surplus notes issued by one of its insurance company subsidiaries
and investments held at the holding company level.  The Company's
primary sources of liquidity are dividends and other
distributions from subsidiaries, interest payments on the surplus
notes, tax sharing payments from its subsidiaries and net
investment income from, and proceeds from the sale of, holding
company investments.  The Company's liquidity needs are primarily
to service debt, pay operating expenses and taxes, and make
investments in subsidiaries.

          Dividends from the insurance subsidiaries of the
Company are regulated by the regulatory authorities of the states
in which each subsidiary is domiciled.  The laws of such states
generally restrict dividends from insurance companies to parent
companies to certain statutorily approved limits.  In 1997, the
statutory limitation on dividends from insurance company
subsidiaries to the parent without further insurance departmental
approval is approximately $10.4 million.  In addition to
dividends from the insurance companies, the Company also may
receive distributions from its non-insurance subsidiaries which
are engaged in agency, premium finance and claim service
operations.

          The Company currently holds two surplus notes, each in
the amount of $20 million, issued by one of its insurance company
subsidiaries, bearing interest at the rate of 9% per annum,
payable quarterly.  Although repayment of all or part of the
principal of this surplus note requires prior insurance
department approval, no prior approval of interest payment is
currently required.

          The Company is currently a party to a tax sharing
agreement with its subsidiaries, under which such subsidiaries
pay the Company amounts in general equal to the federal income
tax that would be payable by such subsidiaries on a stand-alone
basis.

          The Company is also a party to a Credit Agreement which
provides a three-year revolving credit facility in amounts not to
exceed $75 million.  Until July 26, 1996, the Credit Facility
also included a one-year Term Loan Facility not to exceed $15
million.  This Term Loan Facility expired on July 26, 1996, as
the Company had not drawn upon this facility as of that date.
Under the Revolving Credit Facility, interest is payable
quarterly at a rate selected by the Company equal to either the
prime rate or LIBOR plus a margin which varies depending on the
Company's debt to equity ratio.  At December 31, 1996, the
outstanding balance under the facility was $69 million, with an
interest cost of 6.7%.  Borrowings under the facility were used
to provide capital for the insurance companies and to repay other
debt.  The Revolving Credit Facility expires on July 26, 1998,
and may be extended annually by additional one-year periods with
the consent of the lenders.  The Company is currently negotiating
with its banks to restructure the Credit Facility to incorporate
the previous Term Loan Facility and current Revolving Credit
Facility into one Credit Facility.

Insurance Companies

          The principal liquidity needs of the Insurance
Companies are to fund losses and loss adjustment expense payments
and to pay underwriting expenses, including commissions and other
expenses.  The available sources to fund these requirements are
net premiums received and, to a lesser extent, cash flows from
the Company's investment activities, which together have been
adequate to meet such requirements on a timely basis.  The
Company monitors the cash flows of the Insurance Companies and
attempts to maintain sufficient cash to meet current operating
expenses, and to structure its investment portfolio at a duration
which approximates the estimated cash requirements for the
payment of loss and loss adjustment expenses.

          Cash flows from the Company's MPCI and crop hail
businesses differ in certain respects from cash flows associated
with more traditional property and casualty lines.  MPCI premiums
are not received from farmers until the covered crops are
harvested, and when received are promptly remitted by the Company
in full to the government.  Covered losses are paid by the
Company during the growing season as incurred, with such
expenditures reimbursed by the government within three business
days.  Policy acquisition and administration expenses are paid by
the Company as incurred during the year.  The Company
periodically throughout the year receives a payment in
reimbursement of its policy acquisition and administration
expenses.

          The Company's profit or loss from its MPCI business is
determined after the crop season ends on the basis of a profit
sharing formula established by law and the RMA.  At such time,
the Company receives a profit share in cash, with any amount in
excess of 15% of its MPCI Retention in any year carried forward
to future years, or it must pay its share of losses.  The Company
recognized $37.9 million, before private reinsurance, in profit
sharing earned on the MPCI business during 1996, and in addition,
recognized $4.3 million during 1996 in profit sharing earned on
1995 MPCI business.

          In the crop hail insurance business, premiums are
generally not received until after the harvest, while losses and
other expenses are paid throughout the year.

Changes in Financial Condition

          The NAIC has established a Risk Based Capital ("RBC")
formula for property and casualty insurance companies.  The RBC
initiative is designed to enhance the current regulatory
framework for the evaluation of the capital adequacy of a
property and casualty insurer.  The formula requires an insurer
to compute the amount of capital necessary to support four areas
of risk facing property and casualty insurers: (a) asset risk
(default on fixed income assets and market decline), (b) credit
risk (losses from unrecoverable reinsurance and inability to
collect agents' balances and other receivables), (c) underwriting
risk (premium pricing and reserve estimates ), and (d) off
balance sheet/growth risk (excessive premium growth and
unreported liabilities).  The Insurance Companies have reviewed
and applied the RBC formula for the 1996 year and have exceeded
these requirements.

          The Company's stockholder's equity increased by
approximately 17% or $30 million from December 31, 1995 to
December 31, 1996.  The principal components of this change in
stockholder's equity were an increase in the Company's retained
earnings from an accumulated deficit at December 31, 1995 of
$18.8 million to retained earnings of $11.4 million at December
31, 1996, an increase in capital in excess of par value of $1.3
million as a result of the exercise of certain outstanding
warrants and stock options, and an increase in the Company's
unrealized loss on available-for-sale securities, net of tax, of
$1.5 million.

Consolidated Cash Flows

          Cash flows from operations for the year ended December
31, 1996 were $42.9 million as compared to cash flows from
operating activities of $46.5 million during 1995.  The positive
cash flows for both 1996 and 1995 have provided adequate capital
to meet all of the Company's cash needs.

          Cash flows from the Company's MPCI and crop hail
business are different in certain respects from cash flows
associated with more traditional property and casualty lines (see
Liquidity and Capital Resources, Insurance Companies).

Inflation

          The Company does not believe that inflation has had a
material impact on its financial condition or results of
operations.

Recent Statement of Financial Accounting Standards

          In October 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 123
(SFAS No. 123), "Accounting for Stock-Based Compensation," which
was effective for the Company on January 1, 1996.  SFAS No. 123
requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require)
compensation cost to be measured based on the fair value of the
equity instrument awarded.  Companies are permitted, however, to
continue to apply APB Opinion No. 25, which recognizes
compensation cost based on the intrinsic value of the equity
instruments awarded.  The Company will continue to apply APB
Opinion No. 25 in its accounting for stock based compensation
awards to employees and directors, while expanding its
disclosures as required by SFAS No. 123.

Item 8.  Financial Statements and Supplementary Data.

          See Item 14 hereof and the Consolidated Financial
Statements attached hereto.

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

          There have been no disagreements with the Registrant's
independent accountants of the nature calling for disclosure
under Item 9.


                            PART III.

Item 10.  Directors and Executive Officers of the Registrant.

          The information required by Item 10 with respect to the
Registrant's executive officers and directors will be set forth
in the Company's 1997 Proxy Statement included as Exhibit 99.6
hereto and incorporated herein by reference.

Item 11.  Executive Compensation

          The information required by Item 11 will be set forth
in the Company's 1997 Proxy Statement included as Exhibit 99.6
hereto and incorporated herein by reference.

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

          The information required by Item 12 will be set forth
in the Company's 1997 Proxy Statement included as Exhibit 99.6
hereto and incorporated herein by reference.

Item 13.  Certain Relationships and Related Transactions.

          The information required by Item B will be set forth in
the Company's 1997 Proxy Statement included as Exhibit 99.6
hereto and incorporated herein by reference.



                            PART IV.

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

          (a) The following documents are filed as a part of this
Report:

               1.  Financial Statements.  The Company's audited
     Consolidated Financial Statements for the years ended
     December 31, 1996 and 1995 consisting of the following:

                    Reports of Independent Accountants
                    Consolidated Balance Sheets
                    Consolidated Statements of Operations
                    Consolidated Statements of Cash Flows
                    Consolidated Statements of Stockholders'
                      Equity
                    Notes to Consolidated Financial Statements

               2.  Financial Statement Schedules

                    Schedule II.  Condensed Financial Information
                      of Registrant
                    Schedule V.  Valuation Accounts

               3.  The Exhibits filed herewith are set forth in
     the Exhibit Index attached hereto.

          (b) No Current Reports on Form 8-K have been filed
during the last fiscal quarter of the period covered by this
Report.


<PAGE>
                  INDEX TO FINANCIAL STATEMENTS





Audited Consolidated Financial Statements for the
  Years Ended December 31, 1996 and December 31,
  1995:

  Independent Auditors' Report
  Consolidated Balance Sheets
  Consolidated Statements of Operations
  Consolidated Statement of Stockholders' Equity
  Consolidated Statements of Cash Flows
  Notes to Consolidated Financial Statements



<PAGE>
                           SIGNATURES

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

ACCEPTANCE INSURANCE COMPANIES INC.

     /s/ Kenneth C. Coon
By _____________________________________   Dated: March  20, 1997
   Kenneth C. Coon
   Chairman and Chief Executive Officer

     /s/ Georgia M. Mace
By _____________________________________   Dated: March  20, 1997
   Georgia M. Mace
   Chief Financial Officer and Treasurer

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

                              /s/ Jay A. Bielfield
Dated:  March 20, 1997         ______________________________
                              Jay A. Bielfield, Director

                              /s/ Kenneth C. Coon
Dated:  March 20, 1997         ______________________________
                              Kenneth C. Coon, Director

                              /s/ Edward W. Elliott, Jr.
Dated:  March 20, 1997         ______________________________
                              Edward W. Elliott, Jr., Director

                              /s/ Robert LeBuhn
Dated:  March 20, 1997         ________________________________
                              Robert LeBuhn, Director

                              /s/ Michael R. McCarthy
Dated:  March 20, 1997        ________________________________
                              Michael R. McCarthy, Director

                              /s/ John P. Nelson
Dated:  March 20, 1997        ________________________________
                              John P. Nelson, Director

                              /s/ R. L. Richards
Dated:  March 20, 1997        ________________________________
                              R. L. Richards, Director


<PAGE>
                              /s/ David L. Treadwell
Dated:  March 20, 1997        ________________________________
                              David L. Treadwell, Director

                              /s/ Doug T. Valassis
Dated:  March 20, 1997        ________________________________
                              Doug T. Valassis, Director



<PAGE>
               ACCEPTANCE INSURANCE COMPANIES INC.
                   ANNUAL REPORT ON FORM 10-K
               FISCAL YEAR ENDED DECEMBER 31, 1996

                          EXHIBIT INDEX


NUMBER  EXHIBIT DESCRIPTION

3.1     Restated Certificate of Incorporation of Acceptance
        Insurance Companies Inc.  Incorporated by reference to
        Registrant's Annual Report on Form 10-K for the fiscal
        year ended December 31, 1993.

3.1(a)  Amendment to the Registrant's Restated Certificate of
        Incorporation.  Incorporated by reference to Exhibit
        3.(i) to the Registrant's Quarterly Report on Form 10-Q
        for the period ended June 30, 1995.

3.2     Restated By-laws of Acceptance Insurance Companies Inc.
        Incorporated by reference to Registrant's Annual Report
        on Form 10-K for the fiscal year ended December 31,
        1993.

4.1     Form of Stock Certificate representing shares of
        Acceptance Insurance Companies Inc., Common Stock, $.40
        par value.  Incorporated by reference to Exhibit 4.1 to
        Registrant's Annual Report on Form 10-K for the fiscal
        year ended December 31, 1992.

10.1    Office Building Lease dated July 19, 1991, between State
        of California Public Employees' Retirement System and
        Acceptance Insurance Company.  Incorporated by reference
        to Exhibit 10.7 to Registrant's Annual Report on Form
        10-K for the fiscal year ended December 31, 1991.

10.2    Intercompany Federal Income Tax Allocation Agreement
        between Acceptance Insurance Holdings Inc. and its
        subsidiaries and Registrant dated April 12, 1990, and
        related agreements.  Incorporated by reference to
        Exhibit 10i to Registrant's Annual Report on Form 10-K
        for the fiscal year ended August 31, 1990.

10.3    Employment Agreement dated February 19, 1990 between
        Acceptance Insurance Holdings Inc., Registrant and
        Kenneth C. Coon.  Incorporated by reference to Exhibit
        10.65 to Registrant's Annual Report on Form 10-K for the
        fiscal year ended December 31, 1991.

10.4    Employment Agreement dated July 2, 1993, between Redland
        Insurance Group, Inc., and John P. Nelson.  Incorporated
        by reference to Exhibit 2 to Registrant's Current Report
        on Form 8-K dated July 2, 1993.

110.5   Employment Agreement dated July 2, 1993, between Redland
        Insurance Group, Inc., and Richard C. Gibson.
        Incorporated by reference to Exhibit 2 to Registrant's
        Current Report on Form 8-K dated July 2, 1993.

10.6    $90,000,000 Credit Agreement By and Among the
        Registrant, NBD Bank, N.A., First National Bank of
        Omaha, FirsTier Bank, N.A., Comerica Bank, First
        Interstate Bank of Arizona and NBD Bank, N.A., As Agent,
        dated as of July 26, 1995.  Incorporated by reference to
        Exhibit 10.1 to the Registrant's Quarterly Report on
        Form 10-Q for the period ended June 30, 1995.

10.7    Employment Agreement dated July 2, 1993 between the
        Registrant and Richard C. Gibson.  Incorporated by
        reference to Exhibit 10.6 to the Registrant's Quarterly
        Report on Form 10-Q for the period ended September 30,
        1994.

10.8    Warrants to purchase a total of 389,507 shares of common
        stock ($.10 par value) of the Registrant dated April 10,
        1992, issued by the Registrant to the various purchasers
        of the Floating Rate Secured Subordinated Notes, due
        1993, Series A and B.  Incorporated by reference to
        Exhibit 10.41 to the Registrant's Annual Report on Form
        10-K for the fiscal year ended December 31, 1991.

11      Computation of Income per share.

21      Subsidiaries of the Registrant.

23.1    Consent of Deloitte & Touche LLP.

23.2    Report on schedules of Deloitte & Touche LLP.

27      Financial Data Schedule.

99.1    Acceptance Insurance Companies Inc., 1992 Incentive
        Stock Option Plan effective as of December 22, 1992.
        Incorporated by reference to Exhibit 10.1 to
        Registrant's Registration Statement on Form S-1,
        Registration No. 33-53730.

99.2    Acceptance Insurance Companies Inc., Employee Stock
        Purchase Plan, effective as of December 22, 1992.
        Incorporated by reference to Exhibit 10.2 to
        Registrant's Registration Statement on Form S-1,
        Registration No. 33-53730.

99.3    Acceptance Insurance Companies Inc., Employee Stock
        Ownership and Tax Deferred Savings Plan as merged,
        amended and restated effective October 1, 1990.
        Incorporated by reference as Exhibit 10.4 to
        Registrant's Quarterly Report on Form 10-Q for the
        quarter ended November 30, 1990.

99.4    First Amendment to Acceptance Insurance Companies Inc.
        Employee Stock Ownership and Tax Deferred Savings Plan.
        Incorporated by reference to Registrant's Annual Report
        on Form 10-K for the fiscal year ended December 31,
        1993.

99.5    Second Amendment to Acceptance Insurance Companies Inc.
        Employee Stock Ownership and Tax Deferred Savings Plan.
        Incorporated by reference to Registrant's Annual Report
        on Form 10-K for the fiscal year ended December 31,
        1993.

99.6    Proxy Statement for 1997 Annual Meeting of Shareholders
        filed on or prior to April 30, 1997.

99.7    Acceptance Insurance Companies Inc. Amended 1992
        Incentive Stock Option Plan.  Incorporated by reference
        to Registrant's Proxy Statement for 1995 Annual Meeting
        of Shareholders filed on or prior to April 30, 1996.

99.8    Acceptance Insurance Companies Inc. 1996 Incentive Stock
        Option Plan.  Incorporated by reference to Registrant's
        Proxy Statement for 1996 Annual Meeting of Shareholders
        filed on or prior to April 29, 1996.

99.9    Acceptance Insurance Companies Inc. Amended Employee
        Stock Purchase Plan.  Incorporated by reference to
        Registrant's Proxy Statement for 1995 Annual Meeting of
        Shareholders filed on or prior to April 30, 1995.



ACCEPTANCE INSURANCE
COMPANIES INC.


Consolidated Financial Statements for the
Years Ended December 31, 1996 and 1995
and Independent Auditors' Report

<PAGE>
INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
of Acceptance Insurance Companies Inc.

We have audited the accompanying consolidated balance sheets of
Acceptance Insurance Companies Inc. and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996.
These consolidated financial statements are the responsibility of
the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and
perform 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, such consolidated financial statements present
fairly, in all material respects, the financial position of
Acceptance Insurance Companies Inc. and subsidiaries as of
December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted
accounting principles.

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





DELOITTE & TOUCHE LLP

Omaha, Nebraska
March 12, 1997

<TABLE>
<CAPTION>
ACCEPTANCE INSURANCE COMPANIES INC.

CONSOLIDATED BALANCE SHEETS (dollars in thousands except
share data)
DECEMBER 31, 1996 AND 1995

ASSETS                                                                                                        1996        1995
<S>                                                                                                         <C>         <C>
Investments:
  Fixed maturities available-for-sale (Note 2)                                                              $268,004    $218,300
  Marketable equity securities available-for-sale (Note 2)                                                    83,837      48,537
  Mortgage loans and other investments                                                                        11,149      11,290
  Real estate                                                                                                  3,342       3,354
  Short-term investments, at cost, which approximates market                                                  39,594      86,520
                                                                                                            --------    --------
                                                                                                             405,926     368,001
Cash                                                                                                          10,697       7,648
Investment in Major Realty Corporation (Note 4)                                                                8,827       9,878
Receivables, net (Note 5)                                                                                    133,363     106,246
Reinsurance recoverable on unpaid loss and loss adjustment expenses                                          185,421     167,888
Prepaid reinsurance premiums                                                                                  36,140      38,341
Property and equipment, net of accumulated depreciation of $7,077 and $4,886                                   8,988       5,284
Deferred policy acquisition costs                                                                             29,437      24,585
Excess of cost over acquired net assets                                                                       35,783      37,003
Deferred income tax (Note 6)                                                                                  21,172       9,403
Other assets                                                                                                   8,626       6,757
                                                                                                            ________    ________

                                                                                                            $884,380    $781,034
                                                                                                            ========    ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Losses and loss adjustment expenses (Note 7)                                                                $432,173    $369,244
Unearned premiums                                                                                            140,217     124,122
Amounts payable to reinsurers                                                                                 10,157      18,161
Accounts payable and accrued liabilities                                                                      25,013      22,720
Bank borrowings, term debt and other borrowings (Note 8)                                                      69,000      69,000
                                                                                                            --------    --------
           Total liabilities                                                                                 676,560     603,247

Contingencies (Note 9)

Stockholders' equity (Notes 8 and 10):
  Preferred stock, no par value, 5,000,000 shares authorized, none issued                                       -           -
  Common stock, $.40 par value, 20,000,000 shares authorized;
    15,256,507 and 15,141,220 shares issued                                                                    6,103       6,057
  Capital in excess of par value                                                                             196,090     194,823
  Unrealized gain (loss) on available-for-sale securities, net of tax                                         (1,476)         19
  Retained earnings (accumulated deficit)                                                                     11,432     (18,848)
                                                                                                            ________    _________
                                                                                                             212,149     182,051
  Less:
    Treasury stock, at cost, 38,680 and 35,559 shares                                                         (1,629)     (1,564)
    Contingent stock, 240,000 shares (Note 11)                                                                (2,700)     (2,700)
                                                                                                            --------    --------
           Total stockholders' equity                                                                        207,820     177,787
                                                                                                            --------    --------
                                                                                                            $884,380    $781,034
<FN>                                                                                                            ========    ========
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>

<TABLE>
<CAPTION>
ACCEPTANCE INSURANCE COMPANIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

                                                                                                  1996        1995        1994
<S>                                                                                              <C>         <C>         <C>
Revenues:
  Insurance premiums earned (Note 7)                                                             $348,653    $271,584    $202,659
  Insurance agency commissions                                                                     1,035       2,863       3,629
  Net investment income (Note 2)                                                                  26,491      20,651      13,276
  Net realized capital gains                                                                       5,216       2,707         554
                                                                                                --------    --------    --------
                                                                                                 381,395     297,805     220,118
Costs and expenses:                                                                             --------    --------    --------
  Cost of revenues:
    Insurance losses and loss adjustment expenses (Note 7)                                       243,257     212,337     142,951
    Insurance agency costs                                                                         1,024       2,596       3,180
    Insurance underwriting expenses                                                               95,803      72,602      52,627
  General and administrative expenses                                                              2,015       2,165       1,684
                                                                                                --------    --------    --------
                                                                                                 342,099     289,700     200,442
                                                                                                --------    --------    --------
           Operating profit                                                                       39,296       8,105      19,676
                                                                                                --------    --------    --------

Other income (expense):
  Interest expense                                                                                (4,896)     (2,591)     (1,693)
  Loss on investee (Note 4)                                                                       (1,052)       (265)       (297)
  Other, net                                                                                         142          94          26
                                                                                                --------    --------    --------
                                                                                                  (5,806)     (2,762)     (1,964)
                                                                                                --------    --------    --------

           Income before income taxes and minority interests                                      33,490       5,343      17,712

Income tax expense (benefit) (Note 6):
  Current                                                                                         14,173       4,002       2,487
  Deferred                                                                                       (10,963)     (2,814)     (5,930)
                                                                                                --------    --------    --------
                                                                                                   3,210       1,188      (3,443)

Minority interests in net income of consolidated subsidiaries                                       -           -            (80)
                                                                                                --------    --------    --------

           Net income                                                                           $ 30,280    $  4,155    $ 21,075
                                                                                                ========    ========    ========

Net income per share:
  Primary                                                                                       $   2.00    $   0.28    $   1.71
                                                                                                ========    ========    ========

  Fully diluted                                                                                 $   1.96    $   0.27    $   1.68
                                                                                                ========    =======     ========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>

<TABLE>
<CAPTION>
ACCEPTANCE INSURANCE COMPANIES INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

                                                                            Retained
                                                Capital in   Unrealized     Earnings                                Total
                                       Common    Excess of      Gain      (Accumulated   Treasury   Contingent   Stockholders'
                                        Stock    Par Value     (Loss)       Deficit)       Stock       Stock        Equity
<C>                                     <C>       <C>         <C>          <C>           <C>         <C>           <C>
Balance at January 1, 1994              $3,991    $140,002    $    66      $(44,078)     $(1,564)    $(2,700)      $  95,717

  Issuance of common stock on            1,946      51,467        -            -            -            -            53,413
   exercise of warrants
  Issuance of common stock in
    connection with Statewide
    acquisition                            107       2,993        -            -            -            -             3,100
  Issuance of common stock under
    employee benefit plans                   8         212        -            -            -            -               220
  Change in unrealized gain (loss) on
    available-for-sale securities, net
    of income taxes of $6,424             -           -        (13,771)        -            -            -           (13,771)
  Net income                              -           -           -          21,075         -            -            21,075
                                        ------    --------    --------      -------     --------     -------       ---------

Balance at December 31, 1994             6,052     194,674     (13,705)     (23,003)      (1,564)      (2,700)       159,754

  Issuance of common stock under
    employee benefit plans                   5         149        -            -            -            -               154
  Change in unrealized gain (loss) on
    available-for-sale securities,
     net of income taxes of $(6,435)      -           -         13,724         -            -            -            13,724
  Net income                              -           -           -           4,155         -            -             4,155
                                         -----      -------     ------       ------        ------       ------        ------
Balance at December 31, 1995             6,057     194,823         19       (18,848)      (1,564)      (2,700)       177,787

  Issuance of common stock under
  employee benefit plans                    46       1,267        -            -            -            -             1,313
  Purchase of treasury stock              -           -           -            -             (65)        -               (65)
  Change in unrealized gain (loss) on
  available-for-sale securities, net
   of income taxes of $806                -           -         (1,495)        -            -            -            (1,495)

  Net income                              -           -           -          30,280         -            -            30,280
                                        ------    --------    --------      -------     --------     -------       ---------

Balance at December 31, 1996            $6,103    $196,090    $ (1,476)  $ 11,432    $(1,629)   $(2,700)   $207,820
                                        ======    ========    ========   ========    =======    =======    ========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>


<TABLE>
<CAPTION>
ACCEPTANCE INSURANCE COMPANIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

                                                                                              1996         1995        1994
<C>                                                                                        <C>          <C>          <C>
Cash flows from operating activities:
  Net income                                                                               $  30,280    $   4,155    $  21,075
  Adjustments to reconcile net income to net cash provided
    by (used for) operating activities:
      Depreciation and amortization                                                            4,282        3,821        3,522
      Deferred tax benefit                                                                   (10,963)      (2,814)      (5,930)
      Loss on investee                                                                         1,052          265          297
      Minority interests                                                                        -            -              80
      Policy acquisition costs incurred                                                      (94,140)     (62,171)     (55,234)
      Amortization of policy acquisition costs                                                89,288       57,420       47,215
      Gain on sale of investments                                                             (5,216)      (2,707)        (554)
      Increase (decrease) in cash attributable to changes
        in assets and liabilities:
          Receivables                                                                        (27,117)     (29,253)     (28,855)
          Net losses and loss adjustment expenses                                             45,396       59,842       25,800
          Net unearned premiums                                                               18,296       14,599       26,515
          Amounts payable to reinsurers                                                       (8,004)      (1,148)      12,123
          Accounts payable and accrued liabilities                                             2,293        6,191       (2,402)
      Other, net                                                                              (2,516)      (1,674)        (978)
                                                                                           ---------    ---------    ---------
           Net cash from operating activities                                                 42,931       46,526       42,674
                                                                                           ---------    ---------    ---------
Cash flows from investing activities:
  Proceeds from sales of investments                                                            -            -             640
  Proceeds from sales of investments available-for-sale                                      145,819      135,820       24,179
  Proceeds from maturities of investments                                                     29,207       42,938       37,483
  Proceeds from maturities of investments
    available-for-sale                                                                        21,498       10,306       15,437
  Purchases of investments                                                                   (28,230)     (51,233)     (48,162)
  Purchases of investments available-for-sale                                               (249,540)    (187,575)    (101,243)
  Other, net                                                                                  (6,046)      (2,432)      (2,022)
                                                                                           ---------    ---------    ---------
           Net cash from investing activities                                                (87,292)     (52,176)     (73,688)
                                                                                           ---------    ---------    ---------
Cash flows from financing activities:
  Proceeds from bank borrowings                                                                 -          40,000       29,000
  Repayments of bank borrowings                                                                 -            -         (18,597)
  Repayments of term debt, other borrowings
    and notes payable to affiliates                                                             -            -            (354)
  Proceeds from issuance of common stock                                                       1,313          154       53,633
  Purchase of treasury stock                                                                     (65)        -            -
  Minority interests                                                                            -            -               7
                                                                                           ---------    ---------    ---------
           Net cash from financing activities                                                  1,248       40,154       63,689
                                                                                           ---------    ---------    ---------
Net increase (decrease) in cash and short-term investments                                   (43,113)      34,504       32,675

Cash and short-term investments at beginning of period                                        84,740       50,236       17,561
                                                                                           ---------    ---------    ---------

Cash and short-term investments at end of period                                           $  41,627    $  84,740    $  50,236
                                                                                           =========    =========    =========
Non-cash financing activities:
  Issuance of common stock for acquisition of Statewide                                                              $   3,100
                                                                                                                     =========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>



<PAGE>
ACCEPTANCE INSURANCE COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Description of Operations - Acceptance Insurance Companies
   Inc. (the "Company") is primarily engaged in the specialty
   property and casualty insurance business through its wholly-
   owned subsidiaries, Acceptance Insurance Holdings Inc.
   ("Acceptance") and The Redland Group, Inc. ("Redland"), which
   the Company acquired on April 11, 1990 and August 13, 1993,
   respectively.

   The Company concentrates on writing specialty coverages not
   generally emphasized by standard insurance carriers.  These
   specialty coverages primarily include specialty automobile
   lines, surplus lines liability and substandard property
   coverages, complex general liability risks, workers'
   compensation, and crop insurance.  Insurance is marketed
   through both general and independent agents.  The Company
   writes business as both an admitted (licensed) and non-
   admitted (excess and surplus lines) carrier in most of the
   United States.

   Principles of Consolidation - The Company's consolidated
   financial statements include the accounts of its majority-
   owned subsidiaries.  All significant intercompany
   transactions have been eliminated.

   Insurance Accounting - Generally, premiums are recognized as
   income ratably over the terms of the related policies.  The
   crop hail premiums are recorded utilizing historical loss
   activity to match premiums earned with estimated loss
   exposure.  Insurance costs are associated with premiums
   earned, resulting in the recognition of profits over the term
   of the policies.  This association is accomplished through
   amortization of deferred policy acquisition costs and
   provisions for unearned premiums and loss reserves.

   The Company writes multi-peril crop insurance ("MPCI")
   pursuant to terms established by the federal Risk Management
   Agency ("RMA").  The Company issues and administers policies,
   for which it receives administrative fees and the Company
   participates in a profit sharing arrangement in which it
   receives from the government a portion of the aggregate
   profit, or pays a portion of the aggregate loss, with respect
   to the business it writes.  The Company's share of the profit
   or loss on the MPCI business it writes is determined under a
   formula established by the RMA.  The Company records an
   estimate of its share of the profit or loss based upon
   available loss information.  The Company receives a profit
   share in cash, with any amount in excess of 15% of its MPCI
   Retention (as defined in the profit sharing agreement) in any
   year carried forward to future years, or it must pay its
   share of losses.  The Company recognizes as income in the
   current year these amounts which are carried forward as a
   receivable.  The amounts carried forward as a receivable are
   received in future years in cash or as a reduction of losses
   due the RMA.  MPCI premiums received during the year which
   correspond to next year's crop season are deferred until the
   next year.  Insurance underwriting expenses are presented net
   of administrative fees received from the RMA for
   reimbursement of costs incurred by the Company.

   The liability for unearned premiums represents the portion of
   premiums written which relates to future periods and is
   calculated generally using the pro rata method.  The Company
   also provides a liability for policy claims based on its
   review of individual claim cases and the estimated ultimate
   settlement amounts.  This liability also includes estimates
   of claims incurred but not reported based on Company and
   industry paid and reported claim and settlement expense
   experience.  Differences which arise between the ultimate
   liability for claims incurred and the liability established
   will be reflected in the statement of operations of future
   periods as additional claim information becomes available.

   Certain costs of acquiring new insurance business,
   principally commissions, premium taxes, and other
   underwriting expenses, have been deferred.  Such costs are
   being amortized as related premiums are earned.  Anticipated
   investment income is considered in evaluating recoverability
   of deferred acquisition costs.

   Use of Estimates - The preparation of financial statements in
   conformity with generally accepted accounting principles
   requires management to make estimates and assumptions that
   affect the reported amounts of assets and liabilities and
   disclosure of contingent assets and liabilities at the date
   of the financial statements and the reported amounts of
   revenues and expenses during the reporting period.  Actual
   results may differ from those estimates.

   Estimates made by management include the liability for losses
   and loss adjustment expenses and recoverability of deferred
   policy acquisition costs.  The Company underwrites property
   and casualty coverages in a number of specialty areas of
   business which may involve greater risks than standard
   property and casualty lines, including the risks associated
   with the absence of long-term, reliable historical claims
   experience.  These risk components may make more difficult
   the task of estimating reserves for losses, and cause the
   Company's underwriting results to fluctuate.  Due to the
   inherent uncertainty of estimating reserves, it has been
   necessary, and may over time continue to be necessary, to
   revise estimated liabilities as reflected in the Company's
   loss and loss adjustment expense reserves.  Additionally,
   conditions and trends that have affected the development of
   loss reserves in the past may not necessarily occur in the
   future.

   Statements of Cash Flows - The Company aggregates cash and
   short-term investments with maturity dates of three months or
   less from the date of purchase for purposes of reporting cash
   flows.  As of December 31, 1996 and 1995, approximately
   $8,664,000 and $9,428,000 of short-term investments had
   maturity dates at acquisition of greater than three months.

   Investments - On January 1, 1994, the Company adopted
   Statement of Financial Accounting Standards No. 115 ("SFAS
   115"), Accounting for Certain Investments in Debt and Equity
   Securities.  As a result of adoption of this statement,
   $2,912,000 was credited to stockholders' equity at January 1,
   1994.  Since the adoption of SFAS 115, all debt and equity
   securities have been classified as available-for-sale.
   Available-for-sale securities are stated at fair value with
   the unrealized gains and losses reported as a separate
   component of stockholders' equity, net of tax.

   Mortgage loans are carried at the lower of their unpaid
   principal balance or if impaired, fair value.  Real estate is
   stated at the lower of cost or estimated net realizable value
   and is non-income producing.

   Property and Equipment - Property and equipment are stated at
   cost, net of accumulated depreciation.  Depreciation is
   recognized principally using the straight-line method over a
   period of five to ten years.  The Company capitalizes direct
   costs incurred with the development of internal use software.

   Excess of Cost Over Acquired Net Assets - The excess of cost
   over equity in acquired net assets is being amortized
   principally using the straight-line method over periods not
   exceeding 40 years.  Accumulated amortization approximated
   $5,658,000 and $4,439,000 at December 31, 1996 and 1995,
   respectively.

   Impairment of Long-Lived Assets - Measurement of the
   impairment of long-lived assets is evaluated periodically
   based primarily on management's estimate of future earnings.

   Stock Options - The Company recognizes compensation cost
   relating to stock options based upon the difference between
   the market price of the stock at the date of grant, and the
   option exercise price.

   Per Share Data - Primary and fully diluted earnings per share
   are based on weighted average shares outstanding of
   approximately 15.1 million and 15.4 million, respectively,
   for the year ended December 31, 1996; 15.0 million and 15.2
   million, respectively, for the year ended December 31, 1995;
   and approximately 13.4 million and 13.6 million,
   respectively, for the year ended December 31, 1994.  Included
   in weighted average shares outstanding in 1994 is the assumed
   conversion of all outstanding options and warrants utilizing
   the modified treasury stock method, since average outstanding
   options and warrants during those periods exceeded 20% of the
   outstanding stock.  Under this method, appropriate adjustment
   to net income is made to reflect the assumed use of the
   proceeds of the conversion.  In 1996 and 1995, the treasury
   stock method was used without modification.

   Reclassifications - Certain prior period amounts have been
   reclassified to conform with current year presentation.

2. INVESTMENTS

   A summary of net investment income earned on the investment
   portfolio for the years ended December 31 is as follows (in
   thousands):
<TABLE>
<CAPTION>

                                                                                                 1996      1995      1994
     <S>                                                                                       <C>       <C>       <C>
     Interest on fixed maturities                                                              $15,189   $14,913   $10,357
     Interest on short-term investments                                                          9,652     5,461     2,101
     Other                                                                                       2,242       829     1,420
                                                                                               -------   -------   -------
                                                                                                27,083    21,203    13,878
     Investment expenses                                                                          (592)     (552)     (602)
                                                                                               -------   -------   -------

     Net investment income                                                                     $26,491   $20,651   $13,276

                                                                                               =======   =======   =======
</TABLE>

<PAGE>
   The amortized cost and related estimated fair values of
   investments in the accompanying balance sheets are as follows
   (in thousands):
<TABLE>
<CAPTION>
                                                                                     Gross        Gross      Estimated
                                                                       Amortized   Unrealized   Unrealized      Fair
                                                                          Cost       Gains        Losses       Value
     <C>                                                              <C>            <C>          <C>        <C>
     December 31, 1996:
       Fixed maturities available-for-sale:
         U.S. Treasury and government securities                       $ 86,359      $  154       $  260     $ 86,253
         States, municipalities and political subdivisions               93,293       1,620          306       94,607
         Mortgage-backed securities                                      60,138         205        7,508       52,835
         Other debt securities                                           34,581         685          957       34,309
                                                                       --------      ------       ------     --------

                                                                       $274,371      $2,664       $9,031     $268,004
                                                                       ========      ======       ======     ========

       Marketable equity securities - preferred stock                  $ 62,628      $  932       $  596     $ 62,964
                                                                       ========      ======       ======     ========

       Marketable equity securities - common stock                     $ 17,112      $4,641       $  880     $ 20,873
                                                                       ========      ======       ======     ========
     December 31, 1995:
       Fixed maturities available-for-sale:
         U.S. Treasury and government securities                     $ 51,022        $  684       $   17     $ 51,689
         States, municipalities and political subdivisions             69,433         1,991          230       71,194
         Mortgage-backed securities                                    72,359           407        5,546       67,220
         Other debt securities                                         27,484         1,060          347       28,197
                                                                     --------        ------       ------     --------

                                                                     $220,298        $4,142       $6,140     $218,300
                                                                     ========        ======       ======     ========

       Marketable equity securities - preferred stock                $ 31,299        $  266       $  957     $ 30,608
                                                                     ========        ======       ======     ========

       Marketable equity securities - common stock                   $ 15,211        $3,302       $  584     $ 17,929
                                                                     ========        ======       ======     ========
</TABLE>
   The amortized cost and related estimated fair values of the
   fixed maturity securities as of December 31, 1996 are shown
   below by stated maturity dates.  Actual maturities may differ
   from stated maturities because the borrowers may have the
   right to call or prepay obligations with or without call or
   prepayment penalties.
<TABLE>
<CAPTION>
                                                                                                    Amortized     Estimated
                                                                                                       Cost       Fair Value
                                                                                                         (in thousands)
     <S>                                                                                             <C>           <C>
     Fixed maturities available-for-sale:
       Due in one year or less                                                                       $ 14,351      $ 14,300
       Due after one year through five years                                                           50,799        50,689
       Due after five years through ten years                                                          55,470        56,133
       Due after ten years                                                                             93,613        94,047
                                                                                                      -------      --------
                                                                                                      214,233       215,169
       Mortgage-backed securities                                                                      60,138        52,835

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

                                                                                                     $274,371      $268,004
                                                                                                     ========      ========
</TABLE>
   The Company's collateral backed securities portfolio consists
   of mortgage-backed securities, all of which are
   collateralized mortgage obligations ("CMOs").  The following
   table sets forth as of December 31, 1996 the categories of
   the Company's CMOs, which at such date had an average
   expected life of approximately six years (in thousands):
<TABLE>
<CAPTION>

                                                                                        Par      Amortized   Estimated
                                                                                       Value       Cost         Fair
     Type of CMO                                                                        (1)         (1)        Value
     <S>                                                                              <C>         <C>         <C>
     Fixed coupon                                                                     $13,597     $13,372     $13,483
     Floating rate (2)                                                                 16,812      16,486      15,743
     Inverse floating rate (2)                                                         31,410      30,280      23,609
                                                                                      -------     -------     -------

                Total CMOs (3)                                                        $61,819     $60,138     $52,835
                                                                                      =======     =======     =======
<FN>
   (1)  Par value is the face amount of the underlying mortgage
        collateral.  Any cost in excess of par value is a "premium"
        whereas cost lower than par value is a "discount".  The
        Company's aggregate CMO portfolio has been purchased at a
        discount.

   (2)  Floating rate CMOs provide an increased interest rate when a
        specified index interest rate increases and a lower interest
        rate when such index rate decreases, while inverse floating
        rate CMOs provide a lower interest rate when the index
        increases and a higher rate when the index rate decreases.
        Generally, the Company's floating rate and inverse floating
        rate securities are tied to the one month LIBOR.  The market
        values of the Company's floating rate and inverse floating
        rate CMOs are significantly impacted by various factors,
        including the outlook for future interest rate changes and
        such securities' relative liquidity under current market
        conditions.

   (3)  All of the CMO portfolio collateral is guaranteed by
        government agencies.
 </FN>
</TABLE>

   Proceeds from sales of fixed maturity securities during the
   years ended December 31, 1996, 1995 and 1994 were
   approximately $100,203,000, $113,523,000 and $21,729,000,
   respectively.  Gross realized gains on sales of fixed
   maturity securities were approximately $1,681,000, $1,421,000
   and $55,000, and gross realized losses on sales of fixed
   maturity securities were approximately $22,000, $499,000 and
   $13,000 during the years ended December 31, 1996, 1995 and
   1994, respectively.

   As required by insurance regulatory laws, certain bonds with
   an amortized cost of approximately $18,784,000 and short-term
   investments of approximately $3,133,000 at December 31, 1996
   were deposited in trust with regulatory agencies.

3. FAIR VALUES OF FINANCIAL INSTRUMENTS

   Statement of Financial Accounting Standards No. 107,
   Disclosures about Fair Value of Financial Instruments ("SFAS
   107"), requires fair value disclosures for financial
   instruments.  Certain financial instruments, including
   insurance contracts, were excluded from SFAS 107 disclosure
   requirements due to perceived difficulties in measuring fair
   value.

   In determining fair value, the Company used quoted market
   prices when available.  For instruments where quoted market
   prices were not available, the Company used independent
   pricing services or appraisals by the Company's management.
   Those services and appraisals reflected the estimated present
   values utilizing current risk adjusted market rates of
   similar instruments.

   Considerable judgment is necessarily required in interpreting
   market data to develop the estimates of fair value.
   Accordingly, the estimates presented herein are not
   necessarily indicative of the amounts the Company could
   realize in a current market exchange.  The use of different
   market assumptions and/or estimation methodologies may have a
   material effect on the estimated fair value.

   The carrying values of cash and short-term investments,
   receivables and accounts payable, and accruals are deemed to
   be reasonable estimates of their fair values due to their
   short-term nature.  The estimated fair values of the
   Company's other financial instruments as of December 31, 1996
   and 1995, are as follows (in thousands):
<TABLE>
<CAPTION>

                                                                                  Carrying Value     Estimated Fair Value
                                                                                  1996       1995       1996       1995
     <S>                                                                        <C>        <C>        <C>        <C>
     Investments in fixed maturity securities                                   $268,004   $218,300   $268,004   $218,300
     Investments in marketable equity  securities                                 83,837     48,537     83,837     48,537
     Mortgage loans and other investments                                         11,149     11,290     11,149     11,290
     Investment in Major Realty Corporation                                        8,827      9,878      8,827      9,878
     Bank borrowings, term debt and other borrowings                              69,000     69,000     69,000     69,000

</TABLE>

4. INVESTMENT IN MAJOR REALTY CORPORATION

   As of December 31, 1996 and 1995, the Company held an
   approximate 33% equity investment in Major Realty
   Corporation, a publicly traded real estate company engaged in
   the ownership and development of its undeveloped land in
   Orlando, Florida.

   At December 31, 1996, the carrying value of the Company's
   equity investment in Major Realty approximated $3.8 million
   or $1.65 per share.  At that date, Major Realty had a
   stockholders' equity of approximately $3.2 million and the
   quoted market price of Major Realty was $1.50 per share.  The
   Company expects to realize a minimum of its carrying value in
   Major Realty based on the estimated net realizable values of
   Major Realty's underlying assets.  Commencing in 1992, the
   Company has not recognized its share of net gains realized by
   Major Realty on sales of real estate but continues to
   recognize its share of general and administrative expenses
   recorded by Major Realty.

   During 1995, the Company loaned Major Realty $5.1 million,
   collateralized by real estate.  Terms of the note call for
   interest payable quarterly at prime plus 1.5%.  Principal is
   payable as real estate is sold with a final maturity on May
   1, 1998.  The note is convertible into Major Realty stock at
   the option of the Company at the prevailing market price at
   conversion.  Interest income during 1996 and 1995 of $503,000
   and $106,000, respectively, is included in net investment
   income.


<PAGE>
   The following summary financial data for Major Realty as of
   and for the years ended December 31, 1996 and 1995 was
   obtained from Major Realty's consolidated financial
   statements (in thousands):
<TABLE>
<CAPTION>

                                                                                 December 31,
                                                                                1996      1995
     <S>                                                                       <C>       <C>
     Land held for sale or development                                         $5,141    $5,292
     Mortgage note receivable                                                   2,750     2,750
     Other assets                                                               1,235     1,680
                                                                               ------    ------

                Total assets                                                   $9,126    $9,722
                                                                               ======    ======

     Mortgage and other notes payable                                          $5,064    $5,064
     Other liabilities                                                            874       891
     Stockholders' equity                                                       3,188     3,767
                                                                               ------    ------

                Total liabilities and stockholders' equity                     $9,126    $9,722
                                                                               ======    ======

     Total revenues                                                            $  839    $7,255
     Gross profit                                                                 213     4,132
     Net income (loss)                                                           (579)    2,664
</TABLE>

5. RECEIVABLES

   The major components of receivables at December 31 are
   summarized as follows (in thousands):
<TABLE>
<CAPTION>

                                                                                  1996          1995
     <S>                                                                         <C>           <C>
     Insurance premiums and agents' balances due                                 $ 63,079      $ 60,602
     Amounts recoverable from reinsurers                                          11,786        20,379
     Profit sharing gain due from the RMA                                         45,364        19,616
     Accrued interest                                                              4,826         4,023
     Installment notes receivable                                                  5,954         3,207
     Federal income tax receivable                                                 5,085          -
     Other                                                                           723           851
     Less allowance for doubtful accounts                                         (3,454)       (2,432)
                                                                                --------       -------
                                                                                $133,363      $106,246
                                                                                ========      ========
</TABLE>
6. INCOME TAXES

   The Company recognizes a net deferred tax asset or liability
   for all temporary differences and a related valuation
   allowance when realization of the asset is uncertain.  The
   valuation allowance at December 31, 1996 and 1995 related to
   capital loss items.  At December 31, 1996, the realization of
   the majority of these capital loss items are more likely than
   not due to sufficient carryforwards of capital gains as well
   as the likelihood of future capital gains.  The net deferred
   tax as of December 31, is as follows (in thousands):
<TABLE>
<CAPTION>

                                                                                                   1996        1995
     <S>                                                                                         <C>         <C>
     Unpaid losses and loss adjustment expenses                                                  $ 13,322    $ 10,701
     Unearned premiums                                                                              7,283       6,004
     Allowances for doubtful accounts                                                               1,213         869
     Other                                                                                          2,689       1,443
     Unrealized loss on fixed maturities available-for-sale                                         2,229         699
     Major Realty basis difference                                                                  8,317       7,950
                                                                                                 --------    --------
                Deferred tax asset                                                                 35,053      27,666
                                                                                                 --------    --------

     Deferred policy acquisition costs                                                            (10,303)     (8,605)
     Unrealized gain on marketable equity securities                                               (1,434)       (710)
     Other                                                                                         (1,071)       (888)
                                                                                                 --------    --------
                Deferred tax liability                                                            (12,808)    (10,203)
                                                                                                 --------    --------
                                                                                                   22,245      17,463
     Valuation allowance                                                                           (1,073)     (8,060)
                                                                                                 --------    --------

     Net deferred tax asset                                                                      $ 21,172    $  9,403
                                                                                                 ========    ========
</TABLE>
   Income taxes computed by applying statutory rates to income
   before income taxes are reconciled to the provision for
   income taxes set forth in the consolidated financial
   statements as follows (in thousands):
<TABLE>
<CAPTION>

                                                                                      December 31,
                                                                                1996       1995       1994
     <S>                                                                      <C>        <C>        <C>
     Computed U.S. federal income taxes                                       $11,744    $ 1,870    $ 6,022
     Nondeductible amortization of goodwill and other intangibles                 631        541        514
     Tax-exempt interest income                                                (1,408)    (1,049)      (400)
     Dividends received deduction                                              (1,073)      (390)      (217)
     Recognition of a portion of the deferred tax asset                        (7,354)      -        (9,469)
     Other                                                                        670        216        107
                                                                              -------    -------    -------

               Income tax (benefit) expense                                   $ 3,210    $ 1,188    $(3,443)

                                                                              =======    =======    =======

</TABLE>
   Cash payments for income taxes were approximately
   $20,000,000, $4,253,000, and $1,478,000 during the years
   ended December 31, 1996, 1995, and 1994.

7. INSURANCE PREMIUMS AND CLAIMS

   Insurance premiums written and earned by the Company's
   insurance subsidiaries for the years ended December 31, 1996,
   1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>

                                                                                   1996         1995         1994
     <S>                                                                        <C>          <C>          <C>
     Direct premiums written                                                    $ 587,397    $ 514,241    $ 410,228
     Assumed premiums written                                                      63,663       23,108       37,255
     Ceded premiums written                                                      (284,111)    (251,166)    (218,307)
                                                                                ---------    ---------    --------

       Net premiums written                                                     $ 366,949    $ 286,183    $ 229,176
                                                                                =========    =========    =========

     Direct premiums earned                                                     $ 571,971    $ 489,834    $ 376,624
     Assumed premiums earned                                                       62,994       20,563       33,802
     Ceded premiums earned                                                       (286,312)    (238,813)    (207,767)
                                                                                ---------    ---------    ---------

       Net premiums earned                                                      $ 348,653    $ 271,584    $ 202,659
                                                                                =========    =========    =========

</TABLE>
   Included in ceded premiums written and earned is $134.0
   million, $95.4 million, and $92.7 million of MPCI premiums
   ceded to the RMA for the years ended December 31, 1996, 1995,
   and 1994, respectively.  Included in assumed premiums written
   and earned in 1996, 1995, and 1994 is $42.2 million, $14.2
   million, and $17.0 million of MPCI profit share.

   The following table presents an analysis of the Company's
   reserves for losses and loss adjustment expenses, reconciling
   beginning and ending balances for the years ended December 31
   (in thousands):
<TABLE>
<CAPTION>

                                                                                            1996        1995        1994
     <S>                                                                                 <C>         <C>         <C>
     Net loss and loss adjustment expense reserves at beginning of year                  $ 201,356   $ 141,514   $ 115,714
                                                                                         ---------   ---------   ---------
     Provisions for net losses and loss adjustment expenses for claims
      occurring in the current year                                                        233,727     190,019     137,881
     Increase in net reserves for claims occurring in prior years                            9,530      22,318       5,070
                                                                                         ---------   ---------   ---------
                                                                                           243,257     212,337     142,951
                                                                                         ---------   ---------   ---------

     Net losses and loss adjustment expenses paid for claims occurring during:
       Current year                                                                       (102,565)    (80,281)    (60,375)
       Prior years                                                                         (95,296)    (72,214)    (56,776)
                                                                                         ---------   ---------   ---------
                                                                                          (197,861)   (152,495)   (117,151)
                                                                                         ---------   ---------   ---------

     Net loss and loss adjustment expense reserves at end of year                          246,752     201,356     141,514
     Reinsurance recoverable on unpaid loss and loss adjustment expenses                   185,421     167,888      79,811
                                                                                         ---------   ---------   ---------

     Gross loss and loss adjustment expense reserves                                     $ 432,173   $ 369,244   $ 221,325
                                                                                         =========   =========   =========

</TABLE>
   Insurance loss and loss adjustment expenses have been reduced
   by recoveries recognized under reinsurance contracts of
   $300.8 million, $300.9 million, and $145.5 million for the
   years ended December 31, 1996, 1995, and 1994, respectively,
   of which approximately $207.5 million, $204.6 million, and
   $65.8 million, respectively, relate to recoveries on the MPCI
   business from the RMA.

   The liability for losses and loss adjustment expenses is
   determined by management based on historical patterns and
   expectations of claims reported and paid, trends in claim
   experience, information available on an industry-wide basis,
   as well as changes in the Company's claim handling procedures
   and premium rates.  The Company's lines of business are
   considered less predictable than standard insurance
   coverages.  In 1995, the Company determined that its
   liability was understated and made an additional provision
   through a charge to earnings of $22.3 million.

   The liability for losses and loss adjustment expenses
   represents management's best estimate and is based on sources
   of available evidence including an analysis prepared by an
   actuary engaged by the Company.  The Company believes it is
   reasonably possible that such liability may vary by five
   percent.


<PAGE>
8. BANK BORROWINGS, TERM DEBT AND OTHER BORROWINGS AND NOTES
   PAYABLE TO AFFILIATES

   On July 26, 1995, the Company amended its borrowing
   arrangements with its bank lenders providing a $75 million
   three year Revolving Credit Facility which, with the consent
   of the banks, can be renewed annually for three years and a
   $15 million Term Loan Facility with a maturity of the earlier
   of July 1996 or one year from the date of the borrowing.  The
   Term Loan Facility expired on July 26, 1996 as the Company
   had not drawn upon this facility as of that date.  The
   Company is currently negotiating with its banks to
   restructure the credit facility to incorporate the previous
   Term Loan Facility and Revolving Credit Facility into one
   credit facility.  Further, the Company selects its interest
   rate as either the prime rate or LIBOR plus a margin of .75%
   to 1.5% depending on the Company's debt to equity ratio.
   Interest is payable quarterly.  At December 31, 1996 and
   1995, the Company had $69 million outstanding under this
   arrangement at a weighted average interest cost of 6.7% and
   6.8%, respectively.

   At December 31, 1996, the line of credit was collateralized
   by the Company's Acceptance and Redland common stock.
   Borrowings and interest expense averaged $69.0 million and
   7.1% during 1996 and $34.3 million and 7.6% during 1995.  The
   line of credit contains covenants which do not permit the
   payment of dividends by the Company, requires the Company to
   maintain certain operating and debt service coverage ratios,
   requires maintenance of specified levels of surplus and
   requires the Company to meet certain tests established by
   regulatory authorities.

   The Company issued $9.5 million of Secured Subordinated Notes
   to certain directors or stockholders in April 1992 through
   the exchange of previously issued secured and unsecured notes
   aggregating approximately $8.3 million and cash.
   Additionally, the Company issued to the holders of the
   Secured Subordinated Notes approximately 97,500 common stock
   warrants exercisable for five years at a price of $9.50 per
   share, of which 70,725 warrants remained outstanding at
   December 31, 1996.  In January 1993, these notes were
   redeemed.

   Cash payments for interest were approximately $4.7 million,
   $2.3 million and $1.5 million during the years ended December
   31, 1996, 1995 and 1994, respectively.

9. CONTINGENCIES

   The Company is also involved in various insurance related
   claims and other legal actions arising from the normal
   conduct of business.  Management believes that the outcome of
   these proceedings will not have a material effect on the
   consolidated financial statements of the Company.

   At December 31, 1996, Acceptance Premium Finance Company,
   Inc., an affiliate, had a revolving line of credit agreement
   which provided for borrowings up to $16,000,000 maturing in
   September, 1998.  Borrowings under this agreement are
   guaranteed by the Company.  Acceptance Premium Finance
   Company, Inc. had $10,100,000 and $7,200,000 outstanding under
   this line of credit at December 31, 1996 and 1995,
   respectively.

10. COMMON STOCK ISSUED

   On January 27, 1993, the Company completed a Common Stock
   Rights Offering to raise equity capital resulting in the
   issuance of 3,992,480 units, at $8.00 per unit, consisting of
   one share of common stock and a warrant for the purchase of
   one share of common stock exercisable at $11.00.  Net
   proceeds of approximately $31.2 million were used in part to
   retire $9.5 million of Secured Subordinated Notes (see Note
   8).

   Effective April 15, 1993, the holder of a $7,000,000 Secured
   Subordinated Note of one of the Company's subsidiaries, which
   had been assumed by the Company, exchanged such note for
   875,000 shares of common stock and warrants to purchase
   875,000 additional shares of common stock.  The shares of
   common stock and warrants were identical to the shares and
   warrants issued in the Company's Rights Offering.

   On December 1, 1994, pursuant to a call by the Company to
   redeem outstanding warrants, approximately 4.85 million of
   such warrants were exercised to purchase shares of common
   stock, resulting in net proceeds to the Company of
   approximately $53.4 million.

11. ACQUISITIONS

   On March 31, 1994, the Company entered into an Agreement and
   Plan of Merger with Statewide Insurance Corporation
   (Statewide), the exclusive general agent for the Company's
   non-standard automobile insurance program underwritten by
   Phoenix Indemnity Insurance Company (Phoenix Indemnity),
   pursuant to which the Company acquired Statewide.  Statewide
   owned 20% of the outstanding common stock of Phoenix
   Indemnity which was a previously 80% owned subsidiary of the
   Company.  The acquisition was effective April 1, 1994 and was
   accounted for as a purchase.

   The purchase price of approximately $3.1 million, comprised
   of approximately 266,000 shares of the Company's common
   stock, was allocated based upon the estimated fair market
   value of assets acquired and liabilities assumed.  The
   purchase price in excess of the fair market value of the net
   assets acquired is being amortized using the straight-line
   method over 40 years.

   On August 13, 1993, the Company acquired all of the
   outstanding common stock, warrants to purchase common stock,
   and preferred stock of Redland pursuant to an Exchange
   Agreement.  Redland underwrites multi-peril crop, crop hail,
   specialty automobile, and farmowner insurance coverages.  The
   acquisition of Redland was accounted for as a purchase
   transaction.  The purchase price of approximately $15.4
   million, comprised of 1,339,000 shares of the Company's
   common stock  and acquisition related costs of $306,000, was
   allocated based upon the estimated fair market value of
   assets acquired and liabilities assumed.  The purchase price
   in excess of the fair market value of the net assets acquired
   is being amortized using the straight-line method over 40
   years.

   The purchase price does not reflect 240,000 shares issued by
   the Company and held in escrow pursuant to the Exchange
   Agreement, as a fund against which the Company may assert
   certain claims.  The primary contingency under which claims
   may be asserted is the ultimate development of Redland's
   liability for losses and loss adjustment expenses.  Upon
   resolution of contingencies related to the acquisition, such
   shares will be returned to the Company or released to former
   Redland stockholders.

12. OPERATING LEASES

   The Company leases office space and certain furniture and
   equipment under operating leases.  Future minimum obligations
   under these operating leases are as follows at December 31,
   1996 (in thousands):
<TABLE>
         <S>                                                                                                    <C>
         1997                                                                                                   $ 3,922
         1998                                                                                                     3,044
         1999                                                                                                     2,783
         2000                                                                                                     2,672
         2001                                                                                                     1,963
                                                                                                                -------

                                                                                                                $14,384

                                                                                                                =======

</TABLE>
   Rental expense totaled approximately $3,715,000, $3,286,000
   and $2,529,000 for the years ended December 31, 1996, 1995
   and 1994, respectively.

13. STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS

   The Company's 1996 incentive stock option plan provides for a
   maximum of 1,500,000 options to be granted to employees and
   directors.  Stock options issued to employees will vest in
   not less than five annual installments.  Stock options issued
   to non-employee directors will vest at the expiration of the
   directors' current term.  All options expire no later than
   ten years from the date of grant and the exercise price will
   not be less than 100% of the market value at the date of
   grant.

   The 1992 incentive stock option plan was terminated as to
   future grants upon approval of the 1996 incentive stock
   option plan.  The 1992 incentive stock option plan provided
   for options granted to employees which vest over 4 years from
   the date of the grant and options to non-employee directors
   which vest one year from the date of grant.  All options
   expire no later than ten years from the date of grant and the
   exercise price is equal to the market price at the date of
   grant.

   Under the Company's employee stock purchase plan, the Company
   is authorized to issue up to 500,000 shares of common stock
   to its full-time employees.  Under the terms of the plan,
   each year employees can choose to purchase up to 10% of their
   annual compensation.  The purchases may be made during six
   month phases generally commencing at the beginning of January
   and July.  The purchase price of the stock is equal to the
   lower of 85% of the market price on the termination date of
   the phase or when the subscription is paid in full, whichever
   first occurs; or 85% of the average of the market price on
   the commencement date of the phase and the market price on
   the termination date of the phase or when the subscription is
   paid in full, whichever first occurs.  Under the plan, the
   Company sold 12,690, 12,374, and 19,722 shares during 1996,
   1995, and 1994, respectively.


<PAGE>
   The Company applies APB Opinion 25 and related
   Interpretations in accounting for its plans.  Accordingly, no
   compensation cost has been recognized for its stock option
   plans and its stock purchase plan.  Had compensation cost for
   the Company's stock-based compensation plans been determined
   based on the fair value at the grant dates for awards under
   those plans consistent with the method of FASB Statement No.
   123, the Company's net income and earnings per share would
   have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>

                                                                                                             1996       1995
     <S>                                                                                                   <C>         <C>
     Net income:
       As reported                                                                                         $30,280     $ 4,155
       Pro forma                                                                                            28,929       3,754

     Earnings per share:
       Primary:
         As reported                                                                                       $ 2.00      $ 0.28
         Pro forma                                                                                           1.92        0.25

       Fully diluted:
         As reported                                                                                       $ 1.96      $ 0.27
         Pro forma                                                                                           1.88        0.25

</TABLE>

   The fair value of the options at the date of grant under the
   incentive stock option plans and the fair value of the
   employees' purchase rights under the employee stock purchase
   plan were estimated using a Black-Scholes option-pricing
   model with the following weighted-average assumptions for
   1996 and 1995, respectively:  risk-free interest rates of
   6.0% and 6.7%; expected volatility of 22%; weighted-average
   expected lives of options of 7 years and an expected life of
   employees' purchase rights of one year; and no dividend
   yield.

   A summary of the status of the Company's stock option plans
   as of December 31, 1996, 1995 and 1994 and changes during
   those years ending on those dates is presented below:
<TABLE>
<CAPTION>

                                                                            1996               1995               1994
                                                                               Weighted           Weighted           Weighted
                                                                               Average            Average            Average
                                                                               Exercise           Exercise           Exercise
                                                                      Options    Price   Options    Price   Options    Price
     <S>                                                            <C>         <C>      <C>       <C>       <C>       <C>
     Outstanding at beginning of year                                  622,731  $12.96   399,731   $12.12    274,231   $12.42
     Granted                                                           883,000   26.45   223,000    14.47    125,500    11.47
     Exercised                                                          87,210   11.23      -         -         -         -
     Forfeited                                                          40,500   21.54      -         -         -         -
                                                                     ---------  ------   -------   ------    -------   ------
     Outstanding at end of year                                      1,378,021  $21.46   622,731   $12.96    399,731   $12.12
                                                                     =========  ======   =======   ======    =======   ======

     Options exercisable at year end                                   270,896           271,481            211,231
     Weighted-average  fair value of options granted
       during the year                                                $   4.21            $ 5.79
</TABLE>

   The following table summarizes information about stock
   options outstanding at December 31, 1996:
<TABLE>
<CAPTION>

                                                         Options Outstanding              Options Exercisable
                                                              Weighted-
                                                               Average      Weighted-                Weighted-
                                                              Remaining      Average                  Average
                                                    Number   Contractual    Exercise     Number      Exercise
   Range of Exercise Prices                      Outstanding     Life         Price    Exercisable     Price
        <S>                                      <C>          <C>            <C>         <C>          <C>
             $8.75                                   67,500   1.1 years      $ 8.75       67,500      $ 8.75
        11.38 to 14.50                              423,146   7.5 years       13.03      199,021       12.50
             17.13                                   10,500   9.4 years       17.13         -            -
             19.69                                  174,500   9.5 years       19.69         -            -
        22.00 to 22.65                              176,500   9.4 years       22.64        2,000       22.00
        26.05 to 29.95                              350,625   9.5 years       28.00        1,625       28.50
        34.45 to 38.50                              175,250   9.5 years       34.46          750       38.50
                                                  ---------   ---------      ------      -------      ------
        $8.75 to $38.50                           1,378,021   8.5 years      $21.46      270,896      $11.80
</TABLE>

   The Company has a defined contribution plan for which related
   expense for 1996, 1995, and 1994 was approximately
   $1,002,000, $263,000, and $167,000, respectively.

14. RELATED PARTY TRANSACTIONS

   During October 1995, Major Realty issued a promissory note
   bearing interest at prime plus 1.5% for $5,064,144 to the
   Company (see Note 4).  Four members of the Board of Directors
   of the Company also serve on the Board of Directors of Major
   Realty.

   The Company contracts with a related party to administer
   health insurance benefits for its employees and to place
   property and casualty coverage on behalf of the Company
   whereby the related party receives commissions from the
   insurance providers which totalled $237,000 and $241,000 in
   1996 and 1995, respectively.  In addition, the Company pays
   commissions and fees in connection with insurance written and
   loss control activities, which totalled $186,000 and $149,000
   in 1996 and 1995, respectively.  This related party
   reimburses the Company for an allocable share of certain
   office occupancy expenses, $174,000 and $192,000 in 1996 and
   1995, respectively.

   The Company made payments during 1996 and 1995 totalling
   approximately $298,000 and $243,000, respectively, to a
   related party to provide investment related services.

15. REINSURANCE

   The Company's insurance subsidiaries cede insurance to other
   companies under quota share, excess of loss and facultative
   treaties.  The insurance subsidiaries also maintain
   catastrophe reinsurance to protect against catastrophic
   occurrences where claims can arise under numerous policies
   due to a single event.  The reinsurance agreements are
   tailored to the various programs offered by the insurance
   subsidiaries.  The largest amount retained in any one risk by
   the insurance subsidiaries during 1996 was $500,000.  The
   methods used for recognizing income and expenses related to
   reinsurance contracts have been applied in a manner
   consistent with the recognition of income and expense on the
   underlying direct and assumed business (See Note 1).


   Three reinsurers, who have an A.M. Best rating of A-
   (excellent) or better, accounted for approximately 26% of the
   reinsurance recoverables and prepaid reinsurance premiums at
   December 31, 1996 and 1995.  No other reinsurer, except for
   the RMA accounted for more than 5% of these balances.

16. DIVIDEND RESTRICTIONS AND REGULATORY MATTERS

   Dividends from the insurance subsidiaries of the Company are
   regulated by the state regulatory authorities of the states
   in which each subsidiary is domiciled.  The laws of such
   states generally restrict dividends from insurance companies
   to certain statutorily approved limits.  During 1997,
   dividends from insurance company subsidiaries to the Company
   without further insurance department approval are limited to
   approximately $10.4 million.

   The Company's insurance subsidiaries reported to regulatory
   authorities total policyholders' surplus of approximately
   $191,455,000 and $169,628,000 at December 31, 1996 and 1995,
   respectively, and total statutory net income/(loss) of
   $21,344,000, $(247,000), and $6,659,000 for the years ended
   December 31, 1996, 1995, and 1994, respectively.

17. INTERIM FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                        Fully
                                                                       Primary         Diluted
                                               Under-                    Net             Net
                                              writing      Net          Income         Income
                                               Income    Income         (Loss)         (Loss)
               Quarters Ended     Revenues     (Loss)    (Loss)  (1)  Per Share  (1)  Per Share  (1)

                                                     (In thousands, except per share data)
               <S>               <C>         <C>         <C>            <C>             <C>
               1996:
                 December 31      $ 91,461   $ (8,951)   $ 5,459        $ 0.36          $ 0.35
                 September 30      128,853     20,408     17,318          1.14            1.12
                 June 30            85,303     (2,211)     3,025          0.20            0.20
                 March 31           75,778        347      4,478          0.30            0.29
                                  --------   --------    -------        ------           -----

                                  $381,395   $  9,593    $30,280        $ 2.00           $ 1.96
                                  ========   ========    =======        ======           ======

               1995:
                 December 31      $ 75,070   $  2,629    $ 5,634        $ 0.38           $ 0.37
                 September 30       97,133    (14,546)    (5,961)        (0.40)           (0.40)
                 June 30            68,598     (1,992)     1,499          0.10             0.10
                 March 31           57,004        554      2,983          0.20             0.20
                                  --------   --------    -------        ------           ------

                                  $297,805   $(13,355)   $ 4,155        $ 0.28           $ 0.27
                                  ========   ========    =======        ======           ======
<FN>
   (1)  As a result of the acquisition of Redland in July 1993, the
        Company became significantly involved in crop insurance
        programs, including the federal Multi-Peril Crop Insurance
        program and the crop hail business.  The Company's operating
        results from its crop program can vary substantially from
        quarter to quarter as a result of various factors, including
        timing and severity of losses from storms and other natural
        perils and crop production cycles.  Therefore, the results
        for any quarter are not necessarily indicative of results for
        any future period.  The results of the crop program business
        primarily are recognized in the second half of the calendar
        year.
    </FN>
</TABLE>

<TABLE>
<CAPTION>
ACCEPTANCE INSURANCE COMPANIES INC.

SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
DECEMBER 31, 1996 AND 1995
BALANCE SHEETS (Parent Company Only)
(In Thousands)

ASSETS                                                                                           1996         1995
<S>                                                                                            <C>          <C>
Fixed maturities available-for-sale                                                            $   -        $  3,047
Cash and short-term investments                                                                   1,875        3,444
Receivables, net                                                                                  6,485        4,497
Intercompany receivables                                                                          1,061         -
Surplus note receivable from subsidiary                                                          40,000       40,000
Investments in subsidiaries                                                                     226,444      196,268
Other assets                                                                                      1,900        1,922
                                                                                               --------     --------

                                                                                               $277,765     $249,178
                                                                                               ========     ========
LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued liabilities                                                       $    945     $    664
Intercompany payables                                                                              -           1,727
Bank borrowings                                                                                  69,000       69,000
                                                                                               --------     --------
           Total liabilities                                                                     69,945       71,391

Stockholders' equity:
  Preferred stock, no par value, 5,000,000 shares authorized, none issued
  Common stock, $.40 par value, 20,000,000 shares authorized; 15,256,507
    and 15,141,220 shares issued                                                                  6,103        6,057
  Capital in excess of par value                                                                196,090      194,823
  Unrealized gain (loss) on available-for-sale securities, net of tax                            (1,476)          19
  Retained earnings (accumulated deficit)                                                        11,432      (18,848)
                                                                                               --------     --------
                                                                                                212,149      182,051
  Less:
    Treasury stock, at cost, 38,680 and 35,559 shares                                            (1,629)      (1,564)
    Contingent stock, 240,000 shares                                                             (2,700)      (2,700)
                                                                                               --------     --------

           Total stockholders' equity                                                           207,820      177,787
                                                                                               --------     --------

                                                                                               $277,765     $249,178

                                                                                               ========     ========

</TABLE>

<TABLE>
<CAPTION>
ACCEPTANCE INSURANCE COMPANIES INC.

SCHEDULE II - (Continued)
CONDENSED FINANCIAL INFORMATION OF
REGISTRANT
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
STATEMENTS OF OPERATIONS  (Parent Company
Only)
(In Thousands)

                                                                                 1996        1995        1994
<S>                                                                            <C>         <C>         <C>
Revenues                                                                       $  -        $  -        $  -

Costs and expenses:
  General and administrative expenses                                            2,167       2,225       1,878
                                                                               -------     -------     -------
           Operating loss                                                       (2,167)     (2,225)     (1,878)

Other income (expense):
  Interest expense                                                              (4,925)     (2,651)     (1,434)
  Share of net income of subsidiaries                                           31,586       5,254      19,203
  Other                                                                          5,235       3,323         724
                                                                               -------     -------     -------
                                                                                31,896       5,926      18,493
                                                                               -------     -------     -------
          Income before income taxes                                            29,729       3,701      16,615

Income tax benefit:
  Current                                                                          505         382         734
  Deferred                                                                          46          72       3,726
                                                                               -------     -------     -------

Net income                                                                     $30,280     $ 4,155     $21,075
                                                                               =======     =======     =======

</TABLE>

<TABLE>
<CAPTION>
ACCEPTANCE INSURANCE COMPANIES INC.

SCHEDULE II - (Continued)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
STATEMENTS OF CASH FLOWS (Parent Company Only)
(In Thousands)

                                                                                               1996        1995        1994
<S>                                                                                         <C>         <C>         <C>
Cash flows from operating activities:
  Net income                                                                                $ 30,280    $  4,155    $ 21,075
  Adjustments to reconcile net income from continuing operations to
    net cash used for operating activities:
      Deferred tax benefit                                                                       (46)        (72)     (3,726)
      Share of net income of subsidiaries                                                    (31,586)     (5,254)    (19,203)
      Increase (decrease) in cash attributable to changes in assets
        and liabilities:
          Receivables                                                                         (3,049)       (879)       (572)
          Payables                                                                            (1,446)     (1,631)     (4,564)

  Other, net                                                                                      75        (927)        291
                                                                                            --------    --------    --------
           Net cash used for operating activities                                             (5,772)     (4,608)     (6,699)


Cash flows from investing activities:
  Contributions to investments in subsidiaries                                                   (50)    (38,803)    (66,679)
  Purchases of investment                                                                       -           -           (972)
  Purchases of investment available-for- sale                                                   -         (6,030)     (2,977)
  Proceeds from maturities of investments                                                       -          1,000        -
  Proceeds from sale of investments available-for-sale                                         3,005       6,187        -
                                                                                            --------    --------    --------
           Net cash used for investing activities                                              2,955     (37,646)    (70,628)

Cash flows from financing activities:
  Proceeds from bank borrowings                                                                 -         40,000      29,000
  Proceeds from issuance of common stock                                                       1,313         154      53,633
  Purchase of treasury stock                                                                     (65)       -           -
                                                                                            --------   ---------    --------
           Net cash provided by financing activities                                           1,248      40,154      82,633
                                                                                            --------    --------    --------

Net increase (decrease) in cash and short-term investments                                    (1,569)     (2,100)      5,306

Cash and short-term investments at beginning of year                                           3,444       5,544         238
                                                                                            --------    --------    --------

Cash and short-term investments at end of year                                              $  1,875    $  3,444    $  5,544
                                                                                            ========    ========    ========

</TABLE>

<PAGE>
ACCEPTANCE INSURANCE COMPANIES INC.

SCHEDULE II - (Continued)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


On December 1, 1994, pursuant to a call by the Company to redeem
certain outstanding warrants, approximately 4.85 million of such
warrants were exercised to purchase shares of common stock,
resulting in net proceeds to the Company of approximately $53.4
million.

On March 31, 1994, the Company entered into an Agreement and Plan
of Merger with Statewide Insurance Corporation (Statewide), the
exclusive general agent for the Company's non-standard automobile
insurance program underwritten by Phoenix Indemnity Insurance
Company (Phoenix Indemnity), pursuant to which the Company
acquired Statewide.  Statewide owned 20% of the outstanding
common stock of Phoenix Indemnity which was a previously 80%
owned subsidiary of the Company.  The acquisition was effective
April 1, 1994 and was accounted for as a purchase.

The Company aggregates cash and short-term investments with
maturity dates of three months or less from the date of purchase
for purposes of reporting cash flows.

The deferred tax benefit for the year ended December 31, 1994 is
mainly comprised of $3.6 million of realized net operating loss
carryforwards.

Cash payments for interest were $4,708,000, $2,337,000 and
$1,272,000 during the years ended December 31, 1996, 1995 and
1994, respectively.





<TABLE>
<CAPTION>
ACCEPTANCE INSURANCE COMPANIES INC.

SCHEDULE V
VALUATION ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In Thousands)


           Column A                                            Column B    Column C    Column D    Column E

                                                                Balance
                                                                   at                               Balance
                                                               Beginning                               at
                                                                   of                                End of
                                                                 Period    Additions   Deductions    Period
<S>                                                              <C>          <C>          <C>          <C>
Allowance for doubtful accounts:
  Year ended December 31, 1996                                   $2,432       $1,956       $  934       $3,454

  Year ended December 31, 1995                                   $1,321       $1,304       $  193       $2,432

  Year ended December 31, 1994                                   $2,093       $  656       $1,428       $1,321


</TABLE>